What changed in this filing

/stocks — the workspaceLOADING

Item 1. Business

2021-02-24 compared with 2020-02-28 · 256 added, 213 removed, 437 unchanged (52% of the section changed)

Company Overview

(“CareDx” or the “Company” or “we” or “us” and “our”) together with our subsidiaries, is a leading precision medicine company focused on the discovery, development and commercialization of clinically differentiated, high-value healthcare solutions for transplant patients and caregivers.

We offer testing services, products, and digital solutions along the pre- and post-transplant patient journey, and is a leading provider of genomics-based information for transplant patients.

CareDx, Inc., or “CareDx” or the “Company” or “we” or “us” and “our”, together with our 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.

We offer testing services, products, and digital solutions along the pre- and post-transplant patient journey, and are a leading provider of genomics-based information for transplant patients.

Our headquarters are in South San Francisco, California.

The primary operations are in Brisbane, California;

Our primary operations are in Brisbane, California;

Omaha, Nebraska;

Fremantle, Australia and Stockholm, Sweden.

Testing Services

Our commercially available testing services consist of AlloSure® Kidney, which is a donor-derived cell-free DNA, or dd-cfDNA, solution for kidney transplant patients, and AlloMap® Heart, which is a gene expression solution for heart transplant patients.

During the year 2019, we performed more than 49,000 commercial AlloSure Kidney and AlloMap Heart tests from our Brisbane, California, laboratory.

Our commercially available testing services consist of AlloSure® Kidney, which is a donor-derived cell-free DNA, or dd-cfDNA solution for kidney transplant patients, AlloMap® Heart, which is a gene expression solution for heart transplant patients, and AlloSure® Heart, which is a dd-cfDNA test that can identify underlying cell injury leading to organ rejection.

We have initiated several clinical studies to generate data on our existing and planned future testing services.

In April 2020, we announced our first biopharma research partnership for AlloCell, a surveillance solution that monitors the level of engraftment and persistence of allogeneic cells for patients who have received cell therapy transplants.

We also offer 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.

In 2019, we began providing digital solutions to transplant centers following the acquisitions of Ottr Complete Transplant Management, or Ottr, Inc.

and XynManagement, Inc., or XynManagement.

During the year 2020, we performed more than 79,000 commercial AlloSure Kidney, AlloMap Heart and AlloSure Heart tests from our Brisbane, California, laboratory.

According to the U.S.

Department of Health and Human Services’ Organ Procurement and Transplantation Network, there are approximately 346 and 216 centers performing kidney and heart transplants, respectively, in the United States.

AlloSure Kidney applies proprietary next generation sequencing technology to measure donor-derived cell-free DNA, or dd-cfDNA, in the blood stream emanating from the donor kidney.

We believe AlloSure Kidney may help clinicians determine rejection-specific activity manifested as cell damage in the transplanted heart, kidney or other solid organ, irrespective of the type of organ transplanted.

We also believe the use of AlloSure Kidney, in conjunction with other clinical indicators, can help healthcare providers and their patients better manage long-term care following a kidney transplant.

In particular, we believe AlloSure Kidney can improve patient care by helping healthcare providers to reduce the use of invasive biopsies and determine the appropriate dosage levels of immunosuppressants.

Effective October 9, 2017, AlloSure Kidney became available for commercial testing with Medicare coverage and reimbursement.

The Medicare reimbursement rate for AlloSure Kidney is $2,841.

AlloSure Kidney has also received payment from private payers on a case-by-case basis, with the first private payer, BCBS of South Carolina, issuing a positive coverage decision in its October 2019 review.

Prior to the commercialization of AlloSure Kidney, we generated a strong body of clinical evidence.

In late 2015, we announced the completion of analytical validation of AlloSure Kidney.

A report describing the analytical validation of AlloSure Kidney, including clinical validation detailing the quality, reality and consistency of analytical results information for heart transplant, appeared in the November 2016 issue of The Journal of Molecular Diagnostics.

The Circulating Donor-Derived Cell-Free DNA in Blood for Diagnosing Acute Rejection in Kidney Transplant Recipients, or DART, trial, sponsored by us, was conducted between April 2015 and January 2018.

DART was a 14 center observational study of kidney transplant recipients where blood specimens are drawn periodically after transplant during follow up visits and also after treatment for acute rejection.

By the time of completion of the first analysis, 384 patients were followed in DART for up to 24 months.

The results demonstrated that increased levels of dd-cfDNA, determined by the AlloSure Kidney assay, discriminated active rejection of a kidney transplant more effectively than serum creatinine values.

In collaboration with clinical investigators, we published these findings in the scientific peer-reviewed Journal of the American Society of Nephrology and the Journal of Applied Laboratory Medicine in March 2017.

A total of 2,109 patient visits had been accrued in DART by January 2018.

We analyzed this data to report on additional findings from this dataset at the American Transplant Congress, or ATC, held in 2019 and intend to continue to report additional findings into the future.

In January 2018, we initiated the Kidney Allograft Outcomes AlloSure Kidney Registry study, or K-OAR, to develop further data on the clinical utility of AlloSure Kidney for surveillance of kidney transplant recipients.

Testing Services

We develop and provide a diagnostic surveillance testing service for kidney and heart transplant recipients.

AlloSure Kidney, our transplant surveillance solution, was commercially launched in October 2017 and is our dd-cfDNA offering built on a Next Generation Sequencing, or NGS, platform.

In transplantation, 109 papers from 55 studies globally have shown the value of dd-cfDNA in the management of solid organ transplantation.

AlloSure Kidney is able to discriminate dd-cfDNA from recipient-cell-free DNA, targeting polymorphisms between donor and recipient.

This single-nucleotide polymorphism, or SNPs, approach across all the somatic chromosomes is specifically designed for transplantation, allowing a scalable, high-quality test to differentiate dd-cfDNA.

AlloSure Kidney has received positive coverage decisions for reimbursement from Medicare.

The Medicare reimbursement rate for AlloSure Kidney is currently $2,841.

AlloSure Kidney has received positive coverage decisions from Blue Cross Blue Shield, or BCBS of South Carolina, BCBS of Kansas City and Capital Health, and is reimbursed by other private payers on a case-by-case basis.

Multiple studies have demonstrated that significant allograft injury can occur in the absence of changes in serum creatinine.

Thus, clinicians have limited ability to detect injury early and intervene to prevent long term damage using this marker.

While histologic analysis of the allograft biopsy specimen remains the standard method used to assess injury and differentiate rejection from other injury in kidney transplants, as an invasive test with complications, repetitive biopsies are not well tolerated.

AlloSure Kidney provides a non-invasive test, assessing allograft injury that enables more frequent, quantitative and safer assessment of allograft rejection and injury status.

Beyond allograft rejection, the assessment of molecular inflammation has shown further utility in the assessment of proteinuria, the formation of De Novo donor specific antibodies, or DSAs, and as a surrogate predictive measure of estimated glomerular filtration rate, or eGFR, decline.

Monitoring of graft injury through AlloSure Kidney allows clinicians to optimize allograft biopsies, identify allograft injury and guide immunosuppression management more accurately.

Since the analytical validation paper in the Journal of Molecular Diagnostics in 2016, before the commercial launch of AlloSure Kidney, there has been an increasing body of evidence supports the use of AlloSure Kidney dd-cfDNA in the assessment and surveillance of kidney transplants.

Bloom et al, the lead authors on the cfDNA and Active Rejection in Kidney Allografts paper, evaluated 102 kidney recipients and demonstrated that dd-cfDNA levels could discriminate accurately and non-invasively distinguish rejection from other types of graft injury.

In contrast, serum creatinine has area under the curve, or AUC, of 50%, showing no significant difference between patients with and without rejection.

Multiple publications and abstracts have shown AlloSure Kidney’s value in the management of BK viremia, as well as numerous pathologies that cause molecular inflammation and injury such as DSAs and eGFR decline.

Most recently its utility in the assessment of T-cell mediated rejection (TCMR) 1A and borderline rejection has also been published in the American Journal of Transplant, or the AJT.

The prospective multicenter trial, the Kidney Allograft Outcomes AlloSure Kidney Registry stud y, or K-OAR, has enrolled over 1,700 patients, with plans to survey patients with AlloSure Kidney for 3 years and provide further clinical utility of AlloSure Kidney in the surveillance of kidney transplant recipients.

KidneyCare combines the dd-cfDNA analysis of AlloSure Kidney with the gene expression profiling technology of AlloMap Kidney and the predictive artificial intelligence technology of KidneyCare iBox in one surveillance solution.

We have not yet made any applications to private payers for reimbursement coverage of AlloMap Kidney or KidneyCare iBox.

In September 2019, we announced the enrollment of the first patient in the Outcomes of KidneyCare on Renal Allografts, or OKRA, study, which is an extension of the K-OAR study.

OKRA is a prospective, multi-center, observational registry of patients receiving KidneyCare for surveillance.

We have not yet made any applications to payers for reimbursement coverage of AlloMap Kidney or KidneyCare iBox.

Our first commercialized testing solution, the AlloMap Heart transplant molecular test, or AlloMap Heart, is a gene expression test that helps clinicians monitor and identify heart transplant recipients with stable graft function who have a low probability of moderate-to-severe acute cellular rejection.

Since 2008, we have sought to expand the adoption and utilization of our AlloMap Heart solution through ongoing studies to substantiate the clinical utility and actionability of AlloMap Heart, secure positive reimbursement decisions for AlloMap Heart from large private and public payers, develop and enhance our relationships with key members of the transplant community, including opinion leaders at major transplant centers, and explore opportunities and technologies for the development of additional solutions for post-transplant surveillance.

We believe the use of AlloMap Heart, in conjunction with other clinical indicators, can help healthcare providers and their patients better manage long-term care following a heart transplant.

In particular, we believe AlloMap Heart can improve patient care by helping healthcare providers avoid the use of unnecessary, invasive surveillance biopsies and determine the appropriate dosage levels of immunosuppressants.

AlloMap Heart has received 510(k) clearance from the U.S.

Food and Drug Administration, or FDA, for marketing and sale as a test to aid in the identification of recipients with a low probability of moderate or severe acute cellular rejection.

Combined with K-OAR, 4,000 patients will be enrolled into the study.

AlloMap Heart is a gene expression test that helps clinicians monitor and identify heart transplant recipients with stable graft function who have a low probability of moderate-to-severe acute cellular rejection.

Since 2008, we have sought to expand the adoption and utilization of our AlloMap Heart solution through ongoing studies to substantiate the clinical utility and actionability of AlloMap Heart, secure positive reimbursement decisions from large private and public payers, develop and enhance our relationships with key members of the transplant community, including opinion leaders at major transplant centers, and explore opportunities and technologies for the development of additional solutions for post-transplant surveillance.

We believe the use of AlloMap Heart, in conjunction with other clinical indicators, can help healthcare providers and their patients better manage long-term care following a heart transplant, can improve patient care by helping healthcare providers avoid the use of unnecessary, invasive surveillance biopsies and may help to determine the appropriate dosage levels of immunosuppressants.

In 2008, AlloMap Heart received 510(k) clearance from the U.S.

Food and Drug Administration, or the FDA, for marketing and sale as a test to aid in the identification of heart transplant recipients, who have a low probability of moderate/severe acute cellular rejection at the time of testing, in conjunction with standard clinical assessment.

The 510(k) clearance from the FDA is also for an In Vitro Diagnostic Multivariate Index Assay, or IVDMIA.

AlloMap Heart Score Variability, or AMV, is an additional service we offer providing complementary information to help personalize long-term care of heart transplant recipients.

It is available only upon request by clinicians.

A patient’s AMV is based on the variability of a patient’s AlloMap Heart scores over time and may be used as a risk stratification tool in estimating the probability that one or more of the clinical events in heart transplant recipients may occur in the future.

AMV may be computed from four AlloMap Heart test results within a 24-month period.

In addition, the clinical utility of AlloMap Heart is supported by numerous clinical trials that we have sponsored, the results of which have been published in leading peer-reviewed medical journals

AlloMap Heart has been a covered service for Medicare beneficiaries since January 1, 2006.

The Medicare reimbursement rate for AlloMap Heart is currently $3,240.

AlloMap Heart has also received positive coverage decisions from many of the largest U.S.

private payers, including Aetna, Anthem, Cigna, Health Care Services Corporation, or HCSC, Humana, Kaiser Foundation Health Plan, Inc., and UnitedHealthcare.

We have also successfully completed a number of landmark clinical trials in the transplant field demonstrating the clinical utility of AlloMap Heart for surveillance of heart transplant recipients.

We initially established the analytical and clinical validity of AlloMap Heart on the basis of our Cardiac Allograft Rejection Gene Expression Observational (Deng, M.

et al., Am J Transplantation 2006), or CARGO, study, which was published in the American Journal of Transplantation.

AlloMap Heart has also received positive coverage decisions for reimbursement from many of the largest U.S.

private payers, including Aetna, Cigna, Health Care Services Corporation, or HCSC, Humana, Kaiser Foundation Health Plan, Inc., or Kaiser, several BCBS plans and UnitedHealthcare.

In October 2020, AlloSure Heart received a final Palmetto MolDx Medicare coverage decision for AlloSure Heart.

In November 2020, Noridian Healthcare Solutions, our Medicare Administrative contractor, issued a parallel coverage policy granting coverage when used in conjunction with AlloMap Heart, which became effective in December 2020.

The Medicare reimbursement rate for AlloSure Heart is currently $2,753.

We have also successfully completed several landmark clinical trials in the transplant field demonstrating the clinical utility of AlloMap Heart for surveillance of heart transplant recipients.

We initially established the analytical and clinical validity of AlloMap Heart based on our Cardiac Allograft Rejection Gene Expression Observational (Deng, M.

et al., Am J Transplantation 2006), or CARGO, study, which was published in the AJT.

A subsequent clinical utility trial, Invasive Monitoring Attenuation through Gene Expression (Pham MX et al., N.

2 unchanged sentences

AlloMap Heart is now recommended as part of the International Society for Heart and Lung Transplantation, or ISHLT, guidelines.

In September 2018, we initiated the Surveillance HeartCare ™ Outcomes Registry, or SHORE.

SHORE is a prospective, multi-center, observational, registry of patients receiving HeartCare for surveillance.

HeartCare combines the gene expression profiling technology of AlloMap Heart with the dd-cfDNA analysis of AlloSure Heart in one surveillance solution.

An approach to surveillance using HeartCare provides information from the two complementary measures:

HeartCare includes the gene expression profiling technology of AlloMap Heart with the dd-cfDNA analysis of AlloSure Heart in one surveillance solution.

An approach to surveillance using HeartCare provides information from two complementary measures:

(i) AlloMap Heart – a measure of immune activation, and (ii) AlloSure Heart – a measure of graft injury.

Clinical validation data from the Donor-Derived Cell-Free DNA-Outcomes AlloMap Registry (NCT02178943), or D-OAR, was published in AJT in 2019.

D-OAR was an observational, prospective, multicenter study to characterize the AlloSure Heart dd-cfDNA in a routine, clinical surveillance setting with heart transplant recipients.

The D-OAR study was designed to validate that plasma levels of AlloSure Heart dd-cfDNA can discriminate acute rejection from no rejection, as determined by endomyocardial biopsy criteria.

HeartCare provides robust information about distinct biological processes, such as immune quiescence, active injury, Acute Cellular Rejection, or ACR, and Antibody Mediated Rejection, or AMR.

We have not yet made any applications to private payers for reimbursement coverage of AlloSure Heart except for Medicare.

In August 2019, AlloSure Heart received a positive draft Local Coverage Determination, or dLCD, for Medicare coverage.

In September 2018, we initiated the Surveillance HeartCare ™ Outcomes Registry, or SHORE study.

SHORE is a prospective, multi-center, observational, registry of patients receiving HeartCare for surveillance.

Patients enrolled in SHORE will be followed for 5 years with collection of clinical data and assessment of 5-year outcomes.

In February 2019, AlloSure ® Lung became available for lung transplant patients through a compassionate use program while the test is undergoing further studies.

AlloSure Lung applies proprietary next generation sequencing, or NGS, technology to measure dd-cfDNA in the blood stream emanating from the donor lung to monitor graft injury.

We have not yet made any applications to payers for reimbursement coverage of AlloSure Lung.

One of these studies, launched in April 2020, is the ALARM study, or AlloSure Lung Allograft Remote Monitoring, with Johns Hopkins University, where the impact of AlloSure Lung combined with RemoTraC will be measured.

AlloSure Lung applies proprietary NGS technology to measure dd-cfDNA from the donor lung in the recipient bloodstream to monitor graft injury.

In June 2020, we submitted an application to the Palmetto MolDx Technology Assessment program seeking coverage and reimbursement for AlloSure Lung.

Cellular Therapy

In April 2020, we initiated a research partnership for AlloCell, a surveillance solution that monitors the level of engraftment and persistence of allogeneic cells for patients who have received cell therapy transplants.

AlloCell will initially be commercialized through collaborative research agreements with biopharma companies developing cell therapies.

We develop, manufacture, market and sell products that increase the chance of successful transplants by facilitating a better match between a solid organ or stem cell donor and a recipient, and help to provide post-transplant surveillance of these recipients.

2 unchanged sentences

Olerup SBT is a complete product range for sequence-based typing of HLA alleles.

On May 4, 2018, we entered into the License Agreement with Illumina, which provides us with worldwide distribution, development and commercialization rights to Illumina’s NGS product line for use in transplantation diagnostic testing.

As a result, on June 1, 2018, we became the exclusive worldwide distributor of Illumina’s TruSight® HLA product line.

On May 4, 2018, we entered into a license agreement with Illumina, Inc., or Illumina, which provides us with worldwide distribution, development and commercialization rights to Illumina’s NGS products and technologies for use in transplantation diagnostic testing, or the Illumina Agreement.

On June 1, 2018, we became the exclusive worldwide distributor of Illumina’s TruSight HLA product line.

TruSight HLA is a high-resolution solution that uses NGS methodology.

2 unchanged sentences

AlloSeq Tx, a high-resolution HLA typing solution, AlloSeq cfDNA, our surveillance solution designed to measure dd-cfDNA in blood to detect active rejection in transplant recipients, and AlloSeq HCT, a NGS solution for chimerism testing for stem cell transplant recipients.

In 2019, we began providing digital solutions to transplant centers following the acquisitions of OttrCare and XynManagement.

On May 7, 2019, we acquired 100% of the outstanding common stock of OttrCare.

OttrCare was formed in 1993 and is a leading provider of transplant patient tracking software, or the Ottr® software, which provides comprehensive solutions for transplant patient management.

Ottr software enables integration with electronic medical records, or EMR systems, including Cerner and Epic, providing patient surveillance management tools and outcomes data to transplant centers.

In September 2019, we commercially launched AlloSeq cfDNA during the European Society for Organ Transplantation, or ESOT, Congress.

AlloSeq cfDNA is our surveillance solution designed to measure dd-cfDNA in blood to detect active rejection in transplant recipients, and we received CE mark authorization on January 10, 2020.

AlloSeq cfDNA is now commercially available for transplant patients outside of the U.S.

Our ability to increase the clinical uptake for AlloSeq cfDNA will be a result of multiple factors, including local clinical education, customer lab technical proficiency and levels of country-specific reimbursement.

Also in September 2019, we commercially launched AlloSeq Tx during the American Society for Histocompatibility and Immunogenetics, or ASHI, and Banff Foundation for Allograft Pathology’s Joint meeting in Pittsburgh, PA.

AlloSeq Tx is the first of its kind NGS high-resolution HLA typing solution utilizing hybrid capture technology.

This technology enables the most comprehensive sequencing, covering more of the HLA genes than current solutions and adding coverage of non-HLA genes that may impact transplant patient matching and management.

AlloSeq Tx has simple NGS workflow, with a single tube for processing and steps to reduce errors.

AlloSeq Tx 17 received CE mark authorization on May 15, 2020.

In June 2020, we commercially launched AlloSeq HCT, a NGS solution for chimerism testing for stem cell transplant recipients.

This technology has the potential to provide better sensitivity and data analysis compared to current solutions on the market.

Digital and Other

In 2019, we began providing digital solutions to transplant centers following the acquisition of Ottr Complete Transplant Management, or Ottr, Inc., and the acquisition of XynManagement, Inc., or XynManagement.

On May 7, 2019, we acquired 100% of the outstanding common stock of Ottr, Inc.

was formed in 1993 and is a leading provider of transplant patient tracking software, or the Ottr software, which provides comprehensive solutions for transplant patient management.

The Ottr software enables integration with electronic medical records, or EMR, systems, including Cerner Corporation, or Cerner, and Epic Systems Corporation, or Epic, providing patient surveillance management tools and outcomes data to transplant centers.

On August 26, 2019, we acquired 100% of the outstanding common stock of XynManagement.

XynManagement provides two unique solutions, XynQAPI ™ software, or XynQAPI, and Waitlist Management.

XynManagement provides two unique solutions, XynQAPI software, or XynQAPI, and XynCare.

XynQAPI simplifies transplant quality tracking and Scientific Registry of Transplant Recipients, or SRTR, reporting.

Waitlist Management includes a team of transplant assistants who maintain regular contact with patients on the waitlist to help prepare for their transplant and maintain eligibility.

Our software solutions are currently used in 84 transplant centers in the U.S.

XynCare includes a team of transplant assistants who maintain regular contact with patients on the waitlist to help prepare for their transplant and maintain eligibility.

Refer to Note 6 of the consolidated financial statements included elsewhere in this Annual Report on Form 10-K for further detail regarding these acquisitions.

In September 2020 we launched AlloCare, a mobile app that provides a patient-centric resource for transplant recipients to manage medication adherence, coordinate with Patient Care Managers for AlloSure scheduling and measure health metrics.

COVID-19 Pandemic

On January 30, 2020, the World Health Organization, or the WHO, announced a global health emergency because of a new strain of coronavirus, or COVID-19, originating in Wuhan, China and the risks to the international community as the virus spreads globally beyond its point of origin.

In March 2020, the WHO classified the COVID-19 outbreak as a pandemic, based on the rapid increase in exposure globally.

The full impact of the COVID-19 pandemic, including the impact associated with preventative and precautionary measures that we, other businesses and governments are taking, continues to evolve as of the date of this report.

As such, it is uncertain as to the full magnitude that the pandemic will have on us, but the pandemic may materially affect our financial condition, liquidity and future results of operations.

In the final weeks of March and during April 2020, with hospitals increasingly caring for COVID-19 patients, hospital administrators chose to limit or even defer, non-emergency procedures.

Immunosuppressed transplant patients either self-prescribed or were asked to avoid transplant centers and caregiver visits to reduce the risk of contracting COVID-19.

As a result, with transplant surveillance visits down, we experienced a slowdown in testing services volumes in the final weeks of March and during April 2020.

As a response to the COVID-19 pandemic, and to enable immune-compromised transplant patients to continue to have their blood drawn, in late March 2020, we launched RemoTraC, a remote home-based blood draw solution using mobile phlebotomy for AlloSure and AlloMap surveillance tests, as well as for other standard monitoring tests.

To date, more than 150 transplant centers can offer RemoTraC to their patients and over 6,000 kidney, heart and lung transplant patients have enrolled.

Based on existing and new relationships with partners we have established a nationwide network of more than 10,000 mobile phlebotomists.

Following the introduction of RemoTraC and with the easing of stay-at-home restrictions and the opening up of many hospitals to non-COVID-19 patients, our testing services volumes returned to levels consistent with those experienced immediately prior to the COVID-19 pandemic, and through December 31, 2020, volumes continued to be at or above those levels since May 2020.

In spite of the resurgence of COVID-19 infection rates, which resulted in increased stay-at-home and renewed travel restrictions, our testing services did not experience a decrease in testing services volumes.

Our product business experienced a reduction in forecasted sales volume throughout the second and third quarters of 2020, as we were unable to undertake onsite discussions and demonstrations of our recently launched NGS products, including AlloSeq Tx 17, which was awarded CE mark authorization in May 2020.

Our product business maintained normal sales volumes during the fourth quarter of 2020.

We are maintaining our testing, manufacturing, and distribution facilities while implementing specific protocols to reduce contact among our employees.

In areas where COVID-19 impacts healthcare operations, our field-based sales and clinical support teams are supporting providers through telephone and online platforms.

In August 2020, the state of California released revised criteria for loosening and tightening restrictions on certain activities on generally a county-by-county basis.

Under the updated executive orders, San Mateo County, where our laboratory and headquarters are located, continues to be subject to certain restrictions.

These orders and others may be further modified, amended and adopted depending upon the COVID-19 transmission rates in our county and state, as well as other factors.

In addition, we have created a COVID-19 task force that is responsible for crisis decision making, employee communications, enforcing pre-arrival temperature checking, daily health check-ins and enhanced safety training/protocols in our offices for employees that do not work from home.

Due to COVID-19, quarantines, shelter-in-place and similar government orders, or the perception that such orders, shutdowns or other restrictions on the conduct of business operations could occur or could impact personnel at third-party suppliers in the United States and other countries, or the availability or cost of materials, there may be disruptions in our supply chain.

Any manufacturing supply interruption of materials could adversely affect our ability to conduct ongoing and future research and testing activities.

In addition, our clinical studies may be affected by the COVID-19 pandemic.

Clinical site initiation and patient enrollment may be delayed due to prioritization of hospital resources toward the COVID-19 pandemic.

Some patients may not be able to comply with clinical study protocols if quarantines impede patient movement or interrupt healthcare services.

Similarly, the ability to recruit and retain patients and principal investigators and site staff who, as healthcare providers, may have heightened exposure to COVID-19, may adversely impact our clinical trial operations.

We were originally incorporated in Delaware in December 1998 under the name Hippocratic Engineering, Inc.

3 unchanged sentences

Our principal executive offices are located at 1 Tower Place, South San Francisco, California and our telephone number is (415) 287-2300.

On June 10, 2014, we acquired ImmuMetrix, Inc., or IMX, a privately held development-stage company focused on dd-cfDNA-based solutions in transplantation and other fields.

Through this acquisition, we added to our existing know-how, expertise and intellectual property in applying dd-cfDNA technology to the surveillance of transplant recipients, which has contributed to the development of AlloSure Kidney.

The intellectual property rights of IMX included an exclusive license from the Board of Trustees of the Leland Stanford Junior University, or Stanford, to a patent relating to the diagnosis of rejection in organ transplant recipients using dd-cfDNA.

On April 14, 2016, we acquired Allenex AB, or Allenex.

Our combination with Allenex created an international transplant diagnostics company with product offerings along the pre and post-transplant continuum.

As a result of the acquisition we now have a presence and direct distribution channels in the U.S.

and Europe, with additional third party distributors in Europe and other markets around the world.

On January 20, 2017, we acquired the business assets of Conexio Genomics Pty Ltd, Conexio, to offer a complete product range for sequence-based typing of HLA alleles.

On April 30, 2019, we entered into a license and collaboration agreement, or the Cibiltech Agreement, with Cibiltech SAS, or Cibiltech, to commercialize Cibiltech’s proprietary software and service offering known as KidneyCare iBox for the predictive analysis of post-transplantation kidney allograft loss.

We have the right to commercialize KidneyCare iBox in the U.S.

for a period of ten years.

On September 23, 2019, the KidneyCare iBox validation study from the Paris Transplant Group was

published in the British Medical Journal.

On September 18, 2019, we enrolled the first patient in the OKRA clinical study, which incorporates KidneyCare iBox.

On May 7, 2019, we acquired 100% of the outstanding common stock of OttrCare.

OttrCare was formed in 1993 and is a leading provider of transplant patient tracking software, or the Ottr software, which provides comprehensive solutions for transplant patient management.

Ottr software enables integration with electronic medical records, or EMR systems, including Cerner and Epic, providing patient surveillance management tools and outcomes data to transplant centers.

On August 26, 2019, we acquired 100% of the outstanding common stock of XynManagement.

XynManagement provides two unique solutions, XynQAPI software, or XynQAPI, and Waitlist Management.

XynQAPI simplifies transplant quality tracking and Scientific Registry of Transplant Recipients, or SRTR, reporting.

Waitlist Management includes a team of transplant assistants who maintain regular contact with patients on the waitlist to help prepare for their transplant and maintain eligibility.

Our software solutions are currently used in 84 transplant centers in the U.S.

For a further timeline of our history, please refer to our Annual Report on Form 10-K for the fiscal year ended December 31, 2019, filed with the SEC on February 28, 2020.

Our software solutions are currently used in over 90 transplant centers in the U.S.

As of December 31, 2020, substantially all of our revenues came from the United States and Europe, and substantially all of our assets and operations were located in the United States, Sweden and Australia.

35 unchanged sentences

• the ability to provide results with timing and at a frequency that allows for informed and effective treatment decisions.

Our Testing Services, Products and Digital

Testing Services

We develop and provide a diagnostic surveillance testing service for kidney and heart transplant recipients.

AlloSure Kidney, our surveillance solution for kidney transplant recipients, applies proprietary next generation sequencing technology to measure dd-cfDNA in the blood stream emanating from the donor organ.

The evidence for dd-cfDNA in transplantation has been increasing exponentially.

We strongly believe in the added clinical utility AlloSure Kidney brings to clinicians in the assessment of allograft injury, its ability to risk-stratify populations and determine rejection, as well as its response to treatment in a quantifiable manner, has changed the standard of care offered to transplant patients.

AlloSure Kidney has shown to have widespread utility as a leading indicator of allograft injury, with data supporting its use as part of assessment when considering de-novo donor specific antibody formation (dnDSA), estimated glomerular filtration rate (eGFR) decline, and borderline allograft rejection.

We believe the use of AlloSure Kidney, in conjunction with other clinical indicators, can help healthcare providers and their patients better manage long-term care following a kidney transplant, allowing optimization of therapy and medications, as well as acting early with better surveillance.

In particular, we believe AlloSure Kidney can improve patient care by helping healthcare providers to optimize the use of invasive biopsies and determine the appropriate dosage levels of immunosuppressants.

We have not yet made any applications to payers for reimbursement coverage of AlloMap Kidney or KidneyCare iBox.

Our first commercialized testing solution, AlloMap Heart, is a gene expression profiling test that helps clinicians monitor and identify heart transplant recipients with stable graft function who have a low probability of moderate-to-severe acute cellular rejection.

AlloMap Heart is designed to help health care providers and their patients to better manage long-term care, optimize the use of invasive surveillance biopsies and determine the appropriate dosage levels of immumosuppressant medications.

The clinical utility of AlloMap Heart is well established.

AlloMap Heart is the first and only non-invasive method recommended in the International Society for Heart & Lung Transplantation, or ISHLT, patient care guidelines as standard care.

AlloMap Heart uses a sample of the patient’s blood.

AlloMap Heart may be used instead of a surveillance heart biopsy to rule out acute cellular rejection in heart transplant recipients.

AlloMap Heart offers rapid, high quality results, and we aim to return AlloMap Heart results to the clinician within three business days after the blood draw.

AlloMap Heart has obtained 510(k) clearance from the FDA as an In Vitro Diagnostic Multivariate Index Assay, or IVDMIA.

AlloMap Heart Score Variability, or AMV, is an additional service we offer providing complementary information to help personalize long-term care of heart transplant recipients.

It is available only upon request by clinicians.

AMV may be computed from four AlloMap Heart test results within a 24-month period.

In addition, the clinical utility of AlloMap Heart is supported by numerous clinical trials that we have sponsored, the results of which have been published in leading peer-reviewed medical journals.

HeartCare combines the gene expression profiling technology of AlloMap Heart with the dd-cfDNA analysis of AlloSure Heart in one surveillance solution.

An approach to surveillance using HeartCare provides information from the two complementary measures:

(i) AlloMap Heart – a measure of immune activity, and (ii) AlloSure Heart – measures graft injury.

HeartCare provides complementary information about distinct biological processes, such as immune quiescence, active injury, Acute Cellular Rejection, or ACR, and Antibody Mediated Rejection, or AMR, in heart transplant recipients.

Clinical Trials of AlloSure Kidney and AlloMap Heart

Clinical Studies for our Testing Services

In March 2017, the Journal of the American Society of Nephrology published the article Cell-Free DNA and Active Rejection in Kidney Allografts.

The article reports that increased levels of dd-cfDNA detected using AlloSure Kidney are associated with active rejection of the kidney allograft.

The DART study evidence suggests that AlloSure Kidney, a non-invasive blood test, may enable more frequent, quantitative, and safer assessment of allograft rejection and injury.

The Diagnosing Acute Rejection in Kidney Transplant Recipients, or DART, study evidence suggests that AlloSure Kidney, a non-invasive blood test, may enable more frequent, quantitative, and safer assessment of allograft rejection and injury.

As part of a surveillance strategy, AlloSure Kidney could help identify patients with new or ongoing organ injury.

15 unchanged sentences

Publications based on the analyses of the accumulated DART database results were used as a guide to design K-OAR.

K-OAR is a multicenter, non-blinded, prospective observational cohort study which has enrolled 1,500 renal transplant recipients who will receive AlloSure Kidney as part of long-term surveillance.

K-OAR is a multicenter, non-blinded, prospective observational cohort study which has enrolled more than 1,700 renal transplant recipients who will receive AlloSure Kidney as part of long-term surveillance.

The clinical outcomes of these patients will be entered into a registry database as the patients will be surveilled for three years.

The study cohort will include a minimum of 300 patients from centers that use renal surveillance biopsies showing the value of AlloSure in subclinical rejection.

The study cohort will include a minimum of 300 patients from centers that use renal surveillance biopsies showing the value of AlloSure Kidney in subclinical rejection.

The remaining patients will be from centers that do not perform protocol surveillance biopsies, but for cause biopsies, which is the more common practice.

2 unchanged sentences

The primary safety endpoint of this study is the amount of kidney tissue scarring and atrophy at one-year post-transplant, quantified by biopsy-based histopathology grade(s).

The primary efficacy endpoint is the change in estimated glomerular filtration rate (eGFR) with the number of renal allograft biopsies performed during the first year being a secondary outcome.

The primary efficacy endpoint is the change in eGFR with the number of renal allograft biopsies performed during the first year being a secondary outcome.

Other endpoints include patient survival, graft survival, change and serum creatinine, evaluated at years 1, 2 and 3 post-transplantation.

In September 2019, we announced the commencement of the OKRA study.

OKRA is an extension of K-OAR.

In January 2018, we initiated the “K-OAR” study to develop additional data on the clinical utility of AlloSure Kidney for surveillance of kidney transplant recipients.

K-OAR is a multicenter, non-blinded, prospective observational cohort study which has enrolled more than 1,700 renal transplant patients who will receive AlloSure Kidney long-term surveillance.

In September 2019, we announced the commencement of the “OKRA” study, which is an extension of K-OAR.

OKRA is a prospective, multi-center, observational, registry of patients receiving KidneyCare for surveillance.

The patient transplant

registry, will total 4,000 transplant patients, being statistically powered to determine the utility of KidneyCare and AlloSure Kidney to the current standards of care.

It will provide real world data, with OKRA targeting more than 50 transplant centers and enrolling a further 1,500 newly transplanted patients.

The addition of OKRA to K-OAR and the control arm is how the total of 4,000 is reached.

We have not yet made any applications to private payers for reimbursement coverage of AlloMap Kidney or KidneyCare iBox.

Enrollment for OKRA was negatively affected by the COVID-19 restrictions during the year 2020 and the study has been delayed by six months;

however, the collection of samples is currently at normal levels as a result of the introduction of RemoTraC.

The clinical validation and utility of AlloMap Heart is supported by a number of major clinical trials involving more than 2,000 heart transplant recipients and published in leading peer-reviewed medical journals.

7 unchanged sentences

We have also published two reports of retrospective analyses from IMAGE and CARGO II trials that demonstrate that the variability in AlloMap Heart scores over time in an individual patient may be useful in predicting the risk for the patient of a future event of rejection and graft dysfunction.

In September 2018, we initiated the SHORE registry.

In September 2018, we initiated the SHORE study.

SHORE is a prospective, multi-center, observational registry of patients receiving HeartCare for surveillance.

HeartCare combines the gene expression profiling technology of AlloMap Heart with the dd-cfDNA analysis of AlloSure Heart in one surveillance solution.

An approach to surveillance using HeartCare provides information from the two complementary measures:

(i) AlloMap Heart – a measure of immune activation, and (ii) AlloSure Heart – a measure of graft injury.

HeartCare provides robust information about distinct biological processes, such as immune quiescence, active injury, Acute Cellular Rejection, or ACR, and Antibody Mediated Rejection, or AMR.

We have not yet made any applications to private payers for reimbursement coverage of AlloSure Heart except for Medicare.

In August 2019, AlloSure Heart received a positive draft Local Coverage Determination, or dLCD, for Medicare coverage.

HeartCare combines the gene expression profiling technology of Al loMap Heart with the dd-cfDNA analysis of AlloSure ® Heart in one surveillance solution.

Our suite of AlloSeq products are commercial “NGS”-based kitted solutions that we have developed as a result of the Illumina Agreement.

These products include:

AlloSeq ™ Tx, a high-resolution “HLA” typing solution, AlloSeq ™ cfDNA, a surveillance solution designed to measure dd-cfDNA in blood to detect active rejection in transplant recipients, and AlloSeq ™ HCT, a solution for chimerism testing for stem cell transplant recipients.

Our other HLA typing products include:

TruSight HLA, a NGS-based high resolution typing solution;

Olerup SSP, based on the “SSP” technology;

and QTYPE, which uses real-time “PCR” methodology, to perform HLA typing at a low to intermediate resolution for samples that require a fast turnaround time.

QTYPE was commercially launched at the end of September 2016.

QTYPE enables HLA typing at a low to intermediate resolution for samples that require a fast turn-around-time and uses real-time polymerase chain reaction, or PCR, methodology.

QTYPE enables HLA typing at a low to intermediate resolution for samples that require a fast turn-around-time and uses real-time PCR methodology.

QTYPE primarily focuses on low to intermediate resolution typing where high-resolution typing is not a requirement but even more rapid typing results are required, such as for deceased donor typing.

3 unchanged sentences

Olerup SSP is used to type HLA alleles based on the SSP technology.

Olerup SSP is used to type HLA alleles, based on SSP technology.

The Olerup SSP product line comprises products for low to high-resolution HLA typing.

6 unchanged sentences

TruSight HLA is a NGS-based high-resolution typing solution that provides NGS-level resolution to HLA typing.

CareDx licensed the exclusive world-wide distribution rights to this product from Illumina in May 2018.

We licensed the exclusive world-wide distribution rights to this product from Illumina in May 2018.

In addition, we were granted the exclusive right to develop and commercialize other NGS product lines.

2 unchanged sentences

Our AlloSeq products are designed to run on Illumina’s NGS instrumentation.

In September 2019, we launched AlloSeq Tx during the American Society for Histocompatibility and Immunogenetics, or ASHI, and Banff Foundation for Allograft Pathology’s Joint meeting in Pittsburgh, PA.

AlloSeq Tx is a first of its kind NGS HLA typing solution utilizing hybrid capture technology.

This technology enables comprehensive sequencing, covering more genes than current solutions, including coverage of non-HLA genes that may impact transplant patient matching and management.

AlloSeq Tx has straightforward NGS workflow, with a single tube for processing and steps to reduce errors.

In September 2019, we launched AlloSeq cfDNA during the European Society for Organ Transplantation, or ESOT, Congress.

AlloSeq cfDNA has been utilized by beta sites in four countries, and is now commercially available for transplant patients outside of the US.

During the ESOT Congress we held a workshop titled "Innovation in Transplant Diagnostic for Improving Patient Care".

The workshop featured the clinical utility and evidence of dd-cfDNA as a biomarker and unveiled the European clinical study with AlloSeq cfDNA.

On January 10, 2020, AlloSeq cfDNA received CE mark approval.

Through our acquisition of OttrCare, we provide transplant patient tracking software for transplant patient management.

Ottr software enables integration with electronic medical records, or EMR systems, including Cerner and Epic, providing patient surveillance management tools and outcomes data to transplant centers.

Through our acquisition of XynManagement, we provide XynQAPI software for transplant quality tracking and SRTR reporting.

Our software solutions are currently used in 84 transplant centers in the U.S.

Research and Development

1 unchanged sentence

Clinical operations dedicated to the design and implementation of high quality studies and registries for data collection to develop evidence to address unmet clinical needs of transplant recipients are included in research and development.

Research and development activities to integrate recently acquired technology from the acquisitions of OttrCare and XynManagement and our Cibiltech Agreement have also been an area of recent focus.

Integration of such technology with our current service offerings aligns an incredibly rich data set with augmented intelligence tools to better assess risk and help physicians better manage their daily patient care.

One area of focus for research and development activities has been to integrate acquired technology from the acquisitions of Ottr, Inc.

and XynManagement and our Cibiltech Agreement.

Integration of such technology with our current service offerings aligns a rich data set with augmented intelligence tools to better assess risk and help physicians better manage their daily patient care.

Research and development expenses of $48.9 million, $30.7 million and $14.5 million were incurred during the years ended December 31, 2020, 2019 and 2018, respectively.

2 unchanged sentences

• validation and clinical utility studies of AlloSure Kidney for other organs such as lung, pancreas and liver;

• increasing understanding of biological processes of transplant rejection through analysis of genes/metagenes of archived clinical trials, OAR registry, SHORE registry and commercial laboratory testing to further improve clinical utility of AlloMap Heart;

• technology platform and procedure optimization as well as further advances of laboratory information management to increase efficiency and lower costs in our testing and laboratory operations;

34 unchanged sentences

(i) AlloMap Heart – a measure of immune activation, and (ii) AlloSure Heart – measures graft injury.

HeartCare provides complementary information about distinct biological processes, such as immune quiescence, active injury, Acute Cellular Rejection and Antibody Mediated Rejection in heart transplant recipients.

HeartCare provides complementary information about distinct biological processes, such as immune quiescence, active injury, ACR and AMR in heart transplant recipients.

We have established our proprietary strategy for quantification of donor specific dd-cfDNA and published a validation study of AlloSure Heart in 2019.

We now offer AlloSure Heart as a laboratory developed test as part of our SHORE study of dd-cfDNA in association with gene-expression profiling (AlloMap Heart) in heart transplant recipients.

We have established a strategic partnership with NanoString Technologies, Inc., or NanoString, to develop HistoMap, a gene expression profiling, or GEP, solution to identify allograft rejection in transplant biopsy tissue.

We have established a strategic research partnership with NanoString Technologies, Inc., or NanoString, to develop HistoMap, a gene expression profiling, or GEP, solution to identify allograft rejection in transplant biopsy tissue.

NanoString is a leading provider of life science tools for translational research and molecular diagnostic products.

1 unchanged sentence

We will utilize NanoString’s nCounter® technology in conjunction with the newly introduced Human Organ Transplant panel, a 770-gene panel designed to evaluate the human immune response in biopsy tissue from a transplanted organ.

In May 2020, we established a partnership with Veracyte, Inc., pursuant to which we have certain exclusive worldwide field rights to develop and commercialize products, such as HistoMap using the nCounter technology.

Product Advancement and Development

Ongoing research and development in the pre-transplant arena encompasses six areas.

First, the last decade of next generation sequencing has unveiled significant additional sequence diversity in the HLA region on chromosome 6 of the human genome.

Our ongoing research and development for products is divided between kitted products for pre-transplant and post-transplant.

In the last decade of next generation, the ubiquity of sequencing has unveiled significant additional sequence diversity in the HLA region on chromosome 6 of the human genome.

While the clinical impact of some of the sequence diversity is unclear, many newly identified HLA alleles need to be integrated into ongoing updates of the QTYPE and AlloSeq Tx kits.

1 unchanged sentence

QTYPE and AlloSeq Tx use technology platforms that can readily accommodate this increase in HLA allele assays.

Second, the advent of NGS technology has enabled significant improvement in HLA sequencing data.

The advent of NGS technology has enabled significant improvement in HLA sequencing data.

We are developing further improved versions of NGS HLA testing that will provide full gene coverage while streamlining the laboratory workflow.

We expanded our market-leading portfolio of transplantation product with the global launch of AlloSeq cfDNA at the ESOT Congress.

We estimate this launch will enable access to our cfDNA surveillance technology to an additional 800,000 patients outside the United States.

We also introduced AlloSeq Tx at the ASHI Conference.

AlloSeq Tx is the first of its kind next-generation sequencing HLA typing solution, utilizing hybrid capture technology.

1 unchanged sentence

Our HLA typing products are used in labs throughout the world to help determine which organs or bone marrow are a transplantation match between the donor and the recipient.

Third, our AlloSeq Tx NGS testing platform is a technology departure from commonly used approaches for HLA typing.

This enables the addition of non-HLA genes critical to transplant outcome.

The addition of non-HLA genes will have no impact on workflow and enable the inclusion of increasing content, as new transplant outcome related genes are described.

Fourth, depending on the specific indication, different levels of HLA typing resolution and follow up confirmatory testing are required.

Olerup SSP and QTYPE flexible platforms are complemented with Olerup SBT and TruSight HLA, and our research and development staff weave together the four typing product offerings to effectively address laboratory needs.

Fifth, the complexity of the HLA region benefits significantly from interpretive software solutions for the laboratories.

We are committed to ongoing upgrades to our software solutions to further simplify the use of the various HLA kits.

Finally, our research and development staff in transplant environment is working closely together to advance the synergies of products across the pre- and post-transplant continuum.

We expanded our market-leading portfolio of NGS transplantation offerings with the global launch of AlloSeq cfDNA and AlloSeq HCT.

These post-transplant surveillance products enable access to our dd-cfDNA technology to laboratories and patients outside the United States.

We also introduced AlloSeq Tx at the 2019 ASHI Annual Meeting and continue to improve the product.

Finally, our research and development staff are collaborating to advance the synergies of products across the pre- and post-transplant continuum.

Digital Solutions Business Development

We acquired OttrCare and XynManagement in 2019.

We acquired Ottr, Inc.

and XynManagement in 2019.

These acquisitions have strengthened our growing portfolio of transplant software solutions such as Ottr and XynQAPI.

2 unchanged sentences

Our vision is to add smart analytics and machine learning to artificial intelligence in transplant, which we call AiTraC.

Going forward, we will strive to bring our multi-modality testing solutions and machine learning algorithms to the transplant

clinic under our AiTrack umbrella.

Going forward, we will strive to bring our multi-modality testing solutions and machine learning algorithms to the transplant clinic under our AiTraC umbrella.

AiTraC will utilize the large clinical data that are collected through our registry studies to provide caregivers with point of care decision-making support tools that allow them to stratify the patient population.

We are actively working on partnerships in order to help our in house software resources continue to execute on a vision of including smart analytics in the user experience.

Reimbursement

2 unchanged sentences

Reimbursement for AlloMap Heart comes primarily from Medicare and private third party payers such as insurance companies and managed care organizations.

We are reimbursed by Medicare for AlloSure Kidney and AlloMap Heart tests performed on patients covered by Medicare.

We are reimbursed by Medicare for AlloSure Kidney, AlloMap Heart and AlloSure Heart tests performed on patients covered by Medicare.

Tests performed on patients covered by Medicare represented 48%, 49% and 46% of all tests in 2020, 2019 and 2018, respectively.

Approximately 67%, 66% and 62% of all testing services revenue was derived from Medicare for the years ended December 31, 2020, 2019 and 2018, respectively.

Effective October 9, 2017, AlloSure Kidney was reimbursed for kidney transplant patients covered by Medicare.

AlloSure Kidney has been a covered service for Medicare beneficiaries since October 2017.

The Medicare reimbursement rate for AlloSure Kidney is currently $2,841.

Medicare coverage and reimbursement was determined by the Molecular Diagnostic Services Program, or MolDx, administered by Palmetto.

AlloSure Kidney has received positive coverage decisions from BCBS of South Carolina, BCB S of Kansas City and Capital Health, and is reimbursed by other private payers including Kaiser on a contract or case-by-case basis.

Following the assignment of a Category 1 Current Procedural Terminology, or CPT code, for AlloMap Heart in September 2015, CMS issued a proposed Clinical Laboratory Fee Schedule, or CLFS, Preliminary Determinations for calendar year 2016.

3 unchanged sentences

CMS will use the rates and volumes reported by laboratories to develop Medicare payment rates for the tests equal to the volume-weighted median of the private payer payment rates for the tests.

Effective January 1, 2018, Medicare reimburses $3,240 for AlloMap Heart testing of Medicare beneficiaries, which remains applicable through 2021.

In August 2019, AlloSure Heart received a positive draft local coverage determination for Medicare coverage from MolDx.

The CARES Act freezes current (2020) CMS CLFS rates through 2021.

Further, the CARES Act delays the reporting cycle under PAMA to January 1 and March 31, 2025, and the preceding data collection period will become January 1 through June 30, 2024.

AlloMap Heart has been a covered service for Medicare beneficiaries since January 2006.

The Medicare reimbursement rate for AlloMap Heart is currently $3,240.

Al loMap Heart has also received positive coverage decisions for reimbursement from many of the largest U.S.

private payers, including Aetna, Cigna, HCSC, Humana, Kaiser and UnitedHealthcare.

In October 2020, AlloSure Heart received a final Palmetto MolDx Medicare coverage decision for AlloSure Heart.

The Medicare reimbursement rate for AlloSure Heart is currently $2,753.

Private Payers and Medicaid Payers

As of today, there has been one private payer that has adopted a positive coverage policy for AlloSure Kidney, BCBS of South Carolina.

Due to End Stage Renal Disease, or ESRD, regulations by Medicare, most ESRD patients are covered by Medicare and Medicare Advantage plans and have access to AlloSure Kidney.

Private payers that have adopted a positive coverage policy for AlloSure Kidney include BCBS of South Carolina, BCBS of Kansas City, Kaiser and Capital Blue.

However, other private payers and Medicaid payers have not yet adopted positive coverage policies for AlloSure Kidney.

We are reimbursed for a substantial portion of the AlloMap Heart tests we perform on patients covered by private payers.

Coverage policies approving AlloMap Heart for reimbursement have been adopted by many of the largest private payers, including Aetna, Anthem, Cigna, Health Care Services, or HCSC, Humana, Kaiser Foundation Health Plan, Inc., and UnitedHealthcare.

Coverage policies approving AlloMap Heart have approached nearly 90% of all covered lives and are published by many of the largest private payers, including Aetna, Anthem, Cigna, HCSC, Humana, Kaiser, and UnitedHealthcare.

Many other payers have positive coverage policies for AlloMap Heart.

For AlloSure Kidney and AlloMap Heart tests performed outside the scope of the payer’s policy, and for tests performed where the payer has not adopted a coverage policy, we pursue reimbursement on a case-by-case basis.

AlloSure Heart is covered by Geisinger Health Plan and Kaiser.

AlloSure Kidney is covered by BCBS of South Carolina, BCBS of Kansas City and Kaiser.

For all tests performed outside the scope of the payer’s policy, and for tests performed where the payer has not adopted a coverage policy, we pursue reimbursement on a case-by-case basis.

If a reimbursement claim is denied, we generally pursue payment through the particular payer’s appeal process.

3 unchanged sentences

Testing and Laboratory Operations

Our laboratory operations, where we perform all AlloSure Kidney and AlloMap Heart testing, are headquartered at our Brisbane, California laboratory.

AlloSure Kidney, AlloMap Heart and AlloSure Heart testing is performed in our clinical laboratory, which is located in our Brisbane, California location.

Our laboratory holds a certificate of accreditation under the Clinical Laboratory Improvement Amendments of 1988, or CLIA, and is accredited by the College of American Pathologists, or CAP.

We believe that our laboratory capacity will be adequate to meet demand for AlloSure Kidney, AlloMap Heart, and other tests in the development pipeline for the next few years.

We believe that our laboratory capacity will be adequate to meet demand for AlloSure Kidney, AlloMap Heart, AlloSure Heart and other tests in the development pipeline for the next few years.

When a clinician orders AlloMap Heart, a blood sample is drawn and processed to isolate the white blood cells, which are subsequently broken down, frozen and sent via overnight courier to our laboratory.

6 unchanged sentences

Tests that fail to meet quality control criteria are immediately re-tested and the ordering clinician is notified of the need to re-test if turnaround time will be affected.

Results are reported to the ordering clinician by fax or electronically within our WebPortal within two business days of receipt.

We rely solely on certain suppliers to provide some of the laboratory instruments and key reagents that we use to perform AlloSure Kidney and AlloMap Heart testing.

Results are reported to the ordering clinician by fax or electronically via WebPortal within two business days of receipt of the sample.

We rely solely on certain suppliers to provide some of the laboratory instruments and key reagents that we use to perform AlloSure Kidney, AlloMap Heart, and AlloSure Heart testing.

These sole source suppliers include Thermo Fisher Scientific, which supplies us with instruments, laboratory reagents, a master mix formula and consumables;

Roche Molecular Systems, which supplies us with laboratory reagents and consumables;

Hamilton Robotics, which supplies equipment and consumables;

Illumina, which supplies us with instruments, laboratory reagents and consumables;

Becton, Dickinson, and Streck, which supplies us with cell preparation tubes;

Beckman Coulter, which provides laboratory reagents and consumables;

Avantor, which supplies us with kitting services, laboratory reagents and consumables;

Becton, Dickinson and Company, and Streck, which supply us with cell preparation tubes;

Beckman Coulter, which provides laboratory equipment, reagents and consumables;

and Qiagen N.V., which supplies us with a proprietary buffer reagent.

31 unchanged sentences

Our strategy includes educating clinicians and care teams at transplant centers through software demos.

Our marketing team supporting the product marketing for Ottr, XynQAPI, AlloCare and other digital offerings is based in South San Francisco.

With our comprehensive portfolio of surveillance testing services, diagnostic products and digital business offerings, we face many different types of competition.

Our potential competitors may have widespread brand recognition and substantially greater financial, technical and research and development resources and selling and marketing capabilities than we do.

Other competitors may develop products with prices lower than ours that could be viewed by clinicians and payers as functionally equivalent to our solution, offer solutions that may be more accurate or effective than our solutions or offer solutions at prices designed to promote market penetration, which could force us to lower the price of our current and future solutions and affect our ability to achieve or maintain profitability.

Testing Services

Our competition principally includes clinical reference labs and hospital labs using existing and routine clinical chemistry tests.

Our competitors also include companies that are focused on the development and commercialization of molecular diagnostic tests.In the field of post-transplant surveillance, Natera Inc., or Natera, and Eurofins Viracor, Inc., or Eurofins, have commercially available molecular diagnostics tests .

Our competitors also include companies that are focused on the development and commercialization of molecular diagnostic tests.

In the field of post-transplant surveillance, Natera Inc., or Natera, and Eurofins Viracor, Inc., or Eurofins, have commercially available molecular diagnostics tests .

We expect the competition for post-transplant surveillance to increase as there are several established and early-stage companies in the process of developing products and services for the transplant market that may directly or indirectly compete with AlloSure Kidney, AlloMap Heart or our development pipeline.

13 unchanged sentences

These practices have been the standard of care in the United States for many years, and we will need to continue to educate clinicians, transplant recipients and payers about the various benefits of our tests in order to change clinical practice.

Also, many transplant centers are located within hospitals that have their own laboratory facilities and have capacity to conduct various tests, so hospitals may choose to rely on internally developed and/or internally performed surveillance and diagnostic tests.

Also, many transplant centers are located within hospitals that have their own laboratory facilities and have capacity to conduct various tests, and some hospitals may choose to rely on internally developed and/or internally performed surveillance and diagnostic tests.

Our competitors within the HLA tissue typing markets comprise a diverse range of manufacturers servicing hospital and commercial reference testing laboratories.

The market leader in HLA typing and third party distributors is Thermo Fisher through its acquisition of transplant-focused companies One Lambda and and Linkage Biosciences.

The market leader in HLA typing and third party distributors is Thermo Fisher through its acquisition of transplant-focused companies One Lambda and Linkage Biosciences.

In certain HLA tissue typing markets that incorporate a wide variety of technology test platforms, such as SSP, SBT, SSO and NGS, competitors include Thermo Fisher, Omixon, GenDx, BAG, Qiagen, and Immucor.

6 unchanged sentences

Competition for our digital solutions include various companies that develop application software and operate in the healthcare field.

Our primary competitor in this field is Epic Systems Corporation, or Epic.

Our primary competitor in this field is Epic.

In addition, other established and emerging healthcare, information technology and service companies may commercialize competitive products including informatics, analysis, integrated genetic tools and services for health and wellness.

10 unchanged sentences

The expiration dates of these patents range from 2021 to 2024.

We have five additional patents covering additional genes or gene variants for diagnosing transplant rejection.

In connection with our June 2014 acquisition of IMX, we obtained an exclusive license from Stanford to a patent relating to the diagnosis of rejection in organ transplant recipients using dd-cfDNA.

We have six additional patents covering additional genes or gene variants for diagnosing transplant rejection.

In connection with our June 2014 acquisition of ImmuMetrix, Inc., we obtained an exclusive license from the Board of Trustees of the Leland Stanford Junior University, or Stanford, to a patent relating to the diagnosis of rejection in organ transplant recipients using dd-cfDNA.

This patent has an expiration date of November 5, 2030.

2 unchanged sentences

Both patents have the same 2030 expiration date as the original Stanford patent.

As part of our April 2016 acquisition of Allenex, we obtained an additional five U.S.

patents on donor matching technology and treatment for antibody mediated transplant rejection.

We have developed trade secrets and know-how since our inception.

4 unchanged sentences

We may in the future rely, at least in part, upon licensing agreements with third parties to obtain patent rights and transfers of technology, information and know-how that enable us to further our development of additional solutions for post-transplant surveillance.

In June 2014, we entered into an amended and restated license agreement with Stanford, which granted us an exclusive license to a patent relating to the diagnosis of rejection in organ transplant recipients using dd-cfDNA and a non-exclusive license to

related technology provided by Stanford.

Of the 25 existing U.S.

patents related to transplant rejection and autoimmunity, nine are the product of exclusive licensing agreements.

Subject to various rights of extension, we are required to achieve certain development and commercialization milestones set forth in the license agreement.

1 unchanged sentence

In May 2018, we entered into the License Agreement with Illumina, which provides us with worldwide distribution, development and commercialization rights to Illumina’s next generation sequencing product line for use in transplantation diagnostic testing.

On April 30, 2019, we entered into the Cibiltech Agreement, pursuant to which we were granted an irrevocable, non-transferable right to commercialize Cibiltech’s proprietary software, KidneyCare iBox, for the predictive analysis of post-transplantation kidney allograft loss in the field of transplantation in the U.S.

Two issued patents for HLA genotyping are exclusively licensed as part of this agreement.

On April 30, 2019, we entered into a license and collaboration agreement with Cibiltech SAS, or Cibiltech, pursuant to which we were granted an irrevocable, non-transferable right to commercialize Cibiltech’s proprietary software, KidneyCare iBox, for the predictive analysis of post-transplantation kidney allograft loss in the field of transplantation in the U.S.

for a period of ten years.

In April 2020, we entered into a license agreement with Cornell University pursuant to which we were granted exclusive rights to three patents and two patent applications covering methods and technology for measurement of gene expression in urine to diagnose kidney transplant rejection.

Our business is subject to and impacted by frequently changing laws and regulations in the United States and internationally.

6 unchanged sentences

Under the CLIA, administered by CMS, we are required to hold a certificate applicable to the type of work we perform and to comply with standards covering personnel, facilities administration, quality systems, proficiency testing and performance.

Almost all clinical laboratories are subject to regulation under the CLIA, which is designed to ensure that laboratory testing services performed on materials derived from the human body are accurate and reliable.

Most clinical laboratories are subject to regulation under the CLIA, which is designed to ensure that laboratory testing services performed on materials derived from the human body are accurate and reliable.

We have a certificate of accreditation under the CLIA to perform “high complexity” testing.

36 unchanged sentences

We have compensation arrangements with a number of physicians for personal services, such as speaking engagements and clinical advisory boards.

We have structured these arrangements with terms intended to comply with the requirements of the applicable exceptions to the Stark Law and PORA.

We have structured these arrangements with terms intended to comply with the requirements of the applicable exceptions to the Stark Law, PORA and other similar state laws.

However, we cannot be certain that regulators would find these arrangements to be in compliance with the Stark Law, PORA or similar state laws.

2 unchanged sentences

• refunds of amounts collected by an entity in violation of the Stark Law;

• a civil penalty of up to $15,000 for each service arising out of the prohibited referral;

• exclusion from federal healthcare programs, including the Medicare and Medicaid programs;

• a civil penalty of up to $25,820 per service for submitting or causing to be submitted a claim in violation of the Stark Law and an assessment of up to three times the amount claimed;

• exclusion from federal health care programs, including the Medicare and Medicaid programs;

• a civil penalty of up to $172,137 against parties that enter into a scheme to circumvent the Stark Law’s prohibitions.

2 unchanged sentences

Federal and State Fraud and Abuse Laws

Because of the significant federal funding involved in Medicare and Medicaid, Congress and the states have enacted, and actively enforce, a number of laws to eliminate fraud and abuse in federal healthcare programs.

Our business is subject to

compliance with these laws.

Our business is subject to compliance with these laws.

In March 2010, the Patient Protection and Affordable Care Act, as amended by the Healthcare and Education Affordability Reconciliation Act, or collectively, the Affordable Care Act, was enacted in the United States.

1 unchanged sentence

The Affordable Care Act also allocates additional resources and tools for the government to police healthcare fraud, with expanded subpoena power for HHS, additional funding to investigate fraud and abuse across the healthcare system and expanded use of recovery audit contractors for enforcement.

There have been recent public announcements by members of the U.S.

Congress and President Trump and his administration regarding their plans to repeal and replace the Affordable Care Act.

We cannot predict the ultimate form or timing of any repeal or replacement of the Affordable Care Act or the effect such repeal or replacement would have on our business.

There have previously been public announcements by members of the U.S.

Congress regarding their plans to repeal and replace the Affordable Care Act, and the Biden administration has announced plans to expand the Affordable Care Act.

We cannot predict whether future healthcare initiatives, including at the federal level, will be initiated or the effect such initiatives could have on our business.

The Eliminating Kickbacks in Recovery Act of 2018

The Eliminating Kickbacks in Recovery Act of 2018, or EKRA, prohibits payments for referrals to recovery homes, clinical treatment facilities, and laboratories.

EKRA’s reach extends beyond federal health care programs to include private insurance (i.e., it is an “all payer” statute).

For purposes of EKRA, the term “laboratory” is defined broadly and without reference to any connection to substance use disorder treatment.

EKRA is a criminal statute and violations can result in fines of up to $200,000, up to 10 years in prison, or both, per violation.

The law includes a limited number of exceptions, some of which closely align with corresponding Anti-Kickback Statute exceptions and safe harbors and others that materially differ.

Information Blocking Prohibition

On May 1, 2020, the Office of the National Coordinator for Health Information Technology promulgated final regulations under the authority of the 21st Century Cures Act to impose new conditions to obtain and maintain certification of certified health information technology and prohibit certain covered actors—developers of certified health information technology, health information networks / health information exchanges, and health care providers (including laboratories)—from engaging in activities that are likely to interfere with the access, exchange or use of electronic health information (information blocking).

The final regulations further defined exceptions for activities that are permissible, even though they may have the effect of interfering with the access, exchange or use of electronic health information.

Originally, the Office of the National Coordinator for Health Information Technology established an information blocking effective date of November 2, 2020;

however, the agency subsequently issued an interim final rule to extend the effective date to April 5, 2021.

Under the 21st Century Cures Act, health care providers that violate the information blocking prohibition will be subject to appropriate disincentives, which the U.S.

Department of Health and Human services has yet to establish through required rulemaking.

Developers of certified information technology and health information networks / health information exchanges, however, may be subject to civil monetary penalties of up to $1 million per violation.

Department of Health and Human Services Office of Inspector General has the authority to impose such penalties and on April 24, 2020 published a proposed rule to codify new authority in regulation, which the agency proposed would be effective 60 days after it issues a final rule, but in no event before November 2, 2020.

Department of Health and Human Services Office of Inspector General has not yet issued a final rule.

Anti-Kickback Statutes

The federal healthcare programs’ Anti-Kickback Statute prohibits persons from knowingly and willfully soliciting, offering, receiving or providing remuneration, directly or indirectly, in exchange for or to induce either the referral of an individual, or the furnishing or arranging for a good or service, for which payment may be made under a federal healthcare program such as Medicare or Medicaid.

The federal health care programs’ Anti-Kickback Statute prohibits persons from knowingly and willfully soliciting, offering, receiving or paying any remuneration, directly or indirectly, overtly or covertly, in cash or in kind in return for referring an individual for the furnishing of or arranging for the furnishing of any good or service, for which payment may be made under a federal health care program, such as Medicare or Medicaid, or the purchasing, leasing, ordering or arranging for or recommending purchasing, leasing, or order any good, facility, services, or item payable under such programs.

The definition of “remuneration” has been broadly interpreted to include anything of value, including, for example, gifts, certain discounts, the furnishing of free supplies, equipment or services, credit arrangements, payment of cash and waivers of payments.

Several courts have interpreted the statute’s intent requirement to mean that if any one purpose of an arrangement involving remuneration is to induce referrals of federal healthcare covered businesses, the statute has been violated.

Penalties for violations include criminal penalties and civil sanctions such as fines, imprisonment and possible exclusion from Medicare, Medicaid and other federal healthcare programs.

In addition, violations of the Anti-Kickback Statute also are actionable under the federal False Claims Act.

Several courts have interpreted the statute to mean that if any one purpose of remuneration is to induce or reward referrals of federal health care program payable business, the statute has been violated.

The statute contains a number of statutory exceptions and the U.S.

Department of Health and Human Services has created several regulatory "safe harbors." Arrangements that meet all of the conditions of an applicable exception or safe harbor are protected from liability under the Anti-Kickback Statute.

However, the failure to fit an arrangement within an exception or a safe harbor does not necessarily mean that the statute has been violated or that the arrangement will be prosecuted.

Penalties for violations include criminal penalties and civil sanctions such as fines, imprisonment and possible exclusion from Medicare, Medicaid and other federal health care programs.

Violations of the Anti-Kickback Statute also are actionable under the federal False Claims Act.

Many states have adopted laws similar to the Anti-Kickback Statute.

Some of these state prohibitions apply to referral of recipients for healthcare items or services reimbursed by any source, not only the Medicare and Medicaid programs.

Some of these state prohibitions apply to items or services reimbursed by any third-party payer, including commercial insurers.

Federal False Claims Act

The False Claims Act’s “whistleblower” or “qui tam” provisions imposes liability on any person or entity that, among other things, knowingly presents, or causes to be presented, a false or fraudulent claim for payment by a federal healthcare program.

The qui tam provisions of the False Claims Act allow a private individual to bring actions on behalf of the federal government alleging that the defendant has violated the False Claims Act and to share in any monetary recovery.

The federal False Claims Act, which includes “whistleblower” or “qui tam” provisions imposes liability on any person or entity that, among other things, knowingly presents, or causes to be presented, a false or fraudulent claim for payment by the federal government.

The qui tam provisions of the federal False Claims Act allow a private individual to bring actions on behalf of the federal government alleging that the defendant has violated the federal False Claims Act and to share in any monetary recovery.

In recent years, the number of suits brought against healthcare providers by private individuals has increased dramatically.

In addition, various states have enacted false claims laws analogous to the False Claims Act, and many of these state laws apply where a claim is submitted to any third-party payer and not merely a federal healthcare program.

When an entity is determined to have violated the False Claims Act, it may be required to pay up to three times the actual damages sustained by the government, plus civil penalties of between $5,500 and $11,000 for each separate instance of false claim.

In addition, various states have enacted false claims laws analogous to the federal False Claims Act, and many of these state laws apply where a claim is submitted to any third-party payer and not merely the federal government.

When an entity is determined to have violated the False Claims Act, it may be required to pay up to three times the actual damages sustained by the government, plus civil penalties of between $11,665 and $23,331 for each false claim for penalties assessed after June 19, 2020.

There are many potential bases for liability under the False Claims Act.

Liability arises, primarily, when an entity knowingly submits or causes another to submit, a false claim for reimbursement to the federal government.

The federal government has used the False Claims Act to assert liability on the basis of causing physicians to order excessive or unnecessary services, providing false documentation in support of claims, kickbacks, off-label promotion of products, Stark Law violations and other improper referrals and CLIA violations, in addition to the more predictable allegations as to misrepresentations with respect to the services rendered.

Our future activities relating to billing, compliance with the CLIA and Medicare reimbursement requirements, physician and other healthcare provider financial relationships and the sale and marketing of our products may be subject to scrutiny under these laws.

The federal government has used the False Claims Act to assert liability on the basis of, among other things, causing physicians to order excessive or unnecessary services, providing false documentation in support of claims, kickbacks, off-label promotion of products, and Stark Law violations and other improper referrals, in addition to the more predictable allegations as to misrepresentations with respect to the services rendered.

Our future activities relating to billing, compliance with certain regulations and Medicare reimbursement requirements, physician and other healthcare provider financial relationships and the sale and marketing of our products may be subject to scrutiny under these laws.

The California Consumer Privacy Act, or the CCPA, was enacted in 2018 and took effect on January 1, 2020.

32 unchanged sentences

CMDCAS came into effect January 1, 2003.

The General Data Protection Regulation (EU) 2016/679, or the GDPR, is a regulation on data protection and privacy in the European Union, or the EU, and the European Economic Area, or the EEA, that went into effect in May 2018.

The General Data Protection Regulation (EU) 2016/679, or the GDPR, is a regulation on data protection and privacy in the EU, and the European Economic Area, or the EEA, that went into effect in May 2018.

It also addresses the transfer of personal data outside the EU and EEA.

2 unchanged sentences

Controllers and processors of personal data must put in place appropriate technical and organizational measures to implement the data protection principles.

Business processes that handle personal data must be designed and built with consideration of the

principles and provide safeguards to protect data (for example, using pseudonymization or full anonymization where appropriate).

Business processes that handle personal data must be designed and built with consideration of the principles and provide safeguards to protect data (for example, using pseudonymization or full anonymization where appropriate).

Data controllers and processors must design information systems with privacy in mind;

8 unchanged sentences

Our business or financial results may be adversely impacted by adhering to these regulatory requirements and the related costs of ensuring and maintaining compliance .

Employees and Human Capital Resources

At December 31, 2020, we had 475 employees, of which 456 were full-time employees.

2 unchanged sentences

As of December 31, 2020, 399 employees were located in the United States and 76 were located outside of the United States.

The diagnostics industry is characterized by rapid product development and technological advances, which require an adept and skilled workforce.

We believe that it is critical to attract, develop and retain employees with the experience, knowledge, expertise and vision capable of not only operating, but also excelling, in this complex and competitive business environment, including competing against larger competitors and developing and commercializing new products, new and improved technologies and new applications for our existing technologies.

We consider our employees to be our greatest asset and therefore focus on attracting, developing, retaining and motivating our employees.

Our recruitment and retention strategies include partnerships with external agencies to help hire top talent, onboarding processes, a leadership development program and a professional work environment that promotes innovation and rewards performance.

Our total compensation for employees includes a variety of components that support sustainable employment and the ability to build a strong financial future, including competitive market-based pay and comprehensive benefits.

In addition to earning a base salary, eligible employees are compensated for their contributions to our goals with both short-term cash incentives and long-term equity-based incentives.

Through our global pay philosophy, principles and consistent implementation, we are committed to providing fair and equitable pay for employees.

Eligible full-time employees in the United States also have access to medical, dental, and vision plans;

savings and retirement plans;

an employee stock purchase plan;

and other resources.

Programs and benefits differ internationally for a variety of reasons, such as local legal requirements, market practices, and negotiations with works councils and other employee representative bodies.

In addition, the success of our business is fundamentally connected to the well-being, health and safety of our employees.

We are maintaining our testing, manufacturing, and distribution facilities while implementing specific protocols to reduce contact among our employees.

In areas where COVID-19 impacts healthcare operations, our field-based sales and clinical support teams are supporting providers through telephone and online platforms.

From time to time, we also employ independent contractors, consultants and temporary employees to support our operations.

15 unchanged sentences

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 1. Business