What changed in this filing

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Item 1A. Risk Factors

2025-11-03 compared with 2025-08-04 · 42 added, 48 removed, 154 unchanged (37% of the section changed)

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For the year ended December 31, 2024, we had net income of $18.2 million, and as of December 31, 2024, we had an accumulated deficit of $200.1 million.

For the six months ended June 30, 2025, we had net income of $4.5 million, and as of June 30, 2025, we had an accumulated deficit of $221.5 million.

For the nine months ended September 30, 2025, we had net loss of $21.8 million, and as of September 30, 2025, we had an accumulated deficit of $222.0 million.

We cannot predict if we will continue to achieve profitability in the future.

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We also expect increases in our stock-based compensation expense in future periods due to additional awards outstanding, attributable to increased headcount.

Additionally, our performance could be affected by the impacts of geopolitical and macroeconomic developments, such as the invasion of Ukraine by Russia and related sanctions, the ongoing conflicts in the Middle East, economic slowdowns, labor shortages, recessions or market corrections, supply chain disruptions, inflation and monetary policy shifts, bank failures or other disruptions in the banking system or financing markets, rising interest rates and tightening of credit markets resulting from the conflict or other evolving macroeconomic developments.

Additionally, our performance could be affected by the impacts of geopolitical and macroeconomic developments, such as the invasion of Ukraine by Russia and related sanctions, the ongoing conflicts in the Middle East, economic slowdowns, the ongoing shutdown of the federal government including regulatory agencies, labor shortages, recessions or market corrections, supply chain disruptions, inflation and monetary policy shifts, international tariffs, liquidity concerns, and failures of bank or other disruptions in the banking system or financing markets, higher interest rates and financial and credit market fluctuations, volatility in the capital markets or other evolving macroeconomic developments.

Due to the requirements associated with being a public company, we expect to continue incurring significant additional legal, accounting and other expenses.

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See “—Risks Related to Our Business—Our revenue currently depends primarily on sales from our DecisionDx-Melanoma, DecisionDx-SCC and TissueCypher tests, and we will need to generate sufficient revenue from these products and other products to grow our business.” We may also incur significant losses in the future for a number of reasons, many of which are beyond our control, including the other risks described in the 2024 10-K, adoption of our products, coverage of and reimbursement rates for our products from third-party payors, and future research and development activities.

failure to achieve profitability in the future could cause the market price of our common stock to decline and make it more difficult or costly for us to raise additional capital.

Our failure to achieve profitability in the future could cause the market price of our common stock to decline and make it more difficult or costly for us to raise additional capital.

Risks Related to Our Business

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

In July 2025, we submitted reconsideration requests for both the Novitas and MolDX LCDs.

Novitas subsequently confirmed that our request for DecisionDx-SCC was valid.

MolDX also subsequently confirmed that our request for DecisionDx-SCC was valid and that the test has been placed on its waiting list, with an Open Meeting date to be determined.

These confirmations represent another procedural step in the reconsideration process, but it does not indicate coverage or a favorable review outcome.

We believe that our long-term commercial success, and ability to generate revenue, will depend on our ability to develop and market additional products, on our ability to increase market penetration for our existing and potential future products and on our ability to obtain favorable coverage and reimbursement policies from government payors, such as Medicare, and from private payors, such as insurance companies.

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and global financial markets and adverse macroeconomic developments.

and global market and economic conditions have been, and continue to be, disrupted and volatile due to many factors, including public health crises, geopolitical and macroeconomic developments, such as the ongoing conflicts in the Middle East and the ongoing conflict between Ukraine and Russia and related sanctions, economic slowdowns, 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 financial markets, rising interest rates and tightening of credit markets resulting from the conflict or other evolving macroeconomic developments, among others.

General business and economic conditions that could affect our business, financial condition or results of operations include fluctuations in economic growth, debt and equity capital markets, liquidity of the global financial markets, changes in trade and tariff policies, the availability and cost of credit, investor and consumer confidence, and the strength of the economies in which we, our collaborators, our manufacturers and our suppliers operate.

and global market and economic conditions have been, and continue to be, disrupted and volatile due to many factors, including public health crises, geopolitical and macroeconomic developments, such as the ongoing conflicts in the Middle East and the ongoing conflict between Ukraine and Russia and related sanctions, economic slowdowns, the ongoing shutdown of the federal government including regulatory agencies, 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 financial markets, higher interest rates and financial and credit market fluctuations, volatility in the capital markets or other evolving macroeconomic developments, among others.

General business and economic conditions that could affect our business, financial condition or results of operations include fluctuations in economic growth, debt and equity capital markets, foreign currency exchange rates, liquidity of the global financial markets, changes in trade and tariff policies, the availability and cost of credit, investor and consumer confidence, and the strength of the economies in which we, our collaborators, our manufacturers and our suppliers operate.

A severe or prolonged global economic downturn could result in a variety of risks to our business.

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Risks of a prolonged global economic downturn are particularly true in Europe, which is undergoing a continued severe economic crisis.

A weak or declining economy could also strain our suppliers and manufacturers, possibly

resulting in supply disruption.

A weak or declining economy could also strain our suppliers and manufacturers, possibly resulting in supply disruption.

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

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The diagnostics industry is highly regulated, and we cannot assure you that the regulatory environment in which we operate will not change significantly and adversely in the future.

In addition to laws and regulations implemented by the FDA, we may be subject to other applicable laws including health care fraud and abuse, data privacy, and transparency reporting laws, among others.

In many instances, there are no significant regulatory or judicial interpretations of these laws and regulations.

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These tests are referred to as LDTs.

We currently market our products as LDTs.

On May 6, 2024, the FDA published a final rule on the regulation of LDTs, which amends the FDA regulations under 21 CFR Part 809 to make explicit that LDTs are IVDs and are regulated as devices under the FD&C Act.

Under this final rule, 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, including LDTs marketed as of the date of publication of the final rule on May 6, 2024, as well as LDTs that have received approval from the NYSDOH.

On March 31, 2025, the United States District Court for the Eastern District of Texas vacated the FDA's LDT final rule.

government did not appeal the ruling, and the deadline to do so has passed;

therefore, the court’s decision stands.

Even if the LDT final rule were reinstated, we do not believe it would have a material impact on our existing test offerings given all of our tests were marketed before May 6, 2024.

We believe that our tests would continue to be subject to FDA enforcement discretion in their current forms.

Additionally, pursuant to the LDT final rule, the FDA would gradually end its general enforcement discretion approach in five stages over a four-year period for other LDTs not approved by NYSDOH or not already on market.

Each stage of the proposed phaseout period would subject LDTs to a set of regulatory requirements.

For example, the first stage of the phaseout would require LDT developers to comply with medical device reporting requirements and correction and removal reporting requirements by May 6, 2025.

LDTs considered higher-risk IVDs would be subject to premarket review requirements within three and a half years, and LDTs considered low to moderate risk IVDs would be subject to premarket submission requirements within four years after publication of the LDT final rule.

While the enforcement policy is

phased out, the FDA could still decide to pursue enforcement action at any time against LDTs that it deemed to be violative of its regulations when appropriate.

All of our existing tests were marketed prior to May 6, 2024 and are conducted in labs licensed by the NYSDOH.

If the FDA were to determine that our tests, or modifications thereof, are not within the scope of the FDA's enforcement discretion policy for LDTs for any reason, including based on the LDT final rule, if reinstated, or new rules, policies or guidance, or due to changes in statute, our existing tests may become subject to extensive FDA requirements, or our business may otherwise be adversely affected and lead to potential adverse effects on our business, prospects, results of operations and financial condition.

Furthermore, under the terms of the LDT final rule, any future Castle tests developed and commercialized would likely be subject to extensive FDA requirements which could adversely impact our business, prospects, results of operations and financial conditions.

Based on the LDT final rule, any such future Castle tests would be required to obtain marketing authorization by November 6, 2027 (if the tests were considered high risk) or by May 6, 2028 (if the tests were considered low to moderate risk and were otherwise not exempt from premarket review requirements).

We would also be subject to other device requirements, such as establishment registration and device listing requirements, medical device reporting requirements and current good manufacturing practice requirements.

We could be required to conduct clinical trials prior to continuing to sell our existing products or launching any other products we may develop.

This could increase the cost of conducting, or otherwise harm, our business.

Even if the FDA does not modify its policy of enforcement discretion, the FDA may disagree that we are marketing our LDTs within the scope of its policy of enforcement discretion and may impose significant regulatory requirements.

While we believe that we are currently in material compliance with applicable laws and regulations as historically enforced by the FDA, we cannot assure you that the FDA will agree with our determination.

A determination that we have violated these laws and regulations, or a public announcement that we are being investigated for possible violations, could adversely affect our business, prospects, results of operations or financial condition.

We may be required to obtain marketing authorization under Section 510(k), 513(f)(2) or 515 of the FD&C Act for any future test we wish to offer.

We currently market our products as LDTs which are subject to various coverage and reimbursement regulations and policies from governmental and commercial, third-party payors, as described in our 2024 10-K, and are subject to change from time to time.

On May 6, 2024, the FDA published a final rule on the regulation of LDTs, which amended the FDA regulations under 21 CFR Part 809 to make explicit that LDTs are IVDs and are regulated as devices under the FD&C Act.

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

government did not appeal the ruling, and the FDA rescinded the rule on September 19, 2025.

However, it is uncertain whether or when the FDA may be able to otherwise exercise its medical device authority with respect to LDTs or their components.

This uncertainty could adversely affect the FDA’s ability to apply and enforce its medical device requirements with respect to diagnostic tests more broadly, including any LDTs for which we have obtained or plan to obtain marketing authorization.

Such uncertainty and the FDA’s actions in response could have a material adverse effect on our business and operation.

In light of this uncertainty, we do not know if or when our offerings could become or will remain subject to FDA medical device requirements, including the need to seek and obtain marketing authorization.

If we were unable to comply with any medical device requirements applicable to LDTs if and when any such requirements become applicable, we could be required to cease marketing any tests that we market as LDTs.

In addition, further efforts by the FDA or Congress to impose more regulation on LDTs could create a negative public perception about the validity, safety, effectiveness, or performance of LDTs, including our tests, which could adversely affect patient, provider, and customer perception about, and confidence in our tests.

Moreover, the FDA may assert that we are improperly marketing our tests as LDTs or otherwise assert that we do not comply with applicable requirements, and in such cases may take enforcement action against us and/or require premarket review and marketing authorization, which may require us to cease marketing any commercially marketed tests that are marketed as LDTs until such marketing authorization is obtained or the applications are submitted.

There can be no assurance that we will be able to obtain such marketing authorization or that any labeling claims would be consistent with the claims we have made or intend to make for such tests when launched as LDTs, or that such claims will be adequate to support continued adoption of and reimbursement for our tests.

We may also be required to obtain marketing authorization under Section 510(k), 513(f)(2) or 515 of the FD&C Act for any future test we wish to offer.

The process for submitting a premarket notification 501(k) and receiving FDA clearance usually takes from three to 12 months, but it can take significantly longer and clearance is never guaranteed.

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Furthermore, it could reduce our revenues or increase our operating costs and adversely affect our business, prospects, results of operations or financial condition.

In addition, Congress has, for over the past decade, considered a number of proposals, which, if enacted, would subject LDTs to additional regulatory requirements.

Any such legislation could substantially alter our marketing of LDTs and negatively impact our business, financial condition, and results of operations.

The FDA may modify its enforcement discretion policy with respect to LDTs in a risk-based manner, and we may become subject to extensive regulatory requirements and may be required to conduct additional clinical trials prior to continuing to sell our existing tests or launching any other tests we may develop, which may increase the cost of conducting, or otherwise harm, our business.

On May 6, 2024, the FDA published a final rule which amends 21 CFR Part 809 to make explicit that LDTs are IVDs and are regulated as devices under the FD&C Act.

In conjunction with this final rule, the FDA issued a policy to phaseout, over the course of four years, its general enforcement discretion approach for LDTs so that IVDs manufactured by a laboratory would generally fall under the same enforcement approach as other IVDs.

On March 31, 2025, the United States District Court for the Eastern District of Texas vacated the FDA's LDT final rule.

government did not appeal the ruling, and the deadline to do so has passed;

therefore, the court’s decision stands.

If the FDA changes or ends its policy of enforcement discretion with respect to LDTs, and our products become subject to the FDA’s requirements for premarket review of medical devices, we may be required to cease commercial sales of our products and conduct clinical trials prior to making submissions to the FDA to obtain premarket authorization or approval.

On May 6, 2024, the FDA published a final rule which amended 21 CFR Part 809 to make explicit that LDTs are IVDs and are regulated as devices under the FD&C Act.

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

government did not appeal the ruling, and the FDA rescinded the rule on September 19, 2025.

Despite FDA’s rescission of the LDT final rule, if the FDA implements new policy that affects LDTs or their components, and our products become subject to the FDA’s requirements for premarket review of medical devices, we may be required to cease commercial sales of our products and conduct clinical trials prior to making submissions to the FDA to obtain premarket authorization or approval.

If we are required to conduct such clinical trials, delays in the commencement or completion of clinical trials could significantly increase our product development costs and delay commercialization of any currently marketed testing that we may be required to cease selling or the commercialization of any future tests that we may develop.

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The commencement of clinical trials may be delayed due to insufficient patient enrollment, which is a function of many factors, including the size of the patient population, the nature of the protocol, the proximity of patients to clinical sites and the eligibility criteria for the clinical trial.

Moreover, the FDA may request that we provide additional analyses and information beyond that which we intend to produce based on the designs of our current and planned validation studies or clinical trials, or that we modify or narrow our intended use or product claims.

It is possible that the FDA, among other things, could disagree with our interpretation of data we have relied on to support certain intended uses.

If we are required to provide additional analyses or additional data or perform additional clinical trials beyond those we currently contemplate to support the intended uses of our tests, our planned commercialization may be delayed and we may be required to cease commercialization of any tests we currently market as LDTs.

The FDA requires medical device manufacturers to comply with, among other things, current good manufacturing practices for medical devices, known as the Quality System Regulation, which requires manufacturers to follow elaborate design, testing, control, documentation and other quality assurance procedures during the manufacturing process;

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The ability of the FDA to review proposed clinical trials or approve new products can be affected by a variety of factors, including government budget and funding levels, statutory, regulatory, and policy changes, the FDA’s ability to hire and retain key personnel and accept the payment of user fees, and other events that may otherwise affect the FDA’s ability to perform routine functions.

In addition, government funding of other government agencies that fund research and development activities is subject to the political process, including executive and congressional priorities, the impacts of which are inherently fluid and unpredictable.

In addition, government funding of other government agencies that fund R&D activities is subject to the political process, including executive and congressional priorities, the impacts of which are inherently fluid and unpredictable.

Disruptions at the FDA and other agencies may slow the time necessary for new product candidates to be reviewed and/or approved, which would adversely affect our business.

For example, over the last several years, including for 35 days beginning on December 22, 2018, the U.S.

government has shut down several times and certain regulatory agencies, such as the FDA, have had to furlough critical FDA employees and stop critical activities.

In addition, the current administration has proposed substantial reductions in force at various government agencies including the FDA, which could significantly reduce the FDA’s capacity to perform its functions in a manner consistent with its past practices and could delay reviews and negatively impact our business.

For example, over the last several years, including beginning on October 1, 2025 and continuing to the present, and for 35 days beginning on December 22, 2018, the U.S.

government has shut down several times and certain regulatory agencies, such as the FDA, have had to furlough critical FDA employees and stop critical activities to the extent they are not funded by existing available user fees.

In addition, the current administration has proposed, and in some cases implemented, substantial reductions in force at various government agencies including the FDA, which could significantly reduce the FDA’s capacity to perform its functions in a manner consistent with its past practices and could delay reviews and negatively impact our business.

We cannot predict the likelihood, nature or extent of government regulation or other measures that may arise from future legislation or administrative or executive action, either in the United States or abroad.*

The policies of the FDA and other regulatory authorities may change, including as a result of changes in the U.S.

presidential administration, and additional government regulations or executive orders may be enacted that could

change our continuing compliance obligations or otherwise adversely affect our business.

presidential administration, and additional government regulations or executive orders may be enacted that could change our continuing compliance obligations or otherwise adversely affect our business.

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

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Failure in any one of these areas could make it difficult for us to meet market expectations for our products and could damage our reputation and the prospects for our business.

For example, we experienced initial operational challenges in expanding business for our TissueCypher test.

For example, we experienced operational challenges in expanding business for our TissueCypher test.

In July 2023, we elected to temporarily pause accepting additional TissueCypher orders to focus on scaling efforts and to work through a significant backlog of orders.

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Legislation referred to as the One Big Beautiful Bill Act (the “OBBBA”) enacted in 2025, the Inflation Reduction Act enacted in 2022, the Coronavirus Aid, Relief, and Economic Security Act enacted in 2020, and the Tax Cuts and Jobs Act (“TCJA”) enacted in 2017 made many significant changes to the U.S.

For example, for tax years beginning after December 31, 2024, the OBBBA restores the tax deductibility of domestic research and development expenses in the year incurred, which expenses had been required under the TCJA to be capitalized and subsequently amortized over five years.

The OBBBA did not change the tax treatment of expenses incurred in research and development activities conducted outside the United States, which expenses continue to be required to be capitalized and amortized over 15 years.

For example, for tax years beginning after December 31, 2024, the OBBBA restores the tax deductibility of domestic R&D expenses in the year incurred, which expenses had been required under the TCJA to be capitalized and subsequently amortized over five years.

The OBBBA did not change the tax treatment of expenses incurred in R&D activities conducted outside the United States, which expenses continue to be required to be capitalized and amortized over 15 years.

We are evaluating the potential impacts this and other changes under the OBBBA may have on our business.

Future Further guidance from the Internal Revenue Service and other tax authorities with respect to such legislation may affect us, and certain aspects of such legislation could be repealed or modified in future legislation or sunset in future years.

Further guidance from the Internal Revenue Service and other tax authorities with respect to such legislation may affect us, and certain aspects of such legislation could be repealed or modified in future legislation or sunset in future years.

In addition, it is uncertain if and to what extent various states will conform to federal tax laws.

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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