Commitments and Contingencies

12 Months Ended

Dec. 31, 2024

Commitments and Contingencies Disclosure [Abstract]

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 December 31, 2024, the carrying value of the ROU asset was $24.3 million. The related current and non-current liabilities as of December 31, 2024 were $6.1 million and $22.3 million, respectively. The current and non-current lease liabilities are included in accrued and other current liabilities and operating lease liability, less current portion, respectively, in the consolidated balance sheets.

Effective March 2024, the Company entered into a sublease agreement with a sub-lessee (a third-party) for office space with a six-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 lease cost for the years ended December 31, (in thousands):


	2024		2023		2022
Operating lease cost	$	7,717	$	7,936	$	6,716
Total lease cost	$	7,717	$	7,936	$	6,716


	December 31,
	2024		2023
Other information:
Weighted-average remaining lease term - Operating leases (in years)	4.61		5.43

Weighted-average discount rate - Operating leases (%)	7.1	%	7.1	%

Supplemental cash flow information related to leases for the years ended December 31, are as follows (in thousands):


	2024		2023		2022
Cash paid for amounts included in the measurement of lease liabilities
Operating cash flows used for operating leases	$	5,339	$	5,454	$	3,665

Total	$	5,339	$	5,454	$	3,665

Maturities of operating lease liabilities as of December 31, 2024, are as follows (in thousands):


Years ending December 31,	Operating Leases
2025	$	7,823
2026	7,162
2027	7,274
2028	6,599
2029	1,606
Thereafter	2,509
Total lease payments	32,973
Less imputed interest	4,607
Present value of future minimum lease payments	28,366
Less operating lease liability, current portion	6,103
Operating lease liability, long-term portion	$	22,263

As of December 31, 2024, the Company’s leases had remaining terms of 0.33 years to 8.09 years, some of which include options to extend the lease term.

Royalty Commitments

The Board of Trustees of the Leland Stanford Junior University (“Stanford”)

In June 2014, the Company entered into a license agreement with Stanford (the “Stanford License”), which granted the Company an exclusive license to a patent relating to the diagnosis of rejection in organ transplant recipients using dd-cfDNA. Under the terms of the Stanford License, the Company is required to pay an annual license maintenance fee, six milestone payments and royalties in the low single digits of net sales of products incorporating the licensed technology. In March 2023, the Stanford License agreement was amended, which reduced the maximum royalty rate to a lower rate at which the Company may be liable to Stanford effective from April 2022 and also provided that the Company would seek a review from the U.S. Supreme Court (the “Review”). During the pendency of the Review, certain of the Company’s licensing payment and reporting obligations to Stanford with respect to licensed products sold in the U.S. were suspended. As a result, the Company reversed the excess liability in March 2023.

In May 2023, the Company submitted a petition of certiorari to the U.S. Supreme Court for consideration of the patent infringement suit and in October 2023, the U.S. Supreme Court declined to hear this patent infringement suit. As the Review is complete and the Company's petition for review was denied, the Stanford License automatically terminated, and in December 2023, the Company paid Stanford certain past royalties at a reduced rate that were previously suspended within 90 days of the termination. There was no outstanding obligation with Stanford as of December 31, 2024.

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 of four 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 consolidated financial statements indicates that it is probable that a liability had been incurred at the date of the 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 (the “Court”) 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 U.S. District Court for

the District of Delaware issued an order concluding that there was sufficient evidence to support the jury’s findings of falsity on eight 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.

On July 19, 2022, the U.S. Court of Appeals for the Federal Circuit affirmed the Court’s judgment dismissing the Company’s patent infringement suit against Natera. In May 2023, the Company submitted a petition of certiorari to the U.S. Supreme Court for consideration of the patent infringement suit and in October 2023, the U.S. Supreme Court declined to hear the suit.

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 filed two new complaints alleging that AlloSure infringes Natera’s U.S. Patents 10,655,180 and 11,111,544. These two 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 a five-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 but Natera has a right to appeal the Court's invalidation of its patents. The Company intends to defend itself in 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 in other liabilities on the consolidated balance sheets 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 being conducted 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 February 18, 2025, the private plaintiff who originally filed the qui tam action in 2021 filed an

executed summons indicating his intent to proceed with the claims that the DOJ and SEC reviewed and declined to prosecute. 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 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. Plaintiffs filed an amended complaint on November 28, 2022. On January 27, 2023, defendants moved to dismiss all claims and to strike certain allegations in the amended complaint.

On May 24, 2023, the court granted the Company’s motion to strike and motion to dismiss, dismissing all claims against defendants with leave to amend. On June 28, 2023, plaintiffs filed a second amended complaint against the Company, Reginald Seeto, Ankur Dhingra, and Peter Maag. Under a briefing schedule ordered by the court on June 12, 2023, defendants’ motion to dismiss and motion to strike the second amended complaint was filed on July 26, 2023, plaintiffs’ opposition was filed on August 30, 2023, and defendants’ reply was filed on September 22, 2023. The court held oral argument on October 31, 2023.

On September 18, 2024, the court granted the Company’s motion to dismiss the second amended complaint without prejudice, providing plaintiffs leave to file a third amended complaint by no later than October 2, 2024 (a deadline which was subsequently extended by stipulation). 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. Among other things, plaintiffs removed former Chief Financial Officer, Ankur Dhingra, as a named defendant. 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 defendant’s motion to dismiss the third amended complaint.

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

Derivative Actions

On September 21, 2022, Jeffrey Edelman filed a stockholder derivative action complaint in the U.S. District Court for the Northern District of California 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 asserting, among other things, alleged breaches of fiduciary duty against the Individual Defendants based on the factual allegations of the Securities Class Action (the “Edelman Derivative Action”).

In 2023, and 2024, various additional derivative complaints asserting similar allegations and claims were filed in the U.S. District Court for the Northern District of California, all of which were consolidated on April 23, 2024 by the court (the “Consolidated Derivative Action”).

On November 5, 2024 the parties filed a stipulation of voluntary dismissal and proposed order. On November 7, 2024, the court entered a modified order, dismissing the Consolidated Derivative Action without prejudice. In its modified order, the court requested that the parties submit a joint statement to address whether any additional notice to Company stockholders was

required. On November 8, 2024, the parties submitted a supplemental joint statement, explaining that the parties did not believe additional Rule 23(c) notice was required and on January 7, 2025, the Court issued an order affirming that finding. The Consolidated Derivative Action has now been dismissed. On February 26, 2025, the plaintiffs in the 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 the claims in the Consolidated Derivative Action and updating and amending their prior complaint.

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 May 30, 2024, 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 May 31, 2024. Given the decision in the securities class action, the stay in the Burns Derivative Action will lift in accordance with the terms so-ordered by the court unless otherwise extended.

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.