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Item 1A. Risk Factors

2024-02-22 compared with 2023-02-23 · 55 added, 88 removed, 1204 unchanged (11% of the section changed)

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The risks and uncertainties described below are not the only ones we face.

Additional risks and uncertainties that we are unaware of, or that we currently believe are not material, may also become important factors that adversely affect our business.

If any of the following risks or others not specified below materialize, our business, financial condition and results of operations could be materially and adversely affected.

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As of December 31, 2023, we had an accumulated deficit of $2.1 billion.

To date, we have financed our operations principally from the sale of stock or convertible securities, and revenue from precision oncology testing and our development services.

To date, we have financed our operations principally from the sale of stock or convertible securities, and revenue from precision oncology testing, and development services and other.

We have devoted substantially all of our resources to the development and commercialization of our current products and to research and development activities related to our future products, including clinical and regulatory initiatives to obtain marketing approval and sales and marketing activities.

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• the volume and customer mix of our precision oncology testing;

• the start and completion of projects in which our development services are utilized;

• the start and completion of projects in which our development services and other are utilized;

• the introduction of new products or product enhancements by us or others in our industry;

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• developments or disruptions in the business and operations of our clinical, commercial and other partners;

• the impact of natural disasters, political and economic instability, including wars, terrorism, and political unrest, epidemics or pandemics, including the ongoing coronavirus pandemic, boycotts, curtailment of trade and other business restrictions;

• the impact of natural disasters, political and economic instability, including wars, terrorism, and political unrest, epidemics or pandemics, boycotts, curtailment of trade and other business restrictions;

• the effects of high inflation or other general market conditions and other factors, including factors unrelated to our operating performance or the operating performance of our competitors.

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New product development and commercialization involve a lengthy and complex process and we may be unable to develop or commercialize new products on a timely basis, or at all.

Products that are under development have taken time and considerable resources to develop, and we may not be able to complete the development and commercialization of the such products for clinical use on a timely basis, or at all.

Products that are under development have taken time and considerable resources to develop, and we may not be able to complete the development and commercialization of such products for clinical use on a timely basis, or at all.

For example, there can be no assurance that we will be able to produce commercial products for early detection of cancer.

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Our current revenue is primarily generated from sales of our tests and we are highly dependent on them for our success.

Our ability to execute our growth strategy and become profitable is highly dependent on the continued adoption and use of our tests, which accounted for almost all of our revenue in the years ended December 31, 2022, 2021 and 2020.

Our ability to execute our growth strategy and become profitable is highly dependent on the continued adoption and use of our tests, which accounted for 91%, 87% and 81% of our revenue in the years ended December 31, 2023, 2022 and 2021, respectively.

Continued adoption and use of our tests will depend on several factors, including the prices we charge for our tests, the scope of coverage and amount of reimbursement available from third-party payers for our tests, the availability of clinical data that supports the value of our tests and the inclusion of our tests in industry treatment guidelines.

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If we cannot maintain our current relationships, or enter into new relationships, with biopharmaceutical companies, our revenue prospects could be reduced.

Biopharmaceutical customers collaborate with us for analysis of whole blood or plasma samples for multiple applications primarily to support clinical studies, including patient identification, companion diagnostics and retrospective testing.

In addition, we generate revenue from licensing our digital sequencing technologies to our domestic biopharmaceutical customers and international laboratory partners.

In the years ended December 31, 2023, 2022 and 2021, revenue from our top five biopharmaceutical customers, including their affiliated entities, accounted for 14%, 18% and 18% of our total revenue, respectively.

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If commercial payers were to decide not to include us as a participating provider, cease paying us altogether, drastically reduce the amount they were willing to pay us or attempt to recover any amounts they had already paid, it could cause significant fluctuations in our quarterly results and could harm our business and results of operations.

In September 2018, we began to receive reimbursement from Medicare for claims submitted with respect to Guardant360 clinical tests performed for NSCLC patients.

In March 2020, we began to receive reimbursement from Medicare for claims submitted with respect to Guardant360 clinical tests performed for qualifying patients diagnosed with solid tumor cancers of non-central nervous system origin other than NSCLC.

In September 2018, we began to receive reimbursement from Medicare for claims submitted with respect to our precision oncology tests.

Revenue from clinical tests for patients covered by Medicare represented approximately 43%, 45% and 45% of our precision oncology revenue from clinical customers for the years ended December 31, 2023, 2022 and 2021, respectively.

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Our competitors within the liquid biopsy space for therapy selection include Foundation Medicine, Inc., which was acquired by Roche Holdings, Inc.

Roche Molecular Systems, Inc., Thermo Fisher Scientific, Inc., Illumina, Inc., Qiagen N.V., Invitae Corporation, Caris Life Science, Tempus Labs, Inc., and Agilent Technologies, Inc.

In addition, NeoGenomics Laboratories, Inc., Natera, Inc., Exact Sciences Corp., among others, are our competitors in minimal residual disease testing.

Roche Molecular Systems, Inc., Thermo Fisher Scientific, Inc., Illumina, Inc., Qiagen N.V., Invitae Corporation, Caris Life Science, and Tempus Labs, Inc.

In addition, NeoGenomics Laboratories, Inc., Natera, Inc., Exact Sciences Corp., and Tempus Labs, Inc., among others, are our competitors in minimal residual disease testing.

Additionally, our competitors in the early screening testing space include GRAIL, Inc., Exact Sciences Corp., Freenome Holdings, Inc., Delfi Diagnostics and InterVenn Biosciences.

Competitors within the broader genomics profiling space based on tissue include laboratory companies such as Bio-Reference Laboratories, Inc., Laboratory Corporation of America and Quest Diagnostics, Inc., as well as companies such as Foundation Medicine, Inc., Myriad Genetics, Inc., and most if not all of the competitors within the liquid biopsy space for therapy selection, that sell molecular diagnostic tests for cancer to physicians and have or may develop tests that compete with our tests.

Competitors within the broader genomics profiling space based on tissue include laboratory companies such as Bio-Reference Laboratories, Inc., Laboratory Corporation of America and Quest Diagnostics, Inc., as well as companies such as Caris Biosciences, Tempus Labs, Inc., Foundation Medicine, Inc., Myriad Genetics, Inc., and most if not all of the competitors within the liquid biopsy space for therapy selection, that sell molecular diagnostic tests for cancer to physicians and have or may develop tests that compete with our tests.

In addition, we are aware that certain of our customers are also developing their own tests and may decide to enter our market or otherwise stop using our tests.

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However, we have experienced challenges attracting and retaining qualified personnel due to competitive labor markets and may continue to do so.

In this competitive environment, our business could be adversely impacted by increases in labor costs triggered by regulatory actions regarding wages, scheduling and benefits, the need to attract and retain high quality employees with the requisite skill sets, and the ongoing effects of the COVID-19 pandemic.

In this competitive environment, our business could be adversely impacted by increases in labor costs triggered by regulatory actions regarding wages, scheduling and benefits, and the need to attract and retain high quality employees with the requisite skill sets.

In addition, if our new hires perform poorly, if we are unsuccessful in training, managing and integrating these new employees or if we are not successful in developing and retaining our existing employees, our business may be harmed.

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If we should encounter delays or difficulties in securing, reconfiguring or integrating the equipment and reagents we require for our products or in revalidating our products, our business, financial condition, results of operations and reputation could be materially and adversely affected.

The COVID-19 global pandemic and the worldwide attempts to contain it have adversely impacted our supply chain and other aspects of our business, as well as our results of operations, and could continue to do so.

The global outbreak of coronavirus 2019, or COVID-19, and the various attempts throughout the world to contain it, have created significant volatility, uncertainty and disruption, which has and may continue to impact the global economy, disrupt our supply chain, and create significant volatility and disruption of financial markets.

We have experienced significant reduction in access to our customers, including restrictions on our ability to market and distribute our tests and to collect samples.

Our partners, vendors, suppliers and customers have similarly had their operations altered or temporarily suspended.

Due to impacts and measures resulting from the COVID-19 pandemic, we have experienced and could continue to experience unpredictable reductions in the demand for our tests as healthcare customers divert medical resources and priorities toward the treatment of the virus.

Our biopharmaceutical customers are facing challenges in recruiting patients and in conducting clinical studies to advance their product development pipelines, for which our tests could be utilized.

To the extent the COVID-19 pandemic continues to cause severe disruption, vendors of equipment and reagents for our operations could also reduce productions or even go out of business, resulting in supply constraints for us.

For example, movement of supplies has been significantly curtailed worldwide, which has caused supply shortages for certain of our major suppliers.

Disruptions caused by the COVID-19 pandemic have adversely affected the quantity and quality of certain sequencers, reagents, blood tubes and other similar materials that are critical to our commercial and research and development programs.

We currently have a limited amount of stock of these components.

Failure in the future to secure sufficient supply of critical components could materially and adversely affect our ability to manufacture or supply marketed products and product candidates or complete our ongoing research and development programs on the timelines previously established.

Our ability to enroll suitable patients in clinical studies has also been negatively impacted and could continue to be adversely affected by the COVID-19 pandemic.

The full extent to which the COVID-19 pandemic and the various responses to it impacts our business, operations and financial results will depend on numerous evolving factors that we may not be able to accurately predict, including:

the duration and scope of the pandemic;

governmental, business and individuals’ actions that have been and continue to be taken in response to the pandemic;

the adverse effects on our manufacturing operations and supply chain, which may impact our ability to produce and distribute our products, as well as the ability of third parties to fulfill their obligations to us and could increase our expenses;

the possibility that third parties on which we rely for certain functions and services, suppliers, distributors, logistics providers, and external business partners, may be adversely impacted by restrictions resulting from COVID-19, which could cause us to experience delays or incur additional costs;

the availability, cost to access and effectiveness of COVID-19 tests, vaccines and medicines;

the effect on our customers and customer demand for and ability to pay for our tests;

restrictions on the ability of our employees and the employees of third parties on which we rely for certain functions and services to work and travel;

disruptions related to the distribution of our tests, including impacts on logistics of shipping and receiving blood collection kits;

and any stoppages, disruptions or increased costs associated with development, production and marketing of our products.

During the COVID-19 pandemic, we may not be able to maintain the same level of customer outreach and service, which could negatively impact our customers’ perception of us.

We will continue to actively monitor the issues raised by the COVID-19 pandemic and may take further actions that alter our operations, as may be required by federal, state, local or foreign authorities, or that we determine are in the best interests of our employees, customers and stockholders.

It is not clear what the potential effects any such alterations or modifications may have on our business, including the effects on our financial results.

The COVID-19 pandemic has also led to uncertainties related to our growth, forecast and trends.

Our historic results such as revenues, operating margins, net income, cash flows, tests performed, and other financial and operating metrics, may not be indicative of our results for future periods.

Any past increases in the number of clinical tests and/or biopharmaceutical tests performed by us may reflect the acceleration of growth that we have experienced but may not see in subsequent periods given the COVID-19 pandemic.

Even if government and other restrictions are relaxed, our growth may slow or reverse, including due to a slow recovery.

The COVID-19 pandemic and its future developments present uncertainties with respect to our performance, financial condition, volume of business, results of operations, and cash flows.

Due to the uncertain scope and duration of the COVID-19 pandemic and uncertain timing of any recovery or normalization, we are currently unable to estimate the resulting impacts on our operations and financial results.

In addition to the impacts to our business, the global economy is likely to be significantly weakened as a result of actions taken in response to the COVID-19 pandemic.

To the extent that such a weakened global economy impacts customers’ ability or willingness to pay for our tests, our business and results of operation could be negatively impacted.

As a result, we expect our revenue and results of operations to be adversely affected until testing, treatments and vaccines substantially eliminate the impact of the COVID-19 pandemic.

If our existing laboratory facility becomes damaged or inoperable or we are required to vacate our existing facility, our ability to perform our tests and pursue our research and development efforts may be jeopardized.

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

We currently have limited international operations, but our business strategy incorporates potentially significant international expansion, including through Guardant AMEA, which we formed to accelerate the commercialization of our products in Asia, the Middle East and Africa.

We currently have limited international operations, but our business strategy incorporates potentially significant international expansion.

We plan to maintain distributor and partner relationships, to conduct physician and patient association outreach activities, to extend laboratory capabilities and to expand payer relationships, outside of the United States.

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government officials for the purpose of obtaining or retaining business or securing any other improper advantage, as a result of our international customers.

Our reliance on independent distributors to sell our tests in ternationally demands a high degree of vigilance in maintaining our policy against participation in corrupt activity, because these distributors could be deemed to be our agents and we could be held responsible for their actions.

Our reliance on independent distributors and third party partner laboratories to market, sell and/or perform our tests internationally demands a high degree of vigilance in maintaining our policy against participation in corrupt activity, because these distributors could be deemed to be our agents and we could be held responsible for their actions.

companies in the medical device and biopharmaceutical field have faced criminal penalties under the FCPA for allowing their agents to deviate from appropriate practices in doing business with these individuals.

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• federal and state Occupational Safety and Health Administration rules and regulations;

• HIPAA, and similar state or foreign data privacy and security laws;

• HIPAA, GDPR, APPI, CCPA, CPRA and similar state or foreign data privacy and security laws;

• consumer protection laws.

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Certain of our tests are currently marketed as LDTs, and future changes in FDA enforcement discretion for LDTs could subject our operations to much more significant regulatory requirements.

We market some of our tests, Guardant360, Guardant360 Response, Guardant360 Tissue Next, and Guardant Reveal, as LDTs.

We market some of our tests, Guardant360, Guardant360 Response, Guardant360 Tissue Next, Guardant Reveal and Shield, as LDTs.

LDTs are in vitro diagnostic tests that are intended for clinical use and are designed, manufactured, and used within a single laboratory.

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There is no guarantee that the FDA will grant 510(k) clearance or a premarket approval of our products or that similar foreign authorities or notified bodies will grant premarket approval or certify our products and failure to obtain necessary clearances or approvals or certifications for our products would adversely affect our ability to grow our business.

Before we begin to label and market our products for use as clinical diagnostics in the United States, including as companion diagnostics, we may be required to obtain either 510(k) clearance or a premarket approval, or supplemental premarket approval, or respectively, PMA or PMA supplement, from the FDA, unless an exemption applies or FDA exercises its enforcement discretion and refrains from enforcing its medical device requirements.

In the event FDA rulemaking of oversight of LDTs were to be formalized, we may be required to obtain either 510(k) clearance or a premarket approval, or supplemental premarket approval, or respectively, PMA or PMA supplement, from the FDA, for some of our LDT products unless an exemption applies or FDA exercises its enforcement discretion and refrains from enforcing its medical device requirements.

For example, the FDA has a policy of refraining from enforcing such requirements with respect to LDTs, which the FDA considers to be a type of in vitro diagnostic test that is designed, manufactured and used within a single laboratory.

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Clinical data is sometimes required to support a substantial equivalence determination.

In order to sell our products in member states of the EU, our products must comply with the essential requirements of the EU In Vitro Diagnostic Medical Devices Directive (Directive 98/79/EC), or IVDD.

In order to sell our products in member states of the EU, our products must comply with the essential requirements of the new In Vitro Diagnostic Regulation (IVDR) 2017/746 issued and implemented by the European Union (EU) in May 2022.

These regulations introduced risk-based classification for IVDs and require notified body involvement for various high complexity devices including next generation sequencing tests such as Guardant360, Guardant360 Response, Guardant360 Tissue Next, and Guardant Reveal.

Compliance with these requirements is a prerequisite to be able to affix the European Conformity, or CE, mark to our products, without which they cannot be sold or marketed in the EU.

All medical devices placed on the market in the EU must meet the essential requirements laid down in Annex I to the IVDD including the requirement that an in vitro diagnostic medical device must be designed and manufactured in such a way that it will not compromise the clinical condition or safety of patients, or the safety and health of users and others.

All medical devices placed on the market in the EU must fulfill the clinical evidence and post-market performance evidence requirements.

In addition, the device must achieve the performances intended by the manufacturer and be designed, manufactured, and packaged in a suitable manner.

To demonstrate compliance with the essential requirements we must undergo a conformity assessment procedure, which varies according to the type of medical device and its (risk) classification.

As a general rule, demonstration of conformity of in vitro diagnostic medical devices and their manufacturers with the essential requirements must be based, among other things, on the evaluation of clinical data supporting the safety and performance of the products during normal conditions of use.

To demonstrate compliance with the essential requirements we must demonstrate, among other things, on the evaluation of clinical data supporting the safety and performance of the products during normal conditions of use.

Specifically, a manufacturer must demonstrate that the device achieves its intended performance during normal conditions of use, that the known and foreseeable risks, and any adverse events, are minimized and acceptable when weighed against the benefits of its intended performance, and that any claims made about the performance and safety of the device are supported by suitable evidence.

Except for (general) in vitro diagnostic medical devices, where the manufacturer can self-declare the conformity of its products with the essential requirements of the IVDD, a conformity assessment procedure requires the intervention of a notified body.

The conformity assessment procedure requires the intervention of a notified body.

Notified bodies are independent organizations designated by EU member states to assess the conformity of devices before being placed on the market.

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Similar requirements apply in foreign jurisdictions.

For instance, in the EU, we must inform the notified body that carried out the conformity assessment of the devices that we market or sell in the EU and EEA of any planned substantial changes to our quality system or substantial changes to our in vitro diagnostic medical devices that could affect compliance with the essential requirements laid down in Annex I to IVDD or cause a substantial change to the intended use for which the device has been CE marked.

The notified body will then assess the planned changes and verify whether they affect the products’ ongoing conformity with the IVDD.

If the assessment is favorable, the notified body will issue a new certificate of conformity or an addendum to the existing certificate attesting compliance with the essential requirements and quality system requirements laid down in the Annexes to the IVDD.

For instance, in the EU, we must inform the notified body that carried out the conformity assessment of the devices that we market or sell in the EU and EEA of any planned substantial changes to our quality system or substantial changes to our in vitro diagnostic medical devices that could affect compliance with the essential requirements or cause a substantial change to the intended use for which the device has been CE marked.

If third-party payers, including commercial payers and government healthcare programs, do not provide coverage of, or adequate reimbursement for, our tests, our business and results of operations will be negatively affected.

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Becoming a participating provider can result in higher reimbursement amounts for covered uses of our test and, potentially, no reimbursement for non-covered uses identified under the payer’s policies or the contract.

Although we are a participating provider with some commercial payers, certain other large, national commercial payers, including Anthem, Aetna and Humana, have issued non-coverage policies that consider tissue and liquid CGP testing, including our Guardant360 test, as experimental or investigational.

Although we are a participating provider with some commercial payers, certain other large, national commercial payers, including Anthem, Aetna and Humana, have issued non-coverage policies that consider tissue and liquid CGP testing which are not FDA approved, including our Guardant360 and TissueNext test, as experimental or investigational.

If we are not successful in obtaining coverage from such payers, or if other payers issue similar non-coverage policies, our business and results of operations could be materially and adversely affected.

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On December 10, 2021, Congress passed the Protecting Medicare and American Farmers from Sequester Cuts Act, which delayed by one year the next data reporting period and prevented any reduction in payment amounts from commercial payer rate implementation in 2022.

On November 2, 2022, CMS published its final rule for the Medicare Physician Fee Schedule for calendar year (CY) 2023, including changes for clinical laboratories that take effect on January 1, 2023.

On November 2, 2022, CMS published its final rule for the Medicare Physician Fee Schedule for calendar year (CY) 2023, including changes for clinical laboratories that took effect on January 1, 2023.

Changes include updated regulatory definitions to specify the data collection period for the data reporting period of January 1, 2023 through March 31, 2023;

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Our “research use only” and “investigational use only” products could become subject to more onerous regulation by the FDA or other regulatory agencies in the future, which could increase our costs and delay our commercialization efforts, thereby materially and adversely affecting our business and results of operations.

In the United States, some of our products, including our GuardantOMNI test, are currently available for research use only, or RUO, or for investigational use only, or IUO, depending on the proposed application.

In the United States, some of our products are currently available for research use only, or RUO, or for investigational use only, or IUO, depending on the proposed application.

We make our RUO and IUO products available to a variety of parties, including biopharmaceutical companies and research institutes.

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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 be subject to enforcement action and we may not achieve or sustain profitability.

The EU regulatory landscape concerning medical devices (including in vitro diagnostic medical devices) is evolving.

The EU regulatory landscape concerning medical devices (including in vitro diagnostic medical devices) has evolved in recent years.

On April 5, 2017 Regulation (EU) 2017/746 of the European Parliament and of the Council on in vitro diagnostic medical devices and repealing Directive 98/79/EC and Commission Decision 2010/227/EU, or the IVDR, was adopted to establish a modernized and more robust EU legislative framework, with the aim of ensuring better protection of public health and patient safety.

Unlike directives, the IVDR does not need to be transposed into national law and therefore reduces the risk of discrepancies in interpretation across the different European markets.

The IVDR will become applicable five years after publication (on May 26, 2022).

However, on October 14, 2021, the European Commission proposed a “progressive” roll-out of the IVDR to prevent disruption in the supply of in vitro diagnostic medical devices.

Consequently, if the European Parliament and Council adopt the proposed regulation, the IVDR will fully apply on May 26, 2022 but there will be a tiered system extending the grace period for many devices (depending on their risk classification) before they have to be fully compliant with the regulation.

These modifications may have an effect on the way we conduct our business in the EU and the EEA.

Changes in funding for, or disruptions caused by global health concerns impacting, the FDA and other government agencies or notified bodies could hinder their ability to hire and retain key leadership and other personnel, or otherwise prevent new medical device products from being developed, authorized or commercialized in a timely manner, which could negatively impact our business.

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In the EU, notified bodies must be officially designated to certify products and services in accordance with the IVDR.

Only a few notified bodies have been designated so far and the COVID-19 pandemic has significantly slowed down their designation process.

Only a few notified bodies have been designated to date.

Without IVDR designation, notified bodies may not yet start certifying devices in accordance with the new Regulation.

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In addition, some countries outside the United States require CAP accreditation as a condition to permitting clinical laboratories to test samples taken from their citizens.

In 2014, we obtained CAP accreditation for our Redwood City, California laboratory, and in order to maintain such accreditation, we are subject to survey for compliance with CAP standards every two years.

We have obtained CAP accreditation for our laboratories in Redwood City and San Diego, California, and Japan, and in order to maintain such accreditation, we are subject to survey for compliance with CAP standards every two years.

Failure to maintain CAP accreditation could have a material adverse effect on the sales of our tests and the results of our operations.

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Following the FDA approval of our Guardant360 CDx test, a new Z-Code Identifier was issued in August 2020.

In January 2021, a proprietary laboratory analyses, or PLA code was issued for our Guardant360 CDx with an effective date in April 2021.

In January 2021, a proprietary laboratory analyses, or PLA code was issued for our Guardant360 CDx test with an effective date in April 2021.

Additionally, based on this new PLA code, we applied to the CMS for our Guardant360 CDx test to become an advanced diagnostic laboratory test, or ADLT.

In March 2021, CMS approved ADLT status to the Guardant360 CDx test, based on which, Medicare paid us at the lowest available commercial rate from April 1, 2021 to December 31, 2021.

Effective January 1, 2022, Medicare has started to reimburse Guardant360 CDx services at the median rate of claims paid by commercial payers and this rate will apply until December 2023.

In March 2022, Palmetto GBA, the Medicare administrative contractor for MolDX, or MAC, responsible for administering Medicare’s Molecular Diagnostic Services Program, or MolDX, conveyed coverage for our Guardant360 TissueNext test under the existing local coverage determination.

The policy covers our Guardant360 TissueNext test for Medicare fee-for-service patients with advanced solid tumor cancers.

In March 2021, CMS approved ADLT status to the Guardant360 CDx test, based on which Medicare paid us at the lowest available commercial rate per test, from April 1, 2021 to December 31, 2021.

Effective January 1, 2022, Medicare started to reimburse Guardant360 CDx services at the median rate of claims paid by commercial payers and this rate will update annually each year based on the previous year’s private payor data submission.

In July of 2022 a CPT code was issued for Guardant360.

In March 2022, Palmetto GBA, the Medicare administrative contractor for MolDX, conveyed coverage for our Guardant360 TissueNext test under the existing local coverage determination.

The policy covers our Guardant360 TissueNext test for Medicare fee-for-service patients with advanced solid tumor cancers a CPT code was issued for TissueNext effective in October of 2022.

In July 2022, Palmetto GBA conveyed coverage for our Guardant Reveal test for fee-for-service Medicare patients in the United States with stage II or III colorectal cancer whose testing is initiated within three months following curative intent therapy, with an effective date of December 2021.

In April 2023 Guardant360 Response received Medicare coverage for tracking patient response to immunotherapy after an initial Guardant therapy selection test.

In January, 2024 a CPT code was issued for Guardant360 Response.

Effective January 1, 2024, Medicare has increased the reimbursement rate for our Guardant360 LDT test to the same rate as our Guardant360 CDx test.

Due to the inherent variability and unpredictability of the reimbursement landscape, including related to the amount that payers reimburse us for any of our tests, we estimate the amount of revenue to be recognized at the time a test is provided and record revenue adjustments if and when the cash subsequently received for a test differs from the revenue recorded for the test.

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In addition, other legislative changes have been proposed and adopted since the ACA was enacted.

On August 2, 2011, the Budget Control Act of 2011 was signed into law, which, among other things, reduced Medicare payments to providers, effective on April 1, 2013 and, due to subsequent legislative amendments to the statute, will remain in effect through 2032, with the exception of a temporary suspension from May 1, 2020 through March 31, 2022, unless additional Congressional action is taken.

We anticipate there will continue to be proposals by legislators at both the federal and state levels and in foreign jurisdictions, regulators and commercial and government payers to reduce healthcare costs while expanding individual healthcare benefits.

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

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

European court and regulatory decisions subsequent to the CJEU decision of July 16, 2020 have taken a restrictive approach to international data transfers.

In October 2022, President Biden signed an executive order to implement the EU-U.S.

Data Privacy Framework, which serves as a replacement to the Privacy Shield.

The European Commission adopted the adequacy decision on July 10, 2023.

As supervisory authorities issue further guidance on personal data export mechanisms, including circumstances where the SCCs cannot be used, and/or start taking enforcement action, we could suffer additional costs, complaints and/or regulatory investigations or fines, and/or if we are otherwise unable to transfer personal data between and among countries and regions in which we operate, it could affect the manner in which we provide our services, the geographical location or segregation of our relevant systems and operations, and could adversely affect our financial results.

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Third parties have asserted and may in the future assert that we are employing their proprietary technology or trade secrets without authorization.

For instance, Foundation Medicine, Inc.

filed a lawsuit for patent infringement against us in May 2016, which we settled in July 2018.

For instance, TwinStrand Biosciences, Inc.

and the University of Washington filed a lawsuit for patent infringement against us in August 2021 and a jury verdict was entered against us in November 2023.

We are also aware of issued U.S.

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Any of these outcomes could harm our financial position and results of operations.

We expect to incur significant additional costs as a result of being a public company, which may adversely affect our business, financial condition and results of operations.

We expect to incur costs associated with corporate governance requirements that are applicable to us as a public company, including rules and regulations of the SEC, under the Sarbanes-Oxley Act, the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, and the Securities Exchange Act of 1934, as amended, or the Exchange Act, as well as the rules of Nasdaq.

The requirements of being a public company have and may continue to strain our resources, which may adversely affect our business, financial condition and results of operations.

We have incurred, and expect to incur, costs associated with corporate governance requirements that are applicable to us as a public company, including rules and regulations of the SEC, under the Sarbanes-Oxley Act, the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, and the Securities Exchange Act of 1934, as amended, or the Exchange Act, as well as the rules of Nasdaq.

These rules and regulations, including those applicable to a large accelerated filer such as us, significantly increase our accounting, legal and financial compliance costs and make some activities more time-consuming.

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Accordingly, increases in costs incurred as a result of being a publicly traded company may adversely affect our business, financial condition and results of operations.

In addition, changing laws, regulations, and standards relating to corporate governance and public disclosure are creating uncertainty for public companies.

These laws, regulations, and standards are subject to varying interpretations, in many cases due to their lack of specificity, and as a result, their application in practice may evolve over time as new guidance is provided by regulatory and governing bodies.

This could result in continuing uncertainty regarding compliance matters and higher costs necessitated by ongoing revisions to disclosure and governance practices.

For example, pursuant to SEC rules, we are required to make certain cybersecurity disclosures, including related to material cybersecurity incidents and the reasonably likely impact of such an incident.

Determining whether a cybersecurity incident is reportable may not be straightforward and any such disclosures could be costly and lead to negative publicity, loss of customer confidence, diversion of management’s attention, and government investigations.

If our estimates or judgments relating to our critical accounting policies are based on assumptions that change or prove to be incorrect, our operating results could fall below our publicly announced guidance or the expectations of securities analysts and investors, resulting in a decline in the market price of our common stock.

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If we experience material weaknesses in the future or otherwise fail to maintain an effective system of internal controls in the future, we may not be able to accurately report our financial condition or results of operations which may adversely affect investor confidence in us and, as a result, the value of our common stock.

As a result of becoming a public company, we are required, under Section 404 of the Sarbanes-Oxley Act, to furnish annual reports by management on, among other things, the effectiveness of our internal control over financial reporting.

As a result of being a public company, we are required, under Section 404 of the Sarbanes-Oxley Act, to furnish annual reports by management on, among other things, the effectiveness of our internal control over financial reporting.

This assessment needs to include disclosure of any material weaknesses identified by our management in our internal control over financial reporting.

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A cyberattack can also be in the form of unauthorized access or a blocking of authorized access.

The risk of a security breach or disruption, particularly through cyberattacks or cyber intrusion, including by computer hackers, foreign governments and cyber terrorists, has generally increased as the number, intensity and sophistication of attempted attacks and intrusions from around the world have increased.

employee theft or misuse, human error, fraud, denial or degradation of service attacks, sophisticated nation-state and nation-state-supported actors or unauthorized access or use by persons inside our organization, or persons with access to systems inside our organization.

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

The risk of a security breach or disruption, particularly through cyberattacks or cyber intrusion, including by computer attackers, foreign governments and cyber terrorists, has generally increased as the number, intensity and sophistication of attempted attacks and intrusions from around the world have increased.

Our information technology systems and those of our third-party providers, strategic partners and other contractors, subcontractors or consultants are also vulnerable to attack and damage or interruption from telecommunications or network failures, natural disasters, employee theft or misuse, human error, fraud, denial or degradation of service attacks, sophisticated nation-state and nation-state-supported actors or unauthorized access or use by persons inside our organization, or persons with access to systems inside our organization.

As a result of the continued hybrid working environment, we and our third party service providers and partners may face increased cybersecurity risks due to our reliance on internet technology and the number of our employees who are working remotely, which may create additional opportunities for cybercriminals to exploit vulnerabilities.

Furthermore, because the techniques used to obtain unauthorized access to, or to sabotage, systems change frequently and often are not recognized until launched against a target, we may be unable to anticipate these techniques or implement adequate preventative measures.

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however, this insurance may not be sufficient to cover the financial, legal, business or reputational losses that may result from an interruption or breach of our systems.

Unresolved Staff Comments

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-K

Item 1A. Risk Factors