What changed in this filing

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Item 1A. Risk Factors

2024-02-13 compared with 2023-02-14 · 52 added, 38 removed, 432 unchanged (17% of the section changed)

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• We bear financial risk if we underprice our fixed-fee contracts or overrun cost estimates, and our financial results can also be adversely affected by failure to receive approval for change orders or delays in documenting change orders.

• Our business and operations have been impacted by the coronavirus (COVID-19) and may be impacted in the future by COVID-19 or other outbreaks, including epidemics, pandemics or widespread public health crisis.

• Our business and operations may be impacted in the future by epidemics, pandemics or widespread public health crisis.

• If we are unable to successfully execute our growth strategies or manage our growth effectively, our results of operations or financial condition could be adversely affected.

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• Current or potential future investments by the Company in our customers’ businesses or products could have a negative impact on our financial results.

• Continued evolution and use of machine learning and generative artificial intelligence ("AI"), including risks arising from insufficient human oversight of AI or a lack of controls and procedures monitoring the use of AI in day-to-day operations as well as from potential future competitive disadvantages related to a lack of investment in AI tools, could have a negative impact on our financial results.

Technical and Cybersecurity Risks

• Our business depends on the continued effectiveness and availability of our information and digital communications systems, including the information systems we use to provide our services to our customers, such as ClinTrak, and failures of these systems may materially limit our operations.

• Our business depends on the continued effectiveness and availability of our information systems, including the information systems we use to provide our services to our customers, such as ClinTrak, and failures of these systems may materially limit our operations.

• If the security of confidential information used in connection with our services is breached or otherwise subject to unauthorized access, our reputation and business may be materially harmed.

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and other countries where we operate laboratories.

• Environmental, Social and Governance initiatives could increase our costs, and inaction could harm our reputation and adversely impact our financial results.

Structural and Organizational Risks

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Additionally, although an increase in backlog will generally result in an increase in net revenue over time, an increase in backlog at a particular point in time does not necessarily correspond directly to an increase in net revenue during any particular period, or at all.

The extent to which contracts in backlog will result in net revenue depends on many factors, including, but not limited to, delivery against project schedules, scope changes, contract terminations and the nature, duration and complexity of the contracts, and can vary significantly over time.

The extent to which contracts in backlog will result in net revenue depends on many factors, including, but not limited to,

delivery against project schedules, scope changes, contract terminations and the nature, duration and complexity of the contracts, and can vary significantly over time.

As we increasingly compete for and enter into large contracts that are more global in nature, there can be no assurance about the rate at which our backlog will convert into net revenue.

A decrease in this conversion rate would mean that the rate of net revenue recognized on contracts may be slower than what we have experienced in the past, which could impact our net revenue and results of operations on a quarterly and annual basis.

The revenue recognition on larger, more global

projects could be slower than on smaller, less global projects for a variety of reasons, including, but not limited to, an extended period of negotiation between the time the project is awarded to us and the actual execution of the contract, as well as an increased timeframe for obtaining the necessary regulatory approvals.

The revenue recognition on larger, more global projects could be slower than on smaller, less global projects for a variety of reasons, including, but not limited to, an extended period of negotiation between the time the project is awarded to us and the actual execution of the contract, as well as an increased timeframe for obtaining the necessary regulatory approvals.

Additionally, delayed projects will remain in backlog and will not generate revenue at the rate originally expected.

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Our customer or therapeutic area concentration may have a material adverse effect on our business, financial condition, results of operations or cash flows.

Although we did not have any customer that represented 10% or more of our net revenue during the year ended December 31, 2022, we derive approximately one-fourth of our net revenue from our top ten customers.

Although we did not have any customer that represented 10% or more of our net revenue during the year ended December 31, 2023, we derive approximately 29.5% of our net revenue from our top ten customers.

If any large customer decreases or terminates its relationship with us, our business, financial condition, results of operations or cash flows could be materially adversely affected.

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Modifications can occur, for example, when there is a change in a key trial assumption or parameter, a significant change in timing or a change in staffing needs.

Furthermore, we may be

unable to successfully negotiate changes in scope or change orders on a timely basis or at all, which could require us to incur cost outlays ahead of the receipt of any additional revenue.

Furthermore, we may be unable to successfully negotiate changes in scope or change orders on a timely basis or at all, which could require us to incur cost outlays ahead of the receipt of any additional revenue.

In addition, under US GAAP, we cannot recognize additional revenue anticipated from change orders until appropriate documentation is received by us from the customer authorizing the change.

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Such underpricing, significant cost overruns or delay in documentation of change orders could have a material adverse effect on our business, results of operations, financial condition or cash flows.

Our business and operations have been impacted by the coronavirus (COVID-19) and may be impacted in the future by COVID-19 or other outbreaks, including epidemics, pandemics or widespread public health crisis.

For the past several years, the COVID-19 pandemic has, and in the future may continue to have, an adverse effect on our business, operations and financial results.

The pandemic and its uneven recovery have adversely affected, and in the future may continue to adversely affect, our business, in a variety of ways, including:

Our business and operations may be impacted in the future by epidemics, pandemics or widespread public health crisis.

Epidemics, pandemics or widespread public health crisis may have an adverse effect on our business, operations and financial results.

These may adversely affect, our business, in a variety of ways, including, without limitation:

the implementation of travel restrictions from U.S.

and foreign governments, the shutdown of many businesses in countries in which we operate, delays or challenges in patient enrollment and new clinical trial start-up, challenges in clinical site initiation due to difficulties in recruiting clinical site investigators and clinical site staff shortages, and the interruption of key clinical trial activities such as clinical trial site monitoring.

These adverse effects continue to impact study participants and clinical sites which affects our ability to efficiently provide clinical trial services.

We continue to work with our customers to develop solutions to limit disruption to clinical trials while following required regulatory guidelines and maintaining quality to ensure the health and well-being of study participants, including alternative assessment methods such as virtual monitoring visits.

Our office staff are working in the office or remotely and our labs are fully operational with modifications made to ensure the safety of our employees.

Depending on the duration of the disruption, ongoing studies may be cancelled and some of our clients may lack the funding to complete trials which are extended due to slowed recruitment of patients.

We work with many smaller clients with limited financial resources and market disruptions may make raising additional funds difficult for them.

Despite our efforts to manage and remedy the impacts of COVID-19 or other future outbreaks, including epidemics, pandemics or widespread public health crisis to the Company, their ultimate impact also depends on factors beyond our knowledge or control, including the duration and severity of any such outbreak as well as third-party actions taken to contain its spread and mitigate its public health effects.

and foreign governments;

the shutdown of businesses in countries in which we operate;

delays or challenges in patient enrollment and new clinical trial start-up;

challenges in clinical site initiation due to difficulties in recruiting clinical site investigators and clinical site staff shortages;

and the interruption of key clinical trial activities such as clinical trial site monitoring.

These adverse effects could impact study participants and clinical sites and limits our ability to efficiently provide clinical trial services.

We are able to work with our customers to develop solutions to limit disruption to clinical trials while following required regulatory guidelines and maintaining quality to ensure the health and well-being of study participants, including alternative assessment methods such as virtual monitoring visits.

Despite our efforts to manage the impacts of COVID-19 or other future outbreaks, including epidemics, pandemics or widespread public health crisis to the Company, the ultimate impacts of these outbreaks also depend on factors beyond our knowledge or control, including the duration and severity of any such outbreak as well as third-party actions taken to contain their spread and mitigate their related public health effects.

In the case of COVID-19, the emergence of variants may continue to occur across regions and countries where we operate, resulting in further adverse effects on our business, operations and financial results.

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For example, if we are unable to engage investigators to conduct clinical trials as planned or enroll sufficient patients in clinical trials, we may need to expend additional funds to obtain access to resources or else be compelled to delay or modify the clinical trial plans.

These considerations might result in additional costs to us or otherwise adversely impact the progress of a clinical trial, our being

unable to successfully achieve our projected development timelines, or potentially even lead to the termination of ongoing clinical trials or development of a product.

considerations might result in additional costs to us or otherwise adversely impact the progress of a clinical trial, our being unable to successfully achieve our projected development timelines, or potentially even lead to the termination of ongoing clinical trials or development of a product.

The failure of third parties to provide us critical support services could materially adversely affect our business, financial condition, results of operations, cash flows or reputation.

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Our financial results would be adversely affected if the amount realized from any such financial arrangement was less than the value of our services or initial investment under the contract related to such arrangement.

Continued evolution and use of machine learning and generative artificial intelligence ("AI"), including risks arising from insufficient human oversight of AI or a lack of controls and procedures monitoring the use of AI in day-to-day operations as well as from potential future competitive disadvantages related to a lack of investment in AI tools, could have a negative impact on our financial results.

The development, adoption, and use for generative AI technologies are still in their early stages and ineffective or inadequate AI development or deployment practices by the Company or third-party developers or vendors could result in unintended consequences.

Developing, testing, and deploying resource-intensive AI systems may require additional investment and increase our costs.

In addition, any latency, disruption, or failure in systems or infrastructure leveraging AI could result in delays or errors in our offerings.

Technical and Cybersecurity Risks

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While we have disaster recovery plans in place, they might not adequately protect us in the event of a system failure.

Despite any precautions we take, damage from fire, floods, hurricanes, power loss, telecommunications failures, computer viruses, information system intrusions or security breaches and similar events at our facilities or at those of our third party provider that backs up our data centers could result in interruptions in the flow of data to our servers and from our servers to our customers.

Despite any precautions we take, damage from fire, floods, hurricanes, power loss, telecommunications

failures, computer viruses, information system intrusions or security breaches and similar events at our facilities or at those of our third party provider that backs up our data centers could result in interruptions in the flow of data to our servers and from our servers to our customers.

Corruption or loss of data may result in the need to repeat a trial at no cost to the customer, but at significant cost to us, or result in the termination of a contract or damage to our reputation.

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Additionally, in order for our information systems to continue to be effective going forward, we periodically need to upgrade our technology systems and increase our capacity to keep pace with technological developments and our growth as a company.

Significant delays in system enhancements or inadequate performance of new or upgraded systems once completed could damage our reputation

and harm our business.

Significant delays in system enhancements or inadequate performance of new or upgraded systems once completed could damage our reputation and harm our business.

Our operations also may suffer if we are unable to effectively manage the implementation of and adapt to new technology systems.

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While we engage in a number of measures aimed to protect against security breaches and to minimize problems if a data breach were to occur, our information technology systems and infrastructure may be vulnerable to damage, compromise, disruption, and shutdown due to attacks, intrusions or breaches by hackers or due to other circumstances, such as error or malfeasance by employees or third party service providers or technology malfunction.

Like many other companies, we experience attempts to gain unauthorized access to our systems and information on a regular basis, and a number of our employees work remotely, which may create additional opportunities for cybercriminals to exploit vulnerabilities.

The occurrence of any of these events, as well as a failure to promptly remedy these events should they occur, could compromise our systems, and the information stored in our systems could be accessed, publicly disclosed, lost, stolen, or damaged.

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We may be unable to anticipate these techniques or to implement adequate preventive or reactive measures.

We have limited cyber-insurance coverage that may not cover all possible events, and this insurance is subject to deductibles and coverage limitations and exclusions.

Several recent, highly publicized data security breaches at other companies have heightened consumer awareness of this issue and may embolden individuals or groups to target our systems or those of our strategic partners or enterprise customers.

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• natural disasters, pandemics or international conflict, including terrorist acts, could interrupt our services, endanger our personnel or cause project delays or loss of trial materials or results.

• Geopolitical issues in Europe may impact foreign countries in which we may need to enroll patients in our clinical trials, could cause such clinical trials to be delayed or suspended and could impact operations.

• Geopolitical issues in Europe, the Middle East and Asia may impact foreign countries in which we may need to enroll patients in our clinical trials, could cause such clinical trials to be delayed or suspended and could impact operations.

These risks and uncertainties could negatively impact our ability to, among other things, perform large, global projects for our customers.

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export privileges.

Changes in anti-corruption laws or enforcement priorities could also result in increased compliance requirements and related costs which could adversely

affect our business, financial condition and results of operations.

Changes in anti-corruption laws or enforcement priorities could also result in increased compliance requirements and related costs which could adversely affect our business, financial condition and results of operations.

In addition, the U.S.

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Numerous government bodies are considering or have adopted various healthcare reforms and may undertake, or are in the process of undertaking, efforts to control growing healthcare costs through legislation, regulation and voluntary agreements with healthcare providers and biopharmaceutical companies, including many of our customers.

By way of example, in March 2010, the Patient Protection and Affordable Care Act, as amended by the Health Care and Education Reconciliation Act, or collectively, the Affordable Care Act, was signed into law, which, among other things, expanded, over time, health insurance coverage, imposed health industry cost containment measures, enhanced remedies against healthcare fraud and abuse, added new transparency requirements for healthcare and health insurance industries, imposed new taxes and fees on pharmaceutical and medical device manufacturers, added new requirements for certain applicable drug and device manufacturers to disclose payments to physicians, including principal investigators, and imposed additional health policy reforms, any of which may significantly impact the biopharmaceutical industry.

reforms, any of which may significantly impact the biopharmaceutical industry.

We are uncertain as to the full effects of these reforms on our business and are unable to predict what legislative proposals, if any, will be adopted in the future.

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The biopharmaceutical and CRO industries are currently undergoing a period of increased merger activity.

Several large biopharmaceutical companies have recently completed mergers and acquisitions that will consolidate the outsourcing

trends and R&D expenditures into fewer companies, and many larger and medium sized biopharmaceutical companies have been acquiring smaller biopharmaceutical companies.

Several large biopharmaceutical companies have recently completed mergers and acquisitions that will consolidate the outsourcing trends and R&D expenditures into fewer companies, and many larger and medium sized biopharmaceutical companies have been acquiring smaller biopharmaceutical companies.

As a result of this and future consolidations, our customer diversity may decrease and our business may be adversely affected.

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If we fail to perform our services in accordance with these requirements, regulatory authorities may take action against us or our customers.

approvals, rejection of data collected in our clinical trials, license revocation, product seizures or recalls, operational restrictions, civil or criminal penalties or prosecutions, damages or fines.

Such actions may include injunctions or failure of such regulatory authority to grant marketing approval of our customers’ products, imposition of clinical holds or delays, suspension or withdrawal of approvals, rejection of data collected in our clinical trials, license revocation, product seizures or recalls, operational restrictions, civil or criminal penalties or prosecutions, damages or fines.

Customers may also bring claims against us for breach of our contractual obligations, and patients in the clinical trials and patients taking drugs approved on the basis of those trials may bring personal injury claims against us.

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There is a risk that we may initiate a clinical trial for a customer, and then the customer becomes unwilling or unable to fund the completion of the trial.

In such a situation, notwithstanding the customer’s ability or willingness to pay for or otherwise facilitate the completion of the trial, we may be ethically bound to complete or wind down the trial at our own expense.

In such a situation, notwithstanding the customer’s ability or willingness to pay

for or otherwise facilitate the completion of the trial, we may be ethically bound to complete or wind down the trial at our own expense.

Interactive voice/web response service malfunction.

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For example, U.S.

Privacy and Security Rules, or collectively, HIPAA, generally require individuals’ written authorization, in addition to any required informed consent, before protected health information may be used for research and such regulations specify standards for de-identifications and for limited data sets.

federal regulations under the Health Insurance Portability and Accountability Act of 1996, as amended by the Health Information Technology for Economic and Clinical Health Act of 2009 and their implementing regulations, including the Privacy and Security Rules, or collectively, HIPAA, generally require individuals’ written authorization, in addition to any required informed consent, before protected health information may be used for research and such regulations specify standards for de-identifications and for limited data sets.

We may also be subject to applicable state privacy and security laws and regulations in states in which we operate.

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Federal, state and foreign governments may propose or have adopted additional legislation governing the collection, possession, use or dissemination of personal data, such as personal health information, and personal financial data as well as security breach notification rules for loss or theft of or unauthorized access to such data.

Additional legislation or regulation of this type might, among other things, require us to implement new security measures and processes or bring within the legislation or regulation de-identified health or other personal data, each of which may require substantial expenditures or limit our ability to offer some of our services.

which may require substantial expenditures or limit our ability to offer some of our services.

Additionally, if we violate applicable laws, regulations or duties relating to the use, privacy or security of personal data, we could be subject to civil liability or criminal prosecution, be forced to alter our business practices and suffer reputational harm.

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In addition, compliance with future legislation could impose additional requirements on us, which may be costly.

Environmental, Social and Governance initiatives could increase our costs, and inaction could harm our reputation and adversely impact our financial results.

There has been increasing public focus by investors, customers, environmental activists, the media, and governmental and nongovernmental organizations on a variety of environmental, social, governance and other sustainability matters.

In light of the importance of this to internal and external stakeholders, if we are not effective in addressing environmental, social, governance and other sustainability matters affecting our business our reputation and financial results may suffer.

We may experience increased costs in order to execute upon our sustainability goals and measure achievement of those goals, which could have an adverse impact on our business and financial condition.

In addition, this emphasis on environmental, social, governance and other sustainability matters has resulted and may result in the adoption of new laws and regulations, including new reporting requirements.

For example, the SEC has published proposed rules that would require companies to provide significantly expanded climate-related disclosures in their periodic reporting and has announced plans for additional rulemakings on environmental and social topics, such as human capital management.

Such rules may require us to incur significant additional costs to comply, including the implementation of significant additional internal controls processes and procedures regarding matters that have not been subject to such controls in the past, and impose increased oversight obligations on our management and Board.

If we fail to comply with new laws, regulations, or reporting requirements, our reputation and business could be adversely impacted.

In addition, compliance with new laws, regulations, and reporting requirements may increase our costs and result in disclosures of potentially sensitive information.

Changes in climate patterns or unusual weather at some of our locations can lead to increased energy usage and costs, or otherwise adversely impact our facilities and operations and disrupt our ability to conduct clinical trials in the normal course.

Structural and Organizational Risks

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Troendle, our Chief Executive Officer and founder, and other key personnel including qualified management, professional, scientific and technical operating staff.

There is significant competition for qualified personnel in the biopharmaceutical services industry, particularly for those with higher educational degrees, such as a medical or nursing degree, a Ph.D., or an equivalent degree, and our industry generally tends to experience relatively high levels of

employee turnover.

If any of our key employees were to join a competitor or to form a competing company, some of our customers might choose to use the services of that competitor or new company instead of our own.

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Any natural disaster or catastrophic event affecting us or our customers, investigators or collaboration partners could have a significant negative impact on our operations and financial performance.

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