The following discussion and analysis of our financial condition and results of
operations should be read together with the unaudited condensed consolidated
financial statements and related notes included elsewhere in Item 1 of Part I of
this Quarterly Report on Form 10-Q and with the audited consolidated financial
statements and the related notes included in our Annual Report on Form 10-K for
the fiscal year ended December 31, 2021, filed with the Securities and Exchange
Commission, or the SEC, on February 24, 2022.

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains forward-looking statements within
the meaning of Section 27A of the Securities Act of 1933, as amended, and
Section 21E of the Securities Exchange Act of 1934, as amended. All statements
contained in this Quarterly Report on Form 10-Q other than statements of
historical fact, including statements regarding our future results of operations
and financial position, our business strategy and plans, and our objectives for
future operations, are forward-looking statements. The words "believe," "may,"
"will," "potentially," "estimate," "continue," "anticipate," "intend," "could,"
"should," "would," "project," "plan," "target," "contemplate," "predict,"
"expect" and the negative and plural forms of these words and similar
expressions are intended to identify forward-looking statements.

These forward-looking statements may include, but are not limited to, statements regarding the following:

• the potential impact to our business, revenue, financial condition and employees, including disruptions to our testing services, laboratories, clinical trials, supply chain and operations, due to the global COVID-19 pandemic. 19;

• our ability to generate revenue and increase the commercial success of our current and future digital and patient testing services, products and solutions;

• our ability to obtain, maintain and expand payer reimbursement coverage for our current and future testing services, if any;

• our plans and ability to continue to update our testing services, products, and patient and digital solutions to maintain our leadership position in transplants;

•the outcome or success of our clinical trial collaborations and registry
studies, including Kidney Allograft Outcomes AlloSure Registry, or K-OAR, the
Outcomes of KidneyCare™ on Renal Allografts registry study, or OKRA, and the
Surveillance HeartCare Outcomes Registry, or SHORE;

• favorable review of our testing services and product offerings, and future solutions, if any, in peer-reviewed publications;

•our ability to obtain additional financing on terms favorable to us, if at all;

• our anticipated cash requirements and anticipated uses of our funds, including our estimates of operating expenses and capital requirements;

•trends and anticipated challenges in our business and the markets in which we operate;

•our dependence on some of our suppliers, service providers and other distribution partners;

•disruptions to our business, including disruptions to our laboratories and manufacturing facilities;

• our ability to retain key members of our management team;

• our ability to make successful acquisitions or investments and to manage the integration of these acquisitions or investments;

•our ability to expand internationally;

•our compliance with federal, state and foreign regulatory requirements;

•our ability to protect and enforce our intellectual property rights, our
strategies regarding filing additional patent applications to strengthen our
intellectual property rights, and our ability to defend against intellectual
property claims that may be brought against us;

• our ability to successfully assert, defend or settle any litigation brought by or against us or other legal matters or disputes; and

•our ability to meet the requirements of being a public company.

These forward-looking statements are subject to a number of risks, uncertainties
and assumptions, including those described in the section entitled "Risk
Factors" in this Quarterly Report on Form 10-Q and in our Annual Report on Form
10-K for the fiscal year ended December 31, 2021, filed with the SEC on
February 24, 2022. Moreover, we operate in a very competitive and
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rapidly changing environment, and new risks emerge from time to time. It is not
possible for our management to predict all risks, nor can we assess the impact
of all factors on our business or the extent to which any factor, or combination
of factors, may cause actual results to differ materially and adversely from
those contained in any forward-looking statements we may make. In light of these
risks, uncertainties and assumptions, the forward-looking events and
circumstances discussed in this report may not occur and actual results could
differ materially and adversely from those anticipated or implied in the
forward-looking statements.

You should not rely upon forward-looking statements as predictions of future
events. Although we believe that the expectations reflected in the
forward-looking statements are reasonable, we cannot guarantee that the future
results, levels of activity, performance or events and circumstances reflected
in the forward-looking statements will be achieved or occur. Moreover, neither
we nor any other person assumes responsibility for the accuracy and completeness
of the forward-looking statements. Except as required by law, we undertake no
obligation to update publicly any forward-looking statements for any reason
after the date of this report to conform these statements to actual results or
to changes in our expectations.

You should read this Quarterly Report on Form 10-Q and the documents that we
reference in this Quarterly Report on Form 10-Q and have filed with the SEC as
exhibits to this Quarterly Report on Form 10-Q with the understanding that our
actual future results, levels of activity, performance and events and
circumstances may be materially different from what we expect. We qualify all
forward-looking statements by these cautionary statements.

Overview and recent highlights

CareDx, Inc., or collectively, the Company, we, us and our, 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 healthcare solutions along the pre- and post-transplant patient journey,
and we are a leading provider of genomics-based information for transplant
patients.

Highlights for the Three Months Ended March 31, 2022 and recent highlights

• Achieved a total turnover of $79.4 million for the three months ended March 31, 2022increasing 18% year over year

•Provided approximately 42,600 AlloSure and AlloMap patient results in the
quarter, with March being our highest ever month of testing volume for Heart and
Kidney Testing Services

• Demonstrated scientific leadership with more than 25 oral presentations and abstracts at International Society of Heart and Lung Transplantation including real, multicenter, prospective and long-term SHORE data

• Tx access integrated in the AlloCare app to help pre-transplant patients navigate the waitlist process as we digitally connect patients throughout the patient journey

•Helped ensure that the transplant community receives accurate information about
our tests after a jury found that Natera (Nasdaq: NTRA) made false superiority
claims in its advertising, and awarded CareDx monetary damages totaling $44.9
million

•Announced the availability of XenoSure™ and XenoMap™, the world's first
surveillance solutions for investigational use in xenotransplantation research
and post-xenotransplant clinical monitoring

Testing Services

Kidney

AlloSure Kidney, our transplant surveillance solution, was commercially launched
in October 2017 and is our donor-derived cell-free DNA, or dd-cfDNA offering
built on a next generation sequencing, or NGS, platform. In transplantation,
more than 100 papers from over 50 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 SNP 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 $2,841.
AlloSure Kidney has received positive coverage decisions from several commercial
payers, 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.
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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 supporting the use of AlloSure Kidney dd-cfDNA in
the assessment and surveillance of kidney transplants. Bloom et al 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 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 was
published in the American Journal of Transplant, or AJT, and the outcomes of
1,000 patients was published in Kidney International.

The prospective multicenter trial, the K-OAR study, has enrolled over 1,700 patients, with plans to interview patients with AlloSure Kidney for 3 years and provide additional clinical utility of AlloSure Kidney in monitoring recipients of kidney transplant.

Kidney care

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 iBox in one surveillance solution. We have not yet
made any applications to private payers for reimbursement coverage of AlloMap
Kidney or iBox.

In September 2019, we announced the recruitment of the first patient in the OKRA study, which is an extension of the K-OAR study. OKRA is a prospective, multicenter, observational registry of patients receiving KidneyCare for surveillance purposes. Combined with K-OAR, 3,000 patients will be enrolled in the study.

Heart

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 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.

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 for reimbursement from several of the largest WE private payers.

In October 2020, we 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. AlloSure Heart has received positive coverage decisions from several
commercial payers.

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) study, which was published in the AJT. A subsequent clinical utility
trial, Invasive Monitoring Attenuation through Gene Expression (Pham MX et al.,
N. Eng. J. Med., 2010), published in The New England Journal of Medicine,
demonstrated that clinical outcomes in recipients managed with AlloMap Heart
surveillance were equivalent (non-
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inferior) to outcomes in recipients managed with biopsies. The results of our
clinical trials have also been presented at major medical society congresses.
AlloMap Heart is now recommended as part of the ISHLT (International Society for
Heart and Lung Transplantation) guidelines.

heart care

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 the 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 and antibody
mediated rejection. In September 2018, we initiated the 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.

Lung

In February 2019, AlloSure Lung became available for lung transplant patients
through a compassionate use program while the test is undergoing further
studies. 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. In October 2021, we launched
AlloSure Lung as part of the CHEST 2021 Annual Meeting. We have gained early
adoption with some commercial payers.

Cell 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. AlloCell is being
commercialized through research agreements with biopharma companies developing
cell therapies. In 2021, we executed multiple additional agreements with
biopharma therapeutics companies to use AlloCell in research and clinical
studies.

In July 2021, we launched the Assessing Chimerism and Relapse of Bone marrow/
HCT transplant using AlloHeme Testing, or ACROBAT Study. The ACROBAT Study is a
prospective, multicenter, observational cohort study to evaluate the use of
AlloHeme, a microchimerism NGS tool to predict post-transplant relapse in
patients with allogeneic hematopoietic cell transplants, or HCT.

Some products

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.

QTYPE enables Human Leukocyte Antigen, or 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. Olerup SSP is used to type HLA
alleles based on the sequence specific primer, or SSP, technology.

On May 4, 2018we have entered into a license and collaboration agreement with Illumina, Inc., or Illumina, which grants us the worldwide rights to distribute, develop, and commercialize Illumina’s NGS products and technologies for use in transplant diagnostic testing .

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. In addition, we were granted the exclusive right to develop and
commercialize other NGS product lines in the field of bone marrow and solid
organ transplantation on diagnostic testing. These NGS products include: 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.
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In September 2019, we commercially launched AlloSeq cfDNA, 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. 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, 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 other solutions on the market 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.

In March 2021, we acquired certain assets of BFS Molecular S.R.L., or BFS
Molecular, a software company focused on NGS-based patient testing solutions.
BFS Molecular brings extensive software and algorithm development capabilities
for NGS transplant surveillance products.

Patient and digital solutions

In 2019, we started providing digital solutions to transplant centers following the acquisitions of Ottr, Inc.or Ottr, and Xyn Management, Inc.or XynManagement.

On May 7, 2019, we acquired 100% of the outstanding common stock of Ottr. Ottr
was formed in 1993 and is a leading provider of transplant patient management
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 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 XynCare. XynQAPI simplifies transplant quality tracking and
Scientific Registry of Transplant Recipients reporting. 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.

In September 2020 we launched AlloCarea mobile app that provides a patient-centric resource for transplant recipients to manage medication adherence, coordinate with patient care managers for AlloSure planning, and measure health metrics.

In January 2021, we acquired TransChart LLC, or TransChart. TransChart provides
EMR software to hospitals throughout the United States to care for patients who
have or may need an organ transplant. As part of our acquisition of TransChart
in January 2021, we acquired Tx Access, a cloud-based service that allows
nephrologists and dialysis centers to electronically submit referrals to
transplant programs, closely follow and assist patients through the transplant
waitlist process, and ultimately, through transplantation.

In June 2021, we acquired the patient application Transplant Hero. The app helps patients manage their medications with alarms and interactive medication event logging.

Also in June 2021, we entered into a strategic agreement with OrganX to develop
clinical decision support tools across the transplant patient journey. Together,
we and OrganX will develop advanced analytics that integrate AlloSure, the first
transplant specific dd-cfDNA assay, with large transplant databases to provide
clinical data solutions. This partnership delivers the next level of innovation
beyond multi-modality by incorporating a variety of clinical inputs to create a
universal composite scoring system.

In November 2021, we acquired MedActionPlan.com LLC, or MedActionPlan, a New
Jersey-based provider of medication safety, medication adherence and patient
education. MedActionPlan is a leader in patient medication management for
transplant patients and beyond.

In December 2021, we acquired The Transplant Pharmacy, or TTP, a transplant
focused pharmacy located in Mississippi. TTP provides individualized transplant
pharmacy services for patients at multiple transplant centers located throughout
the U.S.

COVID-19 Impact

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
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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 200 transplant and nephrology centers can offer RemoTraC to
their patients and over 12,000 kidney, heart and lung transplant patients have
enrolled. Based on existing and new relationships with partners, we have
established a nationwide network of approximately 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, we
have been able to maintain low levels of interruptions to our testing services
volumes.

There continues to be uncertainty around the COVID-19 pandemic as the Omicron
variant has caused an increase in COVID-19 cases globally, impacted the
availability of medical personnel in transplant centers and the volume of
transplant procedures. A sustained reduction in transplant volume can negatively
impact the testing volumes, as we saw in early part of first quarter of 2022.

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 regained normalized 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 virtual platforms.

Although the executive orders that placed certain restrictions on operations in
San Mateo County and the State of California, where our laboratory and
headquarters are located, were lifted effective June 15, 2021, new orders or
restrictions may be adopted in the future depending upon the COVID-19
transmission rates in our county and state, as well as other factors.

Additionally, we have created a COVID-19 task force that is responsible for crisis decision-making, employee communications, and enforcing all safety, monitoring, and testing protocols in accordance with local regulations.

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, and 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 or reduced
staffing due to staff members contracting COVID-19. 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, or become infected with, COVID-19,
may adversely impact our clinical trial operations.

Overview of financial operations

Revenue

We derive our revenue from testing services, product sales, patient revenue and digital solutions. Revenue is recognized taking into account a five-step revenue recognition model which includes identifying the contract with a customer, identifying the performance obligations in the contract, determining the price of the transaction, allocation of the transaction price to performance obligations and revenue recognition when or as the entity satisfies a performance obligation.

Revenue from testing services

Our testing services revenue is derived from AlloSure Kidney, AlloMap Heart and
AlloSure Heart tests, which represented 84% and 88% of our total revenue for the
three months ended March 31, 2022 and 2021, respectively. Our testing services
revenue depends on a number of factors, including (i) the number of tests
performed; (ii) establishment of coverage policies by third-party insurers and
government payers; (iii) our ability to collect from payers with whom we do not
have positive coverage determination, which often requires that we pursue a
case-by-case appeals process; (iv) our ability to recognize revenues on tests
billed prior to the establishment of reimbursement policies, contracts or
payment histories; and (v) how quickly we can successfully commercialize new
product offerings.
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We currently market testing services to healthcare providers through our direct
sales force that targets transplant centers and their physicians, coordinators
and nurse practitioners as well as general nephrologists managing transplant
recipients. The healthcare providers that order the tests and on whose behalf we
provide our testing services are generally not responsible for the payment of
these services. Amounts received by us vary from payer to payer based on each
payer's internal coverage practices and policies. We generally bill third-party
payers upon delivery of a test result report to the ordering physician. As such,
we take the assignment of benefits and the risk of collection from the
third-party payer and individual patients.

Product revenue

Our product revenue is derived primarily from sales of AlloSeq Tx, Olerup SSP
and QTYPE products. Product revenue represented 9% of our total revenue for each
of the three months ended March 31, 2022 and 2021. We recognize product revenue
from the sale of products to end-users, distributors and strategic partners when
all revenue recognition criteria are satisfied. We generally have a contract or
a purchase order from a customer with the specified required terms of order,
including the number of products ordered. Transaction prices are determinable
and products are delivered and risk of loss passed to the customer upon either
shipping or delivery, as per the terms of the agreement. There are no further
performance obligations related to a contract and revenue is recognized at the
point of delivery consistent with the terms of the contract or purchase order.

Revenues from patients and digital solutions

Our patient and digital solutions revenue is mainly derived from sales of our
Ottr software, XynQAPI, MedActionPlan, TTP, TransChart and Tx Access licenses,
services and SaaS agreements across the digital portfolio. Patient and digital
solutions revenue represented 7% and 3% of our total revenue for the three
months ended March 31, 2022 and 2021, respectively.
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Critical Accounting Policies and Significant Judgments and Estimates

Our management's discussion and analysis of our financial condition and results
of operations is based on our unaudited condensed consolidated financial
statements, which have been prepared in accordance with United States Generally
Accepted Accounting Principles. The preparation of these unaudited condensed
consolidated financial statements requires us to make estimates and assumptions
that affect the reported amounts of assets and liabilities and the disclosure of
contingent assets and liabilities at the date of the unaudited condensed
consolidated financial statements, as well as the reported revenue generated and
expenses incurred during the reporting periods. Our estimates are based on our
historical experience and on various other factors that we believe are
reasonable under the circumstances, the results of which form the basis for
making judgments about the carrying value of assets and liabilities that are not
readily apparent from other sources. Actual results may differ from these
estimates under different assumptions or conditions.

Our significant accounting policies are described in Note 2 of the condensed
consolidated financial statements included elsewhere in this Quarterly Report on
Form 10-Q. Some of these accounting policies require us to make difficult and
subjective judgments, often as a result of the need to make estimates of matters
that are inherently uncertain. We believe that the following critical accounting
policies reflect the more significant estimates and assumptions used in the
preparation of our financial statements. We believe the following critical
accounting policies are affected by significant judgments and estimates used in
the preparation of our unaudited condensed consolidated financial statements:

•Revenue recognition;

•Business combinations;

•Intangible assets acquired;

• Depreciation of goodwill, intangible fixed assets and other long-term assets;

•Stock-based compensation; and

• Common Stock Warrant Liability.

There were no material changes in the matters for which we make critical
accounting estimates in the preparation of our unaudited condensed consolidated
financial statements during the three months ended March 31, 2022 as compared to
those disclosed in Management's Discussion and Analysis of Financial Condition
and Results of Operations included in our Annual Report on Form 10-K for the
year ended December 31, 2021, filed with the SEC on February 24, 2022.

Recently issued accounting standards

Refer to Note 2, Summary of Significant Accounting Policies - Recent Accounting
Pronouncements, to the unaudited condensed consolidated financial statements
included elsewhere in this Quarterly Report on Form 10-Q for a description of
recently issued accounting pronouncements, including the expected dates of
adoption and estimated effects on our results of operations, financial position
and cash flows.
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Operating results

Comparison of the three months ended March 31, 2022 and 2021

(In thousands)

                                                         Three Months Ended March 31,
                                                           2022                2021              Change
Revenue:
Testing services revenue                               $   66,444          $  59,281          $   7,163
Product revenue                                             6,788              5,778              1,010
Patient and digital solutions revenue                       6,184              2,341              3,843
Total revenue                                              79,416             67,400             12,016
Operating expenses:
Cost of testing services                                   17,628             16,483              1,145
Cost of product                                             4,399              3,647                752
Cost of patient and digital solutions                       4,855              1,449              3,406
Research and development                                   21,880             16,004              5,876
Sales and marketing                                        23,148             15,452              7,696
General and administrative                                 26,559             15,223             11,336
Total operating expenses                                   98,469             68,258             30,211
Loss from operations                                      (19,053)              (858)           (18,195)
Other income (expense):
Interest income, net                                          189                126                 63
Change in estimated fair value of common stock warrant
liability                                                      27                 27                  -

Other expense, net                                           (823)              (245)              (578)
Total other expense                                          (607)               (92)              (515)
Loss before income taxes                                  (19,660)              (950)           (18,710)
Income tax benefit                                             12                263               (251)
Net loss                                               $  (19,648)         $    (687)         $ (18,961)


Revenue from testing services

Testing services revenue increased by $7.2 million, or 12%, for the three months
ended March 31, 2022 compared to the same period in 2021. The increase is
primarily due to an increase of more than 8,000 AlloSure Kidney, AlloMap Heart
and AlloSure Heart patient results provided in the three months ended March 31,
2022, compared to the same period in 2021.

Product revenue

Product revenue increased by $1.0 million, or 17%, for the three months ended
March 31, 2022, compared to the same period in 2021, primarily due to growth
from the NGS typing products.

Revenues from patients and digital solutions

Revenue from patients and digital solutions increased by $3.8 millionor 164%, for the three months ended March 31, 2022 compared to the same period in 2021, mainly due to the acquisition of TTP and MedActionPlan during the fourth quarter of 2021.

Testing Services Cost

Cost of testing services increased by $1.1 million, or 7%, for the three months
ended March 31, 2022, compared to the same period in 2021. The increase is
primarily due to increased testing volume, offset by stock-based compensation
expense.

Cost of Product

Cost of product increased by $0.8 million, or 21%, for the three months ended
March 31, 2022, compared to the same period in 2021. The increase is primarily
due to increased product revenue, freight costs and consulting expenses.

Cost of patient and digital solutions

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Cost of patient and digital solutions increased by $3.4 million, or 235%, for
the three months ended March 31, 2022, compared to the same period in 2021. The
increase is primarily due to cost of goods from the acquisition of TTP and
MedActionPlan of $3.0 million, personnel related costs of $0.1 million and
amortization expense of $0.1 million.

Research and development

Research and development expenses increased by $5.9 million, or 37%, for the
three months ended March 31, 2022, compared to the same period in 2021. The
increase is primarily due to an increase in headcount and personnel-related
costs of $2.8 million, an increase in consultants of $1.3 million, an increase
in stock-based compensation expense of $0.8 million, and an increase in
partnership expenses of $0.5 million.

Sales and Marketing

Sales and marketing expenses increased by $7.7 million, or 50%, for the three
months ended March 31, 2022, compared to the same period in 2021. The increase
is primarily due to an increase in headcount and personnel-related costs of $4.6
million, an increase in stock-based compensation expense of $1.5 million and an
increase in marketing programs and travel costs of $0.8 million.

General and administrative

General and administrative expenses increased by $11.3 million, or 74%, for the
three months ended March 31, 2022, compared to the same period in 2021. The
increase is primarily due to an increase in legal expenses of $6.7 million, an
increase in stock-based compensation expense of $2.0 million, an increase in
consultants of $1.2 million and an increase in headcount and personnel-related
expenses of $0.9 million.

Other income (expense)

Other expense, net increased by $0.6 million for the three months ended March
31, 2022, compared to the same period in 2021, primarily due to the unrealized
loss on the investment in Miromatrix.

Cash flow for the three months ended March 31, 2022 and 2021

The following table summarizes the primary sources and uses of cash for the
periods presented:
                                                                       Three Months Ended March 31,
                                                                         2022                   2021
                                                                              (in thousands)
Net cash provided by (used in):
Operating activities                                              $        (21,468)         $ (33,630)
Investing activities                                                      (156,032)            19,079
Financing activities                                                           865            189,228

Effect of changes in exchange rates on cash, cash equivalents and restricted cash

                                                                 45                (23)
Net (decrease) increase in cash, cash equivalents and restricted
cash                                                              $       (176,590)         $ 174,654


Operating Activities

Net cash used in operating activities consists of net loss, adjusted for certain
noncash items in the condensed consolidated statements of operations and changes
in operating assets and liabilities.

Cash used in operating activities for the three months ended March 31, 2022 was
$21.5 million. Our net loss of $19.6 million was our primary use of cash in
operating activities that included a number of noncash items. Our noncash items
included $10.6 million in stock-based compensation expense, $2.6 million of
depreciation and amortization expense and $0.9 million of amortization of
right-of-use assets. Net operating assets decreased $16.7 million.

Cash used in operating activities for the three months ended March 31, 2021 was
$33.6 million. Our net loss of $0.7 million was our primary use of cash in
operating activities that included a number of noncash items. Our noncash items
included $6.5 million in stock-based compensation expense and $2.0 million of
depreciation and amortization expense. Net operating assets decreased by
$21.6 million, and Refund liability - CMS advance payment decreased by
$20.5 million.

Investing activities

For the three months ended March 31, 2022, net cash used in investing activities
of $156.0 million was primarily related to the purchases of marketable
securities of $148.5 million and $8.5 million related to additions of capital
expenditures, net.
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For the three months ended March 31, 2021net cash provided by investing activities of $19.1 million was mainly related to the maturities of the marketable securities of $25.1 million. This proceed was partially offset by the acquisition of TransChart, net of cash acquired from $3.5 million,
$1.2 million related to payments for intangible assets acquired and $1.3 million
related to capital expenditure additions, net.

Fundraising activities

Net cash provided by financing activities for the three months ended March 31,
2022 of $0.9 million was primarily related to proceeds from exercises of stock
options of $1.6 million and proceeds from issuances of common stock under our
employee stock purchase plan of $1.0 million. These proceeds were partially
offset by taxes paid related to net share settlements of restricted stock units
of $1.5 million and payments of contingent consideration $0.3 million.

Net cash provided by financing activities for the three months ended March 31,
2021 of $189.2 million was primarily related to $188.7 million of proceeds from
the issuance of shares of common stock in an underwritten offering, net of
issuance costs, proceeds from exercises of stock options of $2.2 million and
proceeds from issuances of common stock under our employee stock purchase plan
of $0.7 million. These proceeds were partially offset by taxes paid related to
net share settlements of restricted stock units of $2.3 million.

Cash and capital resources

We have suffered significant losses and negative cash flow from our operations since our inception and have accumulated a deficit of $402.8 million to
March 31, 2022. From March 31, 2022we had cash, cash equivalents and marketable securities of $319.2 million and no outstanding debt.

The spread of COVID-19, which has caused a broad impact globally, may materially
affect us economically. While the potential economic impact brought by, and the
duration of, COVID-19 may be difficult to assess or predict, a continued
widespread pandemic could result in significant disruption of global financial
markets, reducing our ability to access capital, which could in the future
negatively affect our liquidity.

Since March 31, 2020, and in response to the outbreak of the COVID-19 pandemic,
we have increased our cash and cash equivalents. With our continuing growth, we
may require additional financing in the future to fund working capital and our
development of future products. Additional financing might include issuance of
equity securities, including through underwritten public offerings or
"at-the-market" offerings, debt offerings or financings or a combination of
these financings. There can be no assurance that we will be successful in
acquiring additional funding at levels sufficient to fund our operations or on
terms favorable to us. We believe our existing cash balance and expected cash
from existing operations, including cash from current license agreements and
future license and collaboration agreements, or a combination of these, will be
sufficient to meet our anticipated cash requirements for the next 12 months.

Accelerated CMS and Prepayment program for health insurance providers

On March 27, 2020, the U.S. government enacted the Coronavirus Aid, Relief, and
Economic Security Act, or the CARES Act. Pursuant to the CARES Act, the Centers
for Medicare & Medicaid Services, or CMS, expanded its Accelerated and Advance
Payment Program in order to increase cash flow to providers of services and
suppliers impacted by the COVID-19 pandemic. CMS was authorized to provide
accelerated or advance payments during the period of the public health emergency
to any Medicare provider who submitted a request to the appropriate Medicare
Administrative Contractor and met the required qualifications. During April
2020, we received an advance payment from CMS of approximately $20.5 million and
recorded the payment as Deferred revenue - CMS advance payment on our condensed
consolidated balance sheet. During December 2020, we reassessed the Deferred
revenue - CMS advance payment and repaid the entire amount in January 2021.

CARES Act Provider Relief Fund for Medicare Providers

Pursuant to the CARES Act, the U.S. Department of Health & Human Services, or
HHS, distributed an initial tranche of $30.0 billion in funds to healthcare
providers that received Medicare fee-for-service, or FFS, reimbursements in
2019. These payments to healthcare providers are not loans and will not be
required to be repaid. As a condition to receiving these payments, providers
must agree to certain terms and conditions and submit sufficient documentation
demonstrating that the funds are being used for healthcare-related expenses or
lost revenue attributable to the COVID-19 pandemic. Due to the recent enactment
of legislation and absence of definitive guidance, there is a high degree of
uncertainty around the CARES Act's implementation and we continue to assess the
impact on our business. Furthermore, HHS has indicated that it, along with the
Office of Inspector General, will be closely monitoring and auditing providers
to ensure that recipients comply with the terms and conditions of relief
programs and to prevent fraud and abuse. All providers will be subject to civil
and criminal penalties for any deliberate omissions, misrepresentations or
falsifications of any information given to HHS. Providers will be distributed a
portion of the initial $30.0 billion based on their share of total Medicare FFS
reimbursements made by the U.S. in 2019. During
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April 2020, we received a payment of approximately $4.8 million, representing
our portion of the initial tranche of funds recorded in other income (expense),
net on the condensed consolidated statements of operations.

We are complying with the key terms and provisions of the CARES Act Provider
Relief Fund which includes, among other things, the requirement that we maintain
appropriate records and cost documentation. During the quarter ended September
30, 2021, we were notified by HHS that the Provider Relief Fund Reporting Portal
was open for reporting on the use of Provider Relief Fund payments, and we
completed and submitted a report indicating our use of the funds we received
pursuant to the CARES Act.

January 2021 Guaranteed public offering of ordinary shares

On January 25, 2021, we sold 1,923,077 shares of our common stock through an
underwritten public offering at a public offering price of $91.00 per share. The
net proceeds to us from the offering were approximately $164.0 million, after
deducting underwriting discounts and commissions and offering expenses.

On February 11, 2021, we sold 288,461 shares of our common stock pursuant to the
full exercise of the overallotment option granted to the underwriters in
connection with the offering. The net proceeds to us from the full exercise of
the underwriters' overallotment option were approximately $24.7 million.

Offer of shares on the market

On April 14, 2022, the Company entered into a sales agreement (the "Sales
Agreement") with Jefferies, LLC as sales agent ("Jefferies"), pursuant to which
the Company may offer and sell, from time to time, through Jefferies, up to
$200.0 million in shares of its common stock, by any method permitted by law
deemed to be an "at-the-market" offering as defined in Rule 415 promulgated
under the Securities Act of 1933, as amended. Jefferies is entitled to
compensation for its services equal to 3% of the gross proceeds of any shares of
common stock sold through Jefferies under the Sales Agreement. Any shares of
common stock offered and sold pursuant to the Sales Agreement will be issued and
sold pursuant to the Company's Registration Statement on Form S-3ASR (File No.
333-239049), filed with the SEC on June 9, 2020, including a base prospectus
dated June 9, 2020, and a prospectus supplement dated April 14, 2022.
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Factors affecting our performance

Covid-19 pandemic

COVID-19 may impact personnel at third-party suppliers in the United States and
other countries, or the availability or cost of materials, which would disrupt
our supply chain. Any manufacturing supply interruption of materials could
adversely affect our ability to conduct ongoing and future research and testing
activities. Clinical trials, clinical site initiation and patient enrollment may
be delayed due to prioritization of hospital resources toward the COVID-19
pandemic or reduced staffing due to staff members contracting COVID-19. Some
patients may not be able to comply with clinical trial 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, or become infected
with, COVID-19, may adversely impact our clinical trial operations. COVID-19 may
impact availability of medical personnel and reduction in transplant procedure
volumes, which in-turn, could adversely affect our testing volumes.

The number of AlloMap Heart, AlloSure Kidney and AlloSure Heart tests we receive and report

The growth of our testing services business is tied to the number of AlloSure
Kidney, AlloSure Lung, AlloMap Heart and AlloSure Heart patient samples we
receive and patient results we report. We incur costs in connection with
collecting and shipping all samples and a portion of the costs when we cannot
ultimately issue a report. As a result, the number of patient samples received
largely correlates directly to the number of patient results reported.

Refund for AlloMap Heart

AlloMap Heart test volume and the corresponding reimbursement revenue has
generally increased over time since the launch of AlloMap Heart, as the ISHLT
included AlloMap in guidelines, payers adopted coverage policies and no longer
consider AlloMap Heart to be experimental and investigational. The rate at which
our tests are covered and reimbursed has varied, and is expected to continue to
vary, by payer. Revenue growth depends on our ability to maintain Medicare and
third party payer reimbursement, and to expand utilization by healthcare
providers.

The Protecting Access to Medicare Act of 2014, or PAMA, included a substantial
new payment system for clinical laboratory tests under the Clinical Laboratory
Fee Schedule, or CLFS. Under PAMA, laboratories that receive the majority of
their Medicare revenues from payments made under the CLFS would report initially
and then on a subsequent three-year basis thereafter (or annually for advanced
diagnostic laboratory tests, or ADLTs), private payer payment rates and volumes
for their tests. The final PAMA ruling was issued June 17, 2016 indicating that
data for reporting for the new PAMA process would begin in 2017 and the new
market based rates took effect on January 1, 2018. Effective January 1, 2018,
Medicare reimburses us $3,240 for AlloMap Heart testing of Medicare
beneficiaries, an increase from the 2017 reimbursement rate of $2,841. 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, 2022. The next
data collection period will become January 1 through June 30, 2024.

AlloMap Heart has also received positive coverage decisions for reimbursement from several of the largest WE private payers.

Reimbursement for AlloSure Kidney

On September 26, 2017, we received notice that the MolDX Program developed by
Palmetto GBA had set AlloSure Kidney reimbursement at $2,841. Effective October
9, 2017, AlloSure Kidney was made available for commercial testing with Medicare
coverage and reimbursement. 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. 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.

Reimbursement for AlloSure Heart

In October 2020, we 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.

Continued growth in product sales

We develop, manufacture, market and sell products that increase the chances of successful transplants by facilitating a better match between a donor and a recipient of stem cells and solid organs.

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QTYPE enables speed and precision in HLA typing at a low to intermediate
resolution for samples that require a fast turn-around-time and uses real-time
PCR methodology. QTYPE received CE mark certification on April 10, 2018. Olerup
SSP is used to type HLA alleles based on the SSP technology.

On May 4, 2018, we entered into a license and collaboration 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.
TruSight HLA is a high-resolution solution that uses NGS methodology. In
addition, we were granted the exclusive right to develop and commercialize other
NGS product lines for use in the field of bone marrow and solid organ
transplantation diagnostic testing. These NGS products include: 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 September 2019, we commercially launched AlloSeq cfDNA, our surveillance
solution designed to measure dd-cfDNA in blood to detect active rejection in
transplant recipients, which received CE mark authorization on January 20, 2020.
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, 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
a simple NGS workflow that reduces complexity and can 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.

Continued growth in patient and digital sales

Our patient and digital revenue growth is driven by the continued successful implementation of our Ottr, MedActionPlan and XynQAPI software businesses, as well as the continued support and maintenance of existing MedActionPlan, Ottr, Inc. and XynManagement customers. Ottr software, TransChart, Tx Access and XynQAPI are currently implemented in several places in the WE The Ottr software implementation and XynQAPI implementation and support teams are based in Omaha, Nebraska. In addition, the patient solutions offered by TTP in Flowood, Mississippi include hospital-affiliated pharmacies located on-site at the transplant center and specialty pharmacies that provide transplant-specific care and dispensing services.

Development of additional services and products

Our development pipeline includes other transplant diagnostic solutions to help
clinicians and transplant centers make personalized treatment decisions
throughout a transplant patient's lifetime. We expect to invest in research and
development in order to develop additional products. Our success in developing
new products and services will be important in our efforts to grow our business
by expanding the potential market for our services and products and diversifying
our sources of revenue.

Research and development expenditure schedule

Our spending on research and development may vary substantially from quarter to
quarter. We conduct clinical studies to validate our new products, as well as
on-going clinical and outcome studies to further the published evidence to
support our commercialized tests. Spending on research and development for both
experiments and studies may vary significantly by quarter depending on the
timing of these various expenses.

Contractual obligations

For a discussion of our material contractual obligations as of
March 31, 2022 and the effect these obligations are expected to have on our liquidity and cash flows in future periods, please refer to Note 9 to the condensed consolidated financial statements and the section entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Liquidity and Capital Resources,” respectively, included elsewhere in this Quarterly Report on Form 10-Q.

Foreign operations

The accompanying unaudited condensed consolidated balance sheets contain certain
recorded assets in foreign countries, namely Stockholm, Sweden and Fremantle,
Australia. Although these countries are considered economically stable and we
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have not suffered any material burden from foreign exchange transactions, export duties or government regulations, unforeseen events in foreign countries could have a material adverse effect on our business.

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