What changed in this filing

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Item 2. Management’s Discussion and Analysis

2025-05-05 compared with 2024-11-04 · 168 added, 307 removed, 250 unchanged (66% of the section changed)

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Actual results or events could differ materially from the plans, intentions or expectations disclosed in the forward-looking statements that we make.

These forward-looking statements involve risks and uncertainties that could cause our actual results to differ materially from those in the forward-looking statements, including, without limitation, the risks set forth in Part I, Item 1A, “Risk Factors” in the 2023 10-K,

Part II, Item 1A, “Risk Factors” in this Quarterly Report on Form 10-Q and in our other filings with the SEC.

The forward-looking statements are applicable only as of the date on which they are made, and we do not assume any obligation to update any forward-looking statements, except as may be required by law.

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Our Test Portfolio

We currently offer five commercially available proprietary multi-analyte assays with algorithmic analysis (“MAAA”) tests for use in the dermatologic, gastroenterology and ocular fields.

We also offer a proprietary pharmacogenomics (“PGx”) test to guide optimal drug treatment for patients diagnosed with depression, anxiety and other mental health conditions.

Currently, our revenue is primarily generated by our DecisionDx-Melanoma risk stratification test for cutaneous melanoma (“CM”), which is supplemented by revenue generated from our DecisionDx-SCC risk stratification test for cutaneous squamous cell carcinoma (“SCC”), our TissueCypher risk stratification test for BE and our DecisionDx-UM risk stratification test for UM.

All five of our MAAA tests have been granted Advanced Diagnostic Laboratory Test (“ADLT”) status by the Centers for Medicare & Medicaid Services (“CMS”) which means each test has demonstrated that (i) when combined with an empirically derived algorithm, it yields a result that predicts the probability a specific individual patient will develop a certain condition or conditions, or will respond to a particular therapy or therapies;

We currently offer five commercially available proprietary multi-analyte assays with algorithmic analysis (“MAAA”) tests for use in the fields of dermatology, gastroenterology and ophthalmology.

We also offer a proprietary a pharmacogenomic (“PGx”) test to guide optimal drug treatment for patients diagnosed with depression, anxiety and other mental health conditions.

Currently, our revenue is primarily generated by our DecisionDx-Melanoma risk stratification test for cutaneous melanoma (“CM”) and our DecisionDx-SCC risk stratification test for cutaneous squamous cell carcinoma (“SCC”), which is supplemented by revenue generated from our TissueCypher risk stratification test for BE and our DecisionDx-UM risk stratification test for UM.

All five of our MAAA tests have been granted Advanced Diagnostic Laboratory Test (“ADLT”) status by the Centers for Medicare and Medicaid (“CMS”) which means each test has demonstrated that (i) when combined with an empirically derived algorithm, it yields a result that predicts the probability a specific individual patient will develop a certain condition or conditions, or will respond to a particular therapy or therapies;

and (ii) it provides new clinical diagnostic information that cannot be obtained from any other test or combination of tests.

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Test Overview

Our Dermatologic Tests

DecisionDx-Melanoma is our proprietary risk stratification gene expression profile (“GEP”) test that is designed to predict the risk of metastasis or recurrence for patients diagnosed with invasive CM.

In a typical year, we estimate approximately 130,000 patients are diagnosed with invasive CM in the United States, representing an estimated

Our Dermatology Tests

DecisionDx-Melanoma is our proprietary risk stratification gene expression profile (“GEP”) test that predicts the risk of metastasis or recurrence, including a positive sentinel lymph node, for patients diagnosed with invasive CM.

typical year, we estimate approximately 130,000 patients are diagnosed with invasive CM in the United States, representing an estimated U.S.

total addressable market (“TAM”) of approximately $540 million.

We estimate that approximately 50% of patients diagnosed with CM are 65 years of age or older.

DecisionDx‑SCC is our proprietary GEP test for use in patients with SCC, with one or more risk factors (also referred to as “high-risk” SCC).

We estimate that 20% of SCC patients, or 200,000 annually in the United States, are classified as high risk, representing an estimated U.S.

DecisionDx-SCC is our proprietary GEP test for use in patients with SCC, with one or more risk factors (also referred to as “high-risk” SCC) that both predicts the risk of metastasis as well as response to adjuvant radiation therapy.

We estimate 20% of SCC, or 200,000 annually in the United States, are classified as high risk, representing an estimated U.S.

TAM of approximately $820 million.

MyPath Melanoma is our proprietary GEP test for use in patients with a melanocytic lesion and uncertainty related to the malignancy of the lesion.

We estimate approximately 300,000 patients each year present with a diagnostically ambiguous lesion, representing an estimated U.S.

We estimate that approximately 300,000 patients each year present with a diagnostically ambiguous lesion, representing an estimated U.S.

TAM of approximately $600 million.

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Our Gastroenterology Test

TissueCypher is our proprietary risk stratification spatial omics test designed to predict future development of high-grade dysplasia and/or esophageal cancer in patients with non-dysplastic, indefinite dysplasia or low-grade dysplasia BE.

TissueCypher is our proprietary risk stratification spatial omics test designed to predict future development of progression of high-grade dysplasia (“HGD”) and/or esophageal cancer in patients with non-dysplastic (“ND”), indefinite dysplasia (“IND”) or low-grade dysplasia (“LGD”) BE.

We estimate a U.S.

TAM of approximately $1 billion.

Our Uveal Melanoma Test

DecisionDx-UM is a proprietary, risk stratification GEP test that is designed to predict the risk of metastasis for patients with UM.

Our Ophthalmology Test

DecisionDx-UM is a proprietary, risk stratification GEP test that predicts the risk of metastasis for patients with UM.

We believe DecisionDx-UM is the standard of care in the management of newly diagnosed UM in the majority of ocular oncology practices in the United States.

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IDgenetix is a PGx test that guides personalized mental health medication selection and management for patients with depression, anxiety and other mental health conditions.

We estimate a U.S.

TAM of approximately $5 billion.

Commercial Expansion Efforts

In September 2022, we established a new commercial sales team dedicated to our Diagnostic GEP offering and added additional outside territories for our TissueCypher test, which were fully integrated into our commercial operations by the end of the second quarter of 2023.

During the year ended December 31, 2023, we continued to expand our dermatologic and gastrointestinal commercial sales forces through territory and headcount expansions with focus being on our DecisionDx-Melanoma, DecisionDx-SCC, and TissueCypher tests.

During the nine months ended September 30, 2024, we further expanded our sales and marketing team for our TissueCypher test.

We will continue to assess market response in determining further commercial expansions and commercial team structure.

During the three months ended March 31, 2025, after careful further assessments, we made the decision to discontinue our IDgenetix test, effective May 2025.

Reimbursement

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We bill third-party payors and patients for the tests we perform.

We have received Medicare coverage for our DecisionDx-Melanoma, DecisionDx-SCC, MyPath Melanoma, DecisionDx-UM, TissueCypher and IDgenetix tests which meet certain criteria for Medicare and Medicare Advantage beneficiaries.

We have received Medicare coverage for our DecisionDx-Melanoma, DecisionDx-SCC, TissueCypher, MyPath Melanoma, DecisionDx-UM, and IDgenetix tests which meet certain criteria for Medicare and Medicare Advantage beneficiaries.

The Medicare rates discussed below are prior to giving effect to applicable sequestration in effect from time to time as described in further detail under “Government Regulation and Product Approval—Healthcare Reform” included in Item 1, Business, of the 2024 10-K.

DecisionDx-Melanoma

DecisionDx-Melanoma tests are processed from our Phoenix laboratory and since the second quarter of 2022, have been covered under “foundational” local coverage determinations (“LCD”) finalized by Medicare Administrative Contractors (“MACs”) Palmetto GBA MolDX (“Palmetto”) and Noridian Health Solutions (“Noridian”).

DecisionDx-Melanoma tests are processed from our Phoenix laboratory and since the second quarter of 2022, have been covered under “foundational” local coverage determinations (“LCD” of “LCDs”) finalized by Medicare Administrative Contractors (“MACs”) Palmetto and Noridian.

DecisionDx-Melanoma has met ADLT status, as determined by the CMS, since 2019.

Since 2022, the rate for DecisionDx-Melanoma is set annually based upon the median private payor rate for the first half of the second preceding calendar year.

For example, the rate for 2023 was set using median private payor rate data from January 1, 2021 to June 30, 2021.

Our rate for 2023 was $7,193 per test and is $7,193 for 2024.

DecisionDx-UM

DecisionDx-UM tests are processed from our Phoenix laboratory and are covered under LCDs finalized by MAC administrators Palmetto and Noridian in July 2017.

DecisionDx-UM has met the criteria of “existing advanced diagnostic laboratory test” status, also referred to as “existing ADLT” status, as determined by the CMS, since May 2019.

Our rate is set annually based upon the median private payor rate for the first half of the second preceding calendar year.

ADLT status determines the process by which the rate is set and is not an indication of Medicare coverage.

Since 2022, the rate for DecisionDx-Melanoma is set annually based upon the median private payor rate for the first half of the second preceding

calendar year.

For example, the rate for 2023 was set using median private payor rate data from January 1, 2021 to June 30, 2021.

Our rate for 2024 was $7,193 per test and is $7,193 for 2025.

MyPath Melanoma and DiffDx-Melanoma

DecisionDx‑SCC

We issue our DecisionDx-SCC tests from our Pittsburgh and Phoenix labs, with a majority of tests being issued from our Pittsburgh lab.

Palmetto’s MolDX program oversees MAAA tests that are reported from our Phoenix laboratory and Noridian is the MAC responsible for administering claims for test reports issued by our Phoenix laboratory.

On July 4, 2024, Palmetto and Noridian finalized an LCD recommending no coverage for DecisionDx-SCC with an effective date of August 18, 2024.

On January 9, 2025, Novitas finalized an oncology biomarker LCD that became effective on April 24, 2025.

On April 24, 2025, the Novitas LCD, Genetic Testing for Oncology:

Specific Tests, that includes DecisionDx-SCC as noncovered, became effective.

DecisionDx-SCC has met “new ADLT” status since 2022.

Effective July 1, 2023 and through March 31, 2024, CMS set the initial period rate equal to the list price of $8,500 per test.

Effective April 1, 2024, and through December 31, 2025, the published Clinical Laboratory Fee Schedule (“CLFS”) rate for DecisionDx-SCC will continue at $8,500 based on the median private payor rates received between July 1, 2023 and November 30, 2023.

Future rates will be set annually based upon the median private payor rate for the first half of the second preceding calendar year.

Most of our TissueCypher tests are processed in our Pittsburgh laboratory under the Medicare jurisdiction managed by Novitas.

On March 24, 2022, CMS determined that TissueCypher meets the criteria for “new ADLT” status.

ADLT status exempts TissueCypher from what is called the “14-day rule,” which simplifies the billing process for Medicare patients.

Effective January 1, 2023, the published CLFS rate for TissueCypher was set at $4,950 per test, which remained effective through December 31, 2024.

This rate was based on the median private payor rates received between April 1, 2022 and August 31, 2022.

Beginning with 2025, the rate for TissueCypher will be set annually based upon the median private payor rate for the first half of the second preceding calendar year.

Our 2025 rate will continue to be $4,950 per test based on the median private payor rate data from January 1, 2023 to June 30, 2023.

MyPath Melanoma

MyPath Melanoma was covered under a test-specific LCD policy through Noridian that became effective in June 2019.

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The rate for our MyPath Melanoma test is set annually based upon the median private payor rate for the first half of the second preceding calendar year.

Our 2023 rate was set at $1,755 per test, based on data submitted by the predecessor owner of the Myriad MyPath Laboratory relating to the first half of 2021.

Our 2024 rate is set at $1,950 per test.

In the second quarter of 2022, we obtained a Proprietary Laboratory Analyses (“PLA”) code for DiffDx-Melanoma.

In 2023, DiffDx-Melanoma went through the CMS gapfill process which concluded in September 2023 with CMS posting a final MAC-specific gapfill rate of $1,950 per test.

Our rate for 2024 is $1,950 per test.

For example, the rate for 2024 was set using median private payor rate data from January 1, 2022 to June 30, 2022.

Our rate for 2024 was $1,950 per test and remains at $1,950 per test for 2025.

Diagnostic GEP Offering

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As such, following an internal assessment of the clinical value of offering both tests, we made the decision to suspend the clinical offering of DiffDx-Melanoma in February 2023.

DecisionDx‑SCC

We issue our DecisionDx-SCC tests from our Pittsburgh and Phoenix labs, with a majority of tests being issued from our Pittsburgh lab.

On June 2, 2023, Novitas Solutions (“Novitas”), the MAC responsible for administering claims for test reports issued by our Pittsburgh laboratory, posted a finalized oncology biomarker LCD pursuant to which the DecisionDx-SCC test would no longer be covered by Medicare effective July 17, 2023.

However, on July 6, 2023, Novitas suspended the final version of the LCD and announced its intent to post a new proposed LCD for comment and presentation at an open meeting.

On July 27, 2023, Novitas posted a nearly identical proposed oncology biomarker LCD that continues to intend to rely upon evidentiary reviews sourced from three databases:

ClinGen, OncoKB and NCCN.

The proposed LCD also recommends non-coverage for our DecisionDx-SCC test.

The comment period for the proposed LCD ended on September 9, 2023.

On July 26, 2024, Novitas posted a note that it had been granted an extension by CMS.

We cannot predict whether this LCD will be finalized as proposed or what the timing of any final LCD might be.

On June 8, 2023, both Palmetto and Noridian posted a preliminary draft LCD recommending no coverage for DecisionDx-SCC.

The comment period for the draft LCDs ended on July 22, 2023.

On July 4, 2024, the LCD was finalized as proposed with a future effective date of August 18, 2024.

DecisionDx-SCC was reimbursed at a rate of $3,873 per test under a PLA code from second quarter of 2022 through June 30, 2023 when CMS determined DecisionDx-SCC meets the criteria for “new ADLT” status.

Effective July 1, 2023 and through March 31, 2024, CMS set the initial period rate equal to the list price of $8,500 per test.

Effective April 1, 2024 and through December 31, 2025, the published CLFS rate for DecisionDx-SCC will be based on the median private payor rates received between July 1, 2023 and November 30, 2023.

We submitted the median private payor data to CMS during the data reporting period in December 2023.

Effective April 1, 2024, the updated CLFS rate will continue at $8,500 through December 31, 2025.

Future rates will be set annually based upon the median private payor rate for the first half of the second preceding calendar year.

ADLT status determines the process by which the rate is set and is not an indication of Medicare coverage.

TissueCypher is processed in our Pittsburgh laboratory and falls under the Medicare jurisdiction managed by Novitas.

On March 24, 2022, CMS determined that TissueCypher meets the criteria for “new ADLT” status.

ADLT status exempts TissueCypher from what is called the “14-day rule,” which simplifies the billing process for Medicare patients.

Effective January 1, 2023, the published CLFS rate for TissueCypher was set at $4,950 per test, which will remain effective through December 31, 2024.

This rate is based on the median private payor rates received between April 1, 2022 and August 31, 2022.

Thereafter, the rate will be set annually based upon the median private payor rate for the first half of the second preceding calendar year.

DecisionDx-UM

DecisionDx-UM tests are processed from our Phoenix laboratory and are covered under LCDs finalized by MAC administrators Palmetto and Noridian in July 2017.

DecisionDx-UM has met the criteria of “existing advanced diagnostic laboratory test” status, also referred to as “existing ADLT” status, as determined by the CMS, since May 2019.

Our rate is set annually based upon the median private payor rate for the first half of the second preceding calendar year.

For example, the rate for 2023 was set using median private payor rate data from January 1, 2021 to June 30, 2021.

Our rate for 2024 was $7,776 per test and remains at $7,776 per test for 2025.

IDgenetix is currently covered under a Noridian LCD policy and accompanying billing and coding article developed by MolDX.

Our IDgenetix multi-gene panel was reimbursed by Medicare at approximately $1,500 per test from April 2022 through February 2023, when MolDX notified us that as part of its annual CPT code updates, IDgenetix should shift billing to a different generic gene sequencing CPT code (the “New CPT Code”) and continue using the IDgenetix Z-Code beginning in March 2023.

The New CPT Code was set at $917 per test while the test went through CMS’s Gapfill pricing process.

We believed the new CPT Code, in conjunction with the IDgenetix Z-Code, did not describe all of the components of the IDgenetix test and thus, was not appropriate for IDgenetix.

We subsequently obtained a test-specific PLA CPT code which became effective October 1, 2023.

During 2023, we obtained a test-specific PLA CPT code for IDgenetix which became effective October 1, 2023.

In November 2023, CMS posted its final CLFS determination which crosswalks our PLA CPT code to an existing PLA code at a rate of $1,336 per test effective January 1, 2024.

Our reimbursement rate for 2024 was $1,336 per test and remains at $1,336 per test in the first quarter of 2025.

IDgenetix test will be discontinued effective May 2025.

Government Regulation and Oversight of Laboratory Developed Tests

On April 29, 2024, the U.S.

Food and Drug Administration (“FDA”) published a final rule on the regulation of Laboratory Developed Tests (“LDTs”) which amends the FDA's regulations to make explicit that LDT's are devices under the Federal Food, Drug, and Cosmetic Act (“FD&C Act”).

The FDA issued a policy to phase out, over the course of four years, its general enforcement discretion approach to LDTs and also issued targeted enforcement discretion policies for certain categories of LDTs.

The FDA is continuing enforcement discretion for currently marketed tests offered as LDTs (that were first marketed before May 6, 2024) that are approved by the New York State Department of Health Clinical Laboratory Evaluation Program (“NYS CLEP”).

Our proprietary tests, outlined above, are all NYS CLEP approved.

On May 6, 2024, the U.S.

Food and Drug Administration (“FDA”) published a final rule on the regulation of LDTs which amends the FDA's regulations to make explicit that LDT's are devices under the FD&C Act.

The FDA issued a policy to phaseout, over the course of four years, its general enforcement discretion approach to LDTs and also issued targeted enforcement discretion policies for certain categories of LDTs.

The FDA is continuing enforcement discretion for currently marketed tests offered as LDTs (that were first marketed before May 6, 2024) that are approved by NYSDOH.

Our proprietary tests, outlined above, are all NYSDOH approved.

We believe this final ruling will have no material impact on our existing test offerings given all of our tests were marketed before May 6, 2024.

In addition, on March 31, 2025, the United States District Court for the Eastern District of Texas vacated the FDA’s LDT final rule.

It is unclear whether the court’s ruling will be appealed.

Delivered Test Reports

The number of test reports we deliver is a key indicator that we use to assess our business.

A test report is generated when we receive a sample in our laboratory, and then the relevant test information is entered into our Laboratory Information Management System, the laboratory portion of the test is performed, including proprietary algorithmic analysis of the combined biomarkers, and a report is then generated which is delivered to the clinician who ordered the test.

The number of test reports delivered by us during the nine months ended September 30, 2024 and 2023 and for the year ended December 31, 2023 are presented in the table below:

The number of test reports delivered by us are presented in the table below:

Proprietary Dermatologic GEP Tests

Melanoma DecisionDx-SCC Diagnostic GEP offering (1)

Dermatologic Total DecisionDx-UM TissueCypher (2)

IDgenetix Grand Total

Q1 2024 8,384 3,577 998 12,959 422 3,429 4,078 20,888

Q2 2024 9,585 4,277 1,099 14,961 456 4,782 4,903 25,102

Melanoma DecisionDx-SCC Diagnostic GEP offering Dermatologic Total DecisionDx-UM TissueCypher IDgenetix Grand Total

Q1 2025 8,621 4,375 926 13,922 470 7,432 2,578 24,402

For the nine months ended September 30, 2024

27,336 12,049 3,030 42,415 1,275 14,284 14,026 72,000

Q1 2024 8,384 3,577 998 12,959 422 3,429 4,078 20,888

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Q3 2024 9,367 4,195 933 14,495 397 6,073 5,045 26,010

For the nine months ended September 30, 2023

24,739 7,912 2,944 35,595 1,269 5,659 7,622 50,145

Q4 2024 8,672 4,299 879 13,850 424 6,672 3,125 24,071

For year ended December 31, 2024 36,008 16,348 3,909 56,265 1,699 20,956 17,151 96,071

(1) Includes MyPath Melanoma and DiffDx-Melanoma.

We offered both MyPath Melanoma and DiffDx-Melanoma under our Diagnostic GEP offering until February 2023 when we suspended the offering of DiffDx-Melanoma, as discussed above.

(2) We temporarily paused accepting additional orders in July 2023, resumed accepting new orders in a phased approach in September 2023, and completed processing of our pre-existing backlog orders in October 2023.

We have continued accepting new orders since September 2023.

For the three and nine months ended September 30, 2024, our test report volume increased by 41.3% and 43.6%, respectively, compared to the same period in 2023.

Our dermatologic test report volume increased by 17% and 19.2% for the three and nine months ended September 30, 2024, respectively, compared to the prior period in 2023.

For the nine months ended September 30, 2024, we have experienced higher test report volumes for all of our tests compared to the prior period in 2023.

For the three months ended March 31, 2025, our test report volume increased by 16.8% compared to the same period in 2024.

Our dermatologic test report volume increased by 7.4% for the three months ended March 31, 2025, compared to the prior period in 2024, largely driven by continued growth from DecisionDx-Melanoma and DecisionDx-SCC tests.

TissueCypher increased by 117% for the three months ended March 31, 2025 compared to the prior period in 2024, further contributing to the overall volume increase.

For a discussion of how we recognize revenue derived from our tests, refer to “— Components of Results of Operations—Net Revenues” below.

In August 2024, we amended our Pittsburgh commercial real estate lease to add 23,821 square feet to our existing facilities, most of which will be used as dedicated lab space for processing our TissueCypher test.

As of September 30, 2024, substantially all leasehold improvements for this added space were complete and the added lab space was ready for use.

We expect the additional space will allow us to continue developing our business through our TissueCypher product line.

For our DecisionDx-SCC product line, we continue to see opportunities for leverage, where many of the clinicians ordering our DecisionDx-Melanoma are the same clinicians who order our DecisionDx-SCC test.

During each of the nine months ended September 30, 2024 and 2023, approximately 75% of all clinicians ordering DecisionDx-SCC had also ordered our DecisionDx-Melanoma test during that same period.

During the three months ended March 31, 2025, approximately 52% of all clinicians ordering DecisionDx-SCC had also ordered our DecisionDx-Melanoma test during that same period.

Information About Certain Metrics

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Test reports delivered represent the number of completed test reports delivered by us during the reporting period indicated.

The period in which a test report is delivered does not necessarily correspond with the period in which the related revenue, if any, is recognized, due to the timing and amount of adjustments for variable consideration under Accounting Standards Codification (“ASC”) Topic 606, Revenue from Contracts with Customers (“ASC 606”).

use this metric to evaluate the growth in adoption of our tests and to measure against our internal performance objectives.

Accounting Standards Codification (“ASC”) Topic 606, Revenue from Contracts with Customers (“ASC 606”).

We use this metric to evaluate the growth in adoption of our tests and to measure against our internal performance objectives.

We believe this metric is useful to investors in evaluating the volume of our business activity from period-to-period that may not be discernible from our reported revenues under ASC 606.

Impact of Macroeconomic Conditions

Macroeconomic conditions, including uncertainties associated with the Israel-Hamas war, the ongoing conflict between Ukraine and Russia, the U.S.

presidential election, economic slowdowns, public health crises, labor shortages, recessions or market corrections, supply chain disruptions, inflation and monetary policy shifts, liquidity concerns at, and failures of, banks and other financial institutions or other disruptions in the banking system or financing markets, changes to interest rates and financial and credit market fluctuations, volatility in the capital markets and other evolving macroeconomic developments, continue to have direct and indirect impacts on our business and could in the future materially impact our results of operations and financial condition.

Macroeconomic conditions, including uncertainties associated with the Israel-Hamas war, the ongoing conflict between Ukraine and Russia, economic slowdowns, public health crises, labor shortages, recessions or market corrections, supply chain disruptions, inflation and monetary policy shifts, international tariffs, liquidity concerns at, and failures of, banks and other financial institutions or other disruptions in the banking system or financing markets, higher interest rates and financial and credit market fluctuations, volatility in the capital markets and other evolving macroeconomic developments, continue to have direct and indirect impacts on our business and could in the future materially impact our results of operations and financial condition.

We continue to actively monitor the impact of these macroeconomic factors on our results of operations, financial condition and cash flows.

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Our Financial Results

Our net income may fluctuate significantly from period to period, depending on the timing of our planned development activities, the growth of our sales and marketing activities and the timing of revenue recognition under ASC 606.

Our net loss may fluctuate significantly from period to period, depending on the timing of our planned development activities, the growth of our sales and marketing activities and the timing of revenue recognition under ASC 606.

We expect our expenses will increase substantially over time as we:

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• add additional operational, financial and management information systems and personnel;

• make additional capital expenditures to support business growth and sustain existing operations.

Factors Affecting Our Performance

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• Integrating acquisitions.

Revenue growth, operational results and advances to our business strategy depends on our ability to integrate any acquisitions into our existing business and effectively scale their operations.

The integration of acquired assets may impact our revenue growth, increase the cost of

operations or may require management resources that otherwise would be available for ongoing development of our existing business.

Revenue growth, operational results and advances to our business strategy depend on our ability to integrate any acquisitions into our existing business and effectively scale their operations.

The integration of acquired assets may impact our revenue growth, increase the cost of operations or may require management resources that otherwise would be available for ongoing development of our existing business.

• New product development.

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We expect cost of sales in absolute dollars to increase as the number of tests we perform increases.

Additionally, we expect cost of sales to increase with the expansion of laboratory capacity and staffing in advance of the anticipated growth of our more recently launched tests and tests acquired through acquisitions.

For example, we commenced operations in a newly expanded laboratory facility in Pittsburgh, Pennsylvania in the second quarter of 2023 and subsequently amended the lease in August of 2024, adding 23,821 square feet to our existing facilities.

Additionally, we expect cost of sales to increase prior to our launching of new tests, or prior to our initiating significant commercial expansion efforts, as we ready our operations to support anticipated business growth.

For example, prior to opening our new Pittsburgh facilities during the second quarter of 2023, we incurred additional rent expense as we readied the space for future use.

Gross margin and gross margin percentage are key indicators we use to assess our business.

See the table in “—Results of Operations—Comparison of the Three Months Ended September 30, 2024 and 2023” and “—Results of Operations—Comparison of the Nine Months Ended September 30, 2024 and 2023” for details.

See the table in “—Results of Operations—Comparison of the Three Months Ended March 31, 2025 and 2024”.

Research and Development

Research and development expenses include costs incurred to develop our tests, collect clinical samples and conduct clinical studies to develop and support our products.

These costs consist of personnel costs (including salaries, bonuses, benefits and stock-based compensation expense), prototype materials, laboratory supplies, consulting costs, regulatory costs, electronic medical records set up costs, costs associated with setting up and

conducting clinical studies and allocated overhead, including rent, information technology, equipment depreciation and utilities.

These costs consist of personnel costs (including salaries, bonuses, benefits and stock-based compensation expense), prototype materials, laboratory supplies,

consulting costs, regulatory costs, electronic medical records set up costs, costs associated with setting up and conducting clinical studies and allocated overhead, including rent, information technology, equipment depreciation and utilities.

We expense all research and development costs in the periods in which they are incurred.

We expect our research and development expenses to increase in absolute dollars as we continue to invest in research and development activities related to developing enhanced and new products.

We expect to use a portion of our cash and cash equivalents and marketable investment securities to further support and accelerate our research and development activities, including important studies that are underway to support our DecisionDx-Melanoma test.

For instance, in February 2023, we announced the publication of data from the DECIDE study presenting DecisionDx-Melanoma test results influenced 85% of clinicians’ decisions regarding the SLNB surgical procedure.

Additionally, use of the tests’ results within current guideline recommendations led to a significant reduction in SLNB procedures performed, demonstrating the clinical value of the test to guide risk-aligned patient care.

Also, in 2021, we initiated our large prospective, multi-center clinical study to develop, validate and bring to market a pipeline genomic test, or tests, aimed at predicting response to systemic therapy in patients with moderate to severe psoriasis, atopic dermatitis and related inflammatory skin conditions.

Since December 31, 2023, we continue to maintain active clinical study test sites and a consistent number of patients enrolled in this study.

Assuming we are successful in validating a genomic test, or tests, for one or more of these uses, then we expect to launch this pipeline test by the end of 2025.

We expect to use a portion of our cash and cash equivalents and marketable investment securities to further support and accelerate our ongoing and future clinical studies and pipeline initiatives.

Selling, General and Administrative

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Amortization of Acquired Intangible Assets

Amortization of acquired intangible assets is primarily associated with developed technology obtained through acquisitions, such as our acquisitions of Cernostics in December 2021 and AltheaDx in April 2022.

Amortization of acquired intangible assets is primarily associated with developed technology obtained through acquisitions, such as our acquisitions of the Myriad MyPath Laboratory in May 2021, Cernostics in December 2021 and AltheaDx in April 2022.

Interest Income

Interest income consists primarily of earnings on cash and cash equivalents, primarily money market funds, and marketable investment securities, primarily short-term U.S.

government obligations.

Interest income consists primarily of earnings on cash and cash equivalents, primarily money market funds, and our short-term U.S.

government obligations are a component of our marketable investment securities.

Change in Fair Value of Trading Securities

Change in fair value of trading securities is primarily attributable to unrealized gains and losses on our equity securities which we present as marketable investment securities.

Interest Expense

Interest expense is primarily attributable to long-term debt and finance leases.

Income Tax Expense

Revisions in our estimate of annual pre-tax income, relating to uncertainty in continued Medicare coverage for our DecisionDx-SCC test and updated information, are sources of variability in our effective tax rates from period to period.

As of December 31, 2023, we had federal net operating loss (“NOL”) carryforwards of $197.1 million, of which $92.0 million will begin to expire in 2029 if not utilized to offset federal taxable income, and $105.1 million may be carried forward indefinitely.

As of December 31, 2023, we also had state NOL carryforwards of $114.3 million, which begin to expire in 2028 if not utilized to offset state taxable income.

Income Tax (Benefit) Expense

Income tax benefit is primarily due to the revised estimated useful life of our intangible asset related to the discontinuation of our IDgenetix test offering, which resulted in a temporary difference and a corresponding deferred tax asset.

Income tax expense consists primarily of income taxes related to federal and state jurisdictions in which we conduct business.

We maintain a full valuation allowance for deferred tax assets including operating loss carryforwards and research and development credits and other tax credits.

As of December 31, 2024, we had federal NOL carryforwards of $129.4 million, of which $52.9 million will begin to expire in 2031 if not utilized to offset federal taxable income, and $76.5 million may be carried forward indefinitely.

Also, as of December 31, 2024, we also had state NOL carryforwards of $86.5 million, which begin to expire in 2028 if not utilized to offset state taxable income.

Results of Operations

Comparison of the Three Months Ended September 30, 2024 and 2023

Comparison of the Three Months Ended March 31, 2025 and 2024

The following table summarizes our results of operations for the periods indicated (in thousands, except percentages):

Three Months Ended

September 30, Change

March 31, Change

Net revenues $ 87,988 $ 72,974 $ 15,014 20.6 %

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Selling, general and administrative 58,620 48,495 10,125 20.9 %

Amortization of acquired intangible assets 2,272 2,272 — — %

Amortization of acquired intangible assets 28,325 2,247 26,078 NM

Total operating expenses, net 115,916 78,445 37,471 47.8 %

Operating income (loss) 5,079 (9,640) 14,719 152.7 %

Operating loss (27,928) (5,471) (22,457) (410.5) %

Interest income 3,099 2,996 103 3.4 %

Interest expense (201) (2) (199) NM

Income (loss) before income taxes 8,282 (6,873) 15,155 220.5 %

Income tax expense 6,013 32 5,981 NM

Net income (loss) $ 2,269 $ (6,905) $ 9,174 132.9 %

Changes in fair value of trading securities (1,425) — (1,425) NA

Interest expense (17) (14) (3) (21.4) %

Loss before income taxes (26,271) (2,489) (23,782) (955.5) %

Income tax (benefit) expense (423) 45 (468) NM

Net loss $ (25,848) $ (2,534) $ (23,314) (920.0) %

NA = Not applicable

NM = Not meaningful

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Three Months Ended

September 30,

2025 2024 Change

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Three Months Ended

September 30,

2025 2024 Change

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Three Months Ended

September 30,

2025 2024 Change

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Gross margin percentage 49.2 % 77.9 % (28.7) %

Net revenues for the three months ended September 30, 2024 increased by $24.3 million, or 39.5%, to $85.8 million compared to the three months ended September 30, 2023, due to a $13.9 million increase in revenue from our dermatologic tests and a $10.4 million increase in revenue from our non-dermatologic tests.

The $13.9 million increase in net revenues for our Dermatologic tests was primarily attributable to our DecisionDx-SCC test, which was due to higher test report volumes and a higher realized average selling price (“ASP”), as well our DecisionDx-Melanoma test which had higher test report volumes though a slightly lower ASP.

For the three months ended September 30, 2024 compared to the three months ended September 30, 2023, test report volumes for our DecisionDx-SCC and DecisionDx-Melanoma tests increased by 48.8% and 9.4%, respectively.

Increases in realized ASP for our DecisionDx-SCC test were primarily attributable to an increase in our Medicare reimbursement rate for this test, beginning in July 2023.

The $10.4 million increase in net revenues from our non-dermatologic tests was largely attributable to a 114.7% increase in test report volumes for our TissueCypher test, and, to a lesser extent, to our IDgenetix test which also had higher test report volumes.

Increases in our TissueCypher test report volumes reflect growth through our sales force efforts as well as the impacts of a temporary pause in accepting new orders from July 2023 through September 2023, during which time our lab operations team successfully implemented certain process improvements, automations, and operational enhancements for this test to support future growth.

Net revenue from our non-dermatologic tests as a percentage of total net revenue increased from 16.8% for the three months ended September 30, 2023 to 24.2% for the three months ended September 30, 2024.

Net revenues for the three months ended March 31, 2025 increased by $15.0 million, or 20.6%, to $88.0 million compared to the three months ended March 31, 2024, due to a $11.4 million increase in revenue from our non-dermatologic tests and a $3.6 million increase in revenue from our dermatologic tests.

The $11.4 million increase in net revenues for our non-dermatologic tests was primarily attributable to our TissueCypher Barrett’s Esophagus test, which was due to higher test report volumes and, to a lesser extent, higher realized average selling price (“ASP”).

For the three months ended March 31, 2025 compared to the three months ended March 31, 2024, test report volumes for our TissueCypher Barrett’s Esophagus tests increased by 117%.

The $3.6 million increase in net revenues from our dermatologic tests was largely attributable to an increase in test report volumes for our DecisionDx-SCC test.

Increases in our DecisionDx-SCC test report volumes reflect growth through our sales force efforts.

Net revenue from our dermatologic tests as a percentage of total net revenue increased from 18.7% for the three months ended March 31, 2024 to 28.4% for the three months ended March 31, 2025.

Cost of Sales (exclusive of amortization of acquired intangible assets)

Cost of sales (exclusive of amortization of acquired intangible assets) for the three months ended September 30, 2024 increased by $4.3 million, or 37.9%, compared to the three months ended September 30, 2023, primarily due to higher personnel costs and higher expense for supplies and lab services.

Cost of sales (exclusive of amortization of acquired intangible assets) for the three months ended March 31, 2025 increased by $2.5 million, or 17.9%, compared to the three months ended March 31, 2024, primarily due to higher personnel costs, higher depreciation expense for lab equipment and leasehold improvements and higher lab services cost.

Increases in personnel costs reflect a higher headcount, due to additions made to support business growth in response to growing test report volumes, as well as merit and annual inflationary wage adjustment for existing employees.

Higher expense for supplies and lab services also reflects higher test report volumes.

Higher expense for lab services also reflects higher test report volumes.

Due to the nature of our business, a significant portion of our cost of sales expenses represents fixed costs associated with our testing operations.

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We expect our cost of sales expenses (exclusive of amortization of acquired intangible assets) to continue to increase in future periods as we hire additional laboratory personnel and related resources to support expected operational growth and higher test volumes.

Our gross margin percentage was 79.2% for the three months ended September 30, 2024, compared to 77.9% for the same period in 2023.

The increase was primarily due to higher revenues which were attributable to increases in both test report volumes and average selling prices, partially offset by higher personnel costs, higher expense for supplies, and higher expense incurred through our expanded laboratory capacity and higher test report volumes.

Our gross margin percentage was 49.2% for the three months ended March 31, 2025, compared to 77.9% for the same period in 2024.

The decrease was primarily due to higher amortization from accelerating our IDgenetix test, higher personnel costs and higher depreciation expense.

Research and Development

Research and development expenses decreased by $0.6 million, or 4.6%, for the three months ended September 30, 2024, compared to the three months ended September 30, 2023, and primarily reflect slightly lower expense for clinical studies and personnel costs.

Research and development expenses decreased by $1.2 million, or 8.8%, for the three months ended March 31, 2025, compared to the three months ended March 31, 2024, and primarily reflect slightly lower personnel costs and expense for clinical studies.

We expect to continue incurring research and development expenses through our continued investments in our ongoing pipeline initiatives and as we seek opportunities to build evidentiary support and new tests where commercial opportunities exist.

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Three Months Ended

September 30,

2025 2024 Change

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Total selling, general and administrative expense $ 58,620 $ 48,495 $ 10,125

Sales and marketing expenses increased by $1.3 million, or 4.7%, for the three months ended September 30, 2024, compared to the three months ended September 30, 2023, primarily reflecting higher travel and transportation costs incurred through our business development activities as well as slightly higher marketing costs and relatively consistent personnel costs.

Stock-based compensation expense included in sales and marketing was $4.0 million for the three months ended September 30, 2024, compared to $4.4 million for the three months ended September 30, 2023.

General and administrative expenses increased by $4.5 million, or 28.2%, for the three months ended September 30, 2024, compared to the three months ended September 30, 2023, and was primarily due to higher personnel costs, higher professional fees and higher information technology related costs.

Sales and marketing expenses increased by $6.3 million, or 20.5%, for the three months ended March 31, 2025, compared to the three months ended March 31, 2024, primarily reflecting higher personnel cost, higher organizational and business development activities cost and higher sales related travel expense.

Stock-based compensation expense included in sales and marketing was $4.0 million for the three months ended March 31, 2025, compared to $4.7 million for the three months ended March 31, 2024.

General and administrative expenses increased by $3.9 million, or 21.5%, for the three months ended March 31, 2025, compared to the three months ended March 31, 2024, and was primarily due to higher personnel costs, higher information technology related costs and higher professional fees.

Higher personnel cost reflects headcount expansions in our administrative support functions as well as merit and annual inflationary wage adjustment for existing employees.

Stock-based compensation expense included in general and administrative expense was $5.2 million for the three months ended September 30, 2024, compared to $4.7 million for the three months ended September 30, 2023.

Amortization of Acquired Intangible Assets

Amortization of acquired intangible assets for the three months ended September 30, 2024 was $2.3 million and remains consistent as compared to the three months ended September 30, 2023.

Interest Income

Interest income increased by $0.6 million for the three months ended September 30, 2024, compared to the three months ended September 30, 2023, primarily as a result of higher average balances of marketable investment securities and slightly higher interest rates.

Interest Expense

Interest expense increased by $0.2 million for the three months ended September 30, 2024, compared to the three months ended September 30, 2023, primarily due to interest incurred on our long-term debt where we had no debt outstanding during the comparative period.

Income Tax Expense

Income tax expense was $6.0 million for the three months ended September 30, 2024 and was due to revisions in estimated pre-tax income, reflecting uncertainty in continued Medicare coverage for our DecisionDx-SCC test and updated information, as well as stock-based compensation, permanent differences, changes in valuation allowance, research and development tax credit and state income taxes.

We recorded a minimal amount in income tax expense for the three months ended September 30, 2023.

Stock-Based Compensation Expense

Stock-based compensation expense, which is allocated among cost of sales, research and development expense and SG&A expense, was $13.0 million for the three months ended September 30, 2024 and 2023, respectively.

We expect material increases in stock-based compensation expense in future periods, attributable to both existing awards outstanding and anticipated additional grants to our current and future employees.

As of September 30, 2024, we had 710 employees, compared to 587 as of September 30, 2023.

As of September 30, 2024, the total unrecognized stock-based compensation cost related to outstanding awards was $77.6 million, which is expected to be recognized over a weighted-average period of 2.2 years.

Comparison of the Nine Months Ended September 30, 2024 and 2023

The following table summarizes our results of operations for the periods indicated (in thousands, except percentages):

Nine Months Ended

September 30, Change

Net revenues $ 245,758 $ 153,668 $ 92,090 59.9 %

Operating expenses

Cost of sales (exclusive of amortization of acquired intangible assets) 44,022 32,559 11,463 35.2 %

Research and development 40,268 40,624 (356) (0.9) %

Selling, general and administrative 150,082 136,062 14,020 10.3 %

Amortization of acquired intangible assets 6,766 6,742 24 0.4 %

Total operating expenses, net 241,138 215,987 25,151 11.6 %

Operating income (loss) 4,620 (62,319) 66,939 107.4 %

Interest income 9,544 7,504 2,040 27.2 %

Interest expense (485) (9) (476) NM

Income (loss) before income taxes 13,679 (54,824) 68,503 125.0 %

Income tax expense 5,024 62 4,962 NM

Net income (loss) $ 8,655 $ (54,886) $ 63,541 115.8 %

NM = Not meaningful

The following table indicates the amount of stock-based compensation expense (non-cash) reflected in the line items above (in thousands):

Nine Months Ended

September 30,

2024 2023 Change

Cost of sales (exclusive of amortization of acquired intangible assets) $ 4,179 $ 3,719 $ 460

Research and development 7,611 7,755 (144)

Selling, general and administrative 27,091 27,943 (852)

Total stock-based compensation expense $ 38,881 $ 39,417 $ (536)

The following table provides a disaggregation of net revenues by type (in thousands):

Nine Months Ended

September 30,

2024 2023 Change

Dermatologic (1)

$ 193,223 $ 130,097 $ 63,126

Non-Dermatologic (2)

52,535 23,571 28,964

Total net revenues $ 245,758 $ 153,668 $ 92,090

(1) Consists of DecisionDx-Melanoma, DecisionDx-SCC and our Diagnostic GEP offering.

(2) Consists of TissueCypher, DecisionDx-UM and IDgenetix.

The following table presents the calculation of gross margin (in thousands, except percentages):

Nine Months Ended

September 30,

2024 2023 Change

Net revenues $ 245,758 $ 153,668 $ 92,090

Cost of sales (exclusive of amortization of acquired intangible assets) 44,022 32,559 11,463

Amortization of acquired intangible assets 6,766 6,742 24

Gross margin $ 194,970 $ 114,367 $ 80,603

Gross margin percentage 79.3 % 74.4 % 4.9 %

Net revenues for the nine months ended September 30, 2024 increased by $92.1 million, or 59.9%, to $245.8 million compared to the nine months ended September 30, 2023, due to a $63.1 million increase in revenue from our dermatologic tests and a $29.0 million increase in revenue from our non-dermatologic tests.

The $63.1 million increase from our dermatologic tests was primarily due to a higher ASP for DecisionDx-SCC test, where we began receiving Medicare reimbursement at a higher rate beginning in July 2023, a 52.3% increase in DecisionDx-SCC test report volumes, and a 10.5% increase in DecisionDx-Melanoma test report volumes.

The $29.0 million increase in revenue from our non-dermatologic tests was largely attributable to a 152% increase in tests report volumes for our TissueCypher test, and, to a much lesser extent, a higher realized ASP.

Our IDgenetix and DecisionDx-UM tests also contributed to the increase in non-dermatologic revenues, with both tests having higher test report volumes as well as higher ASPs.

Net revenue from our non-dermatologic tests as a percentage of total net revenue increased from 15.3% for the nine months ended September 30, 2023 to 21.4% for the nine months ended September 30, 2024.

Cost of Sales (exclusive of amortization of acquired intangible assets)

Cost of sales (exclusive of amortization of acquired intangible assets) for the nine months ended September 30, 2024 increased by $11.5 million, or 35.2%, compared to the nine months ended September 30, 2023, primarily due to higher personnel costs and expense for supplies and lab services.

Higher expense for supplies and lab services also reflects higher test report volumes.

Due to the nature of our business, a significant portion of our cost of sales expenses represents fixed costs associated with our testing operations.

Accordingly, our cost of sales expense will not necessarily increase or decrease commensurately with the change in net revenues from period to period.

We expect our cost of sales expenses (exclusive of amortization of acquired intangible assets) to continue to increase in future periods as we

hire additional laboratory personnel and related resources to support our expected operational growth and higher test volumes.

Our gross margin percentage was 79.3% for the nine months ended September 30, 2024, compared to 74.4% for the nine months ended September 30, 2023.

The increase was primarily due to higher revenues, partially offset by higher personnel costs, higher expense for supplies and lab services and higher expense incurred through our expanded laboratory capacity and higher test report volumes.

Research and Development

Research and development expenses decreased by $0.4 million, or 0.9%, for the nine months ended September 30, 2024, compared to the nine months ended September 30, 2023, primarily reflecting lower clinical studies costs, lower organizational development costs, and lower expense for laboratory supplies, partially offset by higher personnel costs.

Selling, General and Administrative

The following table provides a breakdown of SG&A expenses (in thousands):

Nine Months Ended

September 30,

2024 2023 Change

Sales and marketing $ 93,054 $ 86,693 $ 6,361

General and administrative 57,028 49,369 7,659

Total selling, general and administrative expense $ 150,082 $ 136,062 $ 14,020

Sales and marketing expenses increased by $6.4 million, or 7.3%, for the nine months ended September 30, 2024, compared to the nine months ended September 30, 2023.

The increase is primarily due to higher personnel costs, higher expense incurred through organizational and business development activities and higher marketing expense.

Increases in personnel costs reflect a higher headcount as well as merit and annual inflationary wage adjustment for existing employees.

Higher test report volumes is a result of our continued investments in human capital for our sales organization.

Stock-based compensation expense included in sales and marketing expense was $13.5 million for the nine months ended September 30, 2024, compared to $14.0 million for the nine months ended September 30, 2023.

General and administrative expenses increased by $7.7 million, or 15.5%, for the nine months ended September 30, 2024, compared to the nine months ended September 30, 2023.

The increase is primarily due to higher personnel costs, professional fees and information technology-related costs.

Increases in personnel costs reflect headcount expansions in our administrative support functions as well as merit and annual inflationary wage adjustment for existing employees.

Stock-based compensation expense included in general and administrative expense was $13.6 million for the nine months ended September 30, 2024, compared to $13.9 million for the nine months ended September 30, 2023.

Stock-based compensation expense included in general and administrative expense was $3.8 million for the three months ended March 31, 2025, compared to $4.0 million for the three months ended March 31, 2024.

Amortization of Acquired Intangible Assets

Amortization of acquired intangible assets for the nine months ended September 30, 2024 was $6.8 million and remains consistent as compared to the nine months ended September 30, 2023.

Amortization expense increased by approximately $26.1 million for the three months ended March 31, 2025, compared to the three months ended March 31, 2024, primarily due to our decision to discontinue the IDgenetix test offering beginning in May 2025.

As a result of this decision, the Company revised the estimated useful life of the related developed technology intangible asset and fully amortized the remaining carrying value as of March 31, 2025.

Interest Income

Interest income increased by $2.0 million for the nine months ended September 30, 2024 , compared to the nine months ended September 30, 2023 , primarily as a result of higher average balances of marketable investment securities and slightly higher interest rates.

Interest income increased by $0.1 million for the three months ended March 31, 2025, compared to the three months ended March 31, 2024, primarily as a result of higher average balances of marketable investment securities and slightly higher interest rates.

Changes in Fair Value of Trading Securities

The change in fair value of trading securities decreased by $1.4 million for the three months ended March 31, 2025, compared to the three months ended March 31, 2024, and was entirely associated with our investments in equity securities where we had no such investments during the comparative period.

Interest Expense

Interest expense increased by $0.5 million for the nine months ended September 30, 2024, compared to the nine months ended September 30, 2023 , primarily due to interest incurred on our long-term debt where we had no debt outstanding during the comparative period.

Income Tax Expense

Income tax expense was $5.0 million for the nine months ended September 30, 2024 and was due to revisions in estimated pre-tax income, reflecting uncertainty in continued Medicare coverage for our DecisionDx-SCC test and updated information, as well as stock-based compensation, permanent differences, changes in valuation allowance, research and development tax credit and state income taxes.

We recorded a minimal amount in income tax expense for the nine months ended September 30, 2023 .

Interest expense remained consistent for the three months ended March 31, 2025, compared to the three months ended March 31, 2024.

Income Tax Benefit

Our income tax benefit was $0.5 million for the three months ended March 31, 2025 , primarily driven by the revision of the estimated useful life of an intangible asset and our net operating loss position during the period.

Stock-Based Compensation Expense

Stock-based compensation expense, which is allocated among cost of sales, research and development expense and SG&A expense, totaled $38.9 million for the nine months ended September 30, 2024, compared to $39.4 million for the nine months ended September 30, 2023.

As of September 30, 2024, we had 710 employees compared to 587 as of September 30, 2023.

Stock-based compensation expense, which is allocated among cost of sales, research and development expense and SG&A expense totaled $11.2 million and $12.7 million for the three months ended March 31, 2025 and 2024, respectively.

We expect stock-based compensation expense will continue to be material in future periods, attributable to both existing awards outstanding and anticipated additional grants to our current and future employees.

As of March 31, 2025, we had 784 employees, compared to 638 as of March 31, 2024.

As of March 31, 2025, the total unrecognized stock-based compensation cost related to outstanding awards was $88.7 million, which is expected to be recognized over a weighted-average period of 2.6 years.

Liquidity and Capital Resources

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Our principal sources of liquidity are our cash and cash equivalents, marketable investment securities, cash generated from the sale of our products and our line-of-credit under the 2024 Loan and Security Agreement (the “2024 LSA”).

All of our marketable investment securities are considered investment grade, are readily available for use in current operations and have contractual maturities of one year or less.

As of September 30, 2024 and December 31, 2023, we had marketable investment securities of $184.8 million and $144.3 million, respectively.

As of September 30, 2024 and December 31, 2023, we had cash and cash equivalents of $95.0 million and $98.8 million, respectively.

As of September 30, 2024, we had a $25 million credit-line available under the 2024 LSA.

Our liquidity has been primarily derived from the revenue generated from the sale of our products and proceeds from our initial public offering of common stock in July 29, 2019 (the “IPO”) and our follow-on public offerings of common stock in June and December of 2020.

All of our marketable investment securities are considered investment grade, are readily available for use in current operations.

As of March 31, 2025 and December 31, 2024, we had marketable investment securities of $185.5 million and $173.4 million, respectively.

Additionally, as of March 31, 2025 and December 31, 2024, we had cash and cash equivalents of $89.7 million and $119.7 million, respectively.

As of March 31, 2025, we had a $25.0 million credit-line available under the 2024 LSA.

Furthermore, on April 4, 2025, we amended the 2024 LSA to modify certain terms, including the extension of the draw period from March 31, 2025 to September 30, 2025 for our line of credit.

Our liquidity has been primarily derived from the revenue generated from the sale of our products, and proceeds from our IPO in July 2019 and our follow-on public offerings of common stock in June and December of 2020.

We believe that our existing cash and cash equivalents, marketable investment securities and anticipated cash generated from sales of our products will be sufficient to fund our operations for at least the next 12 months.

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We anticipate that a substantial portion of our cash requirements in the foreseeable future will relate to the further commercialization of our currently marketed products, the development of our future product candidates in our pipeline and the potential commercialization of these pipeline products, should their development be successful, and the construction of our future corporate headquarters.

In July 2023, following approval by our board of directors, we entered into a definitive agreement to purchase a plot of land located in Friendswood, Texas for a purchase price of $7.6 million, subject to certain adjustments, for the purpose of developing a commercial office building to be used as our future corporate headquarters.

In July 2023, we entered into a definitive agreement to purchase a plot of land located in Friendswood, Texas for a purchase price of $7.6 million, subject to certain adjustments, for the purpose of developing a commercial office building where our future corporate headquarters will be located.

In February 2024, we closed on the purchase of the land for cash consideration of $7.2 million.

The development project will include a four-story headquarters building, which will encompass approximately 80,000 square feet of Class A office space.

Construction began in May 2024 and is expected to continue through early 2026, at which time the building

is expected to be ready for occupancy and use.

Over the duration of this project, we expect to make significant capital expenditures in form of payments to the developer under a percentage of completion basis.

As of September 30, 2024, the development project is expected to cost a total of approximately $40 million.

During the nine months ended September 30, 2024, we have made minimal capital expenditures in the planning and early development phases of this project.

We intend to use the proceeds from the 2024 Term Loan, the 2024 Credit Line and our existing cash and cash equivalents to pay for this project.

In connection with our acquisition of AltheaDx, we agreed to pay contingent consideration of up $75.0 million, payable 50% in cash and 50% in common stock, based on the achievement of certain commercial milestones relating to the years ending December 31, 2022, 2023 and 2024.

The portion of the AltheaDx Earnout Payments associated with the commercial milestones for the year ended December 31, 2023 was $37.5 million and was not paid since the applicable commercial milestones were not met.

The AltheaDx Earnout Payments included a 2022 catch-up provision for additional payment of up to $17.5 million that expired in 2023.

Therefore, as of September 30, 2024, we have a potential payment obligation of up to $20.0 million with respect to the remaining commercial milestones for 2024.

The number of shares of our common stock that may be issued in connection with the commercial milestone payment for 2024 is subject to limitations.

As of September 30, 2024, we believe it to be unlikely that the remaining commercial milestones will be met and that future payments will be due.

Since our inception, we have generally incurred significant losses and negative operating cash flows.

For the year ended December 31, 2023, we had a net loss of $57.5 million, used $5.6 million in operating cash flows, and had an accumulated deficit of $218.4 million.

For the nine months ended September 30, 2024, we had net income of $8.7 million and positive operating cash flows of $40.5 million.

The development project will include a four-story building, which will encompass approximately 80,000 square feet of Class A office space.

Construction began in May 2024 and is expected to continue through early 2026, at which time the building is expected to be ready for occupancy and use.

Over the duration of this project, we expect to make significant capital expenditures in the form of payments to the developer under a percentage of completion basis.

As of March 31, 2025, the development project is expected to cost a total of approximately $43.1 million.

During the three months ended March 31, 2025, we have made $5.1

million in capital expenditures for this development project.

We intend to use the proceeds from the 2024 Term Loan, (as defined below), the 2024 Credit Line and our existing cash and cash equivalents to pay for this project.

Since our inception, we have generally incurred significant losses and negative operating cash flows, and we have relied heavily on proceeds from our financing activities to fund capital expenditures, business expansion campaigns, and to offset operating deficits.

For the year ended December 31, 2024, we recognized net income of $18.2 million, and had positive operating cash flow of $64.9 million, though we may be unable to sustain profitability and positive cash flows in future periods.

Collections on Medicare claims for our DecisionDx-SCC test represented a significant portion of our 2024 operating cash flows.

We lost Medicare coverage for our DecisionDx-SCC test in April 2025 and decreases in revenues and cash inflows from this test are expected to follow.

Our ability to maintain profitability will heavily depend on us maintaining Medicare coverage for our currently marketed products, on the successful commercialization of the products we plan to launch in the future, and our ability to manage operating expenses.

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Long-Term Debt

We had no debt as of December 31, 2023.

Our long-term debt as of September 30, 2024 is presented in the table below (in thousands):

September 30, 2024

Our long-term debt is presented in the table below (in thousands):

March 31, 2025 December 31, 2024

Term debt $ 10,200 $ 10,200

Unamortized discount (168) (177)

Total long-term debt 10,015

Total debt, net 10,032 10,023

Current portion of long-term debt (1,111) (278)

Total $ 10,015

Total long-term debt $ 8,921 $ 9,745

2024 Loan and Security Agreement

On March 26, 2024 (the ‘‘Closing Date’’), we entered into the ‘2024 LSA, by and between the Company, its wholly owned subsidiary, Castle Narnia Real Estate Holding 1, LLC and Silicon Valley Bank, a division of First-Citizens Bank & Trust Company (the “Lender’’).

The 2024 LSA provides for (i) on the Closing Date, $10.0 million aggregate principal amount of term loans (discussed in the ‘‘2024 Term Loan’’ section below), and (ii) from the Closing Date until March 31, 2025, an additional line of credit of $25.0 million with the same interest rate and maturity as the term debt available (discussed in ‘‘—2024 Credit Line’’ below) at our option.

The 2024 LSA provides for (i) on the Closing Date, $10.0 million aggregate principal amount of Term Loans (the “2024 Term Loan,” as more fully discussed in the “2024 Term Loan” section below), and (ii) from the Closing Date until March 31, 2025, an additional line of credit of $25.0 million with the same interest rate and maturity as the term debt available (the “2024 Credit Line,” as more fully discussed in ‘‘2024 Credit Line’’ below) at our option.

The obligations under the 2024 LSA are secured by substantially all of our assets, excluding intellectual property, the real property held by the Company, and are subject to certain other exceptions and limitations.

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Should we seek to amend the terms of the 2024 LSA, the consent of the Lender would be required.

As of September 30, 2024, we were in compliance with this covenant.

As of March 31, 2025, we were in compliance with these covenants.

The 2024 LSA bears interest at a floating rate equal to the greater of (a) the WSJ Prime Rate plus 0.25% or (b) 6.00% per annum.

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2024 Term Loan

On March 26, 2024, we drew $10.0 million in Term Loans under the terms and provisions of the 2024 LSA.

On the Closing Date, we drew $10.0 million in Term Loans under the terms and provisions of the 2024 LSA.

We are obligated to make a final payment of $0.2 million under the terms of the 2024 LSA final payment provisions.

A discount on debt equal to this obligation was recorded on the draw date and is being amortized as additional interest expense using the effective interest method over the term of the debt.

As of September 30, 2024, the effective interest rate for all outstanding debt under the 2024 Term Loan was 8.60%.

As of March 31, 2025, the effective interest rate for all outstanding debt under the 2024 Term Loan was 8.19%.

2024 Credit Line

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Amounts repaid under the 2024 Credit Line may not be reborrowed.

As of September 30, 2024, no draws had been made on the line of credit.

As of March 31, 2025, no draws had been made on the 2024 Credit Line.

We have entered into various operating and finance leases, which are primarily associated with our laboratory facilities and office space.

Total undiscounted future minimum payment obligations under our operating leases and finance leases as of September 30, 2024 totaled approximately $24.0 million, of which $0.8 million is payable through the remainder of 2024 and $23.2 million is payable through early 2034.

Total undiscounted future minimum payment obligations under our operating leases and finance leases as of March 31, 2025 totaled approximately $22.4 million, of which $2.2 million is payable through the remainder of 2025 and $20.2 million is payable through early 2034.

The leases expire on various dates through 2034 and provide certain options to renew for additional periods.

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The following table summarizes our sources and uses of cash and cash equivalents for each of the periods presented (in thousands):

Nine Months Ended

September 30,

Net cash provided by (used in) operating activities $ 40,501 $ (24,213)

Three Months Ended

Net cash used in operating activities $ (6,036) $ (6,835)

Net cash used in investing activities (22,431) (19,701)

Net cash provided by financing activities 11,524 999

Net cash (used in) provided by financing activities (1,553) 10,644

Net change in cash and cash equivalents (30,020) (15,892)

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Operating Activities

Net cash provided by operating activities was $40.5 million for the nine months ended September 30, 2024, and was primarily attributable to non-cash stock-based compensation expense of $38.9 million, depreciation and amortization of $10.2 million, net income of $8.7 million, deferred income taxes of $3.7 million and decreases in inventory of $1.4 million, partially offset by increases in accounts receivable of $11.9 million, increases in accretion of discounts on marketable investment securities of $5.1 million, decreases in accounts payable of $3.8 million, increases in prepaid expenses and other current assets of $1.7 million and decreases in accrued compensation of $1.3 million.

Net cash used in operating activities was $24.2 million for the nine months ended September 30, 2023, and was primarily attributable to the net loss of $54.9 million, increases in accounts receivable of $13.8 million, increases in accretion of discounts on marketable investment securities of $3.9 million, decreases in accrued compensation of $2.0 million and increases in inventory of $1.8 million, partially offset by non-cash stock-based compensation expense of $39.4 million, depreciation and amortization of $9.1 million, a change in accounts payable of $2.7 million and a change in other accrued and current liabilities of $1.4 million.

The $64.7 million increase in cash inflows from operating activities for the nine months ended September 30, 2024 compared to the nine months ended September 30, 2023 is primarily due to increases in collections from customers attributable to higher net revenues partially offset by increases in operating expenditures.

During the nine months ended September 30, 2024 net revenues increased by 59.9% compared to the nine months ended September 30, 2023 which outpaced the 11.6% increase in net operating expenses for the same period.

In part, the cash provided during the nine months ended September 30, 2024 reflects the payment of annual cash bonuses to our employees as well as certain health care benefit payments totaling $20.8 million, that are not expected to recur during the remainder of 2024.

Net cash used in operating activities was $6.0 million for the three months ended March 31, 2025, and was primarily attributable to net loss of $25.8 million, decreases in accrued compensation of $14.7 million, increases in accounts receivable of $5.2 million, increases in prepaid expenses and other current assets of $3.4 million and increases in accretion of discounts on marketable investment securities of $1.4 million, partially offset by depreciation and amortization of $29.8 million, non-cash stock-based compensation expense of $11.2 million, change in fair value of trading securities of $1.4 million, decreases in inventory of $1.3 million and increases in other accrued and current liabilities of $1.1 million.

Net cash used in operating activities was $6.8 million for the three months ended March 31, 2024, and was primarily attributable to decreases in accrued compensation of $14.2 million, increases in accounts receivable of $4.3 million, a net loss of $2.5 million, and increases in accretion of discounts on marketable investment securities of $1.7 million, partially offset by non-cash stock-based compensation expense of $12.7 million, depreciation and amortization of $3.3 million.

The $0.8 million decrease in cash outflows from operating activities for the three months ended March 31, 2025 compared to the three months ended March 31, 2024 is primarily due to increases in collections from customers attributable to higher net revenues partially offset by increases in operating expenditures.

In part, the cash provided during the three months ended March 31, 2025 reflects the payment of annual cash bonuses to our employees as well as certain health care benefit payments totaling $22.5 million, that are not expected to recur during the remainder of 2025.

In comparison, we paid $20.8 million during the same period in 2024 towards annual cash bonuses and certain health care benefits.

Investing Activities

Net cash used in investing activities was $55.9 million for the nine months ended September 30, 2024 and consisted primarily of purchases of marketable investment securities of $158.4 million and purchases of property and equipment of $20.8 million, partially offset by the maturity of marketable investment securities of $123.3 million.

Net cash used in investing activities was $8.5 million for the nine months ended September 30, 2023 and consisted primarily of purchases of marketable investment securities of $136.7 million and purchases of property and equipment of $9.8 million, partially offset by the maturity of marketable investment securities of $138.0 million.

The $47.4 million increase in cash used in investing activities for the nine months ended September 30, 2024 compared to the nine months ended September 30, 2023 was primarily due to purchasing $21.7 million more in marketable investment securities and collecting $14.7 million fewer proceeds from maturing marketable investment securities.

We also increased our purchases of property and equipment by $10.9 million for the nine months ended September 30, 2024 compared to the nine months ended September 30, 2023, primarily due to our purchase of land for cash consideration of $7.2 million on February 9, 2024.

Net cash used in investing activities was $22.4 million for the three months ended March 31, 2025 and consisted primarily of purchases of marketable investment securities of $48.4 million, purchases of debt securities classified as held-to-market of $5.6 million and purchases of property and equipment of $4.7 million, partially offset by the maturity of marketable investment securities of $36.3 million.

Net cash used in investing activities was $19.7 million for the three months ended March 31, 2024 and consisted primarily of purchases of marketable investment securities of $60.8 million and purchases of property and equipment of $9.2 million, partially offset by the maturity of marketable investment securities of $50.2 million.

The $2.7 million increase in cash used in investing activities for the three months ended March 31, 2025 compared to the three months ended March 31, 2024 was primarily due to collecting $13.9 million fewer proceeds from maturing marketable investment securities and purchasing $5.6 million of debt securities classified as held-to-maturity, partially offset by decreases of $12.3 million in our purchases of marketable investment securities.

Furthermore, our purchases of property and equipment decreased by $4.4 million for the three months ended March 31, 2025 compared to the three months ended March 31, 2024, primarily due to the timing of the purchase of land for $7.2 million which occurred in February 2024 with no comparable transaction during the three months ended March 31, 2025.

Financing Activities

Net cash provided by financing activities was $11.5 million for the nine months ended September 30, 2024, and consisted primarily of $10.0 million of proceeds from issuance of long-term debt and $2.3 million of proceeds from contributions to our 2019 Employee Stock Purchase Plan (the “ESPP”) and $1.6 million of proceeds from the exercise of stock options, partially offset by the $2.4 million payment of employee taxes attributable to the vesting of Restricted Stock Units (“RSUs”).

Net cash provided by financing activities was $1.0 million for the nine months ended September 30, 2023, and primarily consisted of $2.0 million of proceeds from contributions to the ESPP and $0.2 million of proceeds from the exercise of stock options, partially offset by the $1.1 million payment of employee taxes attributable to the vesting of RSUs.

In 2021, the rate of inflation in the United States began to increase but has continued to subside since the second half of 2022.

We do not believe that inflation has had a material impact on our financial results during the three and nine months ended September 30, 2024.

We are unable to predict if the rate of inflation will increase in future periods.

Net cash used in financing activities was $1.6 million for the three months ended March 31, 2025, and consisted primarily of the $2.5 million payment of employee taxes attributable to the vesting of Restricted Stock Units (“RSUs”), partially offset by the $1.0 million of proceeds from contributions to our 2019 Employee Stock Purchase Plan (the “ESPP”).

Net cash provided by financing activities was $10.6 million for the three months ended March 31, 2024, and consisted primarily of $10.0 million of proceeds from issuance of long-term debt and $1.1 million of proceeds from contributions to our ESPP, partially offset by the $0.5 million payment of employee taxes attributable to the vesting of RSUs.

Critical Accounting Estimates

During the nine months ended September 30, 2024, there were no significant changes to the information discussed under “Critical Accounting Estimates” included in the Management’s Discussion and Analysis of Financial Condition and Results of Operations section of our 2023 10-K.

During the three months ended March 31, 2025, there were no significant changes to the information discussed under “Critical Accounting Estimates” included in the Management’s Discussion and Analysis of Financial Condition and Results of Operations section of our 2024 10-K.

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 2. Management’s Discussion and Analysis