What changed in this filing

/stocks — the workspaceLOADING

Item 1A. Risk Factors

2023-11-03 compared with 2023-08-03 · 92 added, 58 removed, 601 unchanged (20% of the section changed)

You should carefully consider the risks described below together with the other information set forth in this Quarterly Report, which could materially affect our business, financial condition or future results.

The risks described below are not the only risks facing our company.

The risks described below are not the only risks facing the Company.

Risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition and/or operating results.

Additional discussion of the material risks and uncertainties summarized in this risk factor summary, as well as other risks and uncertainties that we face, can be found in this section.

Additional discussion of the material risks and uncertainties summarized in this risk factor summary, as well as certain other risks and uncertainties that we face, can be found in this section.

RISK FACTORS SUMMARY

13 unchanged sentences

• Given our recent change in strategic direction, we may receive limited revenue or no future value from certain of our existing license agreements.

• In connection with our recently announced change in strategic direction, we are closing operations at our San Carlos office and while we are looking to sublease such space, we may ultimately be unable to do so and still be obligated to pay the balance of the lease, which is substantial.

• We use hazardous materials in our business, and we must comply with environmental laws and regulations.

5 unchanged sentences

• If we or our customers fail to comply with certain healthcare laws, including fraud and abuse laws, we could face substantial penalties and our business, results of operations, financial condition and prospects could be adversely affected.

• We contract with third parties for the manufacturing and supply of our performance enzymes, which supply may become limited or interrupted or may not be of satisfactory quality and quantity.

• Our efforts to prosecute, maintain, protect and/or defend our intellectual property rights may not be successful.

10 unchanged sentences

We have a history of net losses and we may not achieve or maintain profitability.

We have incurred net losses since our inception, including losses of $33.6 million, $21.3 million, and $24.0 million for the years ended December 31, 2022, 2021, and 2020, respectively, and $34.1 million and $11.0 million for the six months ended June 30, 2023 and 2022, respectively.

As of June 30, 2023 and December 31, 2022, we had an accumulated deficit of $455.4 million and $421.3 million, respectively.

We have incurred net losses since our inception, including losses of $33.6 million, $21.3 million, and $24.0 million for the years ended December 31, 2022, 2021, and 2020, respectively, and $69.0 million and $21.0 million for the nine months ended September 30, 2023 and 2022, respectively.

As of September 30, 2023 and December 31, 2022, we had an accumulated deficit of $490.3 million and $421.3 million, respectively.

If we are unable to continue to successfully develop and commercialize products in our pharmaceutical manufacturing business, increase sales of existing products and services, develop and commercialize our ECO Synthesis ™ Platform, and or develop new products or services, or otherwise expand our business, whether through new or expanded collaborations or other products and services, our net losses may increase and we may never achieve profitability.

6 unchanged sentences

The ability of our customers, future customers of partners, including any company developing RNAi therapeutics, to advance product candidates utilizing our products to clinical trials and to ultimately receive regulatory approvals is highly uncertain.

Although we are no longer developing our own portfolio of biotherapeutics product candidates, we continue to develop enzyme products, including our ECO Synthesis ™ Platform, that may be used by our customers, future customers or partners in connection with their biotherapeutic product candidates, The successful development of biotherapeutic candidates involves many risks and uncertainties, requires long timelines and may lead to uncertain results.

The successful development of biotherapeutic candidates involves many risks and uncertainties, requires long timelines and may lead to uncertain results.

In addition, drug development is highly regulated and requires areas of expertise and capital resources we do not currently possess.

8 unchanged sentences

• FDA review and approval of a BLA prior to any commercial marketing or sale of the product in the United States;

• any post-approval requirements, if applicable.

The regulatory approval processes of the FDA and comparable foreign authorities are lengthy, time consuming and the results are inherently unpredictable.

3 unchanged sentences

Our current revenues are derived from a limited number of key customers.

For the six months ended June 30, 2023 and 2022, customers that each individually contributed 10% or more of our total revenue accounted for 49% and 62% of our total revenues, respectively.

For the nine months ended September 30, 2023 and 2022, customers that each individually contributed 10% or more of our total revenue accounted for 35% and 54% of our total revenues, respectively.

We expect a limited number of customers to continue to account for a significant portion of our revenues for the foreseeable future.

5 unchanged sentences

Any such termination or reduction could materially adversely affect our revenues, financial condition and results of operations.

For the six months ended June 30, 2023, we derived a majority of our product revenue from these product supply agreements.

For the nine months ended September 30, 2023, we derived a majority of our product revenue from these product supply agreements.

With respect to customers purchasing our products for the manufacture of active pharmaceutical ingredients (“API”) for which they have exclusivity due to patent protection, the termination or expiration of such patent protection and any resulting generic competition may materially and adversely affect our revenues, financial condition or results of operations.

41 unchanged sentences

Takeda recently confirmed that it will end research, discovery and preclinical work in certain rare disease areas that may overlap with the programs on which we collaborate.

We continue to engage in discussions with Takeda about the foregoing but we and Takeda has not terminated the Takeda Agreement as of the date of this report.

We continue to engage in discussions with Takeda about the foregoing but Takeda Agreement remains in effect as of the date of this report.

Even after collaboration relationships expire or terminate, some elements of the collaboration may survive.

9 unchanged sentences

• we may face difficulties in transferring the developed technologies to our customers and the contract manufacturers that we may use for commercial scale production of intermediates and enzymes in these markets;

• the biotherapeutics products we are designing our technologies for may not receive regulatory approval or be commercially viable;

• the biotherapeutics products for which we are designing our technologies may not receive regulatory approval or be commercially viable;

• the contract manufacturers that we may use may be unable to scale their manufacturing operations to meet the demand for these products and we may be unable to secure additional manufacturing capacity;

34 unchanged sentences

This failure could reduce our competitiveness and market share, adversely affect our results of operations and financial position, and prevent us from obtaining or maintaining profitability.

The COVID-19 pandemic has adversely affected and may continue in the future to, directly or indirectly, adversely affect our business, results of operations and financial condition.

The COVID-19 pandemic has had a significant impact globally, prompting governments and businesses to take unprecedented measures in response.

In the United States, the COVID-19 pandemic has and may continue in the future to, directly or indirectly, adversely affect our business, results of operations and financial condition.

COVID-19 has adversely affected, and any resurgence of COVID-19 pandemic or another global health epidemic may in the future, directly or indirectly, adversely affect our business, results of operations and financial condition.

COVID-19 has had a significant impact globally, prompting governments and businesses to take unprecedented measures in response.

In the United States, COVID-19 has and may continue in the future to, directly or indirectly, adversely affect our business, results of operations and financial condition.

In the future, our business could be materially adversely affected, directly or indirectly, by the widespread outbreak of contagious disease, such as COVID-19.

If, similar to the response to COIVD-19, national, state and local governments in affected regions implement safety precautions, including quarantines, border closures, increased border controls, travel restrictions, governmental orders and shutdowns, business closures, cancellations of public gatherings and other measures, which could, and for COVID-19 did, disrupt normal business operations both in and outside of affected areas and could have significant negative impacts on businesses and financial markets worldwide.

The potential impact of COVID-19, or another pandemic or public health crisis, has had and could continue to have, significant repercussions across regional, national and global economies and financial markets, and could trigger a period of regional, national and global economic slowdown or regional, national or global recessions.

The outbreak of COVID-19 in many countries adversely impacted regional, national and global economic activity and has contributed to significant volatility and negative pressure in financial markets.

If, similar to the response to COVID-19, national, state and local governments in affected regions implement safety precautions, including quarantines, border closures, increased border controls, travel restrictions, governmental orders and shutdowns, business closures, cancellations of public gatherings and other measures, which could, and for COVID-19 did, disrupt normal business operations both in and outside of affected areas and could have significant negative impacts on businesses and financial markets worldwide.

The impact of COVID-19 has had, and any resurgence of the COVID-19 pandemic or another pandemic or public health crisis, could in the future have, significant repercussions across regional, national and global economies and financial markets, and could trigger a period of regional, national and global economic slowdown or regional, national or global recessions.

The outbreak of COVID-19 in many countries adversely impacted regional, national and global economic activity and has continued to contribute to significant volatility and negative pressure in financial markets.

As a result, we may experience difficulty accessing debt and equity capital on attractive terms, or at all, due to the severe disruption and instability in the global financial markets.

9 unchanged sentences

• new variants of COVID-19 may emerge which PAXLOVID™ is not effective in treating;

• Pfizer may not ultimately receive full marketing authorization for PAXLOVID™ from the FDA and other international regulatory authorities;

• Pfizer could reformulate or make changes in the manufacturing process for nirmatrelvir which would eliminate or reduce demand for the use of CDX-616 in its manufacture;

4 unchanged sentences

We have investments in illiquid non-marketable equity securities acquired in private transactions.

As of June 30, 2023, 10.3% of our consolidated assets consisted of investment securities, which are illiquid investments.

As of September 30, 2023, 11.7% of our consolidated assets consisted of investment securities, which are illiquid investments.

Investments in illiquid, or non-marketable, securities are inherently risky and difficult to value.

27 unchanged sentences

While we have historically invested significant time and financial resources in the development of CDX-7108 for the treatment of exocrine pancreatic insufficiency, now included in the Nestlé Strategic Collaboration Agreement, and CDX-6114 for the treatment of hyperphenylalaninemia, now included in the Nestlé License Agreement, as well as in the development of candidates for the treatment of Fabry disease and Pompe disease, which are now included in the Takeda Agreement, we recently announced we are terminating investment in our Biotherapeutics business and in other programs.

As a result, we are renegotiating these, along with other license agreements for product candidates in our Biotherapeutics business and food business.

While we are working to amend these agreements or enter into new agreements in such a way that we may be able to receive future revenue or other benefits, we may be unsuccessful in doing so.

As a result, we are renegotiating some of these, along with other license agreements for product candidates in our Biotherapeutics business and food business.

While we are working to amend or terminate some of these agreements and enter into new agreements in such a way that we may be able to receive future revenue or other benefits, we may be unsuccessful in doing so.

As a result, it remains uncertain as to whether we will receive any value or benefit from these license agreements going forward.

Further, renegotiating these agreements may be costly and could divert management attention, which could have an adverse impact on our business and results of operations.

In connection with our recently announced change in strategic direction, we are closing operations at our San Carlos office and while we are looking to sublease such space, we may ultimately be unable to do so and still be obligated to pay the balance of the lease, which is substantial.

As previously announced in July 2023, we made significant changes to our strategic direction and partially due to those changes, we have determined to cease our operations at our San Carlos site and consolidate operations from our Redwood City office.

While we are actively looking to execute a sublease for our San Carlos office, such sublease will likely not cover the entire amount we owe.

As a result, we are likely to incur additional rent obligations for this location.

Further, we may not be able to successfully execute a sublease covering any meaningful amount, or any at all, of the outstanding lease for a variety of reasons, including many of which are outside of our control such as the office real estate market being depressed and our landlord not approving a particular subtenant.

If that were to occur, we would be exposed to substantial liabilities as the remaining balance under the lease is significant.

In addition, searching for a potential subtenant is time consuming and could harmfully divert management's attention from our business and operations.

If we are unable to execute a sublease covering a meaningful amount of the outstanding balance, or execute a sublease at all, our results of operations could be seriously harmed.

Irrespective of our ability to execute a sublease, we anticipate we may have to incur material impairment charges in connection with such relocation due to the expected write-down of certain long-lived assets.

Currently, we are not able to provide an estimate of the timing or the amount, if any, of these material impairments.

We use hazardous materials in our business and we must comply with environmental laws and regulations.

35 unchanged sentences

In addition, we may choose to raise additional capital due to market conditions or strategic considerations, such as funding the ongoing commercialization of our ECO Synthesis ™ Platform , even if we believe we have sufficient funds for our current or future operating plans.

We may seek to obtain such additional capital through equity offerings, debt financings, credit facilities and/or strategic collaborations.

We may seek to obtain such additional capital through equity offerings, including pursuant to the EDA, debt financings, credit facilities and/or strategic collaborations.

If future financings involve the issuance of equity securities, our existing stockholders would suffer dilution.

49 unchanged sentences

In addition, if we or our customers or collaborators fail to comply with applicable regulatory requirements, the FDA and other regulatory authorities may:

• issue an untitled enforcement letter or a warning letter asserting a violation of the law;

• seek an injunction, impose civil and criminal penalties, and impose monetary fines, restitution or disgorgement of profits or revenues;

• issue an untitled letter or a warning letter asserting a violation of the law;

• seek an injunction, impose civil or criminal penalties, and impose monetary fines, restitution or disgorgement of profits or revenues;

• suspend or withdraw regulatory approval;

• issue safety alerts, Dear Healthcare Provider letters, press releases or other communications containing warnings or other safety information about the product;

• mandate modification of promotional materials and labeling and issuance of corrective information;

• issue consent decrees or corporate integrity agreements, or debar or exclude from federal healthcare programs;

• suspend or terminate any ongoing clinical trials or implement requirements to conduct post-marketing studies or clinical trials;

11 unchanged sentences

If we or our customers fail to comply with certain healthcare laws, including fraud and abuse laws, we could face substantial penalties and our business, results of operations, financial condition and prospects could be adversely affected.

Our business operations and future arrangements with investigators, healthcare professionals, and consultants may expose us and our customers to broadly applicable fraud and abuse and other healthcare laws and regulations.

Our business operations and future arrangements with investigators, healthcare professionals, and consultants, among others, may expose us and our customers to broadly applicable fraud and abuse and other healthcare laws and regulations, including, without limitation, the federal Anti-Kickback Statute, the federal civil False Claims Act, the federal Civil Monetary Penalties Law, the federal Physician Payments Sunshine Act, and analogous state laws.

These laws may constrain the business or financial arrangements and relationships through which we will conduct our operations, including how we and our customers research, market, sell and distribute our product candidates, if approved.

Because of the breadth of these laws and narrowness of available statutory and regulatory exceptions, it is possible that some of our business activities could be subject to challenge under one or more of such laws.

Because of the breadth of these laws and narrowness of available statutory and regulatory exceptions, it is possible that some of our business activities could be regulated by or subject to challenge under one or more of such laws.

If we or our operations are found to be in violation of any of the laws described above or any other governmental regulations that apply to us, we may be subject to penalties, including civil and criminal penalties, damages, fines, imprisonment and the curtailment or restructuring of our operations, any of which could materially adversely affect our ability to operate our business and our financial results.

Coverage and reimbursement may be limited or unavailable in certain market segments for our product candidates, if approved, which could make it difficult for us to sell any product candidates profitably.

Significant uncertainty exists as to the coverage and reimbursement status of any products for which we may obtain regulatory approval.

In the United States, sales of any products for which we may receive regulatory approval will depend, in part, on the availability of coverage and adequacy of reimbursement from third-party payors, including Medicare, Medicaid, TRICARE, the Veterans Administration, managed care providers, and private health insurers.

Patients who are provided medical treatment for their conditions typically rely on third-party payors to reimburse all or part of the costs associated with their treatment.

Accordingly, patients may be unlikely to use our product candidates unless coverage is provided and reimbursement is adequate to cover a significant portion of the cost.

We cannot be sure that coverage and adequate reimbursement will be available for any product that we may develop and, if reimbursement is available, what the level of reimbursement will be.

Coverage and reimbursement for products may vary depending on the payor, the insurance plan, and other factors.

In general, obtaining coverage and reimbursement approval of a product from a government or other third-party payor is time-consuming and costly.

We may be required to conduct expensive pharmacoeconomic studies to justify coverage and reimbursement or the level of reimbursement relative to other therapies.

Even if we obtain coverage for a given product, the resulting reimbursement payment rates might not be adequate for us to achieve or sustain profitability or may require co-payments that patients find unacceptably high.

If coverage and adequate reimbursement are not available or reimbursement is available only to limited levels, we may not be able to successfully commercialize the products for which we obtain regulatory marketing approval.

Further, changes to current state and federal healthcare laws and healthcare reform measures that may be adopted in the future that impact coverage and reimbursement for healthcare products and services may result in additional payment reductions in Medicare and other healthcare funding and otherwise affect the prices we may obtain for any products for which we may obtain regulatory approval, or the frequency with which any such product is prescribed or used.

Ongoing healthcare legislative and regulatory reform measures may have a material adverse effect on our business and results of operations.

In the United States and other jurisdictions, there have been a number of legislative and regulatory changes and proposed changes to the healthcare system that could prevent or delay regulator approval of our product candidates, or could affect our ability to profitably sell any product candidates for which we obtain marketing approval or licensure.

Changes in regulations, statutes, or the interpretation of existing regulations governing the regulatory clearance or approval, manufacture, and marketing of regulated products or the pricing, coverage and reimbursement thereof could impact our business in the future by resulting in, for example:

(i) changes to our manufacturing arrangements;

(ii) additions or modifications to product labeling;

(iii) the recall or discontinuation of our products;

(iv) more rigorous coverage criteria or additional downward pressure on the price that we receive for product candidates for which we obtain marketing approval;

or (v) additional record-keeping requirements.

If any such changes were to be imposed, they could adversely affect the operation of our business.

In the United States, there have been, and we expect there will continue to be, a number of legislative initiatives to contain healthcare costs.

For example, in August 2022, President Biden signed into law the Inflation Reduction Act (IRA), which implements substantial changes to the Medicare program, including drug pricing reforms and changes to the Medicare Part D benefit design.

Among other reforms, the IRA imposes inflation rebates on pharmaceutical manufacturers for products reimbursed under Medicare Parts B and D if the prices of those products increase faster than inflation.

It also implements changes to the Medicare Part D benefit that, beginning in 2025, will cap patient annual out-of-pocket spending at $2,000, while imposing new discount obligations for pharmaceutical manufacturers and payors.

Finally, beginning in 2026, the IRA establishes a “maximum fair price” for a fixed number of high spend pharmaceutical and biological products covered under Medicare Parts B and D following a price negotiation process with the Centers for Medicare and Medicaid Services (CMS).

Since its enactment, the Centers for Medicare and Medicaid Services, or CMS, has taken steps to implement various drug pricing provisions of the IRA.

While it remains to be seen how the drug pricing provisions imposed by the IRA will affect the broader pharmaceutical industry, several pharmaceutical manufacturers and other industry stakeholders have challenged the law, including through lawsuits brought against the U.S.

Department of Health and Human Services, the Secretary of the U.S.

Department of Health and Human Services, CMS, and the CMS Administrator challenging the constitutionality and administrative implementation of the IRA’s price negotiation provisions.

We cannot predict whether the IRA, or any of its component parts, will be overturned, repealed, replaced, or amended, nor can we predict the likelihood, nature, or extent of other health reform initiatives that may arise from future legislation, administrative, or other action.

However, we expect these initiatives and other initiatives to increase pressure on drug pricing and healthcare spending in the United States.

If we or any third parties we may engage are slow or unable to adapt to changes in existing requirements or the adoption of new requirements or policies, or if we or such third parties are not able to maintain regulatory compliance, our product candidates may lose any regulatory approval that may have been obtained and we may not achieve or sustain profitability.

Compliance with European Union chemical regulations could be costly and adversely affect our business and results of operations.

27 unchanged sentences

We have adopted a strategy of seeking patent protection in the United States and in foreign countries with respect to certain of the technology used in or relating to our products, services, and processes.

As such, as of June 30, 2023 , we owned or controlled approximately 2,090 issued patents and pending patent applications in the United States and in various foreign jurisdictions.

Our patents and patent applications, if issued, as of June 30, 2023, have terms that expire between 2023 and approximately 2044.

As such, as of September 30, 2023 , we owned or controlled approximately 2,090 issued patents and pending patent applications in the United States and in various foreign jurisdictions.

Our patents and patent applications, if issued, as of September 30, 2023, have terms that expire between 2023 and approximately 2044.

We also have license rights to a number of issued patents and pending patent applications in the United States and in various foreign jurisdictions.

Our owned and licensed patents and patent applications include those directed to our enabling technology and to the methods and products that support our business in the pharmaceutical manufacturing, life sciences and other markets.

We intend to continue to apply for patents relating to our technology, methods, services and products as we deem appropriate.

103 unchanged sentences

These provisions may also frustrate or prevent any attempts by our stockholders to replace or remove our current management by making it more difficult for stockholders to replace members of our board of directors, who are responsible for appointing the members of our management team.

Furthermore, because we are incorporated in Delaware, we are governed by the provisions of Section 203 of the Delaware General Corporation Law which prohibits, with some exceptions, stockholders owning in excess of 15% of our outstanding voting stock from merging or combining with us.

Furthermore, because we are incorporated in Delaware, we are governed by the provisions of Section 203 of the Delaware General Corporation Law (“DGCL”)which prohibits, with some exceptions, stockholders owning in excess of 15% of our outstanding voting stock from merging or combining with us.

Finally, our charter documents establish advanced notice requirements for nominations for election to our board of directors and for proposing matters that can be acted upon at stockholder meetings.

Although we believe these provisions together provide for an opportunity to receive higher bids by requiring potential acquirers to negotiate with our board of directors, they would apply even if an offer to acquire our company may be considered beneficial by some stockholders.

Our bylaws designate a state or federal court located within the State of Delaware as the sole and exclusive forum for substantially all disputes between us and our stockholders, which could limit our stockholders' ability to obtain a favorable judicial forum for disputes with us our current or former directors, officers, stockholders, or other employees.

Our bylaws provide that, unless we consent in writing to the selection of an alternative forum, the Court of Chancery of the State of Delaware shall be the sole and exclusive forum for (i) any derivative action or proceeding brought on behalf of us under Delaware law, (ii) any action asserting a claim of breach of a fiduciary duty owed by any current or former director, officer, or other employee of the Company to us or our stockholders, (iii) any action asserting a claim against us or any of our directors, officers, or other employees arising pursuant to any provision of the DGCL or our certificate of incorporation or bylaws (as either may be amended from time to time), (iv) any action asserting a claim against us governed by the internal affairs doctrine, or (v) any other action asserting an “internal corporate claim,” as defined under Section 115 of the DGCL.

The forgoing provisions do not apply to any claims arising under the Securities Act and, unless we consent in writing to the selection of an alternative forum, the federal district courts of the United States will be the sole and exclusive forum for resolving any action asserting a claim arising under the Securities Act.

These choice of forum provisions may limit a stockholder’s ability to bring a claim in a judicial forum that it finds favorable for disputes with us or any of our current or former directors, officers, or other employees, which may discourage lawsuits with respect to such claims.

There is uncertainty as to whether a court would enforce such provisions, and the enforceability of similar choice of forum provisions in other companies’ charter documents has been challenged in legal proceedings.

It is possible that a court could find these types of provisions to be inapplicable or unenforceable, and if a court were to find the choice of forum provision to be inapplicable or unenforceable in an action, we may incur additional costs associated with resolving such action in other jurisdictions, which could harm our business, results of operations or financial condition.

Our quarterly or annual operating results may fluctuate in the future.

9 unchanged sentences

• our relationships with, and dependence on, collaborators in our principal markets;

• our ability to develop and successfully commercialize new products for the markets we serve;

• our ability to successfully and timely develop and commercialize new products, including our ECO Synthesis ™ Platform, for the markets we serve;

• potential of GSK, Merck, Novartis or any other performance enzyme customer terminating their agreements with us;

47 unchanged sentences

Conducting business internationally exposes us to a variety of risks, including:

• changes in or interpretations of foreign regulations that may adversely affect our ability to sell our products, repatriate profits to the United States or operate our foreign-located facilities;

• changes in or interpretations of U.S.

or foreign laws or regulations that may adversely affect our ability to sell our products, repatriate profits to the United States or operate our foreign-located facilities;

• the imposition of tariffs;

• the imposition of limitations on, or increase of, withholding and other taxes on remittances and other payments by foreign subsidiaries or joint ventures;

• the imposition of limitations on genetically-engineered products or processes and the production or sale of those products or processes in foreign countries;

• the imposition of limitations on genetically-engineered or other products or processes and the production or sale of those products or processes in foreign countries;

• currency exchange rate fluctuations;

• uncertainties relating to foreign laws, regulations and legal proceedings including tax, import/export, anti-corruption and exchange control laws;

• uncertainties relating to foreign laws, regulations and legal proceedings including pharmaceutical, tax, import/export, anti-corruption and exchange control laws;

• the availability of government subsidies or other incentives that benefit competitors in their local markets that are not available to us;

19 unchanged sentences

Earthquakes, wildfires or other natural disasters could severely disrupt our operations, and have a material adverse effect on our business, results of operations, financial condition and prospects.

We are also vulnerable to other types of disasters and other events that could disrupt our operations, such as riot, civil disturbances, war, terrorist acts, infections in our laboratory or production facilities or those of our customers or contract manufacturers and other events beyond our control.

We are also vulnerable to other types of disasters and other events that could disrupt our operations, such as riot, civil disturbances, war, terrorist acts, public health emergencies, domestic or foreign conflicts, infections in our laboratory or production facilities or those of our customers or contract manufacturers and other events beyond our control.

If a natural disaster or other event occurred that prevented us from using all or a significant portion of our headquarters, that damaged critical infrastructure, such as our enterprise financial systems or manufacturing resource planning and enterprise quality systems, or that otherwise disrupted operations, it may be difficult or, in certain cases, impossible, for us to continue our business for a substantial period of time.

25 unchanged sentences

Attacks upon information technology systems are also increasing in their frequency, levels of persistence, sophistication and intensity, and are being conducted by sophisticated and organized groups and individuals with a wide range of motives and expertise.

As a result of the COVID-19 pandemic, and continued hybrid working environment, we may also face increased cybersecurity risks due to our reliance on internet technology and the number of our employees who are working remotely, which may create additional opportunities for cybercriminals to exploit vulnerabilities.

As a result of the remote work policies we initiated in response to the COVID-19 pandemic, and our continued hybrid working environment, we may also face increased cybersecurity risks due to our reliance on internet technology and the number of our employees who are working remotely, which may create additional opportunities for cybercriminals to exploit vulnerabilities.

We have programs in place to detect, contain and respond to data security incidents, and we make ongoing improvements to our information-sharing products in order to minimize vulnerabilities, in accordance with industry and regulatory standards.

11 unchanged sentences

Any failure or perceived failure by us to comply with applicable laws or regulations, our internal policies and procedures or our contracts governing our processing of personal information could result in negative publicity, government investigations and enforcement actions, claims by third parties and damage to our reputation, any of which could have a material adverse effect on our operations, financial performance and business.

In the United States, HIPAA imposes, among other things, certain standards relating to the privacy, security, transmission and breach reporting of individually identifiable health information.

Certain states have also adopted comparable privacy and security laws and regulations, which govern the privacy, processing and protection of health-related and other personal information.

In the United States, HIPAA imposes, among other things, certain standards relating to the privacy, security, transmission and breach reporting of certain individually identifiable health information.

Certain states have also adopted and continue to adopt new privacy and security laws and regulations, which govern the privacy, processing and protection of health-related and other personal information.

Such laws and regulations will be subject to interpretation by various courts and other governmental authorities, thus creating potentially complex compliance issues for us and our future customers and strategic partners.

1 unchanged sentence

The CCPA creates individual privacy rights for California consumers and increases the privacy and security obligations of entities handling certain personal information.

The CCPA also provides for civil penalties for violations, as well as a private right of action for data breaches that has increased the likelihood of, and risks associated with data breach litigation.

Further, the California Privacy Rights Act (“CPRA”) significantly amends the CCPA, and generally went into effect in January 2023.

It imposes additional data protection obligations on covered businesses, including additional consumer rights processes, limitations on data uses, new audit requirements for higher risk data and opt outs for certain uses of sensitive data.

It has also created a new California data protection agency authorized to issue substantive regulations and could result in increased privacy and information security enforcement.

The CCPA also provides for civil penalties for violations, as well as a private right of action for data breaches (which has increased the likelihood of, and risks associated with, data breach litigation).

Further, the California Privacy Rights Act (“CPRA”) significantly amended the CCPA, which went into effect in January 2023.

It imposes additional data privacy obligations on covered businesses, including additional consumer rights processes, limitations on data uses, new audit requirements for higher risk data and opt outs for certain uses of sensitive data.

It also created a new California privacy protection agency authorized to issue substantive regulations and could result in increased privacy and information security enforcement.

Additional compliance investment and potential business process changes may also be required.

Similar laws have passed in Virginia, Colorado, Connecticut, Iowa and Utah and have been proposed in other states and at the federal level, reflecting a trend toward more stringent privacy legislation in the United States.

Similar laws regulating personal information generally or health information in particular have passed in more than a dozen states and have been proposed in other states and at the federal level, reflecting a trend toward more stringent privacy legislation in the United States.

These developments increase our compliance burden and our risk, including risks of regulatory fines, litigation and associated reputational harm.

5 unchanged sentences

The GDPR imposes stringent requirements for controllers and processors of personal data and provides that EEA member states may make their own additional laws and regulations limiting the processing of genetic, biometric or health data, which could limit our ability to use and share personal data or could cause our costs to increase and harm our business and financial condition.

Failure to comply with the requirements of the GDPR can result in fines of up to the greater of €20 million and 4% of the total worldwide annual turnover of the preceding financial year and other administrative penalties.

If we are required to comply with the GDPR, such compliance may be onerous and adversely affect our business, financial condition, and results of operations.

Failure to comply with the requirements of the GDPR can result in fines of up to the greater of €20 million or 4% of the total worldwide annual turnover of the preceding financial year and other administrative penalties.

To the extent that we are required to comply with the GDPR, such compliance may be onerous and adversely affect our business, financial condition, and results of operations.

Among other requirements, the GDPR regulates transfers of personal data subject to the GDPR to third countries that have not been found to provide adequate protection to such personal data, including the United States, and the efficacy and longevity of current transfer mechanisms between the EU and the United States remains uncertain.

For example, in July 2020, the Court of Justice of the EU (“CJEU”) limited how organizations could lawfully transfer personal data from the EU/EEA to the United States by invalidating the Privacy Shield for purposes of international transfers and imposing further restrictions on the use of standard contractual clauses (“SCCs”).

In March 2022, the United States and EU announced a new regulatory regime intended to replace the invalidated regulations;

however, this new EU-US Data Privacy Framework has not been implemented beyond an executive order signed by President Biden on October 7, 2022, on Enhancing Safeguards for United States Signals Intelligence Activities.

In July 2023, the European Commission approved an adequacy decision for the EU/U.S.

Data Privacy Framework, intended to replace the Privacy Shield Program.

The Data Privacy Framework currently is in effect for organizations that voluntarily choose to participate, but it is also subject to ongoing legal challenges.

European court and regulatory decisions subsequent to the CJEU decision of July 2020 have taken a restrictive approach to international data transfers.

10 unchanged sentences

Investors, stockholders, customers, suppliers and other third parties are increasingly focusing on ESG and corporate social responsibility endeavors and reporting.

Companies that do not adapt to or comply with the evolving investor or stakeholder expectations and standards, or which are perceived to have not responded appropriately, may suffer from reputational damage and result in the business, financial condition and/or stock price of a company being materially and adversely affected.

Companies that do not adapt to or comply with the evolving investor or stakeholder expectations and standards, or that are perceived to have not responded appropriately, may suffer from reputational damage, which could result in the business, financial condition and/or stock price of a company being materially and adversely affected.

For example, certain customers have inquired about our ESG practices and may impose ESG guidelines, mandates or reporting requirements for, and may scrutinize relationships more closely with, their suppliers, including us, which may legthen sales cycles, increase our costs or impair our ability to attract and retain customers.

Further, this increased focus on ESG issues may result in new regulations and/or third-party requirements that could adversely impact our business, or certain shareholders reducing or eliminating their holdings of our stock.

5 unchanged sentences

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

What changed 10-Q

Item 1A. Risk Factors