CareDx (NASDAQ:CDNA) executives outlined the company’s strategy to focus on precision diagnostics, expand into minimal residual disease testing and improve profitability during a Goldman Sachs-hosted discussion.
Chief Executive Officer John Hanna said CareDx has reshaped its portfolio around areas where it believes it has core strengths: building clinical adoption of molecular testing, supporting repeat testing workflows and generating evidence to support reimbursement. He said those priorities led the company to divest its lab products business, accelerate its AlloHeme pipeline program and pursue the acquisition of Naveris, a company focused on viral-mediated cancers.
Naveris Deal Expands MRD Focus
Hanna said Naveris’ NavDx product fits CareDx’s strategy because it is used in a concentrated provider market, addresses a high-cost disease area and involves repeat testing. He described NavDx as the market leader in head and neck cancer MRD testing and said it already has Medicare coverage, validation studies and about 56 peer-reviewed publications.
Hanna said CareDx entered MRD selectively in areas where it believes it has technological advantages, including AML monitoring after hematopoietic stem cell transplant and viral-mediated cancers. He said Naveris’ technology for detecting viral-modified tumor tissue is proprietary and protected by a patent portfolio.
Keith Kennedy, CareDx’s chief operating officer and chief financial officer, said Naveris generated 65% gross margins in the first quarter, while CareDx’s testing services business operates in the high 70% range. He said he expects the Naveris business to reach mid-70% margins over the long term, with potential operating leverage in clinical trials, evidence generation, sales and marketing, and general and administrative functions.
Hanna said potential growth catalysts for Naveris include coverage for a gynecological MRD indication and a separate “aid to diagnosis” indication for HPV-positive cancers. He said the aid-to-diagnosis use case could help clinicians diagnose patients when tissue is difficult to obtain or non-diagnostic, and could allow CareDx to capture patients at diagnosis before monitoring them after treatment.
Lab Products Divestiture Funds Strategic Shift
Kennedy said CareDx sold its lab products business for more than three times revenue, generating $170 million in proceeds, or about $160 million net after expenses. He said that amount is roughly equal to the price CareDx paid for Naveris.
He described the transaction as a shift away from a smaller, slower-growth, international and more heavily regulated business and toward a U.S.-based CLIA testing model with higher margins and higher growth.
Hanna said the lab products business, which includes HLA typing products, is being placed with Eurobio Scientific, a company CareDx has partnered with previously. He said CareDx will focus management attention on testing services and integrating Naveris, which he said operated around cash-flow breakeven and posted roughly 70% year-over-year revenue growth last year. CareDx guided for 30% to 40% growth for Naveris over the next three years, Hanna said.
AlloHeme Launch Plans and Pipeline Updates
Hanna said CareDx is preparing AlloHeme for relapse monitoring in AML and MDS patients who have undergone stem cell transplant. He said the ACROBAT study involved more than 200 patients across more than 11 sites and showed strong sensitivity and specificity, with more than 30 days of lead time in identifying relapse compared with traditional methods.
Before launch, Hanna said CareDx needs to publish the clinical data and complete analytical verification work, including studies of variability and reproducibility. The company plans to submit materials to New York State and for coverage before the end of the year, he said. Hanna said CareDx plans a commercial launch in the first quarter of 2027 and expects coverage and reimbursement sometime in 2028.
CareDx is also continuing work on expanding AlloSure into liver transplantation. Hanna said the company has not provided timelines for data from the MAPLE study, but said it is still collecting follow-up data and sees a significant unmet need because there is no molecular testing for liver rejection monitoring.
Transplant Testing Growth and Reimbursement
Hanna said transplant volumes have been relatively flat over the past two years, but CareDx’s testing volumes are growing 17% year over year. He attributed that growth to deeper penetration in existing accounts and increased clinical adoption across heart, kidney and lung transplantation.
In heart transplantation, Hanna said data showing HeartCare is prognostic for graft dysfunction and cardiovascular-related mortality is increasing utilization and helping reduce biopsies. In kidney transplantation, he said growth is coming from both surveillance testing and for-cause testing. He said about 50% of kidney transplant volume is for-cause testing.
Hanna also addressed the draft local coverage determination from MolDx on transplant testing. He said CareDx still expects the policy to be finalized in the first half of the year or around the draft’s mid-July anniversary. Based on the draft, CareDx modeled a $15 million annualized reimbursement headwind, split between kidney and heart testing, and included a $7.5 million second-half headwind in guidance.
Hanna said he does not expect the policy to affect test volume or utilization and added that commercial payers continue to make their own coverage decisions.
Operations, Capital Allocation and Profitability
Kennedy said early feedback on Epic integrations has been positive. He said CareDx is in the early stages, with a pipeline of about 16 center implementations, and hopes to increase implementation pace from about four to six per quarter to eight to 10 per quarter.
CareDx is also working on revenue cycle management. Kennedy said the company is targeting an average payment of $2,000 per test internally. He said the company previously indicated it would average about $1,400 per test and end the year at $1,460.
On long-term profitability, Kennedy said CareDx is focused on shifting research and development resources toward innovation, consolidating lab information systems and aligning operations behind its commercial strategy. He cited Epic Aura, Epic Enterprise and lab consolidation projects as part of that effort.
Kennedy said CareDx is balancing organic investment, M&A and share repurchases. He said management believes the company’s stock is undervalued relative to internal models and that CareDx has been buying back shares when it has excess cash, while continuing to prioritize investments in CLIA markets.
Hanna said the most underappreciated part of CareDx’s story is the impact of its products on patients and the earnings potential created by high-frequency testing and strong reimbursement. He said he is most excited about integrating Naveris and building a new market for relapse monitoring in AML through AlloHeme.
About CareDx (NASDAQ:CDNA)
CareDx, Inc (NASDAQ: CDNA) is a precision diagnostics company focused on the care of transplant patients. The firm develops and commercializes non?invasive tests designed to detect organ transplant rejection and infection risk, helping physicians make informed management decisions throughout the post?transplant journey.
The company’s core product portfolio includes AlloMap®, a gene expression profiling test for heart transplant recipients, and AlloSure®, a donor?derived cell?free DNA assay used primarily in kidney transplant monitoring.
