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Item 1A. Risk Factors

2025-02-25 compared with 2024-02-26 · 113 added, 170 removed, 312 unchanged (48% of the section changed)

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The Company’s business, consolidated financial condition, revenues, results of operations, profitability, reputation or cash flows could be materially impacted by any of these factors.

Risks Related to the Company's Business Including Global Economic and Sociopolitical Factors

General or macro-economic factors in the U.S.

and globally may have a material adverse effect upon the Company, and significant fluctuations in global economic conditions and an increase in the costs of goods and services could negatively impact testing volumes, drug development services, cash collections, profitability, and the availability and cost of credit.

The Company’s operations are dependent upon ongoing demand for diagnostic testing and drug development services by

patients, physicians, hospitals, MCOs, pharmaceutical, biotechnology and medical device companies and others.

Fluctuations in global economic conditions, including inflation and the risk of short- or long-term recessions, could negatively impact demand for diagnostic testing and drug development services, the ability of customers to pay for the Company's services, and the Company’s profitability.

Risks Related to the Company’s Business and Operations Including Global Economic and Geopolitical Factors

General or macro-economic factors and significant fluctuations in economic conditions in the U.S.

and globally may have a material adverse effect upon the Company.

The Company’s operations are dependent upon ongoing demand for diagnostic testing and biopharma laboratory services by patients, physicians, hospitals, MCOs, pharmaceutical, biotechnology and medical device companies and others.

Significant changes in global economic conditions, and an increase in the costs of goods and services, could negatively impact testing volumes, the demand for biopharma laboratory services, cash collections, profitability, and the availability and cost of credit.

Pressures on and uncertainty surrounding the U.S.

federal government’s budget, and potential changes in budgetary priorities, could adversely affect the funding for government programs that comprise a portion of the Company’s revenues.

In addition, uncertainty in the credit markets and interest rate volatility could reduce the availability and increase the cost of credit and impact the Company’s ability to meet its financing needs in the future.

Operations may be disrupted and adversely impacted by the effects of adverse weather, natural disasters, geopolitical events, public health crises, hostilities or acts of terrorism, acts of vandalism, disruption to supply chains, inaccessibility of natural resources, and other events beyond the Company's control.

Operations may be disrupted and adversely impacted by events beyond the Company’s control, including natural disasters, adverse weather, geopolitical events, public health crises, acts of terrorism, disruption to supply chain, and inaccessibility of natural resources.

Natural disasters, such as adverse weather, fires, earthquakes, power shortages and outages, geopolitical events, such as terrorism, war, political instability, or other conflict, public health crises and disease epidemics and pandemics, criminal activities, disruptions to supply chains, inaccessibility of natural resources, and other disruptions or events beyond the Company’s control could negatively affect the Company’s operations.

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Continued changes in healthcare reimbursement models and products (e.g., health insurance exchanges), changes in government payment and reimbursement systems, or changes in payer mix, including an increase in third-party benefits management and value-based payment models, could have a material adverse effect on the Company’s revenues, profitability and cash flow.

Diagnostics Laboratories' (Dx) testing services are billed to MCOs, Medicare, Medicaid, physicians and physician groups, hospitals, patients, and employer groups.

Dx testing services are billed to MCOs, Medicare, Medicaid, physicians and physician groups, hospitals, patients, and employer groups.

Most testing services are billed to a party other than the physician or other authorized person who ordered the test.

Increases in the percentage of services billed to government and MCOs could have an adverse effect on the Company’s revenues.

The Company serves many MCOs.

These organizations have different contracting philosophies, which are influenced by the design of their products.

Some MCOs contract with a limited number of clinical laboratories and engage in direct negotiation of rates.

Other MCOs adopt broader networks with generally uniform fee structures for participating clinical laboratories.

In some cases, those fee structures are specific to independent clinical laboratories, while the fees paid to hospital-based and physician-office laboratories may be different, and are typically higher.

MCOs may also offer Managed Medicare or Managed Medicaid plans.

In addition, an increasing number of MCOs are implementing, directly or through third parties, various types of laboratory benefit management programs that may include laboratory networks, utilization management tools (such as prior authorization and/or prior notification), and claims edits, which may impact coverage or reimbursement for commercial laboratory tests.

Some of these programs address commercial laboratory testing broadly, while others are focused on certain types of testing such as molecular, genetic and toxicology testing.

An increase in the use of such programs could lead to increased denial of claims, extended appeals, and reduced revenue.

Some MCOs use capitation rates to fix the cost of laboratory testing services for their enrollees.

Under a capitated reimbursement arrangement, the clinical laboratory receives a per-member, per-month payment for an agreed upon menu of laboratory tests provided to MCO members during the month, regardless of the number of tests performed.

Capitation shifts the risk of increased test utilization (and the underlying mix of testing services) to the commercial laboratory provider.

The Company makes significant efforts to obtain adequate compensation for its services in its capitated arrangements.

For the year ended December 31, 2023, such capitated contracts accounted for approximately $369.9 million, or 3.9%, of Dx's revenues.

The Company's ability to attract and retain MCOs is critical given the impact of healthcare reform, related products and expanded coverage (e.g.

health insurance exchanges and Medicaid expansion) and evolving value-based care and risk-based reimbursement delivery models (e.g., accountable care organizations (ACOs) and Independent Physician Associations (IPAs)).

The Company expects the efforts to impose reduced reimbursement, more stringent payment policies, and utilization and cost controls by government and other payers to continue.

If Dx cannot offset additional reductions in the payments it receives for its services by reducing costs, increasing test volume, and/or introducing new services and procedures, it could have a material adverse effect on the Company’s revenues, profitability, and cash flows.

In 2014, Congress passed PAMA, requiring Medicare to change the way payment rates are calculated for tests paid under the CLFS, and to base the payment on the weighted median of rates paid by private payers.

Pursuant to PAMA, reimbursement rates for many clinical laboratory tests provided under Medicare were reduced from 2018 through 2020.

Enforcement of PAMA was suspended each year from 2021 through 2025, but a long-term resolution through legislation has not yet been achieved, and the next round of PAMA reductions are currently on track to be implemented in 2026.

Unless implementation of PAMA is further delayed or changed, additional reductions in reimbursements of $100.0 million are expected for 2026 from all payers affected by the CLFS.

The Company’s ability to attract and retain MCOs is critical given the impact of healthcare reform, changes in coverage and evolving value-based care and risk-based reimbursement delivery models (e.g., accountable care organizations (ACOs) and Independent Physician Associations (IPAs)).

A portion of the managed care fee-for-service revenues is collectible from patients in the form of deductibles, coinsurance and copayments.

As patient cost-sharing has been increasing, the Company's collections may be adversely impacted.

As patient cost-sharing continues to increase, the Company’s collections may be adversely impacted.

In addition, Medicare and Medicaid and private insurers have increased their efforts to control the cost, utilization and delivery of healthcare services, including commercial laboratory services.

Measures to regulate healthcare delivery in general, and clinical laboratories in particular, have resulted in reduced prices, added costs and decreased test utilization for the commercial laboratory industry by increasing complexity and adding new regulatory and administrative requirements.

Pursuant to legislation passed in late 2003, the percentage of Medicare beneficiaries enrolled in Managed Medicare plans has increased.

The percentage of Medicaid beneficiaries enrolled in Managed Medicaid plans has also increased;

however, changes to, or repeal of, the Patient Protection and Affordable Care Act (ACA) may continue to affect coverage, reimbursement, and utilization of laboratory services, as well as administrative requirements, in ways that are currently unpredictable.

Further healthcare reform could adversely affect laboratory reimbursement from Medicare, Medicaid or commercial carriers.

The Company has periodically experienced delays in the pricing and implementation of coding and billing changes among various payers, including Medicaid, Medicare and commercial carriers.

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On June 23, 2016, CMS issued a final rule to implement PAMA that required applicable laboratories, including Dx, to begin reporting their test-specific private payer payment amounts to CMS in 2017, based on data collected in 2016.

CMS used that private market data to calculate weighted median prices for each test (based on applicable current procedural technology (CPT) codes) to represent the new CLFS rates beginning in 2018, subject to certain phase-in limits.

For 2018-2020, a test price could not be reduced by more than 10% per year.

As a result of provisions included within the CARES Act, PAMA rate reductions for 2021 were suspended, and therefore the Company did not experience any incremental reimbursement rate impact due to PAMA in 2021.

As a result of the Protecting Medicare and American Farmers from Sequester Cuts Act that became law in December 2021, the data reporting requirements and Medicare reimbursement cuts that would have occurred under PAMA in 2022 were delayed by one additional year, and the Company did not experience incremental reimbursement rate impact due to PAMA in 2022.

As a result of the Consolidated Appropriations Act, 2023, which became law in December 2022, the data reporting requirements and Medicare reimbursement cuts that would have occurred under PAMA in 2023 were delayed by one additional year, and the Company did not experience an incremental reimbursement rate impact due to PAMA in 2023.

In November 2023, provisions in the Further Continuing Appropriations and Other Extensions Act of 2024 further delayed data reporting requirements and the phase-in of payment reductions for Clinical Diagnostic Laboratory Tests (CDLTs) that are not classified as ADLTs under PAMA.

As a result, no payment reduction will be applied to CDLTs in 2024, and for 2025-2027 payment may not be reduced by more than 15% compared to the payment amount established for a test the previous year.

CLFS rates for 2028 and subsequent periods will not be subject to phase-in limits.

The phase-in of rates for CDLTs established in 2018 will resume in 2025.

New CLFS rates will be established in 2026 based on data from 2019 to be reported in 2025.

The process of data reporting and repricing under PAMA will be repeated every three years for CDLTs beginning in 2025.

CLFS rates for ADLTs will be updated annually.

CMS published its initial proposed CLFS rates under PAMA for 2018-2020 on September 22, 2017.

Following a public comment period, CMS made adjustments and published final CLFS rates for 2018-2020 on November 17, 2017, with additional adjustments published on December 1, 2017.

For 2020, the Company realized a net reduction in reimbursement of

approximately $72.0 million from all payers affected by the CLFS (approximately $107.0 million in 2019).

PAMA rates were frozen for years 2021 through 2024 as described above.

Unless implementation of PAMA is further delayed or changed, an additional reduction of approximately $100.0 million is expected for 2025, from all payers affected by the CLFS.

Changes in government regulation or in practices relating to the pharmaceutical, biotechnology, or medical device industries could decrease the need for certain services that BLS provides.

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Also, if government efforts to contain drug and medical product and device costs impact profits from such items, or if health insurers were to change their practices with respect to reimbursement for those items, some of BLS’s customers may spend less, or reduce their growth in spending on R&D.

In addition, proposed changes in the U.S.

relating to FDA oversight of the development and commercialization of LDTs as medical devices pursuant to regulatory interpretation, as well as draft legislation, if implemented, could increase costs, penalties, or fines.

Any such new laws or regulations may create a risk of liability, increase BLS costs and/or limit service offerings through BLS.

Increased competition, including price competition, could have an adverse effect on the Company’s revenues and profitability.

As further described in Item 1 of Part I of this Annual Report, both Dx and BLS operate in competitive industries.

The commercial laboratory business is intensely competitive both in terms of price and service.

Pricing of laboratory testing services is often one of the most significant factors used by physicians, third-party payers and consumers in selecting a laboratory.

As a result of significant consolidation in the commercial laboratory industry, larger commercial laboratory providers are able to increase cost efficiencies afforded by large-scale automated testing.

This consolidation results in greater price competition.

Dx may be unable to increase cost efficiencies sufficiently, if at all, and as a result, its net earnings and cash flows could be negatively impacted by such price competition.

The Company may face increased competition from health system laboratories, due to physicians within those systems directing their testing to the health system laboratory and away from the Company, and as those laboratories seek to expand their testing volume from unaffiliated physicians in their service areas.

The Company may also face competition from companies that do not comply with existing laws or regulations or otherwise disregard compliance standards in the industry.

Additionally, the Company may also face changes in fee schedules, competitive bidding for laboratory services, or other actions or pressures reducing payment schedules as a result of increased or additional competition.

Following the spin-off of Fortrea, BLS’s main competition ranges from hundreds of small providers to a limited number of large companies with global capabilities.

BLS competes against these small and large businesses, as well as in-house departments of pharmaceutical, biotechnology, medical device, and diagnostic companies, and to a lesser extent, selected academic research centers, universities, and teaching hospitals.

In addition, BLS’s services periodically experience periods of increased price competition that may have an adverse effect on the segment’s profitability and consolidated revenues and net income.

As further described in Item 1 and Item 1A of Part I of this Annual Report, both Dx and BLS operate in competitive industries.

The commercial laboratory business is intensely competitive in terms of price, service, specialty offerings, and the type and number of commercial laboratories.

Dx and BLS compete against a wide range of businesses, as well as in-house departments of pharmaceutical, biotechnology, medical device, and diagnostic companies, and to a lesser extent, selected academic research centers, universities, and teaching hospitals.

In addition, BLS’s services periodically experience periods of increased price competition that may have an adverse effect on the segment’s profitability and consolidated revenues and net earnings.

Failure to obtain and retain new customers, the loss of existing customers or material contracts, or a reduction in services or tests ordered or specimens submitted by existing customers, or the inability to retain existing and/or create new relationships with health systems could impact the Company’s ability to successfully grow its business.

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The Company’s failure to successfully compete in any of these areas could result in the loss of existing customers, an inability to gain new customers, and reduced or stagnant growth of the Company’s business.

Discontinuation or recalls of existing testing products;

failure to develop or acquire licenses for new or improved testing technologies;

or the Company’s customers using new technologies to perform their own tests could adversely affect the Company’s business.

Discontinuation or recalls of products used in the performance of testing, failure to develop or acquire licenses for new or improved testing technologies, or the Company’s customers using new technologies to replace offerings currently provided by the Company could adversely affect its business.

From time to time, manufacturers discontinue or recall reagents, test kits, or instruments used by the Company to perform laboratory testing.

Such discontinuations or recalls could adversely affect the Company’s costs, testing volume and revenue.

The commercial laboratory industry is subject to changing technology and new product introductions.

The Company’s success in maintaining a leadership position in genomic and other advanced testing technologies will depend, in part, on its ability to develop, acquire or license new and improved technologies on favorable terms and to obtain appropriate coverage and reimbursement for these technologies.

The commercial laboratory industry is subject to changing technology and the introduction of new and improved test offerings.

appropriate coverage and reimbursement for these technologies.

The Company may not be able to negotiate acceptable licensing arrangements, and it cannot be certain that such arrangements will yield commercially successful diagnostic tests.

If the Company is unable to license these testing methods at competitive rates, its R&D costs may increase as a result.

In addition, if the Company is unable to license new or improved technologies to expand its esoteric testing operations, its testing methods may become outdated when compared with the Company’s competition, and testing volume and revenue may be materially and adversely affected.

In addition, advances in technology may lead to the development of more cost-effective technologies, such as point-of-care testing equipment that can be operated by physicians or other healthcare providers (including physician assistants, nurse practitioners, and certified nurse midwives, generally referred to herein as physicians) in their offices or by patients themselves without requiring the services of freestanding clinical laboratories.

In addition, if the Company is unable to license new or improved technologies to expand its esoteric testing operations, its testing methods may become outdated and testing volume and revenue may be materially and adversely affected.

In addition, advances in technology may lead to the development of more technologies, such as point-of-care testing equipment, that can be operated by healthcare providers in their offices or by patients themselves without requiring the services of commercial laboratories.

Development of such technology and its use by the Company’s customers could reduce the demand for its laboratory testing services and the utilization of certain tests offered by the Company and negatively impact its revenues.

Similarly, application of artificial intelligence to testing could reduce demand for the Company’s services, or competitors could adopt use of these technologies and derive benefits from them sooner than the Company.

Currently, most commercial laboratory testing is categorized as high or moderate complexity, and thereby is subject to extensive and costly regulation under CLIA.

The cost of compliance with CLIA makes it impractical for most physicians to operate clinical laboratories in their offices, and other laws limit the ability of physicians to have ownership in a laboratory and to refer tests to such a laboratory.

Manufacturers of laboratory equipment and test kits could seek to increase their sales by marketing point-of-care laboratory equipment to physicians and by selling test kits approved for home or physician office use to both physicians and patients.

Diagnostic tests approved for home use are automatically deemed to be “waived” tests under CLIA and may be performed in physician office laboratories as well as by patients in their homes with minimal regulatory oversight.

Other tests meeting certain FDA criteria also may be classified as “waived” for CLIA purposes.

The FDA has regulatory responsibility over instruments, test kits, reagents and other devices used by clinical laboratories, and it has responsibility for classifying the complexity of tests for CLIA purposes.

Increased approval of “waived” test kits could lead to increased testing by physicians in their offices or by patients at home, which could affect the Company’s market for laboratory testing services and negatively impact its revenues.

Manufacturers of laboratory equipment and test kits could seek to increase their sales by marketing point-of-care laboratory equipment to physicians and by selling test kits approved by regulatory agencies for home or physician office use to both physicians and patients.

Increased approval and use of such test kits could lead to increased testing by physicians in their offices or by patients at home, which could affect the Company’s market for laboratory testing services and negatively impact its revenues.

Changes or disruption in services, supplies, or transportation provided by third parties have impacted and could continue to impact or adversely affect the Company’s business.

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Disruption of supply and services has impacted and could continue to impact or have a material adverse effect on the Company’s business.

A failure to identify and successfully close and integrate strategic acquisition targets could have a material adverse effect on the Company's business objectives and its revenues and profitability.

A failure to identify suitable acquisition targets and successfully close and integrate acquisitions could have a material adverse effect on the Company’s business objectives and its revenues and profitability.

Part of the Company’s strategy involves deploying capital in investments that enhance the Company’s business, which includes pursuing strategic acquisitions to strengthen the Company’s scientific capabilities and enhance therapeutic expertise, enhance esoteric testing and global drug development capabilities, and increase presence in key geographic areas.

Since 2019, the Company has invested net cash of approximately $3.5 billion in strategic business acquisitions.

Since January 1, 2020, the Company has invested net cash of approximately $3.4 billion in strategic business acquisitions.

However, the Company cannot assure that it will be able to identify acquisition targets that are attractive to the Company or that are of a large enough size to have a meaningful impact on the Company’s operating results.

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The Company has quality control systems and processes to support the performance and delivery of its services.

A failure to establish, update, or perform in accordance with those systems or processes could adversely affect the Company’s business

operations, resulting in the loss of customers, loss or suspension of licensure or certifications, imposition of sanctions or other penalties, damage to the Company’s reputation, or other adverse effects.

A failure to establish, update, or perform in accordance with those systems or processes could adversely affect the Company’s business operations, resulting in the loss of customers, loss or suspension of licensure or certifications, imposition of sanctions or other penalties, damage to the Company’s reputation, or other adverse effects.

Risks Related to Financial Matters

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Such underpricing or significant cost overruns could have an adverse effect on the Company’s business, results of operations, financial condition, and cash flows.

Many of BLS’s contracts, in particular, provide for services on a fixed-price or fee-for-service with a cap basis and they may be terminated or reduced in scope either immediately or upon notice.

Cancellations may occur for a variety of reasons, including:

Many of BLS’s contracts may be terminated or reduced in scope either immediately or upon notice.

Cancellations may

occur for a variety of reasons, including:

• failure of products to satisfy safety requirements;

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• BLS’s failure to perform its duties properly under the contract.

Although BLS' contracts often entitle the Company to receive the costs of winding down the terminated projects, as well as all fees earned up to the time of termination, the loss, reduction in scope or delay of a large contract or the loss, delay or conclusion of multiple contracts could materially adversely affect BLS.

Although BLS’s contracts typically entitle the Company to receive all fees earned up to the time of termination, and often also the costs of winding down the terminated projects, the loss, reduction in scope or delay of large or multiple contracts could materially adversely affect BLS.

A significant increase in the Company’s days sales outstanding could have an adverse effect on the Company’s business, including its cash flow, by increasing its bad debt or decreasing its cash flow.

Billing for laboratory services is a complex process.

Laboratories bill many different payers, including doctors, patients, hundreds of insurance companies, Medicare, Medicaid, and employer groups, all of which have different billing requirements.

In addition to billing complexities, Dx has experienced an increase in patient responsibility as a result of managed care fee-for-service plans that continue to increase patient deductibles, coinsurance and copayments, or implement restrictive coverage or administrative policies that can further increase patient costs.

Dx expects this trend to continue.

A material increase in Dx’s days sales outstanding level could have an adverse effect on the Company's business, including potentially increasing its bad debt rate and decreasing its cash flows.

Laboratories bill many different payers, including doctors, patients, health plans, Medicare, Medicaid, and employer groups, all of which have different billing requirements.

A material increase in Dx’s days sales outstanding level, which could be caused by multiple reasons due to the complexity of billing for laboratory services, could have an adverse effect on the Company’s business, including potentially increasing its bad debt rate and decreasing its cash flows.

Although BLS does not face the same level of complexity in its billing processes, it could also experience delays in billing or collection, and a material increase in BLS’s days sales outstanding could have an adverse effect on the Company’s business, including potentially decreasing its cash flows.

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In some instances, these companies are reliant on their ability to raise capital in order to fund their R&D projects.

These companies are also reliant on reimbursement for their products from government programs and commercial payers.

These companies may be reliant on reimbursement for their products from government programs and commercial payers.

Accordingly, economic factors and industry trends affecting BLS’s customers in these industries may also affect BLS.

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The Company’s level of indebtedness and debt service requirements could adversely affect its business.

In particular, it could increase the Company’s vulnerability to sustained, adverse macroeconomic weakness, limit its ability to obtain further financing or refinance existing debt at maturity, and limit its ability to pursue certain operational and strategic opportunities, including large acquisitions.

In particular, it

could increase the Company’s vulnerability to sustained, adverse macroeconomic weakness, limit its ability to obtain further financing or refinance existing debt at maturity, and limit its ability to pursue certain operational and strategic opportunities, including large acquisitions.

Additionally, the Company’s cost of funds could increase due to the impact of increases in prevailing interest rates on its variable rate debt and should the Company refinance existing debt at maturity or obtain further financing.

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The Company’s ability to engage in certain transactions could be limited or restricted in order to preserve, for U.S.

federal income tax purposes, the tax-free qualification of the Fortrea spin-off and certain related transactions under Sections 355 and

368(a)(1)(D) of the Internal Revenue Code.

federal income tax purposes, the tax-free qualification of the Fortrea spin-off and certain related transactions under Sections 355 and 368(a)(1)(D) of the Internal Revenue Code.

Even if the Spin-off and certain related transactions otherwise qualify for tax-free treatment under Section 355 of the Code, they may result in corporate-level taxable gain to the Company if there is a 50% or greater change in ownership, by vote or value, of shares of the Company’s stock, Fortrea’s stock, or the stock of a successor of either occurring as part of a plan or series of related transactions that includes the Spin-off, which is generally presumed to include any acquisitions or issuances of stock within two years of the Spin-off.

To avoid realizing such taxable gain, the Company may be restricted or limited in its capital-raising or in the strategic transactions that it elects to pursue during such time period.

The recently completed spin-off of Fortrea may not achieve the intended results.

On June 30, 2023, the Company completed the previously announced spin-off of Fortrea Holdings Inc.

The spin-off poses risks and challenges that could impact the Company’s business, including, but not limited to, the failure to achieve the intended benefits from the spin-off, the failure to receive tax- free treatment for U.S.

The spin-off of Fortrea may not achieve the intended results.

On June 30, 2023, the Company completed the previously announced spin-off of Fortrea.

The Spin-off poses risks and challenges that could impact the Company’s business, including, but not limited to, the failure to receive tax-free treatment for U.S.

federal income purposes, and potential exposure to unexpected claims, liabilities, or costs under the Company’s agreements with Fortrea in connection with the Spin-off.

The spin-off may adversely impact relationships with customers, suppliers, employees, and other business counterparties and the Company may experience delays, business disruption, increased costs, including from lost synergies, which could adversely affect the Company’s business, financial condition, and results of operations.

The Company may also experience increased challenges in attracting, retaining, and motivating key personnel, which could harm the Company’s business.

The Company's ongoing transitional and commercial arrangements with Fortrea intend to provide for a seamless delivery of services to the customers and other stakeholders of the independent companies following the spin-off, but those arrangements may not meet the intended objectives and could have unexpected costs or challenges, which could negatively impact the Company’s business, including relationships with customers and other business counterparties, and which could also result in a decline in value of the Company.

Risks Related to Technology and Cybersecurity

Failure to maintain the security of customer-related information or compliance with security requirements could damage the Company’s reputation with customers, cause it to incur substantial additional costs and become subject to litigation and enforcement actions.

The Company receives and stores certain personal and financial information about its customers.

The Company receives, stores, transmits, and processes certain personal and financial information about its customers.

In addition, the Company depends upon the secure transmission of confidential information over public networks, including information permitting cashless payments.

The Company also works with third-party service providers and vendors that provide technology systems and services that are used in connection with the receipt, storage, and transmission of customer personal and financial information.

A compromise in the Company’s security systems, or those of the Company's third-party service providers and vendors, that results in customer personal information being obtained by unauthorized persons, or the Company’s or a third party's failure to comply with security requirements for financial transactions, including security standards for payment cards (e.g., the Payment Card Industry Data Security Standard), could adversely affect the Company’s reputation with its customers and others, as well as the Company’s results of operations, financial condition and liquidity.

The Company also works with third-party service providers and vendors that provide technology systems and services that are used in connection with the receipt, storage, transmission, and processing of customer personal and financial information.

A compromise of the Company’s systems, or those of the Company's third-party service providers and vendors, that results in customer personal information being obtained or altered by unauthorized persons, or the Company’s third party's failure to comply with security requirements, including but not limited to security standards for payment cards (e.g., the Payment Card Industry Data Security Standard), could adversely affect the Company’s reputation with its customers and others, as well as the Company’s results of operations, financial condition and liquidity.

It could also result in litigation against the Company and the imposition of fines and penalties.

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The Company’s operations and customer relationships depend, in part, on the continued performance of its information technology systems.

A failure of the network or data-gathering procedures could impede the processing of data, delivery of databases and services, customer orders and day-to-day management of the business and could result in the corruption or loss of data.

Despite network security measures and other precautions the Company has taken, including the development of disaster recovery plans, its information technology systems are potentially vulnerable to physical or electronic break-ins, computer viruses, fire, natural disaster, power loss, telecommunications failures, cybersecurity incidents and similar disruptions, and there may not be adequate protections, mitigation plans or redundant facilities available in the event of such system failures.

In addition, the Company may experience system failures or interruptions as it integrates the information technology systems of newly acquired businesses.

An information technology or process failure could impede the processing of data, delivery of data and services, customer orders, and day-to-day management of the business, and could result in the corruption or loss of data.

Despite security measures and other precautions the Company has taken, including the development of contingency and disaster recovery plans, its information technology systems are potentially vulnerable to physical break-ins, fire, natural disaster, power loss, telecommunications failures, cybersecurity incidents and similar disruptions, and there may not be adequate protections, mitigation, backups, and/or redundant facilities available in the event these threats are realized.

In addition, the Company may experience system failures, or interruptions, including cybersecurity incidents, as it integrates the information technology systems of newly acquired businesses.

Failures or interruption of the Company’s systems in one or more of its operations could result in interruptions of service, disrupt the Company’s ability to process laboratory requisitions, perform testing, provide test results or drug development data in a timely manner, and/or conduct timely billing operations.

Such system failures could require the

Company to transfer operations to an alternative provider of services, which could result in delays in the delivery of products and services to customers.

Such system failures could require the Company to transfer operations to an alternative provider of services, which could result in delays in the delivery of offerings to customers and other operations.

Additionally, significant delays in the planned delivery of system enhancements or improvements, or inadequate performance of the systems once they are complete, could damage the Company's reputation and harm the business.

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Cybersecurity incidents and unauthorized access to the Company's or its customers’ data could harm the Company’s reputation and adversely affect its business.

The Company has experienced and expects to continue to experience attempts by computer programmers and hackers to penetrate the Company’s layered cybersecurity controls, like the 2018 ransomware attack.

The Company has also experienced and expects to continue to experience similar attempts to penetrate the systems of third-party suppliers and vendors to whom the Company has provided data, like the 2019 AMCA data breach.

The Company has previously experienced and expects to continue to experience attempts by unauthorized parties to compromise the Company’s cybersecurity controls, like the 2018 ransomware attack.

The Company has also experienced and expects to continue to experience similar attempts by threat actors to penetrate the systems of third-party suppliers and vendors to whom the Company has provided data, like the 2019 AMCA data breach.

These attempts, if successful, could result in the misappropriation or compromise of personal information or proprietary or confidential information stored within the Company's systems or within the systems of third parties, create system disruptions or cause shutdowns.

External actors are developing and deploying viruses, worms and other malicious software programs that attack the Company’s systems, the systems of third-parties, or otherwise exploit any security vulnerabilities.

Outside parties may also attempt to fraudulently induce employees to take actions, including the release of confidential or sensitive information or to make fraudulent payments through illegal electronic spamming, phishing, spear phishing, or other tactics.

The Company has robust information security procedures and other safeguards in place, including evaluating the cybersecurity status of third-party suppliers and vendors that will have access to the Company’s data or information technology systems, which are monitored and routinely tested internally and by external parties.

However, because the techniques used to obtain unauthorized access, disable or degrade service, or sabotage systems change frequently and often are not recognized until launched against a target, the Company may be unable to anticipate all of these techniques or to implement adequate preventive measures.

In addition, as cyber threats continue to evolve, the Company may be required to expend additional resources to continue to enhance the Company’s information security measures or to investigate and remediate any information security vulnerabilities.

The Company’s remediation efforts may not be successful and could result in interruptions, delays or cessation of service.

Threat actors have a variety of attack methods, including without limitation, by developing and deploying viruses, worms, and other malicious software programs that attack the Company’s systems, the systems of third-parties, or otherwise exploit any security vulnerabilities.

In addition, the increased use of AI by threat actors is enhancing the scale sophistication and effectiveness of their cyberattacks.

The Company has implemented a formal cybersecurity program;

however, because the techniques used by threat actors to obtain unauthorized access, disable or degrade service, or sabotage systems continue to evolve (and often are not recognized until launched against a target), the Company may be unable to anticipate and/or implement appropriate controls needed to

protect against these evolving threats.

In addition, as cyber threats continue to evolve including the use of AI by threat actors to compromise systems, the Company may be required to expend additional resources to continue to enhance the Company’s cybersecurity measures or to investigate and remediate any cybersecurity vulnerabilities.

The Company’s remediation efforts may not be sufficient and could result in interruptions, delays, cessation of service, loss of data integrity, loss of confidentiality, and/or loss of data.

This could also impact the cost and availability of cyber insurance to the Company.

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Such incidents could expose customers to the risk of financial or medical identity theft or expose the Company or other third parties to a risk of loss or misuse of this information, result in litigation and potential liability for the Company, damage the Company’s brand and reputation, or otherwise harm the Company’s business.

Any of these disruptions or incidents could have a material adverse effect on the Company’s business, regulatory compliance, financial condition and results of operations.

Any of these incidents could have a material adverse effect on the Company’s business, regulatory compliance, financial condition, reputation, and/or results of operations.

In addition, the Company faces increased cybersecurity risks due to the number of employees that continue to work remotely, which remains at levels higher than prior to the COVID-19 pandemic as a result of changes in the workplace and to management and employee expectations.

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In addition, technological resources may become strained due to the number of remote users.

The Company also faces potential cybersecurity risks from the use of artificial intelligence and machine learning (AI) tools.

The use of AI and machine learning tools in our operations and the services of our third-parties may introduce risks that could adversely affect our business, financial condition, and reputation.

The Company and its third parties leverage AI and machine learning tools to increase productivity and innovation.

The Company also faces potential risks from the use of AI and machine learning tools.

The Company, or its customers' sensitive, proprietary, or confidential information could be leaked, disclosed, or revealed as a result of or in connection with employees' or vendors' use of generative AI technologies.

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Due to the potential flaws in the use of AI, the Company could make incorrect decisions, including decisions that could bias certain individuals or classes of individuals and adversely impact their rights.

The rapid development of AI tools could render obsolete certain technologies or tools we currently use, or otherwise provide competitors with a technological edge.

New or evolving legislation or regulations might impose restrictions on how AI and machine learning tools can be used, requiring the Company to adapt its tools or face various penalties for non-compliance, including potential disgorgement of data and associated capabilities.

As a result, the Company could face adverse consequences, including exposure to reputational and competitive harm, customer loss, and legal liabilities.

The AI tools may also be subject to additional, and as yet unidentified, security threats.

The Company depends on third parties to provide services critical to the Company's business, and depends on them to comply with applicable laws and regulations.

Additionally, any cybersecurity incidents affecting the information technology systems of third parties could have a material adverse effect on the Company's operations.

The Company depends on third parties to provide services critical to the Company's business, including supplies, ground and air transport of clinical and diagnostic testing supplies and specimens, research products, and people, among other services.

Any cybersecurity incidents affecting the information technology systems of third parties that provide services to the Company could have a material adverse effect on the Company's operations.

Third parties that provide services to the Company are subject to similar risks related to security of customer-related information and compliance with U.S., state, local, or international environmental, health and safety, and privacy and security laws and regulations as the Company.

receive services from the third parties, legal liability of the Company for the actions or inactions of third parties, or otherwise.

Any failure by third parties to comply with applicable laws, or any failure of third parties to provide services more generally, could have a material impact on the Company, whether because of the loss of the ability to receive services from the third parties, legal liability of the Company for the actions or inactions of third parties, or otherwise.

In addition, third parties to whom the Company outsources certain services or functions may process personal data, or other confidential information of the Company.

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Further reductions due to changes in policy regarding coverage of tests or other requirements for payment, such as prior authorization, diagnosis code and other claims edits, may be implemented from time to time.

Medicare reimbursement for pathology services performed by Dx, which are paid for under the PFS, is also subject to statutory and regulatory reduction.

Medicare reimbursement for pathology services performed by Dx, which are paid

for under the PFS, is also subject to statutory and regulatory reduction.

Reductions in the reimbursement rates and changes in payment policies of other third-party payers may occur as well.

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and other countries where it operates.

The Company’s failure to meet governmental requirements under these regulations, including those relating to billing practices and financial relationships with physicians, hospitals, and health systems, and others could lead to civil and criminal penalties, exclusion from participation in Medicare and Medicaid and possible prohibitions or restrictions on the use of its laboratories.

The Company’s failure to meet governmental requirements under these regulations, including those relating to billing practices and financial relationships with physicians, hospitals, and health systems, biopharmaceutical manufacturers, and others could lead to civil and criminal penalties, exclusion from participation in Medicare and Medicaid and possible prohibitions or restrictions on the use of its laboratories.

While the Company believes that it is in material compliance with all statutory and regulatory requirements, there is a risk that government authorities might take a contrary position.

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• the protection of computing systems maintaining electronic PHI.

In addition to the existing requirements under HIPAA, HHS issued an NPRM regarding revising the HIPAA Security Rule, which, if adopted, would impose increased requirements on regulated entities such as the Company.

The Company has implemented policies and procedures designed to comply with the HIPAA privacy and security requirements as applicable.

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The Company may also be required to comply with the data privacy and security laws of other countries in which it operates or with which it transfers and receives data.

For example, the EU's General Data Protection Regulation (GDPR), which took effect May 25, 2018, created a range of compliance obligations for subject companies and imposes penalties for noncompliance of up to the greater of €20 million or 4% of worldwide revenue for the most serious breaches of data protection obligations.

For example, the EU’s General Data Protection Regulation (GDPR) includes compliance obligations for subject companies and imposes penalties for noncompliance of up to the greater of €20 million or 4% of worldwide revenue for the most serious breaches of data protection obligations, and similar obligations exist under the UK GDPR.

The Company has established processes and frameworks to manage compliance with the GDPR.

Potential fines and penalties in the event of a violation of the GDPR could have a material adverse effect on the Company’s business and operations.

In addition, similar data protection regulations addressing access, use, disclosure and transfer of personal data have been enacted or updated in regions where the Company does business, including in Asia, Latin America, and Europe.

The Company expects to make changes to its business practices and to incur additional costs associated with compliance with these evolving and complex regulations.

The Company may be required to make changes to its business practices and to incur additional costs associated with compliance with these evolving and complex regulations.

The Company’s international operations could subject it to additional risks and expenses that could adversely impact the business or results of operations.

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countries that provide less protection for intellectual property rights;

and procedures and actions affecting approval, production, pricing, reimbursement and marketing of products and services.

Further, international operations could subject the Company to additional expenses that the Company may not fully anticipate, including those related to enhanced time and resources

necessary to comply with foreign laws and regulations, difficulty in collecting accounts receivable and longer collection periods, and difficulties and costs of staffing and managing foreign operations.

and procedures and actions affecting approval, production, pricing, reimbursement and marketing of its offerings.

Further, international operations could subject the Company to additional expenses that the Company may not fully anticipate, including those related to enhanced time and resources necessary to comply with foreign laws and regulations, difficulty in collecting accounts receivable and longer collection periods, and difficulties and costs of staffing and managing foreign operations.

In some countries, the Company’s success will depend in part on its ability to form relationships with local partners.

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International operations may increase the Company’s exposure to liabilities under applicable anti-corruption laws.

Anti-corruption laws in the countries where the Company conducts business, including the FCPA, U.K.

Bribery Act, and similar laws in other jurisdictions, prohibit companies and their intermediaries from engaging in bribery including improperly offering, promising, paying or authorizing the giving of anything of value to individuals or entities for the purpose of corruptly obtaining or retaining business.

Anti-corruption laws in the countries where the Company conducts business, including the FCPA, UK Bribery Act, and similar laws in other jurisdictions, prohibit companies and their intermediaries from engaging in bribery including improperly offering, promising, paying or authorizing the giving of anything of value to individuals or entities for the purpose of corruptly obtaining or retaining business.

The Company operates in parts of the world where corruption may be common and where anti-corruption laws may conflict to some degree with local customs and practices.

The Company maintains an anti-corruption program including policies, procedures, training and safeguards in the engagement and management of third parties acting on the Company’s behalf.

The Company maintains an anti-corruption

program including policies, procedures, training and safeguards in the engagement and management of third parties acting on the Company’s behalf.

Despite these safeguards, the Company cannot guarantee protection from corrupt acts committed by employees or third parties associated with the Company.

Violations or allegations of violations of anti-corruption laws could have a significant adverse effect on the business or results of operations.

Failure to comply with the regulations of pharmaceutical and medical device regulatory agencies, such as the FDA, the Medicines and Healthcare Products Regulatory Agency in the United Kingdom, the European Medicines Agency, the National Medical Products Administration in China (NMPA), and the Pharmaceuticals and Medical Devices Agency in Japan, could result in fines, penalties, and sanctions against BLS and have a material adverse effect upon the Company.

Failure to comply with the regulations of pharmaceutical and medical device regulators, such as the FDA, the Medicines and Healthcare products Regulatory Agency in the United Kingdom, the European Union, the European Medicines Agency, the National Medical Products Administration in China, and the Pharmaceuticals and Medical Devices Agency in Japan, could result in fines, penalties, and sanctions against BLS and have a material adverse effect upon the Company.

The operation of BLS’s preclinical laboratory facilities and central laboratory operations must conform to good laboratory practice (GLP) and good clinical practice (GCP), as applicable, as well as all other applicable standards and regulations, as further described in Item 1 of Part I of this Annual Report.

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Department of Agriculture (USDA).

The AWA establishes facility standards regarding several aspects of animal welfare, including housing, ventilation, lighting, feeding and watering, handling,

veterinary care, and recordkeeping.

The AWA establishes facility standards regarding several aspects of animal welfare, including housing, ventilation, lighting, feeding and watering, handling, veterinary care, and recordkeeping.

Similar laws and regulations apply in other jurisdictions in which BLS conducts animal research, including the UK, EU, and China.

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For noncompliance, the agency may take action against BLS that may include fines, suspension and/or revocation of animal research licenses, or confiscation of research animals.

Food and Drug Administration (FDA) regulation of diagnostic products, increased FDA regulation of laboratory-developed tests (LDTs), and regulation by other countries of diagnostic products could result in increased costs and the imposition of fines or penalties, and could have a material adverse effect upon the Company’s business.

Food and Drug Administration (FDA) regulation of laboratory-developed tests (LDTs) and regulation by other countries of diagnostic offerings could have a material adverse effect upon the Company’s business.

The FDA has regulatory responsibility for instruments, test kits, reagents and other devices used by clinical laboratories.

The FDA enforces laws and regulations that govern the development, testing, manufacturing, performance, labeling, advertising, marketing, distribution, and surveillance of diagnostic products, and it regularly inspects and reviews the manufacturing processes and product performance of diagnostic products.

The FDA enforces laws and regulations that govern the development, testing, manufacturing, performance, labeling, advertising,

marketing, distribution, and surveillance of diagnostics, and it regularly inspects and reviews the manufacturing processes and performance of diagnostics.

Dx’s point-of-care testing devices are subject to regulation by the FDA.

LDTs developed by high complexity clinical laboratories are currently generally offered as services to health care providers under the CLIA regulatory framework administered by CMS, without the requirement for FDA clearance or approval.

However, since the 1990s, the FDA has asserted that it has authority to regulate LDTs as medical devices but has exercised enforcement discretion to refrain from systematic regulation of LDTs.

In 2014, the FDA issued draft guidance describing how it intended to discontinue its enforcement discretion policy and begin regulating LDTs as medical devices;

however, that draft guidance has not been finalized, and the FDA has instead continued its enforcement discretion policy and has indicated that it intends to work with Congress to enact comprehensive legislative reform of diagnostics oversight.

In February 2020, the FDA issued a statement with a table of pharmacogenetic associations setting forth certain gene-drug interactions that the agency determined are supported by the scientific literature to help ensure that claims being made for pharmacogenetic tests are grounded in sound science, thereby reducing the risk of enforcement actions with respect to LDTs offering claims consistent with the table.

The FDA noted that it could take enforcement actions under the current medical device framework regarding diagnostic claims the agency determines not to be sufficiently supported.

In addition, in 2021, the Verifying Accurate, Leading-edge, IVCT Development (VALID) Act was introduced to Congress and provided a framework to change in vitro diagnostics and LDTs to in vitro clinical tests.

In 2022, the VALID Act was incorporated into the Senate user fee bill but was not included in the year-end Consolidated Appropriations Act of 2022.

Following challenges with passing diagnostics reform legislation, the FDA released a proposed rule to clarify its authority to regulate LDTs as medical devices under the federal Food, Drug, and Cosmetic Act in October 2023.

If finalized, FDA would phase out its general enforcement discretion approach for LDTs.

Even without issuance of a finalized LDT oversight framework, in light of the April 4, 2019, FDA warning letter issued to Inova Genomics Laboratory related to certain LDTs that Inova offered, the February 2020 pharmacogenetics statement, and the 2023 proposed rule, there may be an increased risk of FDA enforcement actions for laboratory tests offered by companies without FDA clearance or approval.

However, the outcome and its ultimate impact on the Company’s business is difficult to predict at this time.

Current FDA regulation of the Company’s diagnostic products and the potential for future increased regulation of the Company’s LDTs in the future could result in increased costs and administrative and legal actions for noncompliance, including warning letters, fines, penalties, product suspensions, product recalls, injunctions, and other civil and criminal sanctions, and could impair the development and commercialization of new tests, which could have a material adverse effect upon the Company.

Regulation of diagnostics products in jurisdictions outside the U.S.

Historically, LDTs developed by high complexity clinical laboratories have been generally offered as services to health care providers under the CLIA regulatory framework administered by CMS, without the requirement for FDA clearance or approval.

On April 29, 2024, the FDA released a final rule purporting to clarify its authority to regulate LDTs as medical devices under the federal Food, Drug, and Cosmetic Act, under which it will phase out its general enforcement discretion approach for LDTs under a four-year period subject to certain continuing enforcement discretion policies.

The final rule was published on May 6, 2024, and became effective on July 5, 2024.

In the absence of a successful legal challenge, the first phase of compliance obligations will begin on May 6, 2025.

On May 29, 2024, the American Clinical Laboratory Association (ACLA) and its member company, HealthTrackRx, filed a lawsuit against the FDA in the United States District Court for the Eastern District of Texas, challenging the FDA’s final rule.

While the lawsuit may change the final rule or delay or prevent its enforcement, the issuance of the final rule presents an increased risk of FDA enforcement actions for laboratory tests offered by companies without FDA clearance or approval that do not fall within the ongoing enforcement discretion policies.

However, the outcome and its ultimate impact on the Company’s business remain difficult to predict at this time.

Current FDA regulation of the Company’s diagnostic offerings and the potential for future increased regulation of the Company’s LDTs could result in increased costs and administrative and legal actions for noncompliance, including warning letters, fines, penalties, suspensions, recalls, injunctions, and other civil and criminal sanctions, and could impair the development and commercialization of new tests, which could have a material adverse effect upon the Company.

Regulation of diagnostics offerings in jurisdictions outside the U.S.

in which the Company operates may impact laboratory testing offered by the Company in both Dx and BLS.

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Needlestick Safety and Prevention Act, could result in fines, penalties and loss of licensure, and have a material adverse effect upon the Company.

As previously discussed in Item 1 of Part I of this Annual Report, the Company is subject to licensing and regulation under laws and regulations relating to the protection of the environment and human health and safety, including laws and regulations relating to the handling, transportation and disposal of medical specimens, infectious and hazardous waste and radioactive

materials, as well as regulations relating to the safety and health of laboratory employees.

Failure to comply with these laws and regulations could subject the Company to denial of the right to conduct business, fines, criminal penalties and/or other enforcement actions that would have a material adverse effect on its business.

In addition, compliance with future legislation could impose additional requirements on the Company that may be costly.

Environmental, social and governance (ESG) matters and the perception of the Company’s activities in these areas by stakeholders may impact the Company’s business and reputation.

Governmental authorities, non-governmental organizations, customers, investors, external stakeholders, and employees are increasingly sensitive to ESG concerns, such as diversity and inclusion, climate change, water use, recyclability or recoverability of packaging, and plastic waste.

This focus on ESG concerns may lead to new requirements that could result in increased costs associated with developing, manufacturing, and distributing the Company’s services and products.

The Company’s ability to compete could also be affected by changing customer preferences and requirements and the failure to meet such customer expectations or demand, whether related to environmental concerns or other ESG matters.

While the Company strives to improve its ESG performance, has established certain ESG goals and initiatives, and participates in various third-party assessments and reporting regimens, the Company risks negative stockholder reaction and activism, including from proxy advisory services, as well as damage to its brand and reputation, if the Company fails to meet its goals and initiatives or if the Company is perceived to not be acting responsibly in key ESG areas, including product quality and safety, diversity and inclusion, environmental stewardship, support for local communities, corporate governance and transparency, and addressing human capital factors in the Company’s operations.

Responding to these ESG considerations and implementation of the Company’s ESG goals and initiatives involves risks and uncertainties, requires investments, and depends in part on third-party performance or data that is beyond the Company’s control.

In addition, some stakeholders may disagree with the Company’s ESG goals and initiatives.

If the Company does not meet the evolving and varied ESG expectations of its investors, customers and other stakeholders, the Company could experience reduced demand for its products, loss of customers, and other negative impacts on the Company’s business and results of operations.

Views on matters relating to corporate responsibility and governance and the perception of the Company’s activities in these areas by stakeholders may impact the Company’s business and reputation.

Governmental authorities, non-governmental organizations, customers, investors, external stakeholders, and employees are sensitive to matters of corporate responsibility and governance, such as environmental sustainability.

This focus on these concerns may lead to new requirements that could result in increased costs associated with developing, manufacturing, and distributing the Company’s offerings.

The Company’s ability to compete could also be affected by changing preferences and requirements on these matters and the Company’s ability to meet them.

If the Company does not meet the evolving and varied preferences and requirements of governmental authorities and others on these matters, the Company could experience reduced demand for its offerings, loss of customers, and other negative impacts on the Company’s business and results of operations.

Risks Related to Legal Matters

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The Company also has received and may in the future receive inquiries and requests for information from governmental agencies and bodies, including Medicare or Medicaid payers, requesting comment and/or information on various matters, including allegations of billing irregularities, billing and pricing arrangements, or privacy practices that are brought to its attention through audits or third parties.

Legal actions can result in substantial monetary damages as well as damage to the Company’s reputation with customers, which could have a material adverse effect upon its business.

Legal actions can result in

substantial monetary damages as well as damage to the Company’s reputation with customers, which could have a material adverse effect upon its business.

The failure to successfully obtain, maintain, and enforce intellectual property rights and defend against challenges to the Company’s intellectual property rights could adversely affect the Company.

Many of the Company’s services, products and processes rely on intellectual property, including patents, copyrights, trademarks, and trade secrets.

Many of the Company’s offerings and processes rely on intellectual property, including patents, copyrights, trademarks, and trade secrets.

In some cases, that intellectual property is owned by another party and licensed to the Company, sometimes exclusively.

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In September 2022, a jury rendered a verdict in favor of Ravgen on the remaining patent at issue and awarded damages of $272.0 million.

In May 2023, a judge awarded Ravgen additional enhanced damages in the amount of $100 million.

In May 2023, the court awarded Ravgen additional enhanced damages in the amount of $100.0 million, and in January 2025, the court awarded Raygen post-verdict supplemental damages of $2.6 million, an ongoing royalty of $100 per test through the life of the patent as issue, pre- and post-judgement interest, and other relief.

The Company strongly disagrees with the verdict, based on a number of legal factors, and will vigorously defend the lawsuit through the appeal process.

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Patent and Trademark Office challenging the validity of the Ravgen patent at issue in the trial.

In November 2022, the Patent Trial and Appeal Board issued a decision upholding the validity of the Ravgen patent, and the Company has filed an appeal of this decision.

Adverse effects resulting from the failure to successfully obtain, maintain, and enforce intellectual property rights and defend against challenges to the Company's intellectual property rights could include the Company having to abandon, alter and/or delay the deployment of products, services or processes that rely on such intellectual property;

having to procure and pay

for licenses from the holders of intellectual property rights that the Company seeks to use, having to pay damages, fines, court costs and attorney's fees in connection with intellectual property litigation, and reputational damage.

In November 2022, the Patent Trial and Appeal Board issued a decision upholding the validity of the Ravgen patent, and that decision was upheld on appeal before the U.S.

Court of Appeals for the Federal Circuit in January 2025.

Adverse effects resulting from the failure to successfully obtain, maintain, and enforce intellectual property rights and defend against challenges to the Company’s intellectual property rights could include the Company having to abandon, alter and/or delay the deployment of offerings or processes that rely on such intellectual property;

having to procure and pay for licenses from the holders of intellectual property rights that the Company seeks to use, having to pay damages, fines, court costs and attorney’s fees in connection with intellectual property litigation, and reputational damage.

Changes in tax laws and regulations or the interpretation of such may have a significant impact on the financial position, results of operations, and cash flows of the Company.

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BLS could be materially and adversely affected if it were required to pay damages or bear the costs of defending any claim that is not covered by a contractual indemnification provision, or in the event that a party which must indemnify it does not fulfill its indemnification obligations, or in the event that BLS is not successful in limiting its liability or in the event that the damages and costs exceed BLS’s insurance coverage.

BLS may also be required to agree to contract provisions with clinical site selection or its customers related to the conduct of clinical trials, and BLS could be materially and adversely affected if it were required to indemnify a site or customer against claims pursuant to such contract terms.

BLS may also be required to agree to contract provisions with clinical site selection or its customers related to the conduct of clinical trials, and BLS could

be materially and adversely affected if it were required to indemnify a site or customer against claims pursuant to such contract terms.

There can be no assurance that BLS will be able to maintain sufficient insurance coverage on acceptable terms.

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What changed 10-K

Item 1A. Risk Factors