bioAffinity Technologies, Inc. 10-K

Item 1. Business. Business Overview bioAffinity Technologies, Inc. (the “Company,” “we,” or “our”) develops noninvasive, early-stage diagnostics to detect and researches targeted therapies to detect and treat lung cancer and other diseases of the lung at the cellular level. Our Company also is conducting early-stage research focused on advancing therapeutic discoveries that could result in broad-spectrum cancer treatments. We develop proprietary noninvasive diagnostic tests and cancer therapeutics using technology that preferentially targets cancer cells and cell populations indicative of a diseased state. The Company was formed as a Delaware corporation on March 26, 2014. On June 15, 2016, we formed OncoSelect ® Therapeutics, LLC, a Delaware limited liability company and wholly owned subsidiary of the Company. Research and optimization of our platform technologies are conducted in our laboratories at The University of Texas at San Antonio. Our first diagnostic test, CyPath ® Lung, addresses the need for noninvasive detection of early-stage lung cancer. Lung cancer is the leading cause of cancer-related deaths. Physicians are able to order CyPath ® Lung to assist in their assessment of patients who are at high risk for lung cancer. The CyPath ® Lung test enables physicians to more confidently distinguish between patients who will likely benefit from timely intervention and more invasive follow-up procedures from patients who are likely without lung disease and should continue annual screening. CyPath ® Lung has the potential to increase overall diagnostic accuracy of lung cancer, which could lead to increased survival, fewer unnecessary invasive procedures, reduced patient anxiety, and lower medical costs. Through our wholly owned subsidiary, OncoSelect ® Therapeutics, LLC, our research has led to discoveries and advancement of novel cancer therapeutics that specifically and selectively target cancer cells. We are focused on expanding our broad-spectrum platform technologies to continue developing tests that detect and therapies that target various types of cancer and potentially other diseases. Information regarding the general development of bioAffinity’s business can be found in the “Business” section of our final IPO prospectus filed with the SEC pursuant to Rule 424(b)(4) under the Securities Act of 1933, as amended (the “Securities Act”) on September 2, 2022 (the “Final Prospectus”) (see https://www.sec.gov/Archives/edgar/data/1712762/000149315222024949/form424b4.htm ). Our First Diagnostic Test – CyPath ® Lung Overview of the CyPath ® Lung Methodology Lung cancer is the leading cause of cancer-related death worldwide, claiming nearly 1.8 million lives annually. 1 Individuals at high risk for lung cancer are recommended for annual screening by low-dose computed tomography (“LDCT”). Apart from LDCT, there is currently no reliable noninvasive method that can detect lung cancer at an early stage. Our first diagnostic test, CyPath ® Lung, is designed to be a cost-effective, 2 noninvasive, early-stage lung cancer diagnostic. Using CyPath ® Lung in conjunction with LDCT is predicted to improve the positive predictive value (the proportion of true positive results) by a factor of five. 2 Improving the positive predictive value of LDCT with the use of CyPath ® Lung can result in fewer patients unnecessarily subjected to invasive diagnostic procedures, earlier detection of lung cancer, and a reduction in healthcare costs. 3 1 The Cancer Atlas, Third Edition, American Cancer Society (ACS), World Health Organization (WHO) and The Union for International Cancer Control (UICC); https://canceratlas.cancer.org/the-burden/lung-cancer/. 2 Analysis of the Potential Diagnostic, Patient and Economic Impact of CyPath® Lung When Used After LDCT Screening to Detect Lung Cancer, bioAffinity Technologies Internal Analysis, 2022; attached as Appendix I of the Company’s Final Prospectus filed with the SEC on September 2, 2022, pursuant to Rule 424(b)(4) under the Securities Act (see https://www.sec.gov/Archives/edgar/data/1712762/000149315222024949/form424b4.htm ). 3 Ibid. 5 CyPath ® Lung uses flow cytometry technology to detect and analyze cell populations in a person’s sputum, or phlegm, to find characteristics indicative of lung cancer, including cancer and/or cancer-related cells that have shed from a lung tumor. The flow cytometer is a well-established instrument used in many commercial laboratories that records properties of labeled and unlabeled single cells. Sputum is an excellent sample for analysis because it is in direct contact with any malignancy in the lungs and can thus provide a snapshot of the tumor itself, its microenvironment, and its area of field cancerization. While studies have shown that expert cytological analysis of sputum can detect cancerous and pre-malignant cells, 4 the process of looking at microscopy slides is an extremely laborious approach and demands years of expertise. CyPath ® Lung uses flow cytometry and automated data analysis developed by artificial intelligence (AI) that allows for an entire sample of sputum to be examined for cost-effective, large-scale screening or diagnosis. In particular, CyPath ® Lung uses a synthetic porphyrin called meso-tetra (4-carboxyphenyl) porphine (“TCPP”), which is a naturally highly fluorescent porphyrin that has an unusually high affinity for cancer and cancer-associated cells. 5 The uptake and retention of TCPP in cancerous tissue and its fluorescent properties make TCPP an excellent bio-label for cancer. As used in CyPath ® Lung, the proportion of cells with high TCPP fluorescence intensity in a patient’s sputum sample is a significant predictor of lung cancer. bioAffinity holds multiple patents protecting its use of TCPP for the diagnosis, monitoring, and treatment of cancer. In addition, the Company has multiple domestic and foreign patent applications to protect the use of flow cytometry and its AI-developed automated analysis platform in the detection of lung cancer and other lung diseases using sputum as a sample. We developed an algorithm using AI to distinguish samples from high-risk patients who had lung cancer from those who are cancer-free. Precision Pathology Services (“Precision Pathology”) developed CyPath ® Lung for sale as a Laboratory Developed Test (an “LDT”) in accordance with the standards of the College of American Pathologists (“CAP”) and the regulations and guidance of the Clinical Laboratory Improvement Amendments of 1988 (“CLIA”) program, which is administered by the Centers for Medicare and Medicaid Services (“CMS”). In developing the test as an LDT, Precision Pathology developed and integrated software into the test protocol, which generated high-throughput and user-friendly, standardized analysis of flow cytometric sample data. Our test can analyze an average sputum sample containing about 20 million cells in less than 20 minutes. A physician’s report is generated within minutes after data acquisition. The test can be put into routine lab use without requiring expert evaluation of samples or being subject to operator bias. Our approach allows the entire sputum sample to be rapidly analyzed. The numerical analysis developed by AI captures complex interactions between lung cancer, the microenvironment, and areas of field cancerization that would be difficult if not impossible for individuals to predict or detect reliably by eye. For example, during test development, we discovered that viability staining density suggests a link with apoptosis, or cell death, that is linked to many cancers, including lung cancer. Our model also suggests that specific markers of immune cell populations may be informative as to the presence of cancer in the lung. These findings are the result of our AI approach to automated analysis. To our knowledge, CyPath ® Lung is the first cancer diagnostic that combines automated flow cytometric analysis to predict the presence of lung cancer from sputum samples. Clinical Validation, Certification, and Classification of CyPath ® Lung A 19-month test validation clinical trial of CyPath ® Lung 6 collected sputum noninvasively from people at high risk for lung cancer, including patients with the disease (N=28) and those cancer-free (N=122). Patients collected their sputum sample over three days at home before bringing their sample to the clinical collection site. Samples were shipped overnight to the laboratory for analysis. Study participants in the high-risk cohort had a CT to confirm they did not have lung cancer. Those in the cancer cohort had imaging and a biopsy that confirmed lung cancer. After providing a sputum sample, participants were released from the study after a physician either confirmed the individual was cancer-free by examination of CT imaging or confirmed the presence of lung cancer by biopsy. Flow cytometry and patient data used in analysis to produce the results included (1) the proportion of cells with a high ratio of high TCPP fluorescence intensity over cell size; (2) the proportion of cells with an intermediate ratio of fluorescence intensity caused by the viability dye (FVS510) over cell size; (3) the proportion of cells that were CD206 negative but positive for one or more of the following markers: CD66b (granulocytes), CD3 (T cells), and CD19 (B cells); and (4) patient age. 4 T. Neumann, et al., Premalignant and Malignant Cells in Sputum From Lung Cancer Patients, Cancer Cytopathology, Dec. 25, 2009, page 473-481. 5 El-Far MA, Pimstone N. A comparative study of 28 porphyrins and their abilities to localize in mouse mammary carcinoma: uroporphyrin I superior to hematoporphyrin derivative. Prog Clin Biol Res. 1984;170:661–672. 6 M.E. Lemieux, et al., Detection of Early-Stage Lung Cancer in Sputum using Automated Flow Cytometry and Machine Learning. Respir Res. 2023;24(1):23. doi: 10.1186/s12931-023-02327-3. 6 More than half of those in the cancer cohort had lung cancer in the earlier Stages I-II. The analysis, performed on an LSRII flow cytometer, resulted in 92% sensitivity and 87% specificity in the subgroup of these patients (N=132) who had no nodules or lung nodules smaller than 20 mm on their LDCT scan, while eight out of 10 (80%) of Stage I tumors were correctly identified. Sensitivity is the percentage of persons with the disease – in this case lung cancer – who are correctly identified by the test. Specificity is the percentage of persons without lung cancer who are correctly identified by the test. The cancer group included all lung cancer types, but mostly squamous cell carcinoma and adenocarcinoma lung cancer (in near equal numbers), showing that CyPath ® Lung detects all types of lung cancer. Following completion of the test validation trial, CyPath ® Lung was evaluated independently by Precision Pathology, which developed the test for sale as an LDT in accordance with CAP/CLIA standards. An LDT is a type of in vitro diagnostic (“IVD”) test that is developed, validated, and performed within a single laboratory. CyPath ® Lung has been validated and is being performed by Precision Pathology, a CAP-accredited, CLIA-certified clinical pathology laboratory in San Antonio, Texas, pursuant to a joint development agreement with the Company. In third quarter 2022, Precision was inspected by CAP in accordance with CAP/CLIA regulatory standards and regulations resulting in continued accreditation for the laboratory and the CyPath ® Lung test as an LDT. As part of CAP/CLIA certification, Precision Pathology evaluated the performance of CyPath ® Lung employing its own laboratory technicians and a different flow cytometer, the Navios EX. Results of Precision Pathology’s certification were comparable to those from the test validation trial and demonstrated that CyPath ® Lung remains robust to differences in sample handling, processing, and the type of flow cytometer. bioAffinity Technologies intends to voluntarily seek FDA clearance of the CyPath ® Lung as a Class II IVD medical device for the detection of lung cancer. The Company has designed its pivotal trial with guidance from its clinical research organization (“CRO”), Courante Oncology, and has prepared a pre-submission that will be submitted to the FDA for review and feedback. We anticipate a three-year diagnostic trial including an 18-month patient enrollment of approximately 1,800 patients, with participants followed for at least one year after enrollment to determine whether they have lung cancer. Similar to the test validation trial, the planned pivotal trial will analyze flow cytometry and patient data including (1) the proportion of cells with a high ratio of high TCPP fluorescence intensity over cell size; (2) the proportion of cells with an intermediate ratio of fluorescence intensity caused by the viability dye (FVS510) over cell size; (3) the proportion of cells that were CD206 negative but positive for one or more of the following markers: CD66b (granulocytes), CD3 (T cells), and CD19 (B cells); and (4) patient age. Patient enrollment is scheduled to begin in 2023 at up to 20 collection sites. Assuming the study is successful, we intend to submit a de novo classification request to the FDA within six months of study completion. The Patient- and Physician-Friendly CyPath ® Lung Process CyPath® Lung is designed to be noninvasive and patient friendly. The diagnostic process uses sputum that is obtained noninvasively in the privacy of a patient’s home. Physicians order the test for their patients after lung cancer screening reveals a lung nodule considered to be indeterminate because of the nodule size and lack of suspicious characteristics. Lung nodules are considered indeterminate if their size is between 6-20 mm in diameter. Lung nodules of that size are associated with a lung cancer risk as low as 0.5% and up to 16%. 7 For the CyPath ® Lung test, patients are given a small sample collection kit during an office visit with their physician. (See Figure 1 below.) From the privacy of the patient’s home, the patient collects a sample of his or her sputum over three days using a hand-held assist device that comes in the collection kit called an acapella ® Choice Blue made by Smiths Medical, which acts to break up mucus in the patient’s lung and facilitates the patient’s ability to cough up sputum from the lung into a collection cup that is also supplied with the kit. In addition to the kit’s step-by-step instructions, an instructional video and a live patient coach are available by calling 855-MYLUNGS to help patients with sample collection. With the patient’s permission, the patient coach will proactively call or text patients to offer assistance. After the three-day sample of sputum is collected in the collection cup, the patient puts the collection cup into the kit and uses a pre-addressed envelope provided in the kit to overnight the sample to the laboratory. 7 Gierada et al; https://pubmed.ncbi.nlm.nih.gov/25326638/. 7 At the laboratory, the sputum is processed by technicians into a single-cell suspension and labeled with TCPP, which preferentially binds to cancer cells and/or cancer-related cells. Cells are also stained with fluorescently labeled antibodies that identify hematopoietic and epithelial cells within the sputum sample. A viability dye is used to eliminate dead cells. The sputum sample is analyzed using flow cytometry, which allows an average sputum sample containing about 20 million cells to be profiled in less than 20 minutes. A laboratory technician skilled in general laboratory techniques can accomplish sample processing, labeling, and data collection. Physicians receive test results within three days after the laboratory receives the patient’s sputum sample. CyPath ® Lung testing helps identify patients who should undergo more aggressive follow-up procedures to confirm a suspected lung cancer. When CyPath ® Lung sample analysis determines a patient is unlikely or very unlikely to have lung cancer, the result can serve to support a physician’s decision to monitor this patient by following a recommended LDCT screening routine. Figure 1. Patient- and Physician-Friendly CyPath ® Lung Process. CyPath ® Lung Research and Clinical Studies The high affinity of TCPP for cancer and cancer-related cells and its fluorescent nature makes it an excellent bio-label for cancer. The CyPath ® Lung technology is based on this concept and scientific work originating at Los Alamos National Laboratory in collaboration with St. Mary’s Hospital in Colorado. A blinded clinical trial 8 (Patriquin, et. al, 2015) of an earlier version of CyPath ® Lung used a microscope to directly identify cells labeled with TCPP in one-third or less of the sputum sample. For each trial participant, researchers manually scanned 12 microscope slides labeled with TCPP for the presence of red fluorescing cells (“RFCs”) displaying a spectral signature that indicated uptake of TCPP in the cell. In addition to measuring the spectral signature, the fluorescent intensity and cell size of RFCs were measured. The test data, including fluorescent intensity over cell size, was analyzed. The Patriquin trial was conducted over 24 months and resulted in 81% test accuracy, 77.9% sensitivity, and 65.7% specificity in the ability to correctly differentiate between samples from lung cancer patients and those at high risk who were cancer-free. The Patriquin trial required participants to provide a sputum sample and CT imaging of the lungs. Those in the cancer cohort underwent a biopsy to confirm lung cancer. High-risk patients displaying indeterminate nodules were followed for 18 months to confirm they were cancer-free. The Patriquin study concluded that optimizing the test to provide for analysis of the entire sputum sample would improve results. 8 Patriquin, et.al., Early detection of lung cancer with Meso-Tetra (4-Carboxyphenyl) Porphyrin-Labeled Sputum, J Thorac Oncol. 2015;10(9):1311-1318. doi: 10.1097/JTO.0000000000000627. 8 The Company continued development of its lung cancer diagnostic technology culminating in a flow cytometry-based CyPath ® Lung test incorporating automated AI analysis that evaluates the entire sputum sample. A blinded diagnostic trial of the advanced test 9 (Lemieux, et al, 2023) resulted in 92% sensitivity and 87% specificity in the subgroup of these patients (N=132) who had no nodules or lung nodules smaller than 20 mm on their LDCT scan, while eight out of 10 (80%) of Stage I tumors were correctly identified. The cancer group included all lung cancer types, but mostly squamous cell carcinoma and adenocarcinoma lung cancer (in near equal numbers), showing that CyPath ® Lung detects all types of lung cancer. All studies performed to date are summarized in the table below. CyPath ® Lung Studies and Clinical Trials Study Description Results Porphyrin’s localization and evaluation of cancer cell uptake of four different porphyrins TCPP porphyrin localizes more than other porphyrins in cancer cells; higher uptake of TCPP in cancer cells than in normal cells. Uptake was determined by visual assessment. Cell lines were used. Researchers did not report the length of time taken to conduct this study, nor any follow-up. Blinded study to diagnose lung cancer by labeling sputum with TCPP and identifying red fluorescing cells under a microscope Study of uranium miners (cancer N=8 / healthy N=4) that labeled sputum with TCPP resulted in 100% sensitivity and 100% specificity. Classification of cancer was made by subjective visual assessment of the presence and intensity of red fluorescing cells on slides. In this blinded study, one patient initially enrolled as a healthy subject was correctly diagnosed with cancer by the test. Length of study not reported. No patient follow-up was reported except for correct detection of cancer in patient initially enrolled as healthy. Internal validation study with microscopy-based assay completed to optimize TCPP labeling of sputum containing cancer and cancer-related cells in lung cancer samples In this research study lasting eight months, the florescence intensity of TCPP-labeled cells in sputum was measured by subjective visual assessment of microscope slides to distinguish samples from cancer and healthy cohorts. Researchers who were blinded to sample origin correctly identified samples from lung cancer patients (cancer N=15 / healthy N=12) resulting in 100% sensitivity and 100% specificity. Participants were not followed up after providing the sputum sample and CT scan or biopsy. 9 M.E. Lemieux, et al. Detection of Early-Stage Lung Cancer in Sputum using Automated Flow Cytometry and Machine Learning. Respir Res. 2023;24(1):23. doi: 10.1186/s12931-023-02327-3. 9 Early Detection of Lung Cancer with Meso-Tetra (4-Carboxyphenyl) Porphyrin-Labeled Sputum 10 A 24-month clinical trial of 128 high-risk smokers and cancer patients used microscopy-based assay to identify TCPP-labeled cells in sputum (cancer N=26 / high risk N=102) that resulted in 81% accuracy, 77.9% sensitivity, 65.7% specificity. Slides were scanned. Fluorescent intensity and cell size of RFCs were objectively measured by software. High-risk participants who were cancer-free were followed for 18 months to confirm status. Sputum analysis by flow cytometry; an effective platform to analyze the lung environment. 11 Research reporting on the CyPath ® Lung test’s quality controls included manual analysis of cell population data acquired by flow cytometry analysis of sputum. This research evaluated flow cytometry data from 164 participants’ sputum samples analyzed manually for differences in cell characteristics, cell population size, and cell fluorescence intensity. Detection of Early-Stage Lung Cancer in Sputum using Automated Flow Cytometry and Machine Learning 12 Test validation clinical trial using bioAffinity’s automated flow cytometry CyPath ® Lung test (cancer N=28 / high risk N=122) resulted in overall 82% sensitivity and 88% specificity for the test; CyPath ® Lung sensitivity is 92% and specificity is 87% for patients with lung nodules smaller than 20 mm. Porphyrin-modified beads for use as compensation controls in flow cytometry 13 Reporting on the protocol for preparing porphyrin-labeled compensation beads invented by bioAffinity and used to optimize the results of CyPath ® Lung test to detect early-stage lung cancer. The Cancer Diagnostics Market and CyPath ® Lung The global cancer diagnostic market is projected to grow from an estimated $172.3 billion in 2022 to $293.5 billion in 2030, with a compound annual growth rate (“CAGR”) of 6.8%. 14 The market worldwide for lung cancer diagnostic tests was estimated at $2.6 billion in 2022 and is projected to reach $4.7 billion by 2030, with a CAGR of 7.8% over 2022-2030. 15 bioAffinity Technologies has the potential to play a significant role in the cancer diagnostic market because our platform is noninvasive, easy to use, cost-effective, and has a potential to lead to better patient outcomes. (See Analysis of the Potential Diagnostic, Patient And Economic Impact of CyPath ® Lung When Used After LDCT Screening to Detect Lung Cancer, bioAffinity Technologies Internal Analysis with citations, 2022; attached as Appendix I of the Company’s Final Prospectus filed with the SEC on September 2, 2022, pursuant to Rule 424(b)(4) under the Securities Act) (see https://www.sec.gov/Archives/edgar/data/1712762/000149315222024949/form424b4.htm ). 10 Patriquin, et al. Early Detection of Lung Cancer with Meso-Tetra (4-Carboxyphenyl) Porphyrin-Labeled Sputum. J Thorac Oncol. 2015;10(9):1311-1318. doi: 10.1097/JTO.0000000000000627. 11 Bederka, et al. Sputum analysis by flow cytometry; an effective platform to analyze the lung environment. PLoS One 2022;17(8). doi: 10.1371/journal.pone.0272069. 12 M.E. Lemieux, et al. Detection of Early-Stage Lung Cancer in Sputum using Automated Flow Cytometry and Machine Learning. Respir Res. 2023;24(1):23. doi: 10.1186/s12931-023-02327-3. 13 Bauta, et al., Porphyrin-modified beads for use as compensation controls in flow cytometry, Journal of Visualized Experiments (JoVE) 2023, CITATION 14 Research and Markets. Cancer Diagnostics Market Size, Share & Trends Analysis Report by Product (Consumables, Instruments), by Technology, by Screening Type, by Application, by End-user, by Region, and Segment Forecasts, 2022-2030. Oct. 2022. ResearchAndMarkets.com. 15 ReportLinker. Global Lung Cancer Diagnostics Industry. Jan. 2023. ReportLinker.com. 10 CyPath ® Lung is currently utilized as a diagnostic tool for detecting early-stage lung cancer. bioAffinity is conducting research for the expansion of its flow cytometric platform technology to detect and monitor lung diseases, such as Chronic Obstructive Pulmonary Disease (COPD) and asthma, and other cancers. The Company licensed CyPath ® Lung to Precision Pathology, which began marketing CyPath ® Lung in Texas as an LDT in accordance with CAP/CLIA regulations pursuant to the terms of the joint development agreement between the Company and Precision Pathology. Limited funds were available to market CyPath ® Lung until the Company completed its IPO in September 2022. CyPath ® Lung is sold to physicians who order CyPath ® Lung for patients at high risk for lung cancer after an LDCT confirms the presence of lung nodule(s). As a front-end diagnostic tool used in conjunction with LDCT, the Company’s lung cancer test will help determine whether more expensive, specialized, and/or invasive tests are warranted. CyPath ® Lung compares favorably to current standards of care for diagnosing lung cancer, including invasive biopsies, as seen in the table shown below. Comparison of CyPath ® Lung to Current Standards of Care Diagnostic Test or Procedure Intended Patient Sensitivity Specificity Procedural Risk CyPath ® Lung ‌16 High risk 82% 88% None CyPath ® Lung High risk – nodules less than 20 mm 92% 87% None Low Dose CT screening 17 High risk 93.80% 73.40% Radiation exposure FDG PET imaging ‌18 Suspicious lung nodules 88% 75% Radiation exposure Bronchoscopy ‌19 Suspicious lung nodules – central lesions 88% 47% Invasive, risk of collapsed/bleeding lung infection Fine Needle Biopsy 20 Suspicious lung nodules 90.4% 75.4% Invasive, risk of collapsed/bleeding lung infection Core Needle Biopsy 21 Suspicious lung nodules 89.1% 88.6% Invasive, risk of collapsed/bleeding lung infection 16 Rebel, VI, et al. Automated Flow Cytometry Test Distinguishes Cancer from Non-Cancer in Sputum with High Sensitivity and Specificity, poster, 2020 World Conference on Lung Cancer. January 2021. 17 National Lung Screening Trial Research Team, Church TR, Black WC, Aberle DR, Berg CD, Clingan KL, et al. Results of initial low dose computed tomographic screening for lung cancer. N Engl J Med. 2013;368(21):1980-1991. doi: 10.1056/NEJMoa1209120. 18 Deppen SA, et al. Accuracy of FDG-PET to diagnose lung cancer in areas with infectious lung disease: a meta-analysis, JAMA. 2014;312(12):1227-1336. doi: 10.1001/jama.2014.11488. 19 Silvestri GA, et al. A bronchial genomic classifier for the diagnostic evaluation of lung cancer. N Engl J Med. 2015;373:243-251. doi: 10.1056/NEJMoa1504601 20 Yao X, Gomes MM, Tsao MS, Allen CJ, Geddie W, Sekhon H. Fine-needle aspiration biopsy versus core-needle biopsy in diagnosing lung cancer: a systemic review. Curr Oncol. 2012;19(1):e16-e27. doi: 10.3747/co.19.871. 21 Zhang Y, Luo G, Etxeberria J, Hao Y. Global patterns and trends in lung cancer incidence: a population-based study. J Thorac Oncol. 2021;16:933–944. 11 bioAffinity’s business model is to immediately address the need for a quick-to-market, noninvasive, cost-effective lung cancer diagnostic that will save lives and reduce medical costs. The Company is ready to capture a growing market. The U.S. Preventive Services Task Force recommended doubling the number of Americans at high risk for lung cancer who are recommended for annual screening from 9 million to an estimated 18 million. China has an estimated 300 million smokers. 46 The European Union is estimated to have 34 million people at high risk for lung cancer. Following its entry into the U.S. market, the Company expects to pursue CE marking of CyPath ® Lung for sale in the European Union and is pursuing collaboration with a strategic partner to develop the test for the China market. bioAffinity conducted market research with pulmonologists, oncologists, cardiothoracic surgeons, radiologists, and internists engaged in the diagnosis and treatment of lung cancer to help assess these stakeholders’ reactions to the new diagnostic, CyPath ® Lung. Research revealed a strong interest in CyPath ® Lung, driven by the high level of unmet clinical need for noninvasive diagnostics. A survey conducted with 240 pulmonologists and internists, the primary audience for the test, showed that 96% would use CyPath ® Lung if it were available today as an adjunct used for diagnosis after LDCT screening. Physicians see the value of a noninvasive diagnostic technology with the ability to confirm or rule out cancer and reduce the number of costly invasive procedures that result from LDCT’s low positive predictive rate. CyPath ® Lung Business Development Plan We believe in the viability of the Company’s Business Plan based on the circumstances surrounding our business that are known to us as of the date of this report. However, the timing, strategies, and stages of our Business Plan may evolve in light of new circumstances that cannot be predicted with certainty at this time. Our Business Plan envisions four phases of expanding market entry into the U.S., the EU, and worldwide that are timed to maximize Company resources and minimize market risk. Phase 1 of our Business Plan begins with a controlled market launch of the Company’s LDT CyPath ® Lung in Texas followed by expansion into the Southwest market area. Limited marketing was undertaken prior to the IPO that provided funds necessary to begin our controlled market launch. In February 2023, the Company announced that the marketing and advertising firms of Havas Health & You and Trinity Life Sciences had been engaged to build the CyPath ® Lung brand and position it for success in the cancer diagnostics sector. Havas Health & You, the world’s largest global health network, is creating the branding and broader marketing strategy to align with the need for a patient-friendly diagnostic that gives physicians another tool to assess the potential or presence of lung cancer in their high-risk patients. Trinity Life Sciences is providing advisory services, insights, and analytics to bioAffinity Technologies’ marketing strategy for CyPath ® Lung. The Company expects to begin a staged nationwide expansion of sales and marketing following the successful completion of its controlled launch in 2023. Phase 2 of our Business Plan anticipates entering the EU market with CyPath ® Lung as a CE-marked IVD test with sales in the Netherlands, followed by a staged EU expansion. Phase 3 of our Business Plan focuses on the marketing of an FDA-cleared CyPath ® Lung test, beginning with a pivotal clinical trial in the U.S. Phase 4 of our Business Plan accelerates the market presence of CyPath ® Lung in countries in Asia, Eastern Europe, and Australia after obtaining FDA marketing authorization in 2026. At each phase of commercialization, bioAffinity Technologies will develop messaging and marketing programs, including key convention attendance, digital marketing, social media presence, and advertising, to create an “inbound” lead generation mechanism that delivers our message to our target audience. In addition, bioAffinity will collaborate with key opinion leaders (“KOLs”) to expand our third-party reference and speaking pool of experts. The Company will provide support and collateral materials, including posters, presentations, videos, and peer-reviewed papers, to our KOLs who will present data and their experience with CyPath ® Lung at key meetings. This content can be shared across platforms, including websites and sales tools, and will be used as references to support our product claims as well as sales and marketing efforts to physicians, reference laboratories, and patients. We will also work with lung cancer advocacy groups throughout all phases to support the message that routine screening can diagnose cancer at an early stage and save lives. 12 The Competition for CyPath ® Lung In 2022, we evaluated 67 companies advancing tests for the early detection of lung cancer that provided at least a scientific foundation for their tests. These competitors are investigating lung cancer screening and diagnostic methods that use various types of collected samples (blood, breath, nasal epithelial cells, saliva, sputum, and urine) or imaging systems. Of those 67 companies, we found that only 11 had conducted clinical studies in a manner and with results that could lead to further analysis. The majority of these 11 tests are in research and development, with only four tests on the market and one available to a limited number of medical centers. Although CyPath ® Lung was never tested directly against any of these five tests, comparison of the published performance numbers suggests CyPath ® Lung might outperform them all. (See Summary of Comparative Performance Analysis of Tests on the Market, bioAffinity Technologies Internal Analysis, 2022 ; attached as Appendix II of the Company’s Final Prospectus (see https://www.sec.gov/Archives/edgar/data/1712762/000149315222024949/form424b4.htm )). From the 67 companies we evaluated, we found only seven tests, including CyPath ® Lung, that represent a balanced test for early lung cancer detection and that have advanced to the point that there is sufficient data for evaluation. Of our six competitors with well-balanced tests (two sell the same test; one in the U.S. and one in China), four companies (20/20 GeneSystems 48,49 ; Nuclexi 50 ; Savicell 51 ; Visongate 52 ) conducted their studies on a population that does not match the high-risk population for which the test is intended. Their clinical data, therefore, is suspect as it applies to the population of patients who actually will use the test. The two remaining balanced tests are not on the market. We believe there are many reasons why CyPath ® Lung is a superior test when compared to its competitors. First, lung sputum is an excellent medium for early lung cancer detection because sputum is in close contact with the tumor and pre-cancerous areas that shed cancer and pre-cancerous cells directly into the sputum, can be obtained noninvasively, and can be transported easily. Moreover, sputum contains immune cell populations in reaction to the presence of a tumor. Second, bioAffinity’s proprietary technology is straightforward. bioAffinity’s CyPath ® Lung platform technology is not a molecular test and does not collect genetic material that requires immediate processing. CyPath ® Lung uses well-established flow cytometry techniques to investigate cells contained in the sputum for characteristics that indicate whether cancer is present. Sample processing is straightforward, and laboratory technicians can be easily trained. Reagents used by the test are widely available. Data acquisition and analysis is fully automated, allowing for efficient test results. Third, CyPath ® Lung has shown high specificity and sensitivity that is similar to far more invasive and more expensive procedures currently used to detect lung cancer. Fourth, CyPath ® Lung is cost effective. Existing CPT cost codes that have a reimbursable track record have been identified for use with CyPath. Fifth and as important as any of our test’s benefits, CyPath ® Lung is patient friendly, providing at-home sample collection that is noninvasive and offers particular benefit during a public healthcare crisis like the coronavirus pandemic. For a discussion of our competitors and competitive analysis, please see the “Business – The Competition for CyPath ® Lung” section of our Final Prospectus (see https://www.sec.gov/Archives/edgar/data/1712762/000149315222024949/form424b4.htm ). Research and Development Activities The Company is continuing its research and development activities pertaining to diagnostics that include multiple studies we believe will support FDA final approval of CyPath ® Lung, which we will seek after the pivotal trial is complete. Our scientists also have begun preliminary studies toward the development of CyPath ® Lung for detection of Chronic Obstructive Pulmonary Disease (COPD) and the assay’s use with bronchoalveolar lavage fluid (BAL). With regard to therapeutic research, the Company continues its experiments focused on establishing proof-of-concept for our discovery that the silencing or knockdown of two genes that each encode a cell surface receptor results in cancer death without much harm to healthy cells with the intent of advancing toward animal studies. Intellectual Property Portfolio As of March 31, 2023, the Company and its subsidiary OncoSelect have a patent estate that includes 14 issued U.S. and foreign counterpart patents, including two U.S. patents and twelve foreign counterpart patents in Australia, Canada, China, France, Germany, Hong Kong, Italy, Mexico, Spain, Sweden, and the United Kingdom. One U.S. patent and nine counterpart foreign patents directed at diagnostic applications expire in 2030. Therapeutic patents registered in Australia, China Mexico and the U.S. expire in 2037. With regard to our diagnostic test CyPath ® Lung and other diagnostic candidates, we have one issued U.S. patent and nine foreign counterpart patents in Canada, China, France, Germany, Hong Kong, Italy, Spain, Sweden, and the United Kingdom. With regard to our diagnostic patent applications, one family is directed at diagnosing lung health using flow cytometry, and the other family is directed at proprietary compensation beads used to calibrate the flow cytometry instrument and used in CyPath ® Lung data acquisition. Pending applications directed at diagnosing lung health include one pending U.S. non-provisional patent application and eight foreign counterpart patent applications in Australia, Canada, China, European Patent Office, Hong Kong, Japan, Mexico, and Singapore filed in 2019, one Patent Cooperation Treaty (PCT) International Application directed to the composition of compensation beads and one PCT International Application directed to diagnosing lung health using flow cytometry were filed in 2022. 13 With regard to our therapeutic product candidates, we have one issued U.S. patent, two pending U.S. patent applications, three issued foreign patents, ten foreign applications pending in Canada, China, European Patent Office, Hong Kong, India, and Japan and one pending PCT International Application,. The therapeutic intellectual property is made up of four families directed at our therapeutic product candidates, including two families directed at siRNA product candidates, one family directed at soluble CD320 used in the treatment of cancer, and one family directed at porphyrin conjugates for treating cancer. Government Regulation For a discussion of the extensive government regulation that the Company and our IVD medical device, CyPath ® Lung, are subject to, please see the “Business – Government Regulation” section of our Final Prospectus (see https://www.sec.gov/Archives/edgar/data/1712762/000149315222024949/form424b4.htm ). Our Employees The Company places significant emphasis on the recruitment, development, and retention of its employees who include award-winning scientists dedicated to advancing scientific discovery from bench to bedside. Of the Company’s 14 employees, all of whom are employed full-time by the Company, one holds an MD and seven hold PhDs in biology or medicinal chemistry. Approximately nine employees are engaged in research and development and approximately five in sales or general administration. Our Executive Vice President and Chief Medical and Science Officer, Vivienne Rebel, holds an MD and PhD. Business development is led by our Vice President of Operations, Xavier Reveles, who has 25 years of experience as a clinical geneticist skilled in the creation and management of CLIA clinical laboratories, coding, and CPT reimbursement valuations. Mr. Reveles is board certified by the American Society of Clinical Pathology as a clinical specialist in cytogenetics who has successfully launched multiple diagnostics and commercial laboratories. The innovative and collaborative culture at bioAffinity is in part responsible for the high degree of retention and professional advancement. Of those employees hired prior to 2022, most have been with the Company for more than five years of its nine-year history. Outside partnerships and collaborations that advance business and scientific research are encouraged, allowing the Company to multiply workforce efforts without expending significant capital.