{ "docId": "019dd923-622c-750b-8b98-0c85e40ec39b", "docSlug": "9b248b07037e", "documentTitle": "CareDx, Inc. (CDNA)", "authorId": "53_Kerrisdale_Capital", "authorName": "Kerrisdale Capital", "documentKindSlug": "research-note", "documentKindLabel": "Research note", "sourceTypeSlug": "short_seller", "sourceTypeLabel": "Short seller", "presentationDate": "2019-07-01 00:00:00", "orientation": "portrait", "aspectRatio": 0.77272725, "pageNumber": 5, "pageCount": 29, "prevPage": 4, "nextPage": 6, "slideType": "other", "function": "analyze_data", "density": "overcrowded", "nDataPoints": 11, "notes": "This is a page from a research report rather than a standard presentation slide, containing dense narrative text and footnotes.", "elementsJson": [ "paragraph", "footnote" ], "metadataConfidence": 0.9, "imagePath": null, "slideHref": "/slides/019dd923-622c-750b-8b98-0c85e40ec39b/5", "deckHref": "/decks/019dd923-622c-750b-8b98-0c85e40ec39b", "deckJsonHref": "/decks/019dd923-622c-750b-8b98-0c85e40ec39b.json", "deckAnchorHref": "/decks/019dd923-622c-750b-8b98-0c85e40ec39b#slide-5", "components": [ { "bbox": null, "kind": "callout", "text": "Given the historical disclosure of quarterly surveillance patients, and recent disclosures regarding the total number of patients who have ever been provided AlloSure results, we calculate an attrition rate for surveillance patients of approximately 20-30% per quarter, or a staggering 70% annually.", "attrs": null, "subkind": null, "toolName": "Visual emphasis", "toolSlug": "visual-emphasis", "confidence": null, "componentId": "019dd953-203e-77ad-a69c-bba4d21c73af", "frameworkName": null, "frameworkSlug": null }, { "bbox": { "h": 0.015, "w": 0.405, "x": 0.118, "y": 0.895 }, "kind": "disclaimer", "text": "4 11/9/2017 – CareDx Fiscal 2017 Third Quarter Earnings Call", "attrs": null, "subkind": "disclaimer", "toolName": null, "toolSlug": null, "confidence": null, "componentId": "2e7dafa6-5df3-48dc-b60c-ec8ae51d53a1", "frameworkName": null, "frameworkSlug": null }, { "bbox": { "h": 0.024, "w": 0.208, "x": 0.062, "y": 0.038 }, "kind": "image", "text": "Kerrisdale Capital", "attrs": null, "subkind": "logo", "toolName": null, "toolSlug": null, "confidence": null, "componentId": "e3a304f3-c88f-4107-8f42-958a79b77838", "frameworkName": null, "frameworkSlug": null }, { "bbox": null, "kind": "metric", "text": "patient attrition rate: 70%", "attrs": null, "subkind": "primary", "toolName": "Quantification", "toolSlug": "quantification", "confidence": null, "componentId": "019dd953-203e-77ad-a69c-c13d925782a1", "frameworkName": null, "frameworkSlug": null }, { "bbox": { "h": 0.072, "w": 0.764, "x": 0.118, "y": 0.092 }, "kind": "paragraph", "text": "prospective clinical studies will demonstrate improved patient outcomes. Continued coverage for AlloSure testing is dependent on annual review by this contractor of such data and publications.\" [emphasis added] For now, though, AlloSure is covered and reimbursable for any kidney transplant recipient covered by Medicare.", "attrs": null, "subkind": "paragraph", "toolName": null, "toolSlug": null, "confidence": null, "componentId": "3fa470af-aaf8-40e7-b50e-9222ff358a07", "frameworkName": null, "frameworkSlug": null }, { "bbox": { "h": 0.192, "w": 0.764, "x": 0.118, "y": 0.665 }, "kind": "paragraph", "text": "As with the routine screening of transplant recipients (see below), AlloSure usage is being studied on a protocol basis, with CareDx routinely disclosing on earnings calls the number of patients on an AlloSure surveillance protocol. Recently, the company has disclosed a quarterly attrition rate of 10% for these surveillance patients. While that still implies an incredible 35% annual drop-out rate, we believe that the real attrition rate is much higher. Given the historical disclosure of quarterly surveillance patients, and recent disclosures regarding the total number of patients who have ever been provided AlloSure results, we calculate an attrition rate for surveillance patients of approximately 20-30% per quarter, or a staggering 70% annually. Consider that CareDx has provided results to \"over 8,000 patients\" in the span of 6 quarters, and yet only about 3600 patients are currently on an AlloSure surveillance protocol.", "attrs": null, "subkind": "paragraph", "toolName": null, "toolSlug": null, "confidence": null, "componentId": "9eb6c3cc-91b0-410d-b93c-3357a803138b", "frameworkName": null, "frameworkSlug": null }, { "bbox": { "h": 0.225, "w": 0.764, "x": 0.118, "y": 0.188 }, "kind": "paragraph", "text": "That LCD went into effect on October 2, 2017, which partly explains the AlloSure revenue ramp that started in the fourth quarter of 2017. But it's also worth putting AlloSure into the more general context of organ rejection research. The transplant community has always dreamed of a noninvasive \"silver bullet\" to detect organ rejection, and the genomic revolution has brought with it hope that such a test could be developed. AlloSure measures the quantity of donor-derived cell-free DNA (dd-cfDNA) in the patient's blood stream, and the hypothesis that cfDNA might signal organ rejection was first advanced as far back as 1998. Research on the matter started gaining momentum in 2011 and, since then, small studies of cfDNA as a rejection marker in heart, lung, and kidney transplants showed promise but were inconclusive. Even the March 2017 flagship paper that arose out of CareDx's DART study was small (102 patients, only 27 of whom were diagnosed with rejection) and while \"promising\" (in the words of MolDX), it was far from conclusive.", "attrs": null, "subkind": "paragraph", "toolName": null, "toolSlug": null, "confidence": null, "componentId": "d8001d7b-8081-4e46-a7cb-be9ab1db078e", "frameworkName": null, "frameworkSlug": null }, { "bbox": { "h": 0.208, "w": 0.764, "x": 0.118, "y": 0.435 }, "kind": "paragraph", "text": "The LCD from MolDX in late 2017 essentially subsidized further studies of cfDNA by providing reimbursement for AlloSure, which flung open the door for large-scale studies to take place. cfDNA, which had been the subject of intense speculation and curiosity for a decade, could now be studied as a noninvasive rejection biomarker in large numbers and at negligible cost. On top of the latent demand for studying cfDNA, CareDx shrewdly provided financial support and funding to renowned transplant nephrologists in over two dozen of the largest clinics nationwide, ensuring a steady stream of multi-year studies that would provide \"recurring\" demand for AlloSure tests. The company also immediately began enrollment on a massive 1000-patient clinical trial (KOAR), which, in the company's own words, would \"include approximately 10,000 reimbursed AlloSure tests over the next 3 years, thus representing incremental AlloSure volume as well as another revenue driver going forward.\"4", "attrs": null, "subkind": "paragraph", "toolName": null, "toolSlug": null, "confidence": null, "componentId": "da9c21ad-7d13-4d5e-b3a3-cfb612edf593", "frameworkName": null, "frameworkSlug": null }, { "bbox": null, "kind": "quote", "text": "The LCD from MolDX in late 2017 essentially subsidized further studies of cfDNA by providing reimbursement for AlloSure, which flung open the door for large-scale studies to take place.", "attrs": null, "subkind": null, "toolName": "Authority citation", "toolSlug": "authority-citation", "confidence": null, "componentId": "019dd953-203e-77ad-a69c-bc72c68e4ba6", "frameworkName": null, "frameworkSlug": null }, { "bbox": { "h": 0.012, "w": 0.778, "x": 0.111, "y": 0.945 }, "kind": "source-note", "text": "Kerrisdale Capital Management, LLC | 1212 Avenue of the Americas, 3rd Floor | New York, NY 10036 | Tel: 212.792.7999 | Fax: 212.531.6153", "attrs": null, "subkind": "source-note", "toolName": null, "toolSlug": null, "confidence": null, "componentId": "e095335a-5805-4458-a100-087270512998", "frameworkName": null, "frameworkSlug": null } ], "metrics": [], "tools": [], "frameworks": [], "arcBeats": [], "loops": [ { "to": 26, "from": 4, "name": "Cost Of Inaction", "slug": "27-cost-of-inaction", "bestFor": "Urgent budget requests, compliance, risk mitigation", "matchId": "6ece1bb9-6dc2-4b36-a983-1e6b3a2a754d", "evidence": "The document emphasizes the risks of not acting on AlloSure's ineffectiveness", "position": 0, "objective": "Highlight the cost of inaction for investors", "structure": "The Status Quo -> The Hidden Costs Accumulating -> The Future State of Inaction -> The Tipping Point", "confidence": 0.7, "description": "Quantify what happens if the audience does nothing" } ], "imagePathAlt": null, "thumbSrc": null, "thumbSrcAlt": null, "locked": true }