What changed in this filing

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Item 1A. Risk Factors

2023-02-27 compared with 2022-02-24 · 279 added, 184 removed, 896 unchanged (34% of the section changed)

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Additional discussion of the risks summarized in this risk factor summary, and other risks that we face, can be found below under the heading “Risk Factors” and should be carefully considered, together with other information in this Annual Report on Form 10-K, or this Form 10-K, and our other filings with the SEC before making an investment decision regarding our common stock.

• Our business may be adversely affected by the effects of health epidemics, including the recent coronavirus outbreak.

• Our business may be adversely affected by the effects of health epidemics, including the continuing COVID-19 pandemic.

• We have a history of losses, and we expect to incur net losses for the next several years.

• We may require additional financing.

• We receive a substantial portion of our revenues from Medicare, and the loss of, or a significant reduction in, reimbursement from Medicare would severely and adversely affect our financial performance.

• Our financial results currently are largely dependent on sales of AlloSure Kidney and AlloMap Heart tests and products, and we will need to generate sufficient revenues from these and other solutions and tests we develop to grow our business.

• Our financial results currently are largely dependent on sales of AlloSure Kidney, AlloMap Heart and AlloSure Lung tests and products, and we will need to generate sufficient revenues from these and other solutions and tests we develop to grow our business.

• We are and could become subject to legal proceedings that could be time consuming, result in costly litigation and settlements/judgments, require significant amounts of management attention and result in the diversion of significant operational resources, which could adversely affect our business, financial condition and results of operations.

• The development and commercialization of additional diagnostic solutions are key to our growth strategy.

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• We rely extensively on third party service providers.

Failure of these parties to perform as expected, or interruptions in our relationship with these providers or their provision of services to us, could interfere with our ability to provide test results for our testing services business and kits for our products business.

Failure of these parties to perform as expected, or interruptions in our relationship with these providers or their provision of services or supplies to us, could interfere with our ability to provide test results for our testing services business and kits for our products business.

• We face four primary risks relative to protecting critical information:

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You should carefully consider the risks and uncertainties described below, together with all of the other information in this Annual Report on Form 10-K, including the section titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our consolidated financial statements and related notes, before investing in our common stock.

If any of the follows risks occur, our business, financial condition, results of operations and prospects could be materially harmed.

If any of the following risks occur, our business, financial condition, results of operations and prospects could be materially harmed.

In that event, the market price of our common stock could decline, and you could lose part or all of your investment.

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Our business may be adversely affected by the effects of health epidemics, including the continuing COVID-19 pandemic.

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

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

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, related to COVID-19 or other infectious diseases could 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 interruption in manufacturing or our supply 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.

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.

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The ultimate impact of the COVID-19 pandemic on our business, operations, or the global economy as a whole, remains highly uncertain, and a continued and prolonged public health crisis such as the COVID-19 pandemic could have a material negative impact on our business, financial condition, and operating results.

Though availability of vaccines and reopening of state and local economies has improved the outlook for recovery from COVID-19’s impacts, the impact of the Delta or Omicron variants or other new, more contagious or lethal variants that may emerge, the effectiveness of COVID-19 vaccines against the Delta or Omicron variants or such other variants and the related responses by governments, including reinstated government-imposed lockdowns or other measures, cannot be predicted at this time.

Though availability of vaccines and reopening of state and local economies has improved the outlook for recovery from COVID-19’s impacts, the impact of the Delta or Omicron variants or other new, more contagious or lethal variants that may emerge, the effectiveness of COVID-19 vaccines against variants and the related responses by governments, including reinstated government-imposed lockdowns or other measures, cannot be predicted at this time.

We continue to evaluate and refine our return to work strategy.

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For a detailed discussion of our financial condition and results of operations, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

We may require additional financing.

As of December 31, 2021, we had cash and cash equivalents of $348.5 million and an accumulated deficit of $383.2 million.

In the first quarter of 2021, we completed an underwritten public offering of common stock resulting in aggregate net proceeds to us of approximately $188.7 million, after deducting underwriting discounts and commissions and offering expenses.

We may require additional financing in the future to fund working capital, pay our obligations as they come due and fund our acquisitions of complementary businesses and assets.

Additional financing might include issuance of equity securities, debt, cash from collaboration agreements, or a combination of these.

However, 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 receive a substantial portion of our revenues from Medicare, and the loss of, or a significant reduction in, reimbursement from Medicare would severely and adversely affect our financial performance.

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Under PAMA, laboratories that receive the majority of their Medicare revenues from payments made under the CLFS 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 and the new market based rates took effect January 1, 2018.

The Centers for Medicare & Medicaid Services, or CMS, uses the rates and volumes reported by laboratories to develop Medicare payment rates for the

tests equal to the volume-weighted median of the private payer payment rates for the tests.

The final PAMA ruling was issued on June 17, 2016 and the new market based rates took effect on January 1, 2018.

The Centers for Medicare & Medicaid Services, or CMS, uses the rates and volumes reported by laboratories to develop Medicare payment rates for the tests equal to the volume-weighted median of the private payer payment rates for the tests.

Under PAMA, the reimbursement rate for AlloMap Heart is currently $3,240 for Medicare beneficiaries.

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AlloSure Kidney began to be reimbursed for kidney transplants covered by Medicare across the United States on October 9, 2017, the effective date of the Palmetto local coverage determination, or LCD.

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

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If future reimbursement levels are less than the current price, our revenues and our ability to achieve profitability could be impaired, and the market price of our common stock could decline.

We may also not be able to maintain or increase the portion of our tests reimbursed by Medicare for a variety of other reasons, including changes in reimbursement practices and general policy shifts.

We may also not be able to maintain or increase the portion

of our tests reimbursed by Medicare for a variety of other reasons, including changes in reimbursement practices and general policy shifts.

On a five-year rotational basis, Medicare requests bids for its regional Medicare Administrative Contractors, or MAC, services.

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Any such decision could also cause affected clinicians treating Medicare covered patients to reduce or discontinue the use of our tests.

Our financial results currently are largely dependent on sales of AlloSure Kidney, AlloMap Heart and AlloSure Heart tests and products, and we will need to generate sufficient revenues from these and other solutions and tests we develop to grow our business.

Our financial results currently are largely dependent on sales of AlloSure Kidney, AlloMap Heart and AlloSure Lung tests and products, and we will need to generate sufficient revenues from these and other solutions and tests we develop to grow our business.

We expect that sales of testing services and products will account for a substantial portion of our revenue for at least the next two years.

If we are unable to increase sales of our testing services or products or successfully develop and commercialize other solutions, tests or enhancements, our revenues and ability to achieve profitability would be impaired, and the market price of our common stock could decline.

We could become subject to legal proceedings that could be time consuming, result in costly litigation and settlements/judgments, require significant amounts of management attention and result in the diversion of significant operational resources, which could adversely affect our business, financial condition and results of operations.

Health insurers and other third-party payers may decide to revoke coverage of our existing test, decide not to cover our future solutions or may provide inadequate reimbursement, which could jeopardize our commercial prospects.

Successful commercialization of AlloSure Kidney, AlloSure Lung, AlloMap Heart and AlloSure Heart depends, in large part, on the availability of coverage and adequate reimbursement from government and private payers.

Favorable third-party payer coverage and reimbursement are essential to meeting our immediate objectives and long-term commercial goals.

For new diagnostic testing services, each private and government payer decides whether to cover the test, the amount it will reimburse for a covered test and the specific conditions for reimbursement.

Clinicians and recipients may be likely not to order a diagnostic test unless third-party payers pay a substantial portion of the test price.

Therefore, coverage determinations and reimbursement levels and conditions are critical to the commercial success of a diagnostic testing service, and if we are not able to secure positive coverage determinations and reimbursement levels, our business will be materially adversely affected.

Coverage and reimbursement by a commercial payer may depend on a number of factors, including a payer’s determination that our current and future testing services are:

• not experimental or investigational;

• medically necessary or redundant;

• lead to improved patient outcomes;

• appropriate for the specific recipient;

• cost-saving or cost-effective;

• supported by peer-reviewed publications.

Third-party payers have in the past disallowed, and may in the future disallow, in whole or in part, requests for reimbursement based on determinations that the member is not eligible for coverage, certain amounts are not reimbursable under plan coverage or were for services provided that were not medically necessary or were redundant or not coupled with other specified tests or services or additional supporting documentation is necessary.

Retroactive adjustments may change amounts realized from third-party payers.

We are also subject to claims reviews and/or audits by such payers, including governmental audits of our Medicare claims, and have in the past been required to repay these payers in certain circumstances where a preliminary finding was made that we were incorrectly reimbursed.

We may also in the future be required to repay these payers if a finding is made that we were incorrectly reimbursed.

In addition, several payers and other entities conduct technology assessments of new medical tests and devices and provide and/or sell the results of their assessments to other parties.

These assessments may be used by third-party payers and healthcare providers as grounds to deny coverage for or refuse to use a test or procedure.

We have received a negative technology assessment from at least one of these entities and could receive more.

If third-party payers decide not to cover our diagnostic testing services or if they offer inadequate payment amounts, our ability to generate revenue from AlloSure Kidney, AlloMap Heart, AlloSure Heart and future solutions could be limited.

Payment for diagnostic tests furnished to Medicare beneficiaries is typically made based on a fee schedule set by CMS.

In recent years, payments under these fee schedules have decreased and may decrease further.

Any third-party payer may stop or lower payment at any time, which could substantially reduce our revenue.

See the risk factor above titled “We receive a substantial portion of our revenues from Medicare, and the loss of, or a significant reduction in, reimbursement from Medicare would severely and adversely affect our financial performance” .

Since each payer makes its own decision as to whether to establish a policy to reimburse for a test, seeking payer coverage and other approvals is a time-consuming and costly process.

We cannot be certain that adequate coverage and reimbursement for AlloSure Kidney, AlloSure Lung, AlloMap Heart, AlloSure Heart, or future solutions will be provided in the future by any third-party payer.

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

The reimbursement process can take six months or more to complete depending on the payer.

Coverage policies approving AlloMap Heart have been adopted by many of the largest private payers.

Many of the payers with positive coverage policies have also entered into contracts with us to formalize pricing and payment terms.

We continue to work with third-party payers to expand and seek such coverage and to appeal denial decisions based on existing and ongoing studies, peer reviewed publications, support from physician and patient groups and the growing number of AlloMap Heart tests that have been reimbursed by public and private payers.

There are no assurances that the current policies will not be modified in the future.

If our test is considered on a policy-wide level by major third-party payers, whether at our request or on their own initiative, and our test is determined to be ineligible for coverage and reimbursement by such payers, our collection efforts and potential for revenue growth could be adversely impacted.

Our Medicare Part B coverage for AlloSure Kidney and AlloMap Heart is included in a formal local coverage decision for molecular diagnostics.

However, any change in this coverage decision or other future adverse coverage decisions by the CMS, including with respect to coding, could substantially reduce our revenue.

Medicare reimbursements currently comprise a significant portion of our revenue.

Our current Medicare Part B reimbursement was not set pursuant to a national coverage determination by CMS.

Although we believe that coverage is available under Medicare Part B even without such a determination, we currently lack the national coverage certainty afforded by a formal coverage determination by CMS.

This means that Medicare contractors, including our California Medicare contractor, currently may continue to develop their own coverage and reimbursement policies with respect to our technology.

Until 2016, AlloMap Heart was billed using an unlisted Current Procedural Terminology, or CPT, code, but in 2016 a new CPT Category 1 Multianalyte Assays with Algorithmic Analyses, or MAAA, code was added that specifically describes the test.

Further, pursuant to MolDX billing requirements, the AlloMap Heart test also has been assigned a McKesson Diagnostics Z code™, which is included on all Medicare claims.

If in the future CMS makes a determination not to pay for this code, or for any MAAA codes, this could be harmful to our business, and could have negative spillover implications that prevent or limit coverage by other third-party payers that might mirror aspects of Medicare payment criteria.

Since the launch of AlloSure Kidney in October 2016, and at the instruction of the MolDX Program of Palmetto, the test has been billed utilizing an unlisted CPT code.

If in the future CMS makes a determination to no longer provide coverage for services billed with an unlisted CPT code, our ability to bill and obtain reimbursement from public and private payers could be negatively impacted.

We are and could become subject to legal proceedings that could be time consuming, result in costly litigation and settlements/judgments, require significant amounts of management attention and result in the diversion of significant operational resources, which could adversely affect our business, financial condition and results of operations.

We have in the past been, and from time to time in the future may become, involved in lawsuits, claims and proceedings incident to the ordinary course of, or otherwise in connection with, our business.

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On September 30, 2020, Natera requested leave of the Court to amend its counterclaims to include additional allegations regarding purportedly false claims we made with respect to AlloSure, and the Court granted Natera’s request.

The trial date is currently set to start March 7, 2022.

The trial commenced on March 7, 2022 and concluded on March 14, 2022, with the jury awarding us $44.9 million in damages, comprised of $21.2 million in compensatory damages and $23.7 million in punitive damages.

As of the date of this report, the post-trial motion practice remains pending.

We will not record the award until cash is received or the matter is otherwise resolved.

On July 19, 2022, the United States Court of Appeals for the Federal Circuit affirmed the Court's judgment dismissing our patent infringement suit against Natera.

In addition, in response to our patent infringement suit filed against Natera on March 26, 2019, Natera filed suit against us on January 13, 2020 in the Court alleging, among other things, that AlloSure infringes Natera’s U.S.

Patent 10,526,658.

This case was consolidated with our patent infringement suit on February 4, 2020.

On March 25, 2020, Natera filed an amendment to the suit alleging, among other things, that AlloSure also infringes Natera’s U.S.

Patent 10,597,724.

The suit seeks a judgment that we have infringed Natera’s patents, an order preliminarily and permanently

enjoining us from any further infringement of such patents and unspecified damages.

Trial is currently scheduled for July 24, 2023.

The suit seeks a judgment that we have infringed Natera’s patents, an order preliminarily and permanently enjoining us from any further infringement of such patents and unspecified damages.

On May 13, 2022, Natera filed two new complaints alleging that AlloSure infringes Natera’s U.S.

Patents 10,655,180 and 11,111,544.

These two cases were consolidated with the patent infringement case on June 15, 2022.

On May 17, 2022, Natera agreed to dismiss the case alleging infringement of Natera’s U.S.

Patent 10,526,658.

On July 6, 2022, we moved to dismiss the rest of Natera’s claims.

On September 6, 2022, we withdrew the motion to dismiss.

We intend to defend both of these matters vigorously, and believe that we have good and substantial defenses to the claims alleged in the suits, but there is no guarantee that we will prevail.

Furthermore, on May 23, 2022, Plumbers & Pipefitters Local Union #295 Pension Fund filed a federal securities class action in the U.S.

District Court for the Northern District of California against us, Reginald Seeto, our President, Chief Executive Officer and member of our Board of Directors, Ankur Dhingra, our former Chief Financial Officer;

Marcel Konrad, our former interim Chief Financial Officer and former Senior Vice President of Finance & Accounting;

and Peter Maag, our former President, former Chief Executive Officer, former Chairman of the Board and current member of our Board of Directors.

The action alleges that we and the individual defendants made materially false and/or misleading statements and/or omissions and that such statements violated Section 10(b) of the Securities Exchange Act of 1934, as amended, or the Exchange Act, and Rule 10b-5 promulgated thereunder.

The action also alleges that the individual defendants are liable pursuant to Section 20(a) of the Exchange Act as controlling persons of our Company.

The suit seeks to recover damages caused by the alleged violations of federal securities laws, along with the plaintiffs’ costs incurred in the lawsuit, including their reasonable attorneys’ and experts’ witness fees and other costs.

We intend to defend ourselves vigorously, and believe that we have good and substantial defenses to the claims alleged in the suit, but there is no guarantee that we will prevail.

On August 25, 2022, the court appointed an investor group led by the Oklahoma Police Pension and Retirement System as lead plaintiffs and appointed Saxena White P.A.

and Robbins Geller Rudman & Dowd LLP as lead counsels.

Plaintiffs filed an amended complaint on November 28, 2022.

On January 27, 2023, defendants moved to dismiss all claims and to strike certain allegations in the amended complaint.

Plaintiffs’ opposition to the motion to dismiss and motion to strike is due on March 13, 2023, and defendants’ reply is due on April 13, 2023.

We intend to defend ourselves vigorously, and believes that we have good and substantial defenses to the claims alleged in the suit, but there is no guarantee that we will prevail.

Additionally, on September 21, 2022, Jeffrey Edelman brought a stockholder derivative action complaint in the U.S.

District Court for the Northern District of California, or the Edelman Derivative Action, against us as nominal defendant and Reginald Seeto, our President, Chief Executive Officer and member of our Board of Directors, Ankur Dhingra, our former Chief Financial Officer, Peter Maag, our former President, former Chief Executive Officer, former Chairman of the Board and current member of our Board of Directors, and the other members of our Board of Directors.

The plaintiff alleges that the individual defendants breached their fiduciary duties as directors and/or officers of our Company and engaged in insider trading, waste of corporate assets, unjust enrichment and violations of Sections 14(a) and 20(a) of the Exchange Act.

The action alleges that the individual defendants are liable pursuant to Section 20(a) of the Exchange Act as controlling persons of our Company.

The suit seeks a declaration that the individual defendants breached their fiduciary duties to us, violated Sections 14(a) and 20(a) of the Exchange Act and were unjustly enriched, and also seeks to recover damages sustained by us as a result of the alleged violations, along with the plaintiff’s costs incurred in the lawsuit, including reasonable attorneys’ and experts’ fees, costs and expenses.

In addition, on February 7, 2023, Jaysen Stevenson brought a stockholder derivative action complaint in the U.S.

District Court for the Northern District of California, or the Stevenson Derivative Action, against us as nominal defendant and Reginald Seeto, Ankur Dhingra, Peter Maag and other current and former members of the Company’s Board of Directors.

The claims and allegations in the Stevenson Derivative Action are substantially similar to those in the Edelman Derivative Action.

The plaintiff alleges that the individual defendants breached their fiduciary duties as our directors and/or officers and engaged in insider trading, waste of corporate assets, unjust enrichment and violations of Sections 14(a) and 20(a) of the Exchange Act.

The suit seeks declaratory relief and to recover alleged damages sustained by us as a result of the alleged violations, along with the plaintiff’s costs incurred in the lawsuit, including reasonable attorneys’ and experts’ fees, costs and expenses.

We intend to defend ourselves vigorously, and we believe that we have good and substantial defenses to the claims alleged in the Edelman Derivative Action and the Stevenson Derivative Action, but there is no guarantee that we will prevail.

Litigation is inherently unpredictable.

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In addition, we have included a discussion of a number of anticipated targets in this Form 10-K.

The actual timing of accomplishment of these targets could vary dramatically compared to our estimates, in

some cases for reasons beyond our control, including the continued impact of the COVID-19 pandemic.

The actual timing of accomplishment of these targets could vary dramatically compared to our estimates, in some cases for reasons beyond our control, including the continued impact of the COVID-19 pandemic.

We cannot be certain that we will meet our projected targets and if we do not meet these targets as publicly announced, the commercialization of our diagnostic solutions may be delayed or may not occur at all and, as a result, our business will suffer and our stock price may decline.

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While biopsies are less common for monitoring kidney transplant patients, there are transplant centers that manage patients with protocol biopsies, which could impact AlloSure Kidney revenue.

We cannot provide assurance that our efforts will increase the use of our test by new or existing customers.

We cannot provide assurance that our efforts

will increase the use of our test by new or existing customers.

Our failure to increase the frequency of use of our test by new and existing customers would adversely affect our growth and revenues.

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Our competition for patient solutions includes hospital-affiliated pharmacies located on-site at the transplant center and specialty pharmacies that provide transplant-specific care and dispensing services.

Our primary competitor in the digital solutions field is Epic Systems Corporation, or Epic.

Our primary competitor for our patient management EMR solution is Phoenix, Epic's transplant application.

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

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Others may develop lower-priced, less complex tests that could be viewed by clinicians and payers as functionally equivalent to our AlloSure Kidney, AlloSure Lung, AlloMap Heart and AlloSure Heart tests, which could force us to lower the current list price of our test and impact our operating margins and our ability to achieve profitability.

products and patient and digital solutions, which could prevent us from increasing or sustaining our revenues or achieving profitability and could cause the market price of our common stock to decline.

If we are unable to compete successfully against current or future competitors, we may be unable to increase market acceptance for and sales of AlloSure Kidney, AlloSure Lung, AlloMap Heart, AlloSure Heart and our products and patient and digital solutions, which could prevent us from increasing or sustaining our revenues or achieving profitability and could cause the market price of our common stock to decline.

If we are unable to successfully and continually update our products on a timely basis, our ability to attract and retain customers could be impaired and our competitive position could be harmed.

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We cannot be certain that any increases in scale, related improvements and quality assurance will be successfully implemented or that appropriate personnel will be available.

additional products are developed, we may need to bring new equipment on-line, implement new systems, technology, controls and procedures and hire personnel with different qualifications.

As additional products are developed, we may need to bring new equipment on-line, implement new systems, technology, controls and procedures and hire personnel with different qualifications.

We plan to expand our sales force to support additional products.

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Our facility and the equipment we use to perform testing services would be costly to replace and could require substantial lead time to repair or replace if damaged or destroyed.

Our facilities may be harmed or rendered inoperable by natural or man-made disasters, including earthquakes, power outages, wildfires, flooding, droughts and other extreme weather events and changing weather patterns, which are increasing in frequency due to the impacts of climate change and may render it difficult or impossible for us to perform our tests for some period of time.

Our facilities may be harmed or rendered inoperable by natural or man-made disasters, including earthquakes, power outages, wildfires, flooding, hurricanes, droughts and other extreme weather events and changing weather patterns, which are increasing in frequency due to the impacts of climate change and may render it difficult or impossible for us to perform our tests for some period of time.

The inability to perform our tests may result in the loss of customers or harm our reputation, and we may be unable to regain those customers in the future.

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We also expect that it would be difficult, time-consuming and costly to train, equip and use a third-party to perform tests on our behalf.

We could only use another facility with the established state licensures and CLIA certification necessary to perform AlloSure Kidney, AlloSure Lung, AlloMap Heart, AlloSure Heart, or future solutions following validation and other required procedures.

could only use another facility with the established state licensures and CLIA certification necessary to perform AlloSure Kidney, AlloSure Lung, AlloMap Heart, AlloSure Heart, or future solutions following validation and other required procedures.

We cannot be certain that we would be able to find another CLIA-certified facility willing or able to adopt AlloSure Kidney, AlloSure Lung, AlloMap Heart, AlloSure Heart or future solutions or able to comply with the required quality and regulatory standards, or that this laboratory would be willing or able to perform the tests for us on commercially reasonable terms.

Since the onset of the COVID-19 pandemic, federal, state and local governments have imposed various quarantines, shelter-in-place and similar government orders, including several orders that have impacted operations in San Mateo County, where our laboratory and headquarters are located.

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

If the operations in our laboratory are deemed non-essential, or if sufficient numbers of our laboratory staff are infected with COVID-19 and are unable to perform their roles, we may not be able to perform our tests for the duration of any shelter-in-place order or while we have insufficient numbers of laboratory staff, either of which could negatively impact our business, operating results and financial condition.

Investors’ expectations of our performance relating to environmental, social and governance factors may impose additional costs and expose us to new risks.

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Any failure or perceived failure by us in this regard could have a material adverse effect on our reputation and on our business, share price, financial condition or results of operations, including the sustainability of our business over time.

In addition, the SEC has announced proposed rules that, among other matters, will establish a framework for reporting of climate-related risks.

To the extent the proposed rules impose additional reporting obligations, we could face increased costs.

Separately, the SEC has also announced that it is scrutinizing existing climate-change related disclosures in public filings, increasing the potential for enforcement if the SEC were to allege our existing climate disclosures are misleading or deficient.

Performance issues, service interruptions or price increases by our shipping carriers could adversely affect our business and harm our reputation and ability to provide our services on a timely basis.

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In addition, any significant increase in shipping rates could adversely affect our operating margins and results of operations.

Similarly, strikes, severe weather, natural disasters or other service interruptions, including those related or attributable to the COVID-19 pandemic, affecting delivery services we use would adversely affect our ability to receive and process recipient samples on a timely basis.

Similarly, strikes, severe weather, natural disasters or other service interruptions, including those related or attributable to the COVID-19 pandemic, or related to the ongoing conflict between Ukraine and Russia and the global impact of restrictions and sanctions imposed on Russia, affecting delivery services we use would adversely affect our ability to receive and process recipient samples on a timely basis.

Our ability to commercialize our testing solutions that we develop is dependent on our relationships with laboratory services providers and their willingness to support our current and future solutions.

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If we are unable to raise additional capital on acceptable terms in the future, it may limit our ability to develop and commercialize new diagnostic solutions and technologies, and we may have to curtail or cease operations.

As of December 31, 2022, we had cash, cash equivalents and marketable securities of $293.1 million and an accumulated deficit of $460.4 million.

We expect capital outlays and operating expenditures to increase over the next several years as we expand our infrastructure, commercial operations and research and development activities.

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• changes in regulatory policies or laws that affect our operations.

Additional capital, if needed, may not be available on satisfactory terms, or at all.

Additional capital, if needed, may not be available on satisfactory terms, or at all, and might include the issuance of equity securities, debt, cash from collaboration agreements, or a combination of these.

Furthermore, if we raise additional funds by issuing equity securities, dilution to our existing stockholders could result.

Any equity securities issued also may provide for

rights, preferences or privileges senior to those of holders of our common stock and would result in dilution to our stockholders.

Any equity securities issued also may provide for rights, preferences or privileges senior to those of holders of our common stock and would result in dilution to our stockholders.

Moreover, we have the ability to sell up to $200.0 million of additional shares of our common stock to the public through an “at the market” offering pursuant to a Sales Agreement we entered into with Jefferies, LLC on April 14, 2022.

Any shares of common stock issued in the at-the-market offering will result in dilution to our existing stockholders.

If we raise additional funds by issuing debt securities, these debt securities would have rights, preferences and privileges senior to those of holders of our common stock, and the terms of the debt securities issued could impose significant restrictions on our operations.

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We also face competition from universities, public and private research institutions and other organizations in recruiting and retaining highly qualified scientific personnel.

Moreover, regulation or legislation impacting the workforce, such as the proposed rule published by the Federal Trade Commission which would, if issued, generally prevent employers from entering into non-compete with employees and require employers to rescind existing non-competes, may be lead to increased uncertainty in hiring and competition for talent.

In addition, our success depends on our ability to attract and retain laboratory and field personnel with extensive experience in transplant recipient care and surveillance and close relationships with clinicians, pathologists and other hospital personnel.

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We rely extensively on third party service providers.

Our relationship with any of our third party service providers may impair our ability to perform our services.

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

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

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

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Even if we were to identify secondary suppliers, there can be no assurance that we will be able to enter into agreements with such suppliers on a timely basis on acceptable terms, if at all.

If we should encounter delays or difficulties in securing from Thermo Fisher, Becton, Dickinson and Company or Avantor, or Avantor encounters delays or difficulties in securing from Qiagen N.V., the quality and quantity of reagents, supplies or instruments that we require for our current products and services or other solutions we develop, we may need to reconfigure our test processes, which would result in delays in commercialization or an interruption in sales.

If we should encounter delays or difficulties in securing from

Thermo Fisher, Becton, Dickinson and Company or Avantor, or Avantor encounters delays or difficulties in securing from Qiagen N.V., including as a result of impacts on their respective businesses due to the COVID-19 pandemic or the ongoing conflict between Ukraine and Russia and the global impact of restrictions and sanctions imposed on Russia, the quality and quantity of reagents, supplies or instruments that we require for our current products and services or other solutions we develop, we may need to reconfigure our test processes, which would result in delays in commercialization or an interruption in sales.

Clinicians and customers who order our current products and services rely on the continued and timely availability of our products and services.

If we are unable to provide results within a timely manner, clinicians may elect not to use our products or services in the future and our business and operating results could be harmed.

Security breaches, loss of data and other disruptions could compromise sensitive information related to our business or prevent us from accessing critical information and expose us to liability, which could adversely affect our business and our reputation.

We store sensitive intellectual property and other proprietary business information, including that of our customers, payers and collaboration partners.

We manage and maintain our applications and data utilizing a combination of on-site systems, managed data center systems and cloud-based data center systems.

These applications and data encompass a wide variety of business critical information, including research and development information, commercial information and business and financial information.

We work with a third-party billing software to collect and store sensitive data, including legally-obtained-protected health information, credit card information and personally identifiable information about our customers, payers, recipients and collaboration partners.

A data breach or loss of data could have a material adverse effect on our operations, including the potential for material fines and business interruption.

We face four primary risks relative to protecting critical information:

loss of access risk, inappropriate disclosure risk, inappropriate modification risk and the risk of our being unable to identify and audit our controls over the first three risks.

In addition, an application, data security or network incident may allow unauthorized access to our systems or data or our customers’ data, disable access to our service, harm our reputation, create additional liability and adversely impact our financial results.

We are highly dependent on information technology networks and systems, including the Internet, to securely process, transmit and store our critical information.

Security breaches of this infrastructure, including physical or electronic break-ins, computer viruses, attacks by hackers and similar breaches, can create system disruptions, shutdowns or unauthorized disclosure or modification of confidential information.

The secure processing, storage, maintenance and transmission of this critical information are vital to our operations and business strategy, and we devote significant resources to protecting such information.

Although we take measures to protect sensitive information from unauthorized access or disclosure, our information technology and infrastructure may be vulnerable to attacks by hackers or viruses or breached due to employee error, malfeasance or other disruptions.

In addition, as a result of the COVID-19 pandemic, we may face increased cybersecurity risks due to our reliance on internet technology which may create additional opportunities for cybercriminals to exploit vulnerabilities.

While we maintain monitoring practices and protections for our information technology to reduce these risks and test our systems on an ongoing basis for any potential threats, there can be no assurance that these efforts will prevent a cyber-attack or other security breach.

Third parties have attempted, and may in the future attempt, to fraudulently induce employees, contractors or consumers into disclosing sensitive information such as user names, passwords or other information or otherwise compromise the security of our internal networks, electronic systems and/or physical facilities in order to gain access to our data or our critical information, which could result in significant legal and financial exposure.

In addition, a contractor or other third party with whom we do business, as well as parties with which we do not do business, may attempt to circumvent our security measures or obtain such

information, and may purposefully or inadvertently cause a breach involving sensitive information.

While we still continue to evaluate and implement additional protective measures to reduce the risk and detect cyber incidents, cyberattacks are becoming more sophisticated and frequent and the techniques used in such attacks change rapidly.

Despite our cybersecurity measures (including employee and third party training regarding phishing, malware, and other cyber risks, monitoring of networks and systems and maintenance of back up of protective systems), which are continuously reviewed and upgraded, our information technology networks and infrastructure may still be vulnerable to damage, disruptions or shut downs due to attack by hackers or breaches, phishing scams, ransomware, systems failures, computer viruses or other malfeasance.

A security breach or privacy violation that leads to disclosure or modification of or prevents access to consumer information (including personally identifiable information or protected health information) could harm our reputation, compel us to comply with disparate state breach notification laws, require us to verify the correctness of database contents and otherwise subject us to liability under laws that protect personal data, resulting in increased costs or loss of revenue.

If we are unable to prevent such security breaches or privacy violations or implement satisfactory remedial measures, our operations could be disrupted, and we may suffer loss of reputation, financial loss and other regulatory penalties because of lost or misappropriated information, including sensitive consumer data.

In addition, these breaches and other inappropriate access can be difficult to detect, and any delay in identifying them may lead to increased harm of the type described above.

Any such breach or interruption could compromise our networks or those of our third-party billing agent, and the information stored there could be inaccessible or could be accessed by unauthorized parties, publicly disclosed, lost or stolen.

Any such interruption in access, improper access, disclosure or other loss of information could result in legal claims or proceedings, liability under laws that protect the privacy of personal information, such as the Health Insurance Portability and Accountability Act of 1996, or HIPAA, and regulatory penalties.

Unauthorized access, loss or dissemination could also disrupt our operations, including our ability to perform tests, provide test results, bill our payers or patients, process claims and appeals, provide customer assistance services, conduct research and development activities, collect, process and prepare company financial information, provide information about our current and future products and solutions and other patient and clinician education and outreach efforts through our website, and manage the administrative aspects of our business, any of which could damage our reputation and adversely affect our business.

Any such breach could also result in the compromise of our trade secrets and other proprietary information, which could adversely affect our competitive position.

In addition, the interpretation and application of consumer, health-related, privacy and data protection laws in the U.S., Europe and elsewhere are often uncertain, contradictory and in flux.

It is possible that these laws may be interpreted and applied in a manner that is inconsistent with our practices.

If so, this could result in government-imposed fines or orders requiring that we change our practices, which could adversely affect our business.

Complying with these various laws could cause us to incur substantial costs or require us to change our business practices and compliance procedures in a manner adverse to our business.

For example, the California Consumer Privacy Act, or the CCPA, took effect on January 1, 2020.

The CCPA, among other things, requires covered companies to provide disclosures to California consumers concerning the collection and sale of personal information, and will give such consumers the right to opt-out of certain sales of personal information.

The CCPA may increase our compliance costs and potential liability, and we cannot yet predict the impact of the CCPA on our business.

Internationally, the General Data Protection Regulation, or the GDPR, took effect in May 2018 within the European Economic Area, or the EEA, and many EEA jurisdictions have also adopted their own data privacy and protection laws in addition to the GDPR.

Furthermore, other international jurisdictions, including Singapore, South Korea, China, Brazil, Mexico and Australia, have also implemented laws relating to data privacy and protection.

International expansion of our business exposes us to business, regulatory, political, operational, financial and economic risks associated with doing business outside of the United States.

As part of our longer-term growth strategy, we intend to target select international markets to grow our presence outside of the U.S.

We currently have a commercial agreement for the promotion of AlloMap Heart in Europe with Eurobio Scientific, or Eurobio (formerly known as Diaxonhit SA).

We also currently distribute products directly in Germany, UK, New Zealand, Sweden, Austria, Belgium, Netherlands and Australia and sell products via sub-distributors, in Canada and in significant markets in Europe such as France, Italy, UK and Turkey, and to certain countries in Asia, the Middle East, and Central and South America.

We also currently distribute products in Europe, Canada, Asia, the Middle East, and Central and South America.

To promote the growth of our business internationally, we will need to attract additional partners to expand into new markets.

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• the imposition of trade barriers such as tariffs, quotas, trade wars, preferential bidding or import or export licensing requirements;

• political and economic instability, including interruptions in international relations, wars, terrorism and political unrest, general security concerns, outbreak of disease, boycotts, curtailment of trade and other business restrictions, including the ongoing conflict between Ukraine and Russia and the global impact of restrictions and sanctions imposed on Russia;

• fluctuations in currency exchange rates;

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Additionally, operating internationally requires significant management attention and financial resources.

We cannot be certain

that the investment and additional resources required in establishing operations in other countries will produce desired levels of revenue or profitability.

We cannot be certain that the investment and additional resources required in establishing operations in other countries will produce desired levels of revenue or profitability.

In addition, any failure to comply with applicable legal and regulatory obligations could impact us in a variety of ways that include, but are not limited to, significant criminal, civil and administrative penalties, including imprisonment of individuals, fines and penalties, denial of export privileges, seizure of shipments, and restrictions on certain business activities.

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in particular;

a potential economic recession;

contraction in the availability of credit in the marketplace due to legislation or other economic conditions, which may potentially impair our ability to access the capital markets on terms acceptable to us or at all;

and the effects of government initiatives to manage economic conditions.

A severe or prolonged economic downturn, such as the global financial crisis, could result in a variety of risks to our business, including a decrease in the demand for our tests and in our ability to raise additional capital when needed on acceptable terms, if at all.

In addition, we cannot predict how future economic conditions will affect our critical customers, suppliers and distributors and any negative impact on our critical customers, suppliers or distributors may also have an adverse impact on our results of operations or financial condition.

cannot anticipate all of the ways in which the foregoing, and the current economic climate and financial market conditions generally, could adversely impact our business.

Our effective tax rate may fluctuate and we may incur obligations in tax jurisdictions in excess of amounts that have been accrued.

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In the event of a major earthquake in our region, our business could suffer significant and uninsured damage and loss.

Some of the policies we currently maintain include general liability, foreign liability, employee benefits liability, property,

automobile, umbrella, workers’ compensation, products liability and directors’ and officers’ insurance.

Some of the policies we currently maintain include general liability, foreign liability, employee benefits liability, property, automobile, umbrella, workers’ compensation, products liability and directors’ and officers’ insurance.

We do not know, however, if we will be able to maintain existing insurance with adequate levels of coverage.

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In addition, the preparation of our 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 consolidated financial statements, as well as the reported revenue generated and expenses incurred during the reporting periods.

Any changes or modifications to the methodology used for determining our estimates, assumptions and forecasts could have a material adverse effect on our business, financial condition and results of operations.

or modifications to the methodology used for determining our estimates, assumptions and forecasts could have a material adverse effect on our business, financial condition and results of operations.

Risks Related to Acquisitions, Partnerships and Investments

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If we determine an impairment exists, we may be required to recognize further impairment charges that, if incurred, could have a material adverse effect on our financial condition and results of operations.

We may not be able to achieve the anticipated strategic benefits from our acquisition of Ottr Complete Transplant Management, or Ottr, Inc.

or XynManagement, Inc., or XynManagement, TransChart, MedActionPlan, or the Transplant Pharmacy, or TTP, or any other businesses or assets that we may acquire.

We may not be able to achieve the anticipated strategic benefits from our acquisition of Ottr Complete Transplant Management, or Ottr, or XynManagement, Inc., or XynManagement, TransChart, MedActionPlan, or the Transplant Pharmacy, or TTP, or any other businesses or assets that we may acquire.

The integration of any businesses or assets we may acquire will be a time-consuming process.

The integration process will require substantial management time and attention, which may divert attention and resources from other important areas, including our existing business.

In addition, we may not be able to fully realize the anticipated strategic benefits of any such combination or integration and any other businesses or assets we have or may acquire, which includes, with respect to Ottr, Inc., the complementary Ottr software, with respect to XynManagement, XynQAPI, TransChart and MedActionPlan, as well as TTP's services and technologies, and in each case the benefits of any significant cross-selling opportunities.

In addition, we may not be able to fully realize the anticipated strategic benefits of any such combination or integration and any other businesses or assets we have or may acquire, which includes, with respect to Ottr, the complementary Ottr software, with respect to XynManagement, XynQAPI, TransChart and MedActionPlan, as well as TTP's services and technologies, and in each case the benefits of any significant cross-selling opportunities.

If we are not able to achieve the anticipated strategic benefits of any such combination, it could adversely affect our business, financial condition and results of operations, and could adversely affect the market price of our common stock if the anticipated financial and strategic benefits of the acquisition are not realized as rapidly as, or to the extent anticipated by investors and analysts.

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

The failure to obtain reimbursement coverage from payers for iBox could result in material amounts of revenue not being recognized, and failure to successfully integrate predictive artificial intelligence technology with our existing tests.

The failure to obtain reimbursement coverage from payers for iBox could result in material amounts of revenue not being recognized for iBox itself.

Risks Related to Billing and Reimbursement

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These billing complexities, and the resulting uncertainty in obtaining payment for AlloSure Kidney, AlloMap Heart, AlloSure Heart and future solutions, as well as the results of any audits or inquiries evaluating the medical necessity of our services could negatively affect our revenue, cash flows and profitability.

Favorable third-party payer coverage and reimbursement are essential to meeting our immediate objectives and long-term commercial goals.

Clinicians and recipients may be likely not to order a diagnostic test unless third-party payers pay a substantial portion of the test price.

Coverage and reimbursement by a commercial payer may depend on a number of factors, including a payer’s determination that our current and future testing services are:

• not experimental or investigational;

• medically necessary or redundant;

• lead to improved patient outcomes;

• appropriate for the specific recipient;

• cost-saving or cost-effective;

• supported by peer-reviewed publications.

Third-party payers may disallow, in whole or in part, requests for reimbursement based on determinations that the member is not eligible for coverage, certain amounts are not reimbursable under plan coverage or were for services provided that were not medically necessary or were redundant or not coupled with other specified tests or services or additional supporting documentation is necessary.

Retroactive adjustments may change amounts realized from third-party payers.

We are also subject to claims reviews and/or audits by such payers, including governmental audits of our Medicare claims, and may be required to repay these payers if a finding is made that we were incorrectly reimbursed.