CareDx Inc

1. ORGANIZATION AND DESCRIPTION OF BUSINESS

CareDx, Inc. (“CareDx” or the “Company”), together with its subsidiaries, is a leading precision medicine company focused on the discovery, development and commercialization of clinically differentiated, high-value diagnostic solutions for transplant patients and caregivers. The Company offers testing services, products, and patient and digital solutions along the pre- and post- transplant patient journey. The Company’s headquarters are in Brisbane, California and it has other primary operations in Omaha, Nebraska and Stockholm, Sweden.

The Company’s commercially available testing services consist of AlloSure® Kidney, a donor-derived cell-free DNA (“dd-cfDNA”) solution for kidney transplant patients, AlloMap® Heart, a gene expression solution for heart transplant patients, AlloSure® Heart, a dd-cfDNA solution for heart transplant patients, and AlloSure® Lung, a dd-cfDNA solution for lung transplant patients. The Company has initiated several clinical studies to generate data on its existing and planned future testing services. The Company has signed multiple biopharma research partnerships for AlloCell, a surveillance solution that monitors the level of engraftment and persistence of allogeneic cells for patients who have received cell therapy. The Company also offers high-quality products that increase the chance of successful transplants by facilitating a better match between a donor and a recipient of stem cells and organs. The Company also provides digital solutions to transplant centers and various offerings in patient and digital solutions.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The significant accounting policies and estimates used in the preparation of the unaudited condensed consolidated financial statements are described in the Company’s audited consolidated financial statements as of and for the year ended December 31, 2024, and the notes thereto, which are included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2024, filed with the SEC on February 28, 2025.

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States (“U.S. GAAP”), and follow the requirements of the SEC for interim reporting. As permitted under those rules, certain notes and other financial information that are normally required by U.S. GAAP can be condensed or omitted. These unaudited condensed consolidated financial statements have been prepared on the same basis as the Company’s annual consolidated financial statements and, in the opinion of management, reflect all adjustments, consisting only of normal recurring adjustments that are necessary for a fair statement of the Company’s financial information. The condensed consolidated balance sheet as of December 31, 2024 has been derived from audited consolidated financial statements as of that date but does not include all of the financial information required by U.S. GAAP for complete financial statements. Operating results for the three months ended March 31, 2025 are not necessarily indicative of the results that may be expected for the fiscal year ending December 31, 2025.

Restatement

As noted in the Company's Form 10-K Item 9-B for the fiscal year ending December 31, 2024, as filed with the SEC on February 28, 2025, the Company has restated the comparative financial statements including the Condensed Consolidated Statement of Operations, Condensed Consolidated Statement of Comprehensive Loss, Condensed Consolidated Statement of Stockholders' Equity and Condensed Consolidated Statement of Cash Flows for the three months ended March 31, 2024 and applicable footnotes.

The following tables present a summary of the effects of the correction of the Company’s previously issued condensed consolidated financial statements for three months ending March 31, 2024:

Condensed Consolidated Statement of Operations (unaudited)

Condensed Consolidated Statement of Comprehensive Loss (unaudited)

Condensed Consolidated Statement of Stockholders' Equity (unaudited)

Condensed Consolidated Statement of Cash Flows (unaudited)

Use of Estimates

The preparation of unaudited condensed consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities and the reported amounts of revenues and expenses in the unaudited condensed consolidated financial statements and accompanying notes. On an ongoing basis, management evaluates its estimates, including those related to transaction price estimates used for testing services revenue; accrued expenses for clinical studies; inventory valuation; the fair value of contingent consideration recorded in connection with a business combination or an asset acquisition; the grant date fair value assumptions used to estimate stock-based compensation expense; income taxes; impairment of long-lived assets and indefinite-lived assets (including goodwill); and legal contingencies. Actual results could differ from those estimates.

Concentrations of Credit Risk and Other Risks and Uncertainties

For the three months ended March 31, 2025 and 2024, approximately 37% and 33%, respectively, of total revenue was derived from Medicare.

As of March 31, 2025 and December 31, 2024, approximately 31% and 27%, respectively, of accounts receivable was due from Medicare. No other payer or customer represented more than 10% of accounts receivable at either March 31, 2025 or December 31, 2024.

Recent Accounting Pronouncements

In December 2023, the FASB issued ASU No. 2023-09, Income Taxes (Topic 340): Improvements to Income Tax Disclosures, which requires annual disclosures in the rate reconciliation table to be presented using both percentages and reporting currency amounts, and this table must include disclosure of specific categories. Additional information will also be required for reconciling items that meet a quantitative threshold. The new guidance also requires enhanced disclosures of income taxes paid, including the amount of income taxes paid disaggregated by federal, state and foreign taxes and the amount of income taxes paid disaggregated by individual jurisdictions that exceed a quantitative threshold. The amendments should be applied on a prospective basis, but retrospective application is permitted. The amendments set forth in this ASU are effective for annual periods beginning after December 15, 2024 for public entities. This guidance will be effective for the Company’s annual disclosures in fiscal year 2025. The Company is currently evaluating the potential effect that the updated standard will have on its financial statement disclosures.

In November 2024, the FASB issued ASU 2024-03, Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures. This standard requires entities to disaggregate certain costs and expenses into specific categories and by relevant expense caption in the statement of operations. The standard is effective for fiscal years beginning after December 15, 2026, and interim periods within fiscal years beginning after December 15, 2027. This guidance will be effective for the Company's annual disclosures in fiscal year 2027 and for interim period disclosures beginning in fiscal year 2028. The Company is currently evaluating the potential impact of the new standard on its financial statements and related disclosures.

3. NET LOSS PER SHARE

Basic and diluted net loss per share have been computed by dividing the net loss by the weighted-average number of common shares outstanding during the period, without consideration of common share equivalents as their effect would have been antidilutive.

The following tables set forth the computation of the Company’s basic and diluted net loss per share (in thousands, except shares and per share data):

The following potentially dilutive securities have been excluded from diluted net loss per share as of March 31, 2025 and 2024 because their effect would be antidilutive:

4. FAIR VALUE MEASUREMENTS

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability (an exit price) in an orderly transaction between market participants at the reporting date. The Company uses the U.S. GAAP fair value hierarchy, which prioritizes the inputs used in the valuation methodologies in measuring fair value as follows:

•Level 1: Inputs that include quoted prices in active markets for identical assets and liabilities.

•Level 2: Inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities, quoted prices in markets that are not active or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.

•Level 3: Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.

The following table sets forth the Company’s financial assets and liabilities, measured at fair value on a recurring basis, as of March 31, 2025 and December 31, 2024 (in thousands):

The following table presents the changes in estimated fair value and payments of the Company’s Level 3 financial instruments that are measured at fair value on a recurring basis (in thousands):

In determining fair value, the Company uses various valuation approaches within the fair value measurement framework. The valuation methodologies used for the Company’s instruments measured at fair value and their classification in the valuation hierarchy are summarized below:

•Money market funds – Investments in money market funds are classified within Level 1. Money market funds are valued at the closing price reported by the fund sponsor from an actively traded exchange. At March 31, 2025 and December 31, 2024, money market funds were included as cash and cash equivalents in the condensed consolidated balance sheets.

•Contingent consideration– Contingent consideration is classified within Level 3. Contingent consideration relates to asset acquisitions and business combinations. The Company recorded the estimate of the fair value of the contingent consideration based on its evaluation of the probability of the achievement of the contractual conditions that would result in the payment of the contingent consideration. Contingent consideration was estimated using the fair value of the milestones to be paid if the contingency is met based on management’s estimate of the probability of success and projected revenues for revenue-based considerations at discounted rates of 7% at March 31, 2025 and ranging from 7% to 12% at December 31, 2024. The significant input in the Level 3 measurement that is not supported by market activity is the Company’s probability assessment of the achievement of the milestones. The value of the liability is subsequently remeasured to fair value at each reporting date, and the change in estimated fair value is recorded as income or expense within operating expenses in the condensed consolidated statements of operations until the milestones are paid, expire or are no longer achievable. Increases or decreases in the estimation of the probability percentage results in a directionally similar impact to the fair value measurement of the contingent consideration liability. The carrying amount of the contingent consideration liability represents its fair value.

5. CASH AND MARKETABLE SECURITIES

Cash, Cash Equivalents and Restricted Cash

A reconciliation of cash, cash equivalents and restricted cash reported within the condensed consolidated balance sheets to the amount reported within the condensed consolidated statements of cash flows is shown in the table below (in thousands):

Marketable Securities

All short-term marketable securities were considered held-to-maturity at March 31, 2025. The Company determined that it had the positive intent and ability to hold until maturity all short-term marketable securities that have been in a continuous loss position. The Company assesses whether the decline in value of short-term marketable securities is temporary or other-than-temporary. In making its assessment, the Company evaluates the current market and interest rate environment as well as specific issuer information. There has beenno recognition of any other-than-temporary impairment at March 31, 2025.

The amortized cost, unrealized holding gains and fair value of the Company’s marketable securities by major security type at each balance sheet date are summarized in the tables below (in thousands):

6. GOODWILL AND INTANGIBLE ASSETS

Goodwill

Goodwill is tested annually for impairment at the reporting unit level during the fourth quarter or upon the occurrence of certain events or substantive changes in circumstances. There were no indicators of impairment as of March 31, 2025. The balance of the Company’s goodwill was $40.3 million as of March 31, 2025 and December 31, 2024.

Intangible Assets

The following table presents details of the Company’s intangible assets as of March 31, 2025 ($ in thousands):

The following table presents details of the Company’s intangible assets as of December 31, 2024 ($ in thousands):

As of March 31, 2025, the Company didnot identify any impairment triggering events that would indicate that the carrying value of the intangible assets was not recoverable.

The following table summarizes the Company’s amortization expense of finite-lived intangible assets (in thousands):

The following table summarizes the Company’s estimated future amortization expense of intangible assets with finite lives as of March 31, 2025 (in thousands):

7. BALANCE SHEET COMPONENTS

Inventory

Inventory consisted of the following (in thousands):

Accrued and Other Liabilities

Accrued and other liabilities consisted of the following (in thousands):

8. COMMITMENTS AND CONTINGENCIES

Leases

The Company leases its operating and office facilities for various terms under long-term, non-cancelable operating lease agreements in Brisbane, California; Columbus, Ohio; West Chester, Pennsylvania; Flowood, Mississippi; Omaha, Nebraska; Fremantle, Australia; and Stockholm, Sweden.

The Company’s facility leases expire at various dates through 2033. In the normal course of business, it is expected that these leases will be renewed or replaced by leases on other properties.

As of March 31, 2025, the carrying value of the right-of-use asset was $26.4 million. The related current and non-current liabilities as of March 31, 2025 were $6.2 million and $24.1 million, respectively. The current and non-current lease liabilities are included in accrued andother current liabilities and operating lease liability, less current portion, respectively, in the condensed consolidated balance sheets.

The following table summarizes the lease cost for the three months ended March 31, 2025 and 2024 (in thousands):

Maturities of operating lease liabilities as of March 31, 2025 are as follows (in thousands):

As of March 31, 2025, the Company's leases had remaining terms of 0.08 years to 7.84 years, some of which include options to extend the lease term.

Effective March 2024, the Company entered into a sublease agreement with a sub-lessee (a third-party) for office space with asix-year term, commencing on May 1, 2024, for a total of $2.6 million base rent for the duration of the contract.

The following table summarizes the supplemental cash flow information related to leases for the three months ended March 31, 2025 and 2024 (in thousands):

Royalty Commitments

Illumina

On May 4, 2018, the Company entered into a license agreement with Illumina, Inc. (the “Illumina Agreement”). The Illumina Agreement requires the Company to pay royalties in the mid-single to low-double digits on sales of products covered by the Illumina Agreement.

Other Royalty Commitment

Effective as of August 2023, the Company entered into a license agreement with a university institution (the "University Agreement"). The University Agreement requires the Company to pay royalties in the low single digits on sales of products covered by the University Agreement.

Other Commitments

Effective as of July 2023, the Company entered into a license and collaboration agreement with a private entity pursuant to which the Company was granted an irrevocable, non-transferable right to commercialize its proprietary software, iBox, for the predictive analysis of post-transplantation kidney allograft loss in the field of transplantation for a period offour years with exclusive rights in the United States. The Company will share an agreed-upon percentage of revenue with the private entity, if and when revenues are generated from iBox.

Litigation and Indemnification Obligations

From time to time, the Company may become involved in litigation and other legal actions. The Company estimates the range of liability related to any pending litigation where the amount and range of loss can be estimated. The Company records its best estimate of a loss when the loss is considered probable. Where a liability is probable and there is a range of estimated loss with no best estimate in the range, the Company records a charge equal to at least the minimum estimated liability for a loss contingency when both of the following conditions are met: (i) information available prior to issuance of the condensed consolidated financial statements indicates that it is probable that a liability had been incurred at the date of the condensed consolidated financial statements, and (ii) the range of loss can be reasonably estimated.

Natera

In response to the Company’s false advertising suit filed against Natera Inc. (“Natera”) on April 10, 2019, Natera filed a counterclaim against the Company on February 18, 2020, in the U.S. District Court for the District of Delaware alleging the Company made false and misleading claims about the performance capabilities of AlloSure. The suit seeks injunctive relief and unspecified monetary relief. On September 30, 2020, Natera requested leave of court to amend its counterclaims to include additional allegations regarding purportedly false claims the Company made with respect to AlloSure, and the Court granted Natera’s request. The trial commenced on March 7, 2022 and concluded on March 14, 2022, with the jury finding that Natera violated the Lanham Act by falsely advertising the scientific performance of its Prospera transplant test and awarding the Company $44.9 million in damages, comprised of $21.2 million in compensatory damages and $23.7 million in punitive damages. In July 2023, the Court upheld and reaffirmed the March 2022 jury verdict but did not uphold the monetary damages awarded by the jury. In August 2023, the Court issued an injunction prohibiting Natera from making the claims the jury previously found to be false advertising. Both parties appealed. On October 8, 2024, the United States Court of Appeals for the Third Circuit remanded the case to make additional findings. On December 23, 2024, the Court issued an order concluding that there was sufficient evidence to support the jury’s findings of falsity oneight advertisements by Natera. Following the decision, the parties submitted additional briefing to the Third Circuit. The Company did not record a receivable or a gain from the judgment as the amount has not yet been realized.

In addition, Natera filed suit against the Company on January 13, 2020, in the Court alleging, among other things, that AlloSure infringes Natera’s U.S. Patent 10,526,658. This case was consolidated with the Company’s patent infringement suit on February 4, 2020. On March 25, 2020, Natera filed an amendment to the suit alleging, among other things, that AlloSure also infringes Natera’s U.S. Patent 10,597,724. The suit seeks a judgment that the Company has infringed Natera’s patents, an order preliminarily and permanently enjoining the Company from any further infringement of such patents and unspecified damages. On May 13, 2022, Natera filedtwo new complaints alleging that AlloSure infringes Natera’s U.S. Patents 10,655,180 and 11,111,544. Thesetwo cases were consolidated with the patent infringement case on June 15, 2022. On May 17, 2022, Natera agreed to dismiss the case alleging infringement of Natera’s U.S. Patent 10,526,658. On July 6, 2022, the Company moved to dismiss the rest of Natera’s claims. On September 6, 2022, the Company withdrew its motion to dismiss. On December 11, 2023, the Court dismissed the case alleging infringement of Natera's U.S. Patent 10,597,724. Natera appealed that decision. On March 13, 2024, the Federal Circuit dismissed Natera's appeal after Natera failed to file its brief and other required papers. On May 30, 2024, Natera filed a second notice of appeal of the dismissal of U.S. Patent 10,597,724. On June 19, 2024, the Company moved to dismiss Natera's appeal. On September 11, 2024, the Federal Circuit denied that motion.

On January 26, 2024, following afive-day trial, a jury concluded that the Company did not infringe Natera's U.S. Patent 10,655,180 but did infringe Natera's U.S. Patent 11,111,544. The jury awarded Natera approximately $96.3 million in damages based on sales of AlloSure and AlloSeq between September 2021 and August 2023. Natera's U.S. Patent 11,111,544 expires in September 2026. Following trial, Natera moved for an injunction on the Company's prior AlloSure process and the parties engaged in motion practice regarding the jury's verdict and discovery as to whether the Company's current AlloSure process infringes Natera's U.S. Patent 11,111,544. On September 11, 2024, Natera informed the Court that it was abandoning claims of ongoing infringement. On January 3, 2025, the Court issued an order denying Natera's motion to set aside the jury’s finding that the Company did not infringe Natera's U.S. Patent 10,655,180. On February 24, 2025, the Court issued an order concluding that Natera's U.S. Patents 11,111,544 and 10,655,180 were invalid for lack of written description, thereby overturning the jury verdict. On February 25, 2025, the Court issued an order denying Natera's motion for an injunction as moot. Natera has appealed the Court's invalidation of the three patents it asserted against CareDx. The Company intends to defend these matters vigorously, and believes that the Company has good and substantial defenses to the claims alleged in the suits, but there is no guarantee that the Company will prevail. In addition, Natera's U.S. Patent 11,111,544 is also subject to a pending ex parte reexamination before the United States Patent and Trademark Office (“PTO”). On February 14, 2025, a PTO examiner issued a non-final Office action rejecting Claims 21, 26, and 27 of the patent, the claims CareDx was found to have infringed in the litigation. Natera now has a right to respond to this Office action and there is no guarantee that these Claims will ultimately be rejected. After the jury finding, the Company recognized the damages of $96.3 million as other liabilities on the consolidated balance sheets as of December 31, 2023 as the loss was probable and reasonably estimable at that time. After the Court order overturned the jury finding, the Company derecognized the $96.3 million as of December 31, 2024 as the Company concluded that the loss was no longer probable. It is reasonably possible that the Company may not prevail if the case is appealed, in which case the range of loss could be up to the jury awarded amount of $96.3 million plus potential interest.

United States Department of Justice and United States Securities and Exchange Commission Investigations

As previously disclosed, in 2021, the Company received a civil investigative demand (“CID”) from the United States Department of Justice (“DOJ”) requesting that the Company produce certain documents in connection with a False Claims Act investigation by the DOJ regarding certain business practices related to the Company’s kidney testing and phlebotomy services, and a subpoena from the United States Securities and Exchange Commission (the “SEC”) in relation to an investigation by the SEC in respect of matters similar to those identified in the CID, as well as certain of the Company’s accounting and public reporting practices. By letter dated September 19, 2023, the Company was notified by the staff of the SEC that the SEC has concluded its investigation as to the Company and does not intend to recommend an enforcement action by the SEC against the Company. The notice was provided under the guidelines set out in the final paragraph of Securities Act Release No. 5310.

In a court document unsealed on October 7, 2024, the DOJ notified the United States District Court for the Eastern District of New York that it was declining to intervene in a qui tam action filed against the Company by a former employee that served as the basis for the CID. Accordingly, CareDx understands that the DOJ has closed its investigation of the Company with no finding of wrongdoing. On April 8, 2025, the private plaintiff who originally filed the qui tam action in 2021 (the “relator”) filed an amended complaint on the public docket. Pursuant to the parties’ stipulation, the Company’s pre-motion to dismiss conference letter is due April 30, 2025, and the relator’s opposition letter is due on May 15, 2025. Subsequently, the Court will order a briefing schedule on the Company’s anticipated motion to dismiss the amended complaint. The Company denies the allegations in the qui tam action and intends to vigorously defend itself.

The Company may receive additional requests for information from the DOJ, the SEC, or other regulatory and governmental agencies regarding similar or related subject matters. Although the Company remains committed to compliance with all applicable laws and regulations, it cannot predict the outcome of, or any other requests or investigations that may arise in the future.

Securities Class Action

On May 23, 2022, Plumbers & Pipefitters Local Union #295 Pension Fund filed a federal securities class action in the U.S. District Court for the Northern District of California against the Company, Reginald Seeto, its former President, Chief Executive Officer and member of the Company’s Board of Directors, Ankur Dhingra, its former Chief Financial Officer, Marcel Konrad, its former interim Chief Financial Officer and former Senior Vice President of Finance & Accounting, and Peter Maag, its former President, former Chief Executive Officer, former Chairman of the Company’s Board of Directors and current member of the Company’s Board of Directors (the "Securities Class Action"). The action alleges that the Company and the individual defendants made materially false and/or misleading statements and/or omissions and that such statements violated Section 10(b) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and Rule 10b-5 promulgated thereunder. The action also alleges that the individual defendants are liable pursuant to Section 20(a) of the Exchange Act as controlling persons of the Company. The suit seeks to recover damages caused by the alleged violations of federal securities laws, along with the plaintiffs’ costs incurred in the lawsuit, including their reasonable attorneys’ and experts’ witness fees and other costs.

On August 25, 2022, the Court appointed an investor group led by the Oklahoma Police Pension and Retirement System as lead plaintiffs and appointed Saxena White P.A. and Robbins Geller Rudman & Dowd LLP as lead counsels.

Following multiple rounds of briefing and amendments to the complaint, on October 18, 2024, plaintiffs filed a third amended complaint, which again alleges that the Company and the individual defendants made materially false and/or misleading statements and/or omissions in violation of Section 10(b) of the Exchange Act, and Rule 10b-5 promulgated thereunder, and Section 20(a) of the Exchange Act. The third amended complaint reiterates many of the same factual allegations as in prior complaints, but purports to add new allegations based on, among other things, a recently unsealed qui tam action filed by a former employee. On November 15, 2024 the defendants filed a motion to dismiss the third amended complaint and on December 13, 2024, plaintiffs filed an opposition brief. On January 10, 2025, defendants filed their reply brief and a hearing was held on January 28, 2025. On February 18, 2025, the Court denied the defendants’ motion to dismiss the third amended complaint. The case has now entered discovery.

On April 1, 2025, a mediation was held between theparties to the Securities Class Action with the assistance of Phillips ADR Enterprises. No settlement was reached.

On April 18, 2025, plaintiffs filed a motion for an order certifying the matter as a class action, appointing plaintiffs as class representatives, and appointing Robbins Geller Rudman & Dowd LLP and Saxena White P.A. as class counsel. The opposition to plaintiffs’ motion is due May 16, 2025, plaintiffs’ reply is due May 30, 2025, and a class certification hearing is scheduled for June 17, 2025.

On April 22, 2025, the parties in the Securities Class Action reached an agreement-in-principle to resolve the Securities Class Action under which the Company would pay or cause to be paid a settlement payment of approximately $20.25 million. The agreement-in-principle is subject to the execution of a definitive stipulation of settlement and to Court approval. The Company has recorded the settlement payment obligation of approximately $20.25 million as accrued litigation settlement expense and also recorded approximately $14.9 million in expected insurance proceeds as other receivables on the condensed consolidated balance sheet as of March 31, 2025. The Company recorded a net litigation settlement expense of approximately $5.4 million for the three months ended March 31, 2025 as it has reached an agreement-in-principle to settle the Securities Class Action but there is no guarantee that the agreement-in-principle will be consummated or approved by the Court.

Derivative Actions

On February 26, 2025, the plaintiffs in a previously-dismissed consolidated derivative action initiated a new action, captioned Edelman v. Bickerstaff, 3:25-c-02036 (N.D. Cal. filed Feb. 26, 2025), purporting to reinstate their claims and updating and amending their prior complaint (the "Edelman Derivative Action"). The Edelman Derivative Action asserts claims against the Company as nominal defendant and Drs. Seeto and Maag and Mr. Dhingra, and other current and former members of the Company's Board of Directors alleging, among other things, breaches of fiduciary duty and various state and federal claims based on the factual allegations of the Securities Class Action.

On March 19, 2025, the parties to the Edelman Derivative Action and the Securities Action filed an administrative motion to consider whether the Edelman Derivative Action should be related to the Securities Class Action. On April 1, 2025, the Court granted the motion.

On April 1, 2025, a mediation was held between the parties to the Edelman Derivative Action with the assistance of Phillips ADR Enterprises. No settlement was reached.

On April 10, 2025, the Court held an Initial Case Management Conference in the Edelman Derivative Action and thereafter issued a Case Management and Scheduling Order setting a trial date of July 19, 2027, among other deadlines.

On April 21, 2025, plaintiffs in the Edelman Derivative Action submitted a letter motion to the Court seeking to have the Court lift the discovery stay provided by the Private Securities Litigation Reform Act of 1995, 15 U.S.C. § 78u-4 (the “PSLRA”). On April 23, 2025, CareDx submitted a brief in opposition.

On March 20, 2024, Edward W. Burns IRA filed a stockholder derivative action complaint in the Court of Chancery of the State of Delaware against the Company as nominal defendant and Dr. Seeto, Mr. Dhingra, Dr. Maag, and other current and former members of the Board of Directors (the “Burns Derivative Action”). Prior to filing the complaint, the Company produced documents to the plaintiff in response to a books and records inspection demand made pursuant to Section 220 of the Delaware General Corporation Law. The plaintiff purports to incorporate those documents in the complaint. The plaintiff alleges that the individual defendants breached their fiduciary duties as directors and/or officers of the Company and engaged in insider trading, unjust enrichment, waste of corporate assets, and aiding and abetting breaches of fiduciary duty. The suit seeks declaratory relief, recovery of alleged damages sustained by the Company as a result of the alleged violations, equitable relief, restitution, and plaintiff’s costs incurred in the lawsuit, including reasonable attorneys’, accountants’, and experts’ fees, costs, and expenses. On April 11, 2024, the Court entered an order staying the Burns Derivative Action pursuant to a stipulation filed by the parties.

On March 10, 2025, the parties to the Burns Derivative Action filed an amended stipulation and proposed order to continue the stay in that action, which was so-ordered by the Court on the same day. On April 1, 2025, a mediation was held between the parties to the Burns Derivative Action with the assistance of Phillips ADR Enterprises. No settlement was reached.

The Company intends to defend itself vigorously, and believes that the Company has good and substantial defenses to the claims alleged in the suits, but there is no guarantee that the Company will prevail. The Company has not recorded any liabilities for these suits.

Insurance Matter

In December 2022, the Company filed a lawsuit against its directors and officers liability insurance carriers in San Mateo County Superior Court. The Company seeks a declaration that costs and fees incurred by the Company in responding to governmental investigatory requests are covered under its policies. The Company also asserts breach of contract against its primary insurer Great American Insurance Company for denying the claim. On June 4, 2024, the Superior Court of the State of California for the County of San Mateo entered an order granting a motion for summary judgment by the insurers. The Company is currently pursuing an appeal of the matter. The policies provide up to $15 million in coverage limits. The Company intends to vigorously pursue its claims, and believes it has good and substantial support for its claims, but there is no guarantee that the Company will prevail in these claims. Resolution of the Securities Class Action may moot this matter.

9. STOCK INCENTIVE PLANS

Stock Options, Restricted Stock Units (“RSU”), and Performance Restricted Stock Units (“PSU”)

The following table summarizes option, RSU, and PSU activity under the Company’s 2014 Equity Incentive Plan, 2016 Inducement Equity Incentive Plan and 2019 Inducement Equity Incentive Plan, 2024 Equity Incentive Plan, and related information:

The total intrinsic value of options exercised was $0.4 million and $0.1 million for the three months ended March 31, 2025 and 2024.

As of March 31, 2025, the total intrinsic value of outstanding RSUs was approximately $92.7 million and there were $44.2 million of unrecognized compensation costs related to RSUs, which are expected to be recognized over a weighted-average period of 2.20 years.

The PSUs granted to employees consist of financial and operational metrics to be met over a performance period oftwo years. The number of shares outstanding was 572,460 and 412,843 as of March 31, 2025 and 2024, respectively. The weighted-average remaining recognition period was 2.31 years and 0.84 years for the three months ended March 31, 2025 and 2024, respectively.

Options outstanding that have vested and are expected to vest at March 31, 2025 are as follows:

The aggregate intrinsic value is calculated as the difference between the exercise price of the underlying stock options and the fair value of the Company’s common stock at March 31, 2025 for stock options that were in-the-money.

The total fair value of options that vested during the three months ended March 31, 2025 was $1.2 million. As of March 31, 2025, there were approximately $9.5 million of unrecognized compensation costs related to stock options, which are expected to be recognized over a weighted-average period of 2.67 years.

2014 Employee Stock Purchase Plan

The Company has an Employee Stock Purchase Plan (the “ESPP”) under which employees can purchase shares of its common stock based on a percentage of their compensation, but not greater than 15% of their respective earnings, provided an eligible employee’s right to purchase shares of the Company’s common stock may not accrue at a rate which exceeds $25,000 of the fair market value of such shares for each calendar year in which such rights are outstanding. The ESPP has consecutive offering periods of approximatelysix months in length. The purchase price per share must be equal to the lower of 85% of the fair value of the common stock on the first day of the offering period or on the exercise date.

During the offering period in 2024 that ended on December 31, 2024,66,747 shares were purchased pursuant to the ESPP for aggregate proceeds of $0.9 million from the issuance of such shares, which occurred on January 2, 2025.

Valuation Assumptions

The estimated fair values of employee stock options and ESPP shares were estimated using the Black-Scholes option pricing model based on the following weighted average assumptions:

Risk-free Interest Rate: The Company based the risk-free interest rate over the expected term of the award based on the constant maturity rate of U.S. Treasury securities with similar maturities as of the date of grant.

Volatility: The Company used an average historical stock price volatility of its own stock.

Expected Term: The expected term represents the period for which the Company’s stock-based compensation awards are expected to be outstanding and is based on analyzing the vesting and contractual terms of the awards and the holders’ historical exercise patterns and termination behavior.

Expected Dividends: The Company has not paid and does not anticipate paying any dividends in the near future.

There wereno stock options granted during the periods.

Stock-Based Compensation Expense

The following table summarizes stock-based compensation expense relating to employee and non-employee stock-based awards for the three months ended March 31, 2025 and 2024, included in the condensed consolidated statements of operations as follows (in thousands):

10. STOCKHOLDERS’ EQUITY

Stock Repurchase Program

On February 20, 2025, the Company's Board of Directors approved a Stock Repurchase Program (the "Repurchase Program"), whereby the Company may purchase up to $50 million in shares of its common stock over a period of up totwo years, commencing on February 20, 2025. The Repurchase Program may be carried out, subject to approval by the committee of the Board of Directors, through open market purchases, one or more Rule 10b5-1 trading plans, block trades and in privately negotiated transactions. No shares have been repurchased under the Repurchase Program as of March 31, 2025.

11. INCOME TAXES

The Company's effective tax rate may vary from the U.S. federal statutory tax rate due to a change in valuation allowance, change in the mix of earnings in tax jurisdictions with different statutory rates, benefits related to tax credits, and the tax impact of non-deductible expenses and other permanent differences between income before income taxes and taxable income.

For the three months ended March 31, 2025 and 2024, the Company recorded an income tax expense of $0.1 million and an income tax benefit of $0.1 million, respectively. The Company assesses the realizability of its net deferred tax assets by evaluating all available evidence, both positive and negative, including (i) cumulative results of operations in recent years, (ii) sources of recent losses, (iii) estimates of future taxable income, and (iv) the length of net operating loss carryforward periods. The Company believes that based on the history of its U.S. losses and other factors, the weight of available evidence indicates that it is more likely than not that it will not be able to realize its U.S. consolidated net deferred tax assets. The Company has also placed a valuation allowance on the net deferred tax assets of its Sweden operations. Accordingly, the U.S. and Sweden net deferred tax assets have been offset by a full valuation allowance.

12. SEGMENT REPORTING

Operating segments are defined as components of an enterprise for which separate financial information is available that is evaluated regularly by the Company’s Chief Operating Decision Maker (“CODM”), or decision making group, whose function is to allocate resources to and assess the performance of the operating segments. The Company has identified its President and Chief Executive Officer as the CODM. In determining its reportable segments, the Company considered the markets and types of customers served and the products or services provided in those markets. The Company has determined that it hasone operating segment and, therefore, one reportable segment.

Revenue by geographic regions are based upon the customers’ ship-to address for product revenue, the region of testing for testing services revenue and the region where the performance obligation is satisfied for patient and digital solutions revenue. The following table summarizes reportable revenue by geographic regions (in thousands):

The following table summarizes long-lived assets, consisting of property and equipment, net, by geographic regions (in thousands):

The Company's CODM assessed the Company’s performance by using net loss. The CODM uses net loss predominately in the annual budget and forecasting process. The CODM considers budget-to-actual variances on a quarterly basis for the profit measure when making decisions. The CODM organizes the business and leaders functionally. The CODM assesses performance and resources are allocated to functions which utilize those allocations across the business's services, products and digital solutions offerings.

The following table summarizes the reconciliation to net loss (in thousands):

1 Cost of testing services and cost of product include depreciation expense

2 Other segment items include the following: acquisition costs, software expenses, corporate expenses, rent and maintenance expense, travel and event related expense, and other expenses (income)