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Risks Related to Our Business and Our Strategy
−Removed: • Our financial condition and results of operations could be further adversely affected by the ongoing coronavirus pandemic.
• We may not be able to generate sufficient revenue from our existing tests or develop new tests to be profitable.
−Removed: • We may not be able to maintain revenue growth or operate our business on a profitable basis, and our transformation plan may not achieve the anticipated results.
−Removed: • If we do not continue to generate sufficient revenue from sales of our molecular diagnostic tests and are unable to secure additional funding, we may have to reduce our operations.
−Removed: • An inability to attract and retain experienced and qualified personnel, including key management personnel, could adversely affect our business.
+Added: • Our strategic growth plan may not achieve the anticipated results, and we may not be able to achieve or maintain revenue growth or operate our business on a profitable basis.
+Added: • Our financial condition and results of operations could be further adversely affected by the ongoing coronavirus pandemic or any other adverse public health development.
+Added: • If we do not generate sufficient cash flow from operations and are unable to secure additional funding, we may have to reduce our operations.
• We are subject to debt covenants that impose operating and financial restrictions on us and if we are not able to comply with them, it could have a material adverse impact on our operations and liquidity.
• If our current operating plan changes and we find that our existing capital resources will not meet our needs, we may find it necessary to raise additional funding, which may not be available.
−Removed: • We may acquire technologies, assets or other businesses that could cause us to incur significant expense and expose us to a number of unanticipated operational and financial risks, which could adversely affect our financial condition, results of operations and business prospects.
• We are currently subject to, and in the future may be subject to, securities class action lawsuits and stockholder derivative actions, as well as product or professional liability claims.
−Removed: These, and potential similar or related litigation, could result in substantial damages and may divert management’s time and attention from our business.
+Added: These, and potential similar or related litigation, could result in substantial losses and have a material adverse effect on our business, cash position, operating results or financial condition.
+Added: • An inability to attract and retain experienced and qualified personnel, including key management personnel, could adversely affect our business.
+Added: • We have acquired and we may continue to acquire technologies, assets or other businesses that could cause us to incur significant expense and expose us to a number of unanticipated operational and financial risks, which could adversely affect our financial condition, results of operations and business prospects.
+Added: • If our SneakPeek Early Gender DNA Test does not perform as expected, we may not realize the expected benefits of our acquisition of Gateway.
• Security breaches, loss of data and other disruptions, including from cyberattacks, could compromise sensitive information related to our business, prevent us from accessing critical information or expose us to liability, which could adversely affect our business and our reputation.
−Removed: • If we experience a significant disruption in our information technology systems, including security breaches, or if we fail to implement new systems and software successfully, our business operations and financial condition could be adversely affected.
−Removed: • Our business involves environmental risks that may result in liability for us.
−Removed: • Changes in health care policy could increase our costs, decrease our revenues and impact sales of and reimbursement for our tests.
+Added: • If we experience a significant disruption in our information technology systems, our business operations and financial condition could be adversely affected.
+Added: • Each of our tests is processed in a single one of our laboratory facilities, and any loss or prolonged interruption of our ability to use these laboratories or failure to maintain their operation in compliance with applicable regulations would seriously harm our business.
+Added: • We depend on a limited number of third parties, or, in some cases, single-source suppliers, for equipment, reagents and other supplies.
+Added: If these supplies become unavailable or are disrupted, including as a result of COVID-19 or another disease and responses to it, then we may not be able to successfully perform our research or operate our business on a timely basis or at all.
+Added: • Our international business exposes us to business, regulatory, political, operational, financial and economic risks associated with doing business outside of the United States.
• Ethical, legal and social concerns related to the use of genetic information could reduce demand for our tests.
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• We face risks associated with currency exchange rate fluctuations, which could adversely affect our operating results.
−Removed: Risks Related to Commercialization of Our Tests, Our Services and Test Candidates
−Removed: • Our molecular diagnostic and companion diagnostic tests in development may never achieve significant commercial market acceptance.
+Added: Risks Related to the Development and Commercialization of Our Tests and Test Candidates
+Added: • Our tests in development may not be clinically effective or may never achieve significant commercial market acceptance and our test offerings that we have recently launched or acquired may not be commercially successful.
• If we do not compete effectively with scientific and commercial competitors, we may not be able to successfully commercialize our tests, increase our revenue or achieve and sustain profitability.
−Removed: • Our international business exposes us to business, regulatory, political, operational, financial and economic risks associated with doing business outside of the United States.
−Removed: • Foreign governments may impose reimbursement standards, which may adversely affect our future profitability.
−Removed: • Domestic and international data protection laws and regulations may restrict our activities and increase our costs.
−Removed: • Each of our molecular diagnostic tests is processed in a single one of our laboratory facilities, and any loss or prolonged interruption of our ability to use these laboratories or failure to maintain their operation in compliance with applicable regulations would seriously harm our business.
−Removed: • We depend on a limited number of third parties for some of our supplies of equipment and reagents.
−Removed: If these supplies become unavailable or are disrupted, including as a result of COVID-19 and responses to it, then we may not be able to successfully perform our research or operate our business on a timely basis or at all.
−Removed: • If our current research collaborators or scientific advisors terminate their relationships with us or develop relationships with a competitor, our ability to discover genes, proteins, and biomarkers, and to validate and commercialize molecular diagnostic and companion diagnostic tests could be adversely affected.
+Added: • If our current research collaborators or scientific advisors terminate their relationships with us or develop relationships with a competitor, our ability to discover genes, proteins, and biomarkers, and to validate and commercialize tests could be adversely affected.
+Added: Risks Related to Reimbursement
+Added: • If the government and third-party payors fail to provide coverage and adequate payment for our existing and future tests, if any, our revenue and prospects for profitability will be harmed.
+Added: • Failure to comply with laws and regulations related to submission of claims for our services could result in significant monetary damages and penalties and exclusion from the Medicare and Medicaid programs and corresponding foreign reimbursement programs.
Risks Related to Our Intellectual Property
• If we are not able to protect our proprietary technology, others could compete against us more directly, which would harm our business.
−Removed: • If we were sued for patent infringement by third parties, we might incur significant costs and delays in test introduction.
−Removed: • We may be unable to adequately prevent disclosure of trade secrets, proprietary databases, and other proprietary information.
+Added: • If we are subject to litigation or other proceedings arising from a claim of infringement of the intellectual property of a third party, we might incur significant costs and delays in test introduction or we could be prevented from using technologies incorporated in our tests.
• If we fail to comply with our obligations under license or technology agreements with third parties, we could lose license rights that are critical to our business.
−Removed: • We may be subject to claims that we or our employees or consultants have wrongfully used or disclosed alleged trade secrets.
+Added: • We may be subject to claims that we or our employees have wrongfully used or disclosed alleged trade secrets.
+Added: • If we fail to adequately protect our trademarks, service marks, trade names and trade dress, we may lose goodwill and brand equity associated with our business.
Risks Related to Government Regulation
−Removed: • If we fail to comply with the complex federal, state, local and foreign laws and regulations that apply to our business, we could suffer severe consequences that could materially and adversely affect our operating results and financial condition.
−Removed: • If the government and third-party payors fail to provide coverage and adequate payment for our existing and future tests, if any, our revenue and prospects for profitability will be harmed.
−Removed: • FDA regulation of our industry generally or our tests specifically could be disruptive to our business.
−Removed: • Failure to comply with laws and regulations related to submission of claims for our services could result in significant monetary damages and penalties and exclusion from the Medicare and Medicaid programs and corresponding foreign reimbursement programs.
+Added: • If we fail to comply with the complex federal, state, local and foreign laws and regulations that apply to our business, we could suffer consequences that could materially and adversely affect our operating results and financial condition.
+Added: • Our actual or perceived failure to comply with data protection laws and regulations could lead to government enforcement actions, private litigation, and/or adverse publicity and could negatively affect our business.
• We may from time to time be subject to government investigation(s), the unfavorable outcome of which may have a material adverse effect on our financial condition, results of operations and cash flows.
+Added: • Changes in health care policy could increase our costs, decrease our revenues and impact sales of and reimbursement for our tests.
• Our business could be harmed by the loss, suspension, or other restriction on a license, certification, or accreditation, or by the imposition of a fine or penalties, under CLIA, its implementing regulations, or other state, federal and foreign laws and regulations affecting licensure or certification, or by future changes in these laws or regulations.
• Changes in the way that the FDA regulates tests performed by laboratories like ours could result in delay or additional expense in offering our tests and tests that we may develop in the future.
+Added: • FDA regulation of our GeneSight Psychotropic test could be disruptive to our business.
• Companion and complementary diagnostic tests require FDA approval, and we may not be able to secure such approval in a timely manner or at all.
+Added: • Our companion diagnostic tests are subject to ongoing regulatory compliance obligations and continued regulatory review and the failure to comply with such obligations could result in regulatory enforcement and/or penalties.
+Added: • Our business involves environmental risks that may result in liability for us.
Risks Related to Our Common Stock
• Our stock price is highly volatile, and our stock may lose all or a significant part of its value.
−Removed: • We have identified two material weaknesses in our internal control over financial reporting related to our income tax provision process and our general information technology controls and such weaknesses led to a conclusion that our internal control over financial reporting and disclosure controls and procedures were not effective as of December 31, 2021.
−Removed: Our inability to remediate these material weaknesses, our discovery of any additional weaknesses, or our inability to achieve and maintain effective disclosure controls and procedures and internal control over financial reporting could adversely affect our results of operations, our stock price and investor confidence in us.
+Added: • Our inability to achieve and maintain effective disclosure controls and procedures and internal control over financial reporting could adversely affect our results of operations, our stock price and investor confidence in us.
• Anti-takeover provisions of Delaware law, provisions in our charter and bylaws and re-adoption of our stockholders’ rights plan, or poison pill, could make a third-party acquisition of us difficult.
+Added: • Future sales and issuances of our common stock would result in dilution of the percentage ownership of our stockholders and could cause the price of our common stock to decline.
• We do not intend to pay dividends on our common stock so any returns will be limited to changes in the value of our common stock.
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Risks Related to Our Business and Our Strategy
−Removed: Our financial condition and results of operations could be further adversely affected by the ongoing coronavirus pandemic.
−Removed: Any outbreaks of COVID-19 (including its variant strains, such as the highly transmissible Omicron and Delta variants) or any other outbreak of contagious disease or adverse public health development, could have a further material and adverse effect on our business operations, financial condition, or results of operations.
−Removed: For example, government public health officials have implemented, and may continue to implement restrictions to curb the spread of COVID-19, which has limited, and may continue to limit, patients’ access to our services, and has caused, and may continue to cause, patients to elect to defer certain testing, each of which has impeded, and may continue to impede, our progress in returning to profitability and recovering from the earlier effects of the COVID-19 pandemic.
−Removed: Such adverse effects have included, and may continue to include, diversion or prioritization of health care resources away from the conduct of genetic testing, disruptions, or restrictions affecting the ability of laboratories to process our tests, and delays or difficulties in patients accessing our tests.
−Removed: Future surges in COVID-19 cases and related employee absences may strain our workforce and impact our ability to process tests in a timely way due to reduced staff availability.
−Removed: In addition, failure to comply with potential federal or state regulations requiring us to mandate COVID-19 vaccination for our employees could result in our losing access to government funding or facing monetary penalties.
−Removed: As COVID-19 continues to affect individuals and businesses around the globe, we will likely experience further disruptions from time to time that could severely impact our business, including:
−Removed: • decreased volume of testing as a result of disruptions to health care providers and limitations on the ability of providers to administer tests, including the suspension of non-emergency appointments and services;
−Removed: • disruptions or restrictions on the ability of our customers, our collaborators’, or our suppliers’ personnel to travel, including as a result of shelter-in-place or stay-at-home orders from state and local governments, and temporary closures of our facilities or the facilities of our collaborators or suppliers;
−Removed: • limitations on employee resources that would otherwise be focused on the development of our products, processing our diagnostic tests, and the conduct of our clinical trials, including because of sickness of employees or their families or requirements imposed on employees to avoid contact with large groups of people;
−Removed: • delays in necessary interactions with local regulators, ethics committees and other important agencies and contractors due to limitations in employee resources or access.
−Removed: In addition, the continued spread of COVID-19 globally could continue to adversely affect our manufacturing and supply chain.
−Removed: Parts of our direct and indirect supply chain are located overseas and both international and domestic components have been, and may continue to be, subject to disruption as a result of COVID-19 and ongoing responses to it.
−Removed: If the supplies and components necessary to manufacture our products become unavailable or are disrupted as a result of COVID-19 and ongoing responses to it, then we may not be able to successfully perform our research, sell our diagnostic tests, or operate our business on a timely basis or at all.
−Removed: Additionally, our results of operations could be adversely affected to the extent that the continued spread of COVID-19 or any other public health emergency harms our business or the economy in general either domestically or in any other region in which we do business.
−Removed: The extent to which COVID-19 continues to affect our business, results of operations, financial condition and impede our recovery from the earlier effects of the COVID-19 pandemic will depend on future developments, which are highly uncertain and cannot be predicted with confidence, including the duration, spread and severity of COVID-19 outbreaks, the rate of vaccination and efficacy of approved vaccines against COVID-19 and its variant strains, actions taken to contain COVID-19 or treat its impact, new information that may emerge concerning the health effects of COVID-19, and how quickly and to what extent normal economic and operating conditions would resume if the pandemic subsided, any of which could have a further adverse effect on our business and financial condition.
−Removed: Even after the COVID-19 pandemic subsides, we may continue to experience an adverse impact to our business as a result of its global economic impact, including from increased inflation and the prospect that policy responses to inflation could delay economic recovery or lead to another recession.
We may not be able to generate sufficient revenue from our existing tests or develop new tests to be profitable.
−Removed: We believe our future success is dependent upon our ability to successfully market our existing molecular diagnostic tests to additional patients within the United States, to expand into new markets within and outside the United States, and to develop and commercialize new molecular diagnostic and companion diagnostic tests.
−Removed: However, we may not be able to generate sufficient revenue from our existing tests and launching and commercializing our new tests to be profitable.
−Removed: The demand for our existing molecular diagnostic tests may decrease or may not continue to increase at historical rates due to sales of new tests that may replace or cannibalize our existing product portfolio, or for other reasons such as the introduction of competing molecular diagnostic testing products by competitors.
−Removed: For example, because most of our molecular diagnostic tests are only utilized once per patient, we will need to sell our services through physicians to new patients or develop new molecular diagnostic tests in order to continue to generate revenue.
+Added: We believe our future success is dependent upon our ability to successfully market our existing tests to additional patients within the United States, to expand into new markets within and outside the United States, and to develop and commercialize new tests.
+Added: However, we may not be able to generate sufficient revenue, from our existing tests and launching and commercializing new tests, to be profitable.
+Added: The demand for our existing tests may decrease or may not continue to increase at historical rates due to sales of new tests that may replace or cannibalize our existing product portfolio, or for other reasons such as the introduction of competing testing products by competitors.
+Added: For example, because most of our tests are only utilized once per patient, we will need to sell our products to new patients or develop new tests in order to continue to generate revenue.
Our average reimbursement rate per test may also decline, which may cause our revenues to decrease.
−Removed: Our pipeline of new molecular diagnostic and companion diagnostic test candidates is in various stages of development, some of which may take many more years to develop, and must undergo extensive clinical validation.
−Removed: We may be unable to discover or develop any additional molecular diagnostic or companion diagnostic tests through the utilization of our technologies or technologies we license or acquire from others.
−Removed: Even if we develop tests or services for commercial use, we may not be able to develop tests or services that:
+Added: Our pipeline of new test candidates, such as FirstGene and Precise MRD, are in various stages of development, some of which may take many more years to develop, and must undergo extensive clinical validation.
+Added: We may be unable to discover or develop any additional tests through the utilization of our technologies or technologies we license or acquire from others.
+Added: Even if we develop tests for commercial use, we may not be able to develop tests that:
• meet applicable regulatory standards, in a timely manner or at all;
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We must generate significant revenue to achieve profitability.
−Removed: Even if we succeed in marketing our existing molecular diagnostic tests to physicians for use in new patients and in developing and commercializing any additional molecular diagnostic tests and companion diagnostic tests, we may not be able to generate sufficient revenue and we may not be profitable.
−Removed: We may not be able to maintain revenue growth or operate our business on a profitable basis, and our transformation plan may not achieve the anticipated results.
−Removed: We may not be able to generate revenue growth or maintain existing revenue levels.
−Removed: Historically, our molecular diagnostic business has operated profitably providing a cash contribution to our funding and operational needs.
−Removed: We may not, however, be able to operate our molecular diagnostic business on a profitable basis in the future.
−Removed: Potential events or factors that may have a significant impact on our ability to sustain revenue growth and achieve or maintain profitability for our molecular diagnostic business include the following:
+Added: Even if we succeed in marketing our existing tests to physicians for use in new patients and in developing and commercializing any additional tests, we may not be able to generate sufficient revenue to be profitable.
+Added: Our strategic growth plan may not achieve the anticipated results, and we may not be able to achieve or maintain revenue growth or operate our business on a profitable basis.
+Added: We are currently executing upon a strategic growth plan in which we intend to accelerate growth through launching new tests, utilizing a unified ordering portal to improve access and ease of use for patients and providers, expanding reimbursement coverage for our tests, enhancing our commercial capabilities and deploying a new commercial model in our Women's Health and Oncology businesses.
+Added: Our future performance and growth depends on the success of our growth plan, including management's ability to execute upon that plan and the ability of our employees to respond quickly and effectively to strategic projects and changes in our operations and business practices.
+Added: The implementation of our strategic growth plan has resulted, and is expected to continue to result, in changes to business priorities and operations, capital allocation priorities, operational and organizational structures, and increased demands on management.
+Added: The execution of our strategic growth plan may take longer than anticipated, and we may not realize, in full or part, our anticipated growth targets in our testing volumes and revenue, or such growth may be realized more slowly than anticipated.
+Added: Historically, our business operated profitably and provided a cash contribution to our funding and operational needs.
+Added: However, in recent years we have not operated our business profitably, and we may not be able to operate our business on a profitable basis in the future.
+Added: Potential events or factors that may have a significant impact on our ability to achieve our growth targets and achieve and/or maintain revenue growth and profitability for our business include the following:
• the efforts of third-party payors to limit or decrease the amounts that they are willing to pay for our tests, recoup amounts already paid, or institute burdensome administrative requirements for reimbursement, such as prior authorization requirements;
−Removed: • increased costs of reagents and other consumables required for molecular diagnostic testing;
+Added: • increased costs of reagents and other consumables required for testing;
• increased personnel and facility costs;
−Removed: • our inability to hire competent, trained staff, including laboratory directors required to review and approve all reports we issue in our molecular diagnostic business, and sales personnel;
−Removed: • our inability to obtain necessary equipment or reagents to perform molecular diagnostic testing;
−Removed: • our inability to increase production capacity as demand increases;
+Added: • our inability to hire competent, trained staff, including laboratory directors required to review and approve all reports we issue in our business, and sales personnel;
+Added: • our inability to obtain necessary equipment or reagents to perform testing;
+Added: • our inability to increase production capacity to meet demand increases;
• our inability to expand into new markets within or outside the United States;
+Added: • our ability to execute on our strategic growth plan;
• increased licensing or royalty costs, and our ability to maintain and enforce the intellectual property rights underlying our tests and services;
• changes in intellectual propriety law applicable to our patents or enforcement in the United States and foreign countries;
+Added: • the expiration of the patents covering our products;
+Added: • the outcome of outstanding or new litigation;
• potential obsolescence of our tests;
−Removed: • our inability to increase commercial acceptance of our molecular diagnostic tests;
+Added: • our inability to obtain or increase commercial acceptance of our tests;
• increased competition and loss of market share;
+Added: • global or local economic conditions;
• increased regulatory requirements;
−Removed: • material litigation costs and judgments.
−Removed: We are currently executing upon a strategic transformation plan, which, among other things, is focused on developing and enhancing best-in-class products to support growth, improving the patient and provider experience, and reaching more patients of all backgrounds.
−Removed: In addition, as part of that transformation plan, we intend to accelerate growth through the launch of a new enterprise commercial model, the launch of a unified ordering portal, investment in new sequencing technologies, the development of direct-to-consumer channels, and building commercial capabilities to support new products and offerings.
−Removed: Our future performance and growth depends on the success of our transformation plan, including management's ability to execute upon that plan and the ability of our employees to respond quickly and effectively to transformational projects and rapid changes in our operations and business practices.
−Removed: The implementation of our transformation plan has resulted and is expected to continue to result in changes to business priorities and operations, capital allocation priorities, operational and organizational structures, and increased demands on management.
−Removed: The execution of our transformation plan may take longer than anticipated, and once implemented, we may not realize, in full or part, the anticipated benefits, including growth in our testing volumes and revenue, or such benefits may be realized more slowly than anticipated.
−Removed: The failure to realize benefits, which may be due to our inability to execute plans, delays in the implementation of the transformation plan, global or local economic conditions, competition, changes in the molecular diagnostics industry, the ongoing COVID-19 pandemic, and the other risk factors described herein, could have a material adverse effect on our business, prospects, financial condition, results of operations, cash flows, as well as the trading price of our common stock.
−Removed: If we do not continue to generate sufficient revenue from sales of our molecular diagnostic tests and are unable to secure additional funding, we may have to reduce our operations.
−Removed: While we anticipate that our existing cash, cash equivalents and marketable securities, cash flow from operations, and in certain circumstances, amounts available for borrowing under our Amended Facility (as defined below) will be sufficient to fund our current operations for the foreseeable future, changes could occur that would consume available capital resources more quickly than we currently expect and we may need or want to raise additional financing.
−Removed: On December 23, 2016, we entered into a senior secured revolving credit facility as borrower, with the lenders from time to time party thereto, which was amended on July 31, 2018, May 1, 2020 and February 22, 2021 (the "Amended Facility").
−Removed: On July 30, 2021, using cash generated from our recent divestitures, we repaid all outstanding borrowings under our Amended Facility.
+Added: • material litigation costs, settlements, and judgments.
+Added: The failure to achieve our growth targets and achieve and/or maintain revenue growth and profitability for our business could have a material adverse effect on our business, prospects, financial condition, results of operations, cash flows, as well as the trading price of our common stock.
+Added: Our financial condition and results of operations could be further adversely affected by the ongoing coronavirus pandemic or any other adverse public health development.
+Added: Any further outbreaks of COVID-19 (including its variant strains) or any other outbreak of contagious disease or adverse public health development, could have a further material and adverse effect on our business operations, financial condition, or results of operations.
+Added: For example, government public health officials and businesses have implemented, and may continue to implement, restrictions to curb the spread of COVID-19, which has limited, and may continue to limit, patients’ access to our products, and has caused, and may continue to cause, patients to elect to defer certain testing, each of which has impeded, and may continue to impede, our progress in returning to profitability and recovering from the earlier effects of the COVID-19 pandemic.
+Added: Such adverse effects have included, and may continue to include, diversion or prioritization of health care resources away from the conduct of testing, and disruptions or restrictions affecting the ability of our laboratories to process our tests.
+Added: Future surges in COVID-19 cases or any other outbreak of contagious disease and related employee absences may strain our workforce and impact our ability to process tests in a timely way due to reduced staff availability.
+Added: To the extent that COVID-19 or another disease affects individuals and businesses around the globe, we may experience further disruptions from time to time that could severely impact our business, including:
+Added: • decreased volume of testing as a result of disruptions to health care providers and limitations on the ability of providers to administer tests, including the suspension of non-emergency appointments and services;
+Added: • disruptions or restrictions on the ability of our customers, our collaborators’, or our suppliers’ personnel to travel, including as a result of shelter-in-place or stay-at-home orders from state and local governments, and temporary closures of our facilities or the facilities of our collaborators or suppliers;
+Added: • limitations on employee resources that would otherwise be focused on the development of our products, processing our tests, and the conduct of our clinical trials, including because of sickness of employees or their families or requirements imposed on employees to avoid contact with large groups of people;
+Added: • delays in necessary interactions with local regulators, ethics committees and other important agencies and contractors due to limitations in employee resources or access.
+Added: In addition, the continued spread of COVID-19 or the spread of another disease globally could continue to adversely affect our manufacturing and supply chain.
+Added: Parts of our direct and indirect supply chain are located overseas and both international and domestic components have been, and may continue to be, subject to disruption as a result of COVID-19 or another disease and responses to it.
+Added: If the supplies and components necessary to manufacture our products become unavailable or are disrupted as a result of COVID-19 or the spread of another disease and responses to it, then we may not be able to successfully perform our research, sell our tests, or operate our business on a timely basis or at all.
+Added: The extent to which COVID-19 continues to affect our business, results of operations and financial condition will depend on future developments, which are highly uncertain and cannot be predicted with confidence, including the duration, spread and severity of COVID-19 outbreaks, the rate of vaccination and efficacy of approved vaccines against COVID-19 and its variant strains, actions taken to contain COVID-19 or treat its impact, new information that may emerge concerning the health effects of COVID-19, and how quickly and to what extent normal economic and operating conditions resume, any of which could have a further adverse effect on our business and financial condition.
+Added: Even after the COVID-19 pandemic subsides or becomes endemic, we may continue to experience an adverse impact to our business as a result of its global economic impact, including from increased inflation, delayed economic recovery and any recession that has occurred or may occur in the future.
+Added: In addition, difficult macroeconomic conditions, such as inflation, decreases in per capita income and level of disposable income and related health insurance coverage, increased and prolonged unemployment or a decline in consumer confidence as a result of the pandemic, could have a material adverse effect on the demand for some or all of our products.
+Added: If we do not generate sufficient cash flow from operations and are unable to secure additional funding, we may have to reduce our operations.
+Added: While we anticipate that our existing cash, cash equivalents and marketable securities, future cash flow from operations, and in certain circumstances, amounts available for borrowing under our Amended Facility (as defined below) will be sufficient to fund our current operations for the foreseeable future, changes could occur that would consume available capital resources more quickly than we currently expect and we may need or want to raise additional financing.
+Added: On December 23, 2016, we entered into a senior secured revolving credit facility as borrower, with the lenders from time to time party thereto, which was amended on July 31, 2018, May 1, 2020, February 22, 2021 and July 26, 2022 (the "Amended Facility").
+Added: As of December 31, 2022, we have no outstanding borrowings under our Amended Facility and our revolving commitment amount was $150.0 million.
The Amended Facility restricts our ability to make future borrowings if unrestricted cash, cash equivalents and marketable securities exceed $150.0 million, unless such borrowings are used in connection with certain permitted acquisitions.
Unrestricted cash, cash equivalents and marketable securities totaled $169.7 million as of December 31, 2022.
−Removed: Our revolving commitment amount is $250.0 million as of December 31, 2021.
−Removed: As our total unrestricted cash, cash equivalents, and marketable securities exceeded $150.0 million as of December 31, 2021, we will be unable to make future borrowings unless related to a permitted acquisition.
−Removed: In addition, following the expiration of the waiver of the leverage ratio and interest coverage ratio covenants, which waiver is effective until March 31, 2022, our ability to borrow under the Amended Facility will be limited if we are unable to comply with those financial covenants.
−Removed: We may not be able to secure additional financing in a timely manner or on favorable terms, if at all.
−Removed: In addition, we are subject to financial covenants as part of our Amended Facility that could limit our ability to incur additional indebtedness.
−Removed: Without additional funds, we may be forced to delay, scale back or eliminate some of our sales and marketing activities, research and development activities, or other operations, and potentially delay development of our diagnostic tests in an effort to provide sufficient funds to continue our operations.
+Added: As our total unrestricted cash, cash equivalents, and marketable securities under the Amended Facility exceeded $150.0 million as of December 31, 2022, we are currently unable to make future borrowings under the Amended Facility unless related to a permitted acquisition.
+Added: In addition, our Amended Facility expires on July 31, 2023, and there is no guarantee that the Amended Facility will be extended or that we will be able to secure additional funding or other financing options in a timely manner or on favorable terms, if at all.
+Added: We are also subject to financial covenants as part of our Amended Facility that could limit our ability to incur additional indebtedness.
+Added: Without additional funds, we may be forced to delay, scale back or eliminate some of our sales and marketing activities, research and development activities, or other operations, and potentially delay development of our tests in an effort to provide sufficient funds to continue our operations.
If any of these events occur, our ability to achieve our development and commercialization goals could be adversely affected.
Our future capital requirements will depend on many factors that are currently unknown to us, including:
−Removed: • the scope, progress, results and cost of development, clinical testing and pre-market studies of any new molecular diagnostic tests that we may discover or acquire;
−Removed: • the progress, results, and costs to develop additional molecular diagnostic tests;
+Added: • the scope, progress, results and cost of development, clinical testing and pre-market studies of any new tests that we may develop or acquire;
+Added: • the progress, results, and costs to develop additional tests;
• our ability to operate our business on a profitable basis;
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• the costs to satisfy our current and future obligations.
−Removed: An inability to attract and retain experienced and qualified personnel, including key management personnel, could adversely affect our business.
−Removed: Because of the specialized scientific nature of our business, we are highly dependent upon our ability to attract and retain highly qualified and experienced personnel, including key management personnel.
−Removed: Competition for these personnel is intense, especially for management, sales, scientific, medical, information technology, research and development and other technical personnel.
−Removed: We may not be able to attract or retain qualified personnel in the future due to the competition for qualified personnel among life science and technology businesses as well as universities and public and private research institutions, particularly in the San Francisco Bay Area, where we have office and laboratory facilities.
−Removed: We have from time to time experienced, and we expect to continue to experience, difficulty in hiring and retaining employees with appropriate qualifications.
−Removed: Our compensation arrangements, such as our equity award programs, may not be successful in attracting new employees and retaining and motivating our existing employees.
−Removed: Our agreements with our employees generally provide for employment that can be terminated by either party without cause at any time, subject to specified notice requirements.
−Removed: Further, the non-competition provision that certain key employees are subject to may not be enforceable under certain state, particularly California, or federal laws or such provisions may be prohibitively expensive to enforce.
−Removed: Competition and compensation for highly qualified and experienced personnel increased as employment vacancies surged over the past year, which has increased the difficulty and cost of hiring and retaining qualified personnel.
−Removed: Our transformation and commercial activities have placed a greater workload and strain on our existing employees, increasing the risk that our employees experience fatigue or burnout or terminate their employment with us.
−Removed: Potential federal or state regulations may require us to mandate COVID-19 vaccinations for our employees, or any future decision on our part to voluntarily require our employees to receive a COVID-19 vaccine, could also impact our ability to hire and retain employees.
−Removed: In addition, inflation has had, and we expect that it will continue to have, an impact on the costs that we incur to attract and retain qualified personnel, and may make it more difficult for us to attract and retain such personnel.
−Removed: Our success also depends on the skills, experience and performance of key members of our senior management team, who are critical to directing and managing our growth and development in the future.
−Removed: The loss of any member of our senior management team may cause us to experience difficulties in competing effectively, developing our technologies, and implementing our business strategies.
−Removed: Furthermore, the loss of the services of or failure to recruit key scientific and technical personnel and other qualified personnel who are necessary to operate our business would adversely affect our molecular diagnostic business and it may have a material adverse effect on our business as a whole.
We are subject to debt covenants that impose operating and financial restrictions on us and if we are not able to comply with them, it could have a material adverse impact on our operations and liquidity.
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These restrictions could also limit our ability to take advantage of business opportunities.
−Removed: We must maintain specified leverage and interest ratios measured as of the end of each applicable quarter as financial covenants in the Amended Facility.
−Removed: The Amended Facility, through Amendment No.
−Removed: 2 entered into on May 1, 2020 and Amendment No.
−Removed: 3 entered into on February 22, 2021, modified compliance with the leverage covenant and the interest coverage ratio covenant, which were waived through March 31, 2022, and added a minimum liquidity covenant.
−Removed: If we are unable to improve our results of operations, it is possible that we could be in violation of certain financial covenants contained in the Amended Facility in the future.
−Removed: If we are unable to comply with the covenants and ratio in the Amended Facility, we may be in default under the agreement.
+Added: We are also required to comply with certain financial covenants, including a minimum liquidity covenant, under the Amended Facility.
+Added: If we are unable to comply with these financial covenants in the Amended Facility, we may be in default under the agreement.
A default would result in an increase in the rate of interest and limits on our ability to incur certain additional indebtedness and it could potentially cause any loan repayment to be accelerated, any of which could have a material adverse impact on our operations and liquidity.
If our current operating plan changes and we find that our existing capital resources will not meet our needs, we may find it necessary to raise additional funding, which may not be available.
−Removed: We anticipate that our existing capital resources and expected net cash to be generated from sales of our molecular diagnostic tests will enable us to maintain our currently planned operations for the foreseeable future.
+Added: We anticipate that our existing capital resources and expected net cash to be generated from sales of our tests will enable us to maintain our currently planned operations for the foreseeable future.
However, we base this expectation on our current operating plan, which may change.
−Removed: We have incurred, and will continue to incur, significant costs in the discovery, development and marketing of current and prospective molecular diagnostic and companion diagnostic tests.
+Added: We have incurred, and will continue to incur, significant costs in the development and marketing of current and prospective tests.
Our ongoing efforts to develop tests and expand our business, which may be through internally developed products, partnerships, in-licensing and mergers and acquisitions, will require substantial cash resources.
−Removed: If, due to changes in our current operating plan, adequate funds are not available, we may be required to raise additional funds.
+Added: In addition, we have incurred, and may continue to incur, substantial costs in defending and settling legal proceedings.
+Added: We may also be required to pay an additional $32.5 million to the former equity and vested incentive unit holders of Gateway, if certain revenue, volume and earnings targets set forth in the acquisition agreement are achieved.
+Added: If adequate funds are not available, we may be required to raise additional funds.
Sources of potential additional capital resources may include, but are not limited to, public or private equity financings, expanding or supplementing our Amended Facility, or selling convertible or non-convertible debt securities.
This additional funding, if necessary, may not be available to us on reasonable terms, or at all.
−Removed: If we issue shares of stock or other securities to acquire new companies or technologies, the ownership interests of our existing stockholders may be significantly diluted.
+Added: If we issue shares of stock or other securities to acquire new companies or technologies, the ownership interests of our existing stockholders may be significantly diluted and the price of our common stock may decrease.
Because of our potential long-term capital requirements, we may access the public or private equity or debt markets whenever conditions are favorable, even if we do not have an immediate need for additional capital at that time.
−Removed: Under Securities and Exchange Commission rules, we currently qualify as a well-known seasoned issuer, or WKSI, and can at any time file a registration statement registering securities to be sold to the public which would become effective upon filing.
−Removed: If additional funds are raised by issuing equity securities, existing stockholders may suffer significant dilution.
+Added: Under Securities and Exchange Commission rules, we currently qualify as a well-known seasoned issuer (WKSI), and can at any time file a registration statement registering securities to be sold to the public which would become effective and available for use upon filing.
+Added: If additional funds are raised by issuing equity or equity-based securities, existing stockholders may suffer significant dilution.
Debt financing, if available, may involve agreements that include covenants limiting or restricting our ability to take specific actions, such as incurring debt, making capital expenditures or declaring dividends.
If we raise additional funds through collaborations, strategic alliances, partnerships and licensing arrangements with third parties, we may have to relinquish valuable rights to our technologies or tests or grant licenses on terms that are not favorable to us.
−Removed: We may acquire technologies, assets or other businesses that could cause us to incur significant expense and expose us to a number of unanticipated operational and financial risks, which could adversely affect our financial condition, results of operations and business prospects.
+Added: We are currently subject to, and in the future may be subject to, securities class action lawsuits and stockholder derivative actions, as well as product or professional liability claims.
+Added: These, and potential similar or related litigation, could result in substantial losses and have a material adverse effect on our business, cash position, operating results or financial condition.
+Added: We are currently subject to a variety of litigation, including a securities class action lawsuit filed in the United States District Court for the District of Utah, and stockholder derivative actions filed in the Delaware Court of Chancery and the United States District Court for the District of Delaware.
+Added: We also may be subject to future securities class action and stockholder derivative claims.
+Added: Such litigation may adversely impact our business, cash position, results of operations or financial condition and divert management's time and attention from our business.
+Added: We cannot predict the outcome of these lawsuits, nor can we predict the amount of time and expense that will be required to resolve these lawsuits and the expense of resolving these lawsuits may be in amounts significantly above our insurance coverage.
+Added: In addition, the marketing, sale and use of our tests could subject us to liability for errors in, misunderstandings of, or inappropriate reliance on, information we provide to clinicians, geneticists or patients, and lead to claims against us if someone were to allege that a test failed to perform as it was designed or marketed, if we failed to provide a correct test result to a patient, if we failed to correctly interpret the test results, if we failed to update the test results due to a reclassification of the variants according to new published guidelines, or if the ordering physician or patient were to misinterpret test results or improperly rely on them when making a clinical decision.
+Added: We could also be subject to claims, lawsuits or liability if the biological materials we receive for analysis were not properly attributed to the correct patient or if we failed to maintain custody of or properly track the biological materials.
+Added: A product liability or professional liability claim could result in substantial damages and be costly and time-consuming for us to defend.
+Added: For example, on January 24, 2022, we paid $14.0 million to settle a lawsuit that alleged negligence, breach of contract and associated torts in connection with an alleged error in testing performed by us in 2004.
+Added: Although we maintain liability insurance for certain claims, including director and officer's insurance and insurance for errors and omissions, we cannot assure you that such insurance would fully protect us from the financial impact of defending against outstanding or future claims or any judgments, fines or settlement costs arising out of any outstanding or future claims.
+Added: Any claim, including the securities class action and stockholders derivative claims or an errors and omissions liability claim, brought against us, with or without merit, could increase our insurance rates or prevent us from securing insurance coverage in the future.
+Added: If we were successfully sued for product or professional liability claims or in connection with current or future securities class action and stockholder derivative claims, we could face substantial losses that exceed our insurance coverage and our other resources.
+Added: For example, although we maintain director and officer's insurance coverage and continue to engage in defense of the outstanding securities class action and stockholder derivative claims, our insurance coverage will only cover up to an aggregate of $20.0 million of liability in certain circumstances after we have paid a significant deductible.
+Added: If we are not successful in our defense of these litigations, we could be forced to make significant payments to or other settlements with our stockholders and their lawyers outside of our insurance coverage, and such payments or settlement arrangements could have a material adverse effect on our business, cash position, operating results or financial condition.
+Added: Additionally, any lawsuit could cause injury to our reputation or cause us to suspend sales of our tests.
+Added: The occurrence of any of these events could have a materially adverse effect on our reputation, cash position, and results of operations.
+Added: An inability to attract and retain experienced and qualified personnel, including key management personnel, could adversely affect our business.
+Added: Because of the specialized scientific nature of our business, we are highly dependent upon our ability to attract and retain highly qualified and experienced personnel, including key management personnel.
+Added: Competition for these personnel is intense, especially for management, sales, scientific, medical, information technology, research and development and other technical personnel.
+Added: We may not be able to attract or retain qualified personnel in the future due to the competition for qualified personnel among life science and technology businesses as well as universities and public and private research institutions.
+Added: We have from time to time experienced, and we expect to continue to experience, difficulty in hiring and retaining employees with appropriate qualifications.
+Added: Our compensation arrangements, such as our short-term incentive and equity award programs, may not be successful in attracting new employees and retaining and motivating our existing employees.
+Added: Our agreements with our employees generally provide for employment that can be terminated by either party without cause at any time, subject to specified notice requirements.
+Added: Further, the non-competition provision that certain key employees are subject to may not be enforceable under certain state laws, particularly California, or federal laws or such provisions may be prohibitively expensive to enforce.
+Added: Our growth and commercial activities have placed a greater workload and strain on our existing employees, increasing the risk that our employees experience fatigue or burnout or terminate their employment with us.
+Added: In addition, inflation has had, and we expect that it will continue to have, an impact on the costs that we incur to attract and retain qualified personnel, and may make it more difficult for us to attract and retain such personnel.
+Added: Our success also depends on the skills, experience and performance of key members of our senior management team, who are critical to directing and managing our growth and development in the future.
+Added: The loss of any member of our senior management team may cause us to experience difficulties in competing effectively, developing our technologies, and implementing our business strategies.
+Added: Furthermore, the loss of the services of or failure to recruit key scientific and technical personnel and other qualified personnel who are necessary to operate our business would adversely affect our business and it may have a material adverse effect on our business as a whole.
+Added: We have acquired and we may continue to acquire technologies, assets or other businesses that could cause us to incur significant expense and expose us to a number of unanticipated operational and financial risks, which could adversely affect our financial condition, results of operations and business prospects.
In addition to organic growth, we intend to continue to pursue growth through the acquisition of technology, assets or other businesses that may enable us to enhance our technologies and capabilities, expand our geographic market and sales channels, add experienced management personnel and increase our test offerings.
−Removed: However, these acquisitions may not achieve profitability or generate a positive return on our investment.
+Added: For example, on November 1, 2022, we acquired Gateway, which markets and sells the SneakPeek Early Gender DNA Test.
+Added: However, these acquisitions may not generate a positive return on our investment.
Additionally, we may be unable to implement our growth strategy if we cannot identify suitable acquisition candidates, reach agreement on potential acquisitions on acceptable terms, successfully integrate personnel or assets that we acquire or for other reasons.
−Removed: We may also experience increased expenses, distraction of our management, and personnel and customer uncertainty.
+Added: We may also experience increased expenses, distraction of our management, and personnel and customer uncertainty as a result of our acquisition activities.
Our acquisition efforts may involve certain risks, including:
−Removed: • we may have difficulty integrating operations and systems;
+Added: • we may have difficulty integrating operations and systems of any acquired business;
• key personnel and customers of the acquired company may terminate their relationships with the acquired company as a result of the acquisition;
−Removed: • we may not be successful in launching new molecular diagnostic tests or companion diagnostic tests, or if those tests are launched, they may not prove successful in the marketplace;
+Added: • we may not be successful in launching newly acquired tests, or if those tests are launched, they may not prove successful in the marketplace;
• we may experience additional financial and accounting challenges and complexities in areas such as tax planning and financial reporting;
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Future acquisitions could result in the use of our available cash and marketable securities, potentially dilutive issuances of equity securities, the need to incur additional debt, contingent liabilities, or impairment expenses related to goodwill, and impairment or amortization expenses related to other intangible assets, which could harm our financial condition.
−Removed: In addition, if we are unable to integrate any acquired businesses, tests or technologies effectively, our business, financial condition and results of operations may be materially adversely affected.
+Added: In addition, if we are unable to integrate any acquired businesses, tests or technologies effectively, our business, financial condition and results of operations may be adversely affected.
We may also seek to divest assets from time to time, including but not limited to, large capital equipment, diagnostic tests, intellectual property, business units, or corporate affiliates.
−Removed: The prices that we receive we are able to command for such assets may not be high and, in some cases, may be lower than the amount we invested in or paid for such assets.
−Removed: We are currently subject to, and in the future may be subject to, securities class action lawsuits and stockholder derivative actions, as well as product or professional liability claims.
−Removed: These, and potential similar or related litigation, could result in substantial damages and may divert management’s time and attention from our business.
−Removed: We are currently subject to a variety of litigation, including a securities class action lawsuit filed in the United States District Court for the District of Utah, and stockholder derivative actions filed in the Delaware Court of Chancery and the United States District Court for the District of Delaware, each of which could result in substantial damages and may divert management’s time and attention from our business.
−Removed: We also may be subject to future securities class action and stockholder derivative claims, which may adversely impact our business, results of operations, financial condition or cash flows and divert management’s time and attention from our business.
−Removed: In addition, the marketing, sale and use of our genetic tests could subject us to liability for errors in, misunderstandings of, or inappropriate reliance on, information we provide to clinicians, geneticists or patients, and lead to claims against us if someone were to allege that a test failed to perform as it was designed or marketed, if we failed to provide a correct test result to a patient, if we failed to correctly interpret the test results, if we failed to update the test results due to a reclassification of the variants according to new published guidelines, or if the ordering physician or patient were to misinterpret test results or improperly rely on them when making a clinical decision.
−Removed: We could also be subject to claims, lawsuits or liability if the biological materials we receive for analysis were not properly attributed to the correct patient or if we failed to maintain custody of or properly track the biological materials.
−Removed: A product liability or professional liability claim could result in substantial damages and be costly and time-consuming for us to defend.
−Removed: Although we maintain liability insurance for certain claims, including for errors and omissions, we cannot assure you that such insurance would fully protect us from the financial impact of defending against these types of claims or any judgments, fines or settlement costs arising out of any such claims.
−Removed: Any liability claim, including an errors and omissions liability claim, brought against us, with or without merit, could increase our insurance rates or prevent us from securing insurance coverage in the future.
−Removed: If we were successfully sued for product or professional liability claims, we could face substantial liabilities that exceed our insurance coverage and our other resources.
−Removed: Additionally, any liability lawsuit could cause injury to our reputation or cause us to suspend sales of our tests.
−Removed: The occurrence of any of these events could have an adverse effect on our reputation and results of operations.
+Added: For example, we divested Myriad RBM, Inc., which provided pharmaceutical and clinical services, on July 1, 2021, and we completed the sale of select operating assets and intellectual property, including the Vectra test, from the Myriad Autoimmune business unit, on September 13, 2021.
+Added: The prices that we receive for such assets may not be high and, in some cases, have been and may be lower than the amount we invested in or paid for such assets.
+Added: If our SneakPeek Early Gender DNA Test does not perform as expected, we may not realize the expected benefits of our acquisition of Gateway.
+Added: On November 1, 2022, we acquired Gateway, a personal genomics company and developer of consumer genetic tests that gives families insight into their future children.
+Added: Gateway offers and sells the SneakPeek Early Gender DNA Test in the U.S.
+Added: direct to consumers via sneakpeektest.com and Amazon.com and through various clinical channels, such as OBGYN offices, midwives, birth centers and ultrasound clinics and laboratories.
+Added: The SneakPeek Early Gender DNA Test is also sold internationally through distributors in the United Kingdom, Canada, Australia and certain other countries.
+Added: The SneakPeek Early Gender DNA Test competes against other gender DNA tests and other methods of determining fetal sex (such as non-invasive prenatal testing and ultrasounds) based on a variety of factors, including accuracy, how early the sex of the fetus can be determined, price, ease of use, convenience, and the speed in which test results are delivered.
+Added: We believe that the SneakPeek Early Gender DNA Test currently outperforms competing tests and methods of fetal sex determination on a number of these factors, including accuracy, ease of sample collection with the at-home SNAP blood collection device, and the test's ability to reveal a baby’s sex at six weeks into pregnancy, the earliest method available.
+Added: However, there can be no guarantee that the SneakPeek Early Gender DNA Test will continue to outperform other early fetal sex determination tests in these areas or that we will be able to continue to enhance and improve the SneakPeek Early Gender DNA Test in ways that would allow it to remain the market-leading early fetal sex determination test.
+Added: The success of our acquisition of Gateway depends in part on the continued growth of the SneakPeek Early Gender DNA Test, including our ability to sell the SneakPeek Early Gender DNA Test in retail stores while continuing to increase sales volumes in existing channels, and our ability to cross-sell our Prequel prenatal screening test to SneakPeek Early Gender DNA Test customers.
+Added: Historically, we have limited experience with marketing non-clinical, consumer products directly to consumers or with retail-based marketing strategies, and there can be no guarantee that we will be successful in doing so.
+Added: In addition, we may not be able to continue to grow the SneakPeek Early Gender DNA Test at the rate at which it was growing prior to our acquisition of Gateway, and we may not be successful at selling the SneakPeek Early Gender DNA Test in retail stores.
+Added: We may also face a number of obstacles to cross-sell our Prequel prenatal screening test to SneakPeek Early Gender DNA Test customers, including persuading physicians of our SneakPeek Early Gender DNA Test customers to use our Prequel prenatal screening test and navigating patient consent and data privacy laws.
Security breaches, loss of data and other disruptions, including from cyberattacks, could compromise sensitive information related to our business, prevent us from accessing critical information or expose us to liability, which could adversely affect our business and our reputation.
−Removed: In the ordinary course of our business, we collect and store sensitive data, including legally protected patient health information, credit card information, personally identifiable information about our employees, intellectual property, and proprietary business information, including that of our customers, payors and collaboration partners.
+Added: In the ordinary course of our business, we collect and store sensitive data, including legally protected patient health information, credit card information, personally identifiable information about our employees and customers, intellectual property, and proprietary business information, including that of our customers, payors and collaboration partners.
We manage and maintain our applications and data utilizing on-site, remote, or cloud-based systems.
These applications and data encompass a wide variety of business-critical information including research and development information, commercial information and business and financial information.
−Removed: The secure processing, storage, maintenance and transmission of this critical information is vital to our operations and business strategy, and we devote significant resources to protecting such information.
−Removed: Although we take measures to protect sensitive information from unauthorized access or disclosure, our information technology and infrastructure may be vulnerable to attacks by hackers, or viruses, malware, including ransomware, breaches or interruptions due to employee error, malfeasance or other disruptions, or lapses in compliance with privacy and security mandates.
+Added: The secure processing, storage, maintenance and transmission of this critical information are vital to our operations and business strategy, and we devote significant resources to protecting such information.
+Added: Although we take measures to protect sensitive information from unauthorized access or disclosure, our information technology and infrastructure has been, and may continue to be, vulnerable to attacks by hackers, or viruses, malware, including ransomware, breaches or interruptions due to employee error, malfeasance or other disruptions, or lapses in compliance with privacy and security mandates.
Any such malicious cyberattack, virus, breach or interruption could compromise our networks and the information stored there could be accessed by unauthorized parties, publicly disclosed, held for ransom, lost or stolen.
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Increased levels of remote access create additional opportunities for cybercriminals to exploit vulnerabilities, and employees may be more susceptible to phishing and social engineering attempts.
−Removed: If we experience a significant disruption in our information technology systems, including security breaches, or if we fail to implement new systems and software successfully, our business operations and financial condition could be adversely affected.
−Removed: Information technology and communication systems are an important part of our business operations.
+Added: If we experience a significant disruption in our information technology systems, our business operations and financial condition could be adversely affected.
+Added: Information technology (IT) and communication systems are an important part of our business operations.
These IT and communications systems support a variety of functions, including sample processing, tracking, quality control, customer service and support, billing, research and development activities, and various general and administrative activities.
−Removed: The availability of our products and services and fulfillment of our customer contracts depends on the continuing operation of our information technology and communication systems.
−Removed: Our information technology and communication systems may be susceptible to damage, disruptions or shutdowns due to power outages, hardware failures, computer viruses, attacks by computer hackers, telecommunication failures, user errors, catastrophes or other unforeseen events.
−Removed: Our information technology and communication systems also may experience interruptions, delays or cessations of service or produce errors in connection with system integration, upgrades or system migration work that takes place from time to time.
−Removed: If we were to experience a prolonged system disruption in the information technology and communication systems that involve our interactions with customers, providers or suppliers, it could result in the loss of sales and customers and significant incremental costs, which could adversely affect our business.
−Removed: In addition, security breaches of our information technology systems could result in the misappropriation or unauthorized disclosure of confidential information belonging to us or to our employees, partners, customers or suppliers, which could result in our suffering significant financial or reputational damage .
−Removed: Our business involves environmental risks that may result in liability for us.
−Removed: In connection with our research and development activities, we are subject to federal, state and local laws, rules, regulations and policies governing the use, generation, manufacture, storage, air emission, effluent discharge, handling and disposal of certain materials, including hazardous materials, biological specimens, chemicals and waste.
−Removed: The cost of compliance with these laws and regulations may become significant and could negatively affect our operating results.
−Removed: Although we believe that we have complied with the applicable laws, regulations and policies in all material respects and have not been required to correct any material noncompliance, we may be required to incur significant costs to comply with environmental and health and safety regulations in the future.
−Removed: Although we believe that our safety procedures for handling and disposing of controlled materials comply with the standards prescribed by state and federal regulations, accidental contamination or injury from these materials may occur.
−Removed: In the event of such an occurrence, we could be held liable for any damages that result and any such liability could exceed our resources or any applicable insurance coverage we may have.
−Removed: Changes in health care policy could increase our costs, decrease our revenues and impact sales of and reimbursement for our tests.
−Removed: In March 2010, the Patient Protection and Affordable Care Act, as amended by the Health Care and Education Affordability Reconciliation Act, collectively called the ACA, became law.
−Removed: This law substantially changed the way health care is financed by both government and private third-party payors and continues to significantly impact our business and operations in ways we cannot currently predict.
−Removed: Since its enactment, there have been judicial and Congressional challenges to certain aspects of the ACA, and as a result, certain sections of the ACA have not been fully implemented or were effectively repealed.
−Removed: However, following several years of litigation in the federal courts, in June 2021, the U.S.
−Removed: Supreme Court upheld the ACA when it dismissed a legal challenge to the ACA’s constitutionality.
−Removed: Further legislative and regulatory changes under the ACA remain possible, although the federal administration under President Biden has signaled that it plans to build on the ACA and expand the number of people who are eligible for health insurance subsidies under it.
−Removed: Future changes or additions to the ACA or the Medicare and Medicaid programs, such as changes allowing the federal government to directly negotiate drug prices, or changes stemming from other health care reform measures, especially with regard to health care access, financing or other legislation in individual states, could have a material adverse effect on the health care industry in the United States.
−Removed: The uncertainty around the future of the ACA, and in particular the impact to reimbursement levels and the number of insured individuals, may lead to delay in the purchasing decisions of our customers, which may in turn negatively impact our product sales.
−Removed: Further, if reimbursement levels are inadequate, our business and results of operations could be adversely affected.
−Removed: In addition to the ACA, there will continue to be proposals by legislators at both the federal and state levels, regulators and private third-party payors to reduce costs while expanding individual health care benefits.
−Removed: Certain of these changes could impose additional limitations on the prices we will be able to charge for our tests or the amounts of reimbursement available for our tests from governmental agencies or private third-party payors.
−Removed: Any future changes to legal or regulatory requirements or new cost containment initiatives could have a materially adverse effect on our business, financial condition, results of operation, and cash flows.
+Added: The availability of our products and services and fulfillment of our customer contracts depends on the continuing operation of our IT and communication systems.
+Added: Our IT and communication systems may be susceptible to damage, disruptions or shutdowns due to power outages, hardware failures, computer viruses, attacks by computer hackers, telecommunication failures, user errors, catastrophes or other unforeseen events.
+Added: Our IT and communication systems also may experience interruptions, delays or cessations of service or produce errors in connection with system implementation, integration, upgrades or system migration work that takes place from time to time.
+Added: If we were to experience a prolonged system disruption in the IT and communication systems that involve our interactions with customers, providers or suppliers, it could result in the loss of sales and customers and significant incremental costs, which could adversely affect our business.
+Added: In addition, security breaches of our IT systems could result in the misappropriation or unauthorized disclosure of confidential information belonging to us or to our employees, partners, customers or suppliers, which could result in our suffering significant financial or reputational damage .
+Added: Each of our tests is processed in a single one of our laboratory facilities, and any loss or prolonged interruption of our ability to use these laboratories or failure to maintain their operation in compliance with applicable regulations would seriously harm our business.
+Added: We rely on a CLIA-certified facility in Salt Lake City, Utah to perform most of our tests;
+Added: a CLIA-certified laboratory in South San Francisco, California to perform our Foresight and Prequel tests;
+Added: a single laboratory facility in Cologne, Germany to perform and produce our EndoPredict test kits;
+Added: a CLIA-certified laboratory in Mason, Ohio to perform our GeneSight test;
+Added: and a laboratory in La Jolla, California to perform our SneakPeek Early Gender DNA test.
+Added: We also plan to open new laboratories in South San Francisco, California, San Diego, California and west Salt Lake City, Utah.
+Added: Our laboratories and the equipment we use to perform our tests would be difficult to replace and may require significant lead time to replace and qualify for use if they become inoperable.
+Added: Some of our laboratories are located near active earthquake fault lines and in a region affected by wildfires and flooding.
+Added: We currently have no backup or redundant facility to perform each of our tests.
+Added: In the event any of our testing facilities were to lose its CLIA certification or other required certifications or licenses or were affected by a pandemic or man-made or natural disaster, such as an earthquake, severe weather, flooding, rising sea levels, other physical effects of climate change, power outages or contamination, we would be unable to continue our business, with respect to the tests performed at the particular facility or overall, at current levels to meet customer demands for a significant period of time.
+Added: Although we maintain insurance on these facilities, including business interruption insurance, it may not be adequate to protect us from all potential losses if these facilities were damaged or destroyed.
+Added: In addition, any interruption in our business would result in a loss of goodwill, including damage to our reputation.
+Added: If our business were interrupted, it would seriously harm our business.
+Added: The inability to open the planned facilities in South San Francisco, California, San Diego, California and west Salt Lake City, Utah, delays in opening such facilities or the failure to obtain any required permits, licenses, or certifications could result in increased costs, limit our ability to keep up with the demand for our products, and prevent us from realizing the intended benefits of these new facilities and our future laboratories.
+Added: We depend on a limited number of third parties, or, in some cases, single-source suppliers, for equipment, reagents and other supplies.
+Added: If these supplies become unavailable or are disrupted, including as a result of COVID-19 or another disease and responses to it, then we may not be able to successfully perform our research or operate our business on a timely basis or at all.
+Added: We currently rely on a small number of suppliers, or, in some cases, single-source suppliers, to provide our gene sequencing equipment, content enrichment equipment, multiplex protein analysis equipment, robots, and specialty reagents and other laboratory supplies required in connection with our testing and research and development activities.
+Added: We believe that currently there are limited alternative suppliers of the equipment, robots, reagents and certain other supplies that we use in our business.
+Added: The equipment, robots, reagents or other supplies may not remain available in commercial quantities at acceptable costs.
+Added: If we are unable to obtain when needed additional or alternative equipment or robots, or an adequate supply of reagents or other ingredients or supplies at commercially reasonable rates, our ability to continue to identify genes and perform testing would be adversely affected.
+Added: In addition, the loss of a single-source supplier or the failure to perform by a single-source supplier could have a disruptive effect on our business, including our ability to perform testing, and could adversely affect our results of operations.
+Added: In addition, the continued spread of COVID-19 or the spread of another disease globally could further adversely affect our manufacturing and supply chain.
+Added: Parts of our direct and indirect supply chain are located overseas and both international and domestic components have been, and may continue to be, subject to disruption as a result of COVID-19 or another disease and responses to it.
+Added: We have experienced and may continue to experience a shortage of certain laboratory supplies and equipment, and we may experience a suspension of services from other laboratories or third parties as a result of COVID‑19 or another disease and responses to it.
+Added: Political, administrative, legislative, legal or regulatory actions in response to COVID‑19 or another disease could create additional supply shortages, disruptions or other uncertainties affecting our research and business.
+Added: If the supplies and components necessary to manufacture our products become unavailable or are disrupted, including as a result of COVID-19 or another disease and responses to it, then we may not be able to successfully perform our research or operate our business on a timely basis or at all.
+Added: Our international business exposes us to business, regulatory, political, operational, financial and economic risks associated with doing business outside of the United States.
+Added: As part of our business strategy, we operate in international markets and have active sales operations in Germany, France, and Japan and production operations in Germany.
+Added: We also distribute our SneakPeek Early Gender DNA Test through distributors in the United Kingdom, Australia, Canada and certain other countries.
+Added: We may establish additional operations or acquire additional properties outside the United States in order to advance our international sales.
+Added: Doing business internationally involves a number of risks, including:
+Added: • multiple, conflicting and changing laws and regulations such as tax laws, export and import restrictions, employment laws, data privacy laws such as the EU GDPR, regulatory requirements and other governmental approvals, permits and licenses;
+Added: • failure by us to obtain regulatory approvals or adequate reimbursement for the use of our tests in various countries;
+Added: • ineffective marketing campaigns leading to failure in establishing a viable, profitable, and sustainable presence in our international markets;
+Added: • difficulty in staffing and managing foreign operations;
+Added: • managing multiple payor reimbursement regimes, government payors and self-pay systems;
+Added: • complexities and difficulties in obtaining protection and enforcing our intellectual property;
+Added: • logistics and regulations associated with shipping patient samples, including infrastructure conditions, customs and transportation delays, including compliance with the Office of Foreign Assets Control and other international trade sanctions;
+Added: • limits in our ability to penetrate international markets if we are not able to process tests locally;
+Added: • financial risks, such as longer payment cycles, difficulty collecting accounts receivable and exposure to foreign currency exchange rate fluctuations;
+Added: • political and economic instability, including wars, terrorism, and political unrest, outbreak of disease, boycotts, curtailment of trade and other business restrictions;
+Added: • regulatory and compliance risks that relate to maintaining accurate information and control over sales and distributors’ activities that may fall within the purview of the U.S.
+Added: Foreign Corrupt Practice Act, UK Bribery Act, anti-boycott laws and other anti-corruption laws;
+Added: • risks related to the disruptions caused by COVID-19 or another disease and responses to it.
+Added: Any of these factors could significantly harm our international operations and, consequently, our revenues and results of operations.
+Added: In addition, any failure to comply with applicable legal and regulatory obligations could impact us in a variety of ways that include, but are not limited to, significant criminal, civil and administrative penalties, including imprisonment of individuals, fines and penalties, denial of export privileges, seizure of shipments, and restrictions on certain business activities.
+Added: Also, the failure to comply with applicable legal and regulatory obligations could result in the disruption of our distribution and sales activities.
+Added: Our international operations could be affected by changes in laws, trade regulations, labor and employment regulations, and procedures and actions affecting approval, production, pricing, reimbursement and marketing of tests, as well as by inter-governmental disputes.
+Added: Any of these changes could adversely affect our business.
+Added: Our success internationally will depend, in part, on our ability to develop and implement policies and strategies that are effective in anticipating and managing these and other risks in the countries in which we do business.
+Added: Failure to manage these and other risks may have a material adverse effect on our operations in any particular country and on our business as a whole.
Ethical, legal and social concerns related to the use of genetic information could reduce demand for our tests.
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and foreign patent offices and courts with regard to patent protection for technology relevant to our business.
−Removed: Although the Genetic Information Non-discrimination Act has criminalized the disallowance of health insurance on the basis of genetic information, modification or retraction of this federal law could dramatically reduce public demand for genetic testing.
+Added: Although the Genetic Information Non-discrimination Act has criminalized the disallowance of health insurance on the basis of genetic information, modification or retraction of this federal law could reduce public demand for genetic testing.
These and other ethical, legal and social concerns may limit market acceptance of our tests or reduce the potential markets for our tests, either of which could have an adverse effect on our business, financial condition or results of operations.
4 unchanged sentences
In addition, if we are unable to continue to obtain expedited delivery services on commercially reasonable terms, our operating results may be adversely affected.
+Added: We also rely on commercial courier delivery services to transport our SneakPeek Early Gender DNA Test directly to customers and any disruptions in delivery service could adversely affect our ability obtain and process samples in a timely manner and to service our customers.
We face risks associated with currency exchange rate fluctuations, which could adversely affect our operating results.
−Removed: We receive a portion of our revenues and pay a portion of our expenses in currencies other than the United States dollar, such as the Euro, the Swiss franc, the Japanese yen, and the British pound.
−Removed: As a result, we are at risk for exchange rate fluctuations between such foreign currencies and the United States dollar, which could affect the results of our operations.
+Added: We receive a portion of our revenues and pay a portion of our expenses in currencies other than the U.S.
+Added: dollar, such as the Euro, the Swiss franc, the Japanese yen, and the British pound.
+Added: As a result, we are at risk for exchange rate fluctuations between such foreign currencies and the U.S.
+Added: dollar, which could affect the results of our operations.
dollar strengthens against foreign currencies, the translation of these foreign currency denominated transactions will result in decreased revenues and operating expenses.
+Added: During the year ended December 31, 2022, our revenues were negatively impacted by approximately $10.4 million due to foreign currency fluctuations.
We may not be able to offset adverse foreign currency impact with increased revenues.
We do not currently utilize hedging strategies to mitigate foreign currency risk and even if we were to implement hedging strategies to mitigate foreign currency risk, these strategies might not eliminate our exposure to foreign exchange rate fluctuations and would involve costs and risks of their own, such as ongoing management time and expertise, external costs to implement the strategies and potential accounting implications.
−Removed: Risks Related to Commercialization of Our Tests, Our Services and Test Candidates
−Removed: Our molecular diagnostic and companion diagnostic tests in development may never achieve significant commercial market acceptance.
−Removed: We may not succeed in achieving significant commercial market acceptance of our diagnostic test offerings that we have launched in recent years or are currently developing.
−Removed: Our ability to successfully develop and commercialize our current molecular diagnostic and companion diagnostic tests, as well as any future molecular diagnostic and companion diagnostic tests that we may develop, will depend on several factors, including:
−Removed: • our ability to convince the medical community of the clinical utility of our tests and their potential advantages over existing tests;
+Added: Risks Related to the Development and Commercialization of Our Tests and Test Candidates
+Added: Our tests in development may not be clinically effective or may never achieve significant commercial market acceptance and our test offerings that we have recently launched or acquired may not be commercially successful.
+Added: We may not succeed in achieving significant commercial market acceptance of our test offerings that we have launched or acquired in recent years or are currently developing.
+Added: Our ability to successfully develop and commercialize our current tests, as well as any future tests that we may develop or acquire, depend on several factors, including:
+Added: • our ability to convince the medical community and consumers of the utility of our tests and their potential advantages over existing tests or other competing products or services;
+Added: • our ability to market current and future products in new and existing channels, such as the launch of our SneakPeek Early Gender DNA Test in retail stores;
• our ability to collaborate with biotechnology and pharmaceutical companies to develop and commercialize companion diagnostic tests for their therapeutic drugs and drug candidates;
• the agreement by third-party payors to reimburse our tests, the scope and extent of which will affect patients’ willingness or ability to pay for our tests and will likely heavily influence physicians’ decisions to recommend our tests;
−Removed: • the willingness of physicians to utilize our tests, which can be difficult to interpret.
−Removed: This difficulty is caused by the ability of our tests to predict only as to a probability, not certainty, that a tested individual will develop the disease, will benefit from a particular therapy or has an aggressive form of the disease that the test is intended to predict.
+Added: • the willingness of physicians to utilize our diagnostic tests, which can be difficult to interpret as our tests only predict as to a probability, not certainty, that a tested individual will develop the disease, will benefit from a particular therapy or has an aggressive form of the disease that the test is intended to predict.
These factors present obstacles to commercial acceptance of our tests, which we would have to spend substantial time and money to overcome, if we can do so at all.
Our inability to successfully do so would harm our business.
+Added: In addition, we may experience research and development and regulatory challenges that could delay or prevent the development and commercialization of new test offerings, such as FirstGene and Precise MRD.
+Added: The tests we enhance or develop may not be clinically effective in clinical trials or commercially, or may not ultimately meet our desired target product profile, be offered at acceptable cost and with the test performance metrics necessary to address the relevant clinical need or commercial opportunity.
+Added: We also may experience difficulties completing the clinical development of any new or enhanced product, or establishing or maintaining the collaborative relations that may be essential to our clinical development and commercialization efforts.
+Added: Clinical development requires large numbers of patient specimens and, for certain products, require large, prospective, and controlled clinical trials.
+Added: We may not be able to enroll patients or collect a sufficient number of appropriate specimens in a timely manner, or we may experience delays during clinical development due to slower than anticipated enrollment, or due to changes in study design or other unforeseen circumstances, or we may be unable to afford or manage the large-sized clinical trials that some of our planned future products may require.
+Added: In addition, the publication of clinical data in peer-reviewed journals is an important step in commercializing and obtaining reimbursement for tests such as ours, and our inability to control when, if ever, results are published may delay or limit our ability to derive sufficient revenues from any test that is the subject of a study.
+Added: Peer-reviewed publications regarding our tests may be limited by many factors, including delays in the completion of, poor design of, or lack of compelling data from, clinical studies, as well as delays in the review, acceptance and publication process.
+Added: If our tests or the technology underlying our current or future tests do not receive sufficient favorable exposure in peer-reviewed publications, the rate of clinician adoption of our tests and positive reimbursement coverage determinations for our tests could be negatively affected.
If we do not compete effectively with scientific and commercial competitors, we may not be able to successfully commercialize our tests, increase our revenue or achieve and sustain profitability.
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Our competitors in the United States and abroad are numerous and include, among others, major diagnostic companies, reference laboratories, molecular diagnostic firms, direct-to-consumer genetic companies, low-priced competitors, clinical laboratories, universities and other research institutions.
−Removed: Some of our competitors and potential competitors have larger customer bases, greater brand recognition and market penetration, better selling and marketing capabilities, more experience with third-party payors and considerably greater financial, technical, marketing and other resources than we do, which may allow these competitors to discover important genes and determine their function before we do, respond more quickly to changes in customer preferences, devote greater resources to the development, promotion and sale of their tests than we do, sell their tests at prices designed to win significant levels of market share, or obtain reimbursement from more third-party payors and at higher prices than we do.
−Removed: We could be adversely affected if we do not discover genes, proteins or biomarkers and characterize their function, develop molecular diagnostic tests based on these discoveries, obtain required regulatory and other approvals and launch these tests and their related services before our competitors.
+Added: Some of our competitors and potential competitors have larger customer bases, greater brand recognition and market penetration, better selling and marketing capabilities, more experience with third-party payors and considerably greater financial, technical, marketing and other resources than we do, which has allowed and may continue to allow these competitors to discover important genes and determine their function before we do, respond more quickly to changes in customer preferences, devote greater resources to the development, promotion and sale of their tests than we do, sell their tests at prices designed to win significant levels of market share, or obtain reimbursement from more third-party payors and at higher prices than we do.
+Added: We could be adversely affected if we do not discover genes, proteins or biomarkers and characterize their function, develop tests based on these discoveries, obtain required regulatory and other approvals and launch these tests and their related services before our competitors.
We may also not be able to keep pace with the rapid technological changes in our industry, or properly leverage new technologies to achieve or sustain competitive advantages in our tests, systems and processes.
−Removed: We also expect to encounter significant competition with respect to any molecular diagnostic and companion diagnostic tests that we may develop or commercialize.
−Removed: Those companies that bring to market new molecular diagnostic and companion tests before we do may achieve a significant competitive advantage in marketing and commercializing their tests.
−Removed: We may not be able to develop additional molecular diagnostic tests successfully and we or our licensors may not obtain or enforce patents covering these tests that provide protection against our competitors.
−Removed: Moreover, our competitors may succeed in developing molecular diagnostic and companion diagnostic tests that circumvent our technologies or tests.
+Added: We also expect to encounter significant competition with respect to any tests that we may develop or commercialize.
+Added: Those companies that bring to market new tests before we do may achieve a significant competitive advantage in marketing and commercializing their tests.
+Added: We may not be able to develop additional tests successfully and we or our licensors may not obtain or enforce patents covering these tests that provide protection against our competitors.
+Added: Moreover, our competitors may succeed in developing tests that circumvent our technologies or tests.
Furthermore, our competitors may succeed in developing technologies or tests that are more effective or less costly than those developed by us or that would render our technologies or tests less competitive or obsolete.
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We expect competition to intensify in the fields in which we are involved as technical advances in these fields occur and become more widely known and changes in intellectual property laws generate challenges to our intellectual property position.
−Removed: Our international business exposes us to business, regulatory, political, operational, financial and economic risks associated with doing business outside of the United States.
−Removed: As part of our business strategy, we operate in international markets.
−Removed: Although we recently narrowed our international operations, we have active sales operations in Germany, France, and Japan and production operations in Germany.
−Removed: We may establish additional operations or acquire additional properties outside the United States in order to advance our international sales.
−Removed: Doing business internationally involves a number of risks, including:
−Removed: • multiple, conflicting and changing laws and regulations such as tax laws, export and import restrictions, employment laws, data and privacy laws such as the EU GDPR, regulatory requirements and other governmental approvals, permits and licenses;
−Removed: • failure by us to obtain regulatory approvals or adequate reimbursement for the use of our tests in various countries;
−Removed: • ineffective marketing campaigns leading to failure in establishing a viable, profitable, and sustainable presence in our international markets;
−Removed: • difficulty in staffing and managing foreign operations;
−Removed: • managing multiple payor reimbursement regimes, government payors and self-pay systems;
−Removed: • complexities and difficulties in obtaining protection and enforcing our intellectual property;
−Removed: • logistics and regulations associated with shipping patient samples, including infrastructure conditions, customs and transportation delays, including compliance with the Office of Foreign Assets Control and other international trade sanctions;
−Removed: • limits in our ability to penetrate international markets if we are not able to process tests locally;
−Removed: • financial risks, such as longer payment cycles, difficulty collecting accounts receivable and exposure to foreign currency exchange rate fluctuations;
−Removed: • political and economic instability, including wars, terrorism, and political unrest, outbreak of disease, boycotts, curtailment of trade and other business restrictions;
−Removed: • regulatory and compliance risks that relate to maintaining accurate information and control over sales and distributors’ activities that may fall within the purview of the U.S.
−Removed: Foreign Corrupt Practice Act, UK Bribery Act, anti-boycott laws and other anti-corruption laws;
−Removed: • risks related to the disruptions caused by COVID-19 and ongoing responses to it.
−Removed: Any of these factors could significantly harm our international operations and, consequently, our revenues and results of operations.
−Removed: In addition, any failure to comply with applicable legal and regulatory obligations could impact us in a variety of ways that include, but are not limited to, significant criminal, civil and administrative penalties, including imprisonment of individuals, fines and penalties, denial of export privileges, seizure of shipments, and restrictions on certain business activities.
−Removed: Also, the failure to comply with applicable legal and regulatory obligations could result in the disruption of our distribution and sales activities.
−Removed: Our international operations could be affected by changes in laws, trade regulations, labor and employment regulations, and procedures and actions affecting approval, production, pricing, reimbursement and marketing of tests, as well as by inter-governmental disputes.
−Removed: Any of these changes could adversely affect our business.
−Removed: Our success internationally will depend, in part, on our ability to develop and implement policies and strategies that are effective in anticipating and managing these and other risks in the countries in which we do business.
−Removed: Failure to manage these and other risks may have a material adverse effect on our operations in any particular country and on our business as a whole.
−Removed: Foreign governments may impose reimbursement standards, which may adversely affect our future profitability.
−Removed: We market our tests in foreign jurisdictions and as such may be subject to rules and regulations in those jurisdictions relating to our testing.
−Removed: In some foreign countries, the reimbursement of diagnostic tests is subject to governmental control.
−Removed: In these countries, reimbursement negotiations with governmental authorities can take considerable time after the receipt of marketing approval for a test candidate.
−Removed: If reimbursement of our future tests is unavailable or limited in scope or amount, or if reimbursement rates are set at unsatisfactory levels, we may be unable to achieve or sustain profitability.
−Removed: Domestic and international data protection laws and regulations may restrict our activities and increase our costs.
−Removed: Domestic and international data protection laws and regulations may affect our collection, use, storage, and transfer of information obtained within and outside of the United States.
−Removed: State privacy and data security laws in the United States are becoming more stringent.
−Removed: For example, California adopted the California Consumer Privacy Act of 2018 (“CCPA”), which was effective in January 2020.
−Removed: The CCPA establishes a new privacy framework for covered businesses by creating an expanded definition of personal information, establishing new data privacy rights for consumers in the State of California, imposing special rules on the collection of consumer data from minors, and creating a new and potentially severe statutory damages framework for violations of the CCPA and for businesses that fail to implement reasonable security procedures and practices to prevent data breaches.
−Removed: In addition to the CCPA, other states are introducing similar legislation which will impact compliance obligations and increase complexity and cost of compliance.
−Removed: The European Union ("EU") has adopted the GDPR, which applies to all EU member states.
−Removed: The GDPR requires us to meet new and more stringent requirements regarding the handling of personal data about European Union residents.
−Removed: Failure to meet GDPR requirements could result in penalties of up to $20 million Euros or 4% of our worldwide revenue, whichever is higher.
−Removed: The GDPR has increased our responsibility and liability in relation to personal data that we process, and we may be required to put in place additional procedures to ensure compliance with the new EU data protection rules.
−Removed: The GDPR is a complex law with still evolving regulatory guidance, including with respect to how the GDPR should be applied in the context of clinical studies or other transactions from which we may gain access to personal data.
−Removed: Furthermore, many of the countries within the European Union are still in the process of drafting supplementary data protection legislation in key fields where the GDPR allows for national variation, including the fields of clinical study and other health-related information.
−Removed: These variations in European data protection laws may raise our costs of compliance and result in greater legal risks.
−Removed: Failure to comply with data protection laws and regulations could result in government enforcement actions, which may involve civil and criminal penalties, private litigation and/or adverse publicity and could negatively affect our operating results and business.
−Removed: Claims that we have violated individuals’ privacy rights or breached our contractual obligations, even if we are not found liable, could be expensive and time-consuming to defend and could result in adverse publicity that could harm our business.
−Removed: Each of our molecular diagnostic tests is processed in a single one of our laboratory facilities, and any loss or prolonged interruption of our ability to use these laboratories or failure to maintain their operation in compliance with applicable regulations would seriously harm our business.
−Removed: We rely on a CLIA-certified facility in Salt Lake City, Utah to perform most of our molecular diagnostic tests;
−Removed: a CLIA-certified laboratory in South San Francisco, California to perform our Foresight and Prequel tests;
−Removed: a single laboratory facility in Cologne, Germany to perform and produce our EndoPredict test kits;
−Removed: and a CLIA-certified laboratory in Mason, Ohio to perform our GeneSight test.
−Removed: Our laboratory in South San Francisco is near major earthquake faults known for seismic activity and in a region affected by wildfires.
−Removed: These facilities and certain pieces of laboratory equipment would be difficult to replace and may require significant lead time to replace and qualify for use if they became inoperable.
−Removed: We currently have no backup or redundant facility to perform each of our molecular diagnostic tests.
−Removed: In the event any of our clinical testing facilities were to lose its CLIA certification or other required certifications or licenses or were affected by a pandemic or man-made or natural disaster, such as an earthquake, severe weather, flooding, rising sea levels, other physical effects of climate change, power outages or contamination, we would be unable to continue our molecular diagnostic business at current levels to meet customer demands for a significant period of time.
−Removed: Although we maintain insurance on these facilities, including business interruption insurance, it may not be adequate to protect us from all potential losses if these facilities were damaged or destroyed.
−Removed: In addition, any interruption in our molecular diagnostic business would result in a loss of goodwill, including damage to our reputation.
−Removed: If our molecular diagnostic business were interrupted, it would seriously harm our business.
−Removed: We depend on a limited number of third parties for some of our supplies of equipment and reagents.
−Removed: If these supplies become unavailable or are disrupted, including as a result of COVID-19 and responses to it, then we may not be able to successfully perform our research or operate our business on a timely basis or at all.
−Removed: We currently rely on a small number of suppliers to provide our gene sequencing equipment, content enrichment equipment, multiplex protein analysis equipment, robots, and specialty reagents and laboratory supplies required in connection with our testing and research.
−Removed: We believe that currently there are limited alternative suppliers of the equipment, robots, and reagents.
−Removed: The equipment, robots, or reagents may not remain available in commercial quantities at acceptable costs.
−Removed: If we are unable to obtain when needed additional or alternative equipment or robots, or an adequate supply of reagents or other ingredients at commercially reasonable rates, our ability to continue to identify genes and perform molecular diagnostic testing would be adversely affected.
−Removed: In addition, the continued spread of COVID-19 globally could further adversely affect our manufacturing and supply chain.
−Removed: Parts of our direct and indirect supply chain are located overseas and both international and domestic components may continue to be subject to disruption as a result of COVID-19 and ongoing responses to it.
−Removed: We have experienced and may continue to experience a shortage of certain laboratory supplies and equipment, and we may experience a suspension of services from other laboratories or third parties as a result of COVID‑19 and ongoing responses to it.
−Removed: Political, administrative, legislative, legal or regulatory actions in response to COVID‑19, including the possible use of the Defense Production Act in the United States to compel manufacturers to prioritize other products or customers over us, could create additional supply shortages, disruptions or other uncertainties affecting our research and business.
−Removed: If the supplies and components necessary to manufacture our products become unavailable or are disrupted as a result of COVID-19 and ongoing responses to it, then we may not be able to successfully perform our research or operate our business on a timely basis or at all.
−Removed: If our current research collaborators or scientific advisors terminate their relationships with us or develop relationships with a competitor, our ability to discover genes, proteins, and biomarkers, and to validate and commercialize molecular diagnostic and companion diagnostic tests could be adversely affected.
+Added: If our current research collaborators or scientific advisors terminate their relationships with us or develop relationships with a competitor, our ability to discover genes, proteins, and biomarkers, and to validate and commercialize tests could be adversely affected.
We have relationships with research collaborators at academic and other institutions who conduct research at our request.
1 unchanged sentence
As a result, we have limited control over their activities and, except as otherwise required by our collaboration agreements, can expect only limited amounts of their time to be dedicated to our activities.
−Removed: Our ability to discover genes, proteins, and biomarkers involved in human disease and validate and commercialize molecular diagnostic and companion diagnostic tests will depend in part on the continuation of these collaborations.
+Added: Our ability to discover genes, proteins, and biomarkers involved in human disease and validate and commercialize tests will depend in part on the continuation of these collaborations.
If any of these collaborations are terminated, we may not be able to enter into other acceptable collaborations.
4 unchanged sentences
The dissemination of our confidential information to third parties could have a material adverse effect on our business.
+Added: Risks Related to Reimbursement
+Added: If the government and third-party payors fail to provide coverage and adequate payment for our existing and future tests, if any, our revenue and prospects for profitability will be harmed.
+Added: In both domestic and foreign markets, sales of our tests or any future tests will depend in large part, upon the availability of reimbursement from third-party payors.
+Added: Such third-party payors include state and federal health care programs such as Medicare, managed care organizations, private health insurers and other organizations.
+Added: These third-party payors are increasingly attempting to contain health care costs by demanding price discounts and limiting both coverage regarding which tests they will pay for and the amounts that they will pay for existing and new tests.
+Added: We have experienced coverage limitations and price reductions for many of our products, including for our GeneSight Psychotropic Mental Health Medication Test, and we may continue to experience future coverage limitations and price reductions from CMS, managed care organizations, and other third-party payors.
+Added: The fact that a test has been approved for reimbursement in the past, for any particular indication or in any particular jurisdiction, does not guarantee that such a test will be approved or remain approved for reimbursement, that the reimbursement amount approved for such test will not be reduced in the future, or that similar or additional tests will be approved for reimbursement in the future.
+Added: Historically, we have not received reimbursement from third-party payors or payment from patients for many of our tests.
+Added: Moreover, there can be no assurance that any new tests we have launched or may launch will be reimbursed at rates that are comparable to the rates that we historically obtained for our existing product portfolio.
+Added: As a result, third-party payors may not cover or provide adequate payment for our current or future tests to enable us to maintain past levels of revenue or profitability with respect to such tests.
+Added: Further, third-party reimbursement might not be available to enable us to maintain price levels sufficient to realize an appropriate return on investment in product development.
+Added: In addition, under PAMA, Medicare reimbursement for any given test is based on the weighted-median of the payments made by private payors for such test, rendering private payor payment levels even more significant.
+Added: As a result, future Medicare payments may fluctuate more often and become subject to the willingness of private payors to recognize the value of tests generally and any given test individually.
+Added: On December 10, 2021, Congress passed the Protecting Medicare and American Farmers from Sequester Cuts Act, which included a provision that delays the next PAMA reporting period for clinical laboratory tests that are not advanced diagnostic tests to January 1, 2023 through March 31, 2023.
+Added: The Consolidated Appropriations Act, 2023, enacted on December 29, 2022, delayed the next PAMA reporting period for clinical laboratory tests that are not advanced diagnostic tests to January 1, 2024 through March 31, 2024.
+Added: In addition, the next round of rate cuts will not be implemented until 2024, with tests receiving cuts of up to 15 percent a year from 2024 through 2026.
+Added: Any declines in average selling prices of our products due to pricing pressures may have an adverse impact on our business, results of operations and financial condition.
+Added: Third-party payors may also dispute our billing or coding and may decide to deny payment or recoup payment for testing that they contend to have been not medically necessary, against their coverage determinations, or for which they have otherwise overpaid, and we may be required to refund reimbursements already received.
+Added: We have also experienced delays or denials of coverage for failure to adequately comply with procedural requirements imposed by third-party payors to obtain reimbursement.
+Added: We also periodically receive and respond to requests for recoupment from third-party payors in the ordinary course of business.
+Added: When a third-party payor denies payment for testing, we often are not able to collect payment from the patient, and therefore, we do not receive any revenue from our testing.
+Added: In addition, if a third-party payor successfully proves that payment for prior testing was in breach of contract or otherwise contrary to law, they may recoup payment, which amounts could be significant and would impact our results of operations.
+Added: We may also continue to negotiate and settle with third-party payers in order to resolve allegations of overpayment.
+Added: Third-party payors, such as commercial health insurers and government payors and programs, may also adopt requirements, programs or policies that may restrict or adversely affect our business.
+Added: For example, in September 2022, the California Department of Public Health (CDPH) promulgated certain regulatory amendments to the California Prenatal Screening (PNS) Program that made the PNS Program the exclusive means of obtaining cfDNA trisomy screening in California.
+Added: These regulatory amendments set a price that participating laboratories would receive for each cfDNA test that was substantially lower than laboratories had previously charged, and prohibited laboratories that did not contract with CDPH from participating in the PNS Program and from offering or performing cfDNA trisomy screening in California.
+Added: As we are not currently a participating laboratory under the PNS Program, we would be prohibited from offering or performing our Prequel screening test in California.
+Added: On September 16, 2022, we filed jointly with Laboratory Corporation of America Holdings (Labcorp) a writ petition in the Superior Court of the State of California, County of San Francisco, against the CDPH and its Director challenging CDPH’s ability to make the PNS Program the exclusive means of obtaining cfDNA trisomy screening in California.
+Added: On September 16, 2022, we also moved jointly with Labcorp for a preliminary injunction to enjoin the implementation and enforcement of the new exclusivity regulation.
+Added: On November 2, 2022, the Superior Court granted our motion for a preliminary injunction, which allowed us to continue to offer our Prequel screening test in California.
+Added: On December 17, 2022, we filed jointly with Labcorp a motion for judgment on our writ, through which we are seeking a permanent injunction to enjoin the implementation and enforcement of the new exclusivity regulation.
+Added: A hearing on that motion is scheduled for March 21, 2023.
+Added: CDPH has also commenced the process of appealing the preliminary injunction, though no hearing date has been set, and that appeal may be mooted by the Superior Court’s decision on our motion for judgment on the writ prior to any hearing.
+Added: Pending the outcome of this ongoing litigation, we cannot be certain that we will be able to continue offering or performing our Prequel screening test in California.
+Added: If the exclusivity regulation is ultimately determined to be valid and we are either not able to offer our Prequel screening test in California at all, or must do so through the PNS Program at lower rates than we currently charge, our financial and operating results will likely be adversely affected.
+Added: In addition, although the implementation and enforcement of the exclusivity regulation has been preliminarily enjoined, the possibility that we may be unable to continue to offer our Prequel screening test in California has had a chilling effect on sales of our Prequel screening test in California.
+Added: and foreign governments continue to propose and pass legislation designed to reduce the cost of health care.
+Added: For example, in some foreign markets, the government controls the pricing of many health care products.
+Added: We expect that there will continue to be federal and state proposals to implement governmental controls or impose health care requirements.
+Added: In addition, the Medicare program and increasing emphasis on managed care in the United States will continue to put pressure on product pricing.
+Added: Cost control initiatives could decrease the price that we would receive for any tests in the future, which would limit our revenue and profitability.
+Added: Failure to comply with laws and regulations related to submission of claims for our services could result in significant monetary damages and penalties and exclusion from the Medicare and Medicaid programs and corresponding foreign reimbursement programs.
+Added: We are subject to laws and regulations governing the submission of claims for payment for our services, such as those relating to:
+Added: coverage of our services under Medicare, Medicaid and other state, federal and foreign health care programs;
+Added: the amounts that we may bill for our services;
+Added: and the party to which we must submit claims.
+Added: Our failure to comply with applicable laws and regulations could result in our inability to receive payment for our services or in attempts by state and federal health care programs, such as Medicare and Medicaid, to recover payments already made.
+Added: Submission of claims in violation of these laws and regulations can result in recoupment of payments already received, substantial civil monetary penalties, and exclusion from state and federal health care programs, and can subject us to liability under the federal False Claims Act and similar laws.
+Added: The failure to report and return an overpayment to the Medicare or Medicaid program within 60 days of identifying its existence can give rise to liability under the False Claims Act.
+Added: Further, a government agency could attempt to hold us liable for causing the improper submission of claims by another entity for services that we performed if we were found to have knowingly participated in the arrangement at issue.
Risks Related to Our Intellectual Property
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If our intellectual property is not adequately protected, competitors may be able to use our technologies and erode or negate any competitive advantage we may have, which could harm our business and ability to achieve profitability.
−Removed: Patents may also issue to third parties which could interfere with our ability to bring our molecular diagnostic tests to market.
+Added: Patents may also issue to third parties which could interfere with our ability to bring our tests to market.
The laws of some foreign countries do not protect our proprietary rights to the same extent as U.S.
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• our patents or patents that we license from others will survive legal challenges and remain valid and enforceable.
−Removed: If a third party files a patent application with claims to subject matter we have invented, the United States Patent and Trademark Office (“USPTO”) may declare interference between competing patent applications.
+Added: If a third party files a patent application with claims to subject matter we have invented, the U.S.
+Added: Patent and Trademark Office (USPTO) may declare interference between competing patent applications.
If an interference is declared, we may not prevail in the interference.
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A license may not be available to us on commercially acceptable terms, if at all.
−Removed: We also rely upon unpatented proprietary technologies and databases.
−Removed: Although we require employees, consultants and collaborators to sign confidentiality agreements, we may not be able to adequately protect our rights in such unpatented proprietary technologies and databases, which could have a material adverse effect on our business.
−Removed: For example, others may independently develop substantially equivalent proprietary information or techniques or otherwise gain access to our proprietary technologies or disclose our technologies to our competitors.
−Removed: If we were sued for patent infringement by third parties, we might incur significant costs and delays in test introduction.
+Added: We also rely on trade secrets to protect our proprietary technologies and databases, especially where we do not believe patent protection is appropriate or obtainable.
+Added: However, trade secrets are difficult to protect.
+Added: We rely in part on confidentiality agreements with our employees, consultants, outside scientific collaborators, sponsored researchers and others to protect our trade secrets and other proprietary information.
+Added: These agreements may not effectively prevent disclosure of confidential information and may not provide an adequate remedy if unauthorized disclosure of confidential information occurs.
+Added: In addition, others may independently discover our trade secrets and proprietary information.
+Added: Costly and time-consuming litigation could be necessary to enforce and determine the scope of our proprietary rights, and failure to obtain or maintain trade secret protection could adversely affect our competitive position.
+Added: If we are subject to litigation or other proceedings arising from a claim of infringement of the intellectual property of a third party, we might incur significant costs and delays in test introduction or we could be prevented from using technologies incorporated in our tests.
Our tests may also conflict with patents that have been or may be granted to others.
Our industry includes many organizations that have or are seeking to discern biomarkers and develop genomic, proteomic and other technologies.
−Removed: To the extent any patents are issued or have been issued to those organizations, the risk increases that the sale of our molecular diagnostic and companion diagnostic tests currently being marketed or under development may give rise to claims of patent infringement.
+Added: To the extent any patents are issued or have been issued to those organizations, the risk increases that the sale of our tests currently being marketed or under development may give rise to claims of patent infringement.
Others may have filed and in the future are likely to file patent applications covering biomarkers that are similar or identical to our tests.
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In addition, we could experience delays in product introductions or sales growth while we attempt to develop non-infringing alternatives.
−Removed: We believe that there may be significant litigation in the industry regarding patent and other intellectual property rights.
−Removed: If we become involved in this litigation, it could consume a substantial portion of our managerial and financial resources.
−Removed: We may be unable to adequately prevent disclosure of trade secrets, proprietary databases, and other proprietary information.
−Removed: We rely on trade secrets to protect our proprietary technologies and databases, especially where we do not believe patent protection is appropriate or obtainable.
−Removed: However, trade secrets are difficult to protect.
−Removed: We rely in part on confidentiality agreements with our employees, consultants, outside scientific collaborators, sponsored researchers and others to protect our trade secrets and other proprietary information.
−Removed: These agreements may not effectively prevent disclosure of confidential information and may not provide an adequate remedy if unauthorized disclosure of confidential information occurs.
−Removed: In addition, others may independently discover our trade secrets and proprietary information.
−Removed: Costly and time-consuming litigation could be necessary to enforce and determine the scope of our proprietary rights, and failure to obtain or maintain trade secret protection could adversely affect our competitive position.
+Added: We believe that there has been, and may continue to be, significant litigation in the industry regarding patent and other intellectual property rights.
+Added: On December 21, 2020, Ravgen, Inc.
+Added: filed a lawsuit against us and our wholly owned subsidiary, Myriad Women's Health, in the U.S.
+Added: District Court for the District of Delaware, alleging infringement of two patents relating to blood collection tubes and non-invasive prenatal testing analysis.
+Added: This litigation and any other intellectual property litigation that we may become involved with in the future could consume a substantial portion of our managerial and financial resources.
+Added: If any such litigation is resolved adversely to us, we could be required to pay damages, cease the infringing activity or pay an ongoing licensing fee for our prenatal tests, each of which could have a material adverse effect on our financial condition, results of operations or cash flows.
+Added: Additionally, third parties may claim that the branding of our products infringes the trademarks, service marks, trade names or otherwise misappropriates or dilutes those third parties’ rights.
+Added: If we are found to be liable or to have infringed upon those third parties' rights, we may be required to pay damages and rebrand the infringing products.
+Added: Rebranding can be expensive and time-consuming and may lead to the loss of brand equity or goodwill associated with the rebranded products.
If we fail to comply with our obligations under license or technology agreements with third parties, we could lose license rights that are critical to our business.
−Removed: We license intellectual property that is important to our business, including licenses underlying the technology in our molecular diagnostic tests, and in the future, we may enter into additional agreements that provide us with licenses to valuable intellectual property or technology.
+Added: We license intellectual property that is important to our business, including licenses underlying the technology in our tests, and in the future, we may enter into additional agreements that provide us with licenses to valuable intellectual property or technology.
These licenses impose various royalty payments, milestones, and other obligations on us.
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Termination by the licensor would cause us to lose valuable rights, and could prevent us from distributing our current tests, or inhibit our ability to commercialize future test candidates.
−Removed: Our business would suffer if any current or future licenses terminate, if the licensors fail to abide by the terms of the license, if the licensors fail to prevent infringement by third parties, if the licensed patents or other rights are found to be invalid or unenforceable, or if we are unable to enter into necessary licenses on acceptable terms.
−Removed: We may be subject to claims that we or our employees or consultants have wrongfully used or disclosed alleged trade secrets.
+Added: Our business would suffer if any current or future licenses terminate, if the licensors fail to abide by the terms of the license, if the licensors fail to prevent infringement by third parties, if the licensed patents or other rights are found to be invalid, unenforceable or infringe upon third party patents, or if we are unable to enter into necessary licenses on acceptable terms.
+Added: We may be subject to claims that we or our employees have wrongfully used or disclosed alleged trade secrets.
As is commonplace in our industry, we employ individuals who were previously employed at universities or genetic testing, diagnostic, biotechnology or other health care companies, including our competitors or potential competitors.
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Even if we are successful in defending against these claims, litigation could result in substantial costs and be a distraction to management.
+Added: If we fail to adequately protect our trademarks, service marks, trade names and trade dress, we may lose goodwill and brand equity associated with our business.
+Added: Our registered and unregistered trademarks, service marks, or trade names could be infringed by third parties.
+Added: Enforcing our rights against such third parties can be expensive and distracting.
+Added: If we fail to effectively enforce such rights against third parties, our trademark, service mark or trade name rights, and the associated goodwill and brand equity, could be lost.
+Added: We file applications for registration of various marks associated with our brands in the United States and foreign jurisdictions.
+Added: We may fail to successfully register these marks.
+Added: Additionally, once a mark is registered, we may fail to pay all fees and attend to all formalities required to maintain the registration.
+Added: Failure to obtain or maintain registration of our marks could make those marks harder to enforce and reduce the liability of an infringer even if we are able to successfully enforce such rights.
Risks Related to Government Regulation
−Removed: If we fail to comply with the complex federal, state, local and foreign laws and regulations that apply to our business, we could suffer severe consequences that could materially and adversely affect our operating results and financial condition.
+Added: If we fail to comply with the complex federal, state, local and foreign laws and regulations that apply to our business, we could suffer consequences that could materially and adversely affect our operating results and financial condition.
Our operations are subject to extensive federal, state, local and foreign laws and regulations, all of which are subject to change.
These laws and regulations currently include, among other things:
−Removed: • CLIA, which requires that laboratories obtain certification from the federal government, and state licensure laws;
−Removed: • FDA laws and regulations that apply to medical devices such as our in vitro diagnostics;
−Removed: • HIPAA, which imposes comprehensive federal standards with respect to the privacy and security of protected health information and requirements for the use of certain standardized electronic transactions;
+Added: • Clinical Laboratory Improvement Amendments of 1988, which requires that laboratories obtain certification from the federal government, and state licensure laws;
+Added: Food and Drug Administration laws and regulations that apply to medical devices such as our companion diagnostics;
+Added: • Health Insurance Portability and Accountability Act of 1996 (HIPAA), which imposes comprehensive federal standards with respect to the privacy and security of protected health information and requirements for the use of certain standardized electronic transactions;
amendments to HIPAA under HITECH, which strengthened and expanded HIPAA privacy and security compliance requirements, increased penalties for violators, extended enforcement authority to state attorneys general and imposed requirements for breach notification;
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• the Eliminating Kickbacks in Recovery Act of 2018 (EKRA), which is an all-payor anti-kickback prohibition on, among other things, knowingly and willfully paying or offering any remuneration directly or indirectly to induce a referral of an individual to a clinical laboratory;
−Removed: • the federal physician self-referral prohibition (Stark Law), which, absent an exception, prohibits a physician from making a referral for certain designated health services, including clinical laboratory services, if the physician or an immediate family member of the physician has an applicable financial relationship with the entity providing the designated health services;
+Added: • the federal physician self-referral prohibition (Stark Law or the Physician Self-Referral Law), which, absent an exception, prohibits a physician from making a referral for certain designated health services, including clinical laboratory services, if the physician or an immediate family member of the physician has an applicable financial relationship with the entity providing the designated health services;
• the federal False Claims Act, which imposes liability on any person or entity that, among other things, knowingly presents, or causes to be presented, a false or fraudulent claim for payment to the federal government;
1 unchanged sentence
• other federal and state fraud and abuse laws, such as anti-kickback laws, prohibitions on self-referral, and false claims acts, which may extend to services reimbursable by any third-party payor, including private insurers;
−Removed: • the federal Physician Payments Sunshine Act, which requires medical device manufactures to track and report to the federal government certain payments and other transfers of value made to physicians and teaching hospitals and ownership or investment interests held by physicians and their immediate family members;
−Removed: • Section 216 of the federal Protecting Access to Medicare Act of 2014 (“PAMA”), which requires the Centers for Medicare & Medicaid Services to set Medicare rates for clinical laboratory testing based on private payor data reported by applicable laboratories;
+Added: • the federal Physician Payments Sunshine Act, which requires medical device manufactures to track and report to the federal government certain payments and other transfers of value made to physicians, other health care professionals, teaching hospitals and ownership or investment interests held by physicians and their immediate family members;
+Added: • Section 216 of the federal Protecting Access to Medicare Act of 2014, which requires the Centers for Medicare & Medicaid Services (CMS) to set Medicare rates for clinical laboratory testing based on private payor data reported by applicable laboratories;
Foreign Corrupt Practices Act of 1977, as amended, which prohibits companies and their intermediaries from making payments in violation of law to non-U.S.
2 unchanged sentences
• similar foreign laws and regulations that apply to us in the countries in which we operate.
−Removed: As a clinical laboratory, our business practices may face heightened scrutiny from government enforcement agencies such as the Department of Justice, the OIG, and CMS.
−Removed: The OIG has issued fraud alerts in recent years, including a fraud alert relating to speaker programs in November 2020, that identify certain arrangements between clinical laboratories and referring physicians as implicating the Anti-Kickback Statute.
−Removed: The OIG has stated that it is particularly concerned about these types of arrangements because the choice of laboratory, as well as the decision to order laboratory tests, typically are made or strongly influenced by the physician, with little or no input from the patient.
+Added: We may also be subject to or affected by current or future federal, state, local and foreign laws and regulations, including laws relating to reproductive health care, which could restrict our business, reduce demand for our products, and adversely affect our operations, revenue, and results of operations.
+Added: As a clinical laboratory, our business practices may face heightened scrutiny from government enforcement agencies such as the Department of Justice, the Office of Inspector General for the Department of Health and Human Services (OIG), and CMS.
+Added: The OIG has issued fraud alerts in recent years, including a fraud alert relating to speaker programs in November 2020, that identify certain arrangements between medical device and drug companies and referring physicians as implicating the Anti-Kickback Statute.
Moreover, the provision of payments or other items of value by a clinical laboratory to a referral source could be prohibited under the federal self-referral prohibition, commonly known as the Stark Law or the Physician Self-Referral Law, unless the arrangement meets all criteria of an applicable exception.
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Any of the foregoing consequences could seriously harm our business and our financial results.
−Removed: If the government and third-party payors fail to provide coverage and adequate payment for our existing and future tests, if any, our revenue and prospects for profitability will be harmed.
−Removed: In both domestic and foreign markets, sales of our molecular diagnostic tests or any future diagnostic tests will depend in large part, upon the availability of reimbursement from third-party payors.
−Removed: Such third-party payors include state and federal health care programs such as Medicare, managed care organizations, private health insurers and other organizations.
−Removed: These third-party payors are increasingly attempting to contain health care costs by demanding price discounts and limiting both coverage regarding which diagnostic tests they will pay for and the amounts that they will pay for existing and new molecular diagnostic tests.
−Removed: We have experienced price reductions from CMS for some of our products, including for our GeneSight® psychotropic test subsequent to the July 2020 release of the final pharmacogenomics LCD, and we may experience future price reductions from CMS, managed care organizations, and other third-party payors.
−Removed: The fact that a diagnostic test has been approved for reimbursement in the past, for any particular indication or in any particular jurisdiction, does not guarantee that such a diagnostic test will remain approved for reimbursement, that the reimbursement amount approved for such test will not be reduced in the future, or that similar or additional diagnostic tests will be approved in the future.
−Removed: Moreover, there can be no assurance that any new tests we have launched or may launch will be reimbursed at rates that are comparable to the rates that we historically obtained for our existing product portfolio.
−Removed: As a result, third-party payors may not cover or provide adequate payment for our current or future molecular diagnostic tests to enable us to maintain past levels of revenue or profitability with respect to such tests.
−Removed: Further, third-party reimbursement might not be available to enable us to maintain price levels sufficient to realize an appropriate return on investment in product development.
−Removed: In addition, under PAMA, Medicare reimbursement for any given diagnostic test is based on the weighted-median of the payments made by private payors for such test, rendering private payor payment levels even more significant.
−Removed: As a result, future Medicare payments may fluctuate more often and become subject to the willingness of private payors to recognize the value of diagnostic tests generally and any given test individually.
−Removed: On December 10, 2021, Congress passed the Protecting Medicare and American Farmers from Sequester Cuts Act, which included a provision that delays the next PAMA reporting period for clinical laboratory tests that are not advanced diagnostic tests to January 1, 2023 through March 31, 2023.
−Removed: In addition, the next round of rate cuts will not be implemented until 2023, with tests receiving cuts of up to 15 percent a year from 2023 through 2025.
−Removed: Any declines in average selling prices of our products due to pricing pressures may have an adverse impact on our business, results of operations and financial condition.
−Removed: and foreign governments continue to propose and pass legislation designed to reduce the cost of health care.
−Removed: For example, in some foreign markets, the government controls the pricing of many health care products.
−Removed: We expect that there will continue to be federal and state proposals to implement governmental controls or impose health care requirements.
−Removed: In addition, the Medicare program and increasing emphasis on managed care in the United States will continue to put pressure on product pricing.
−Removed: Cost control initiatives could decrease the price that we would receive for any tests in the future, which would limit our revenue and profitability.
−Removed: FDA regulation of our industry generally or our tests specifically could be disruptive to our business.
−Removed: As described further below, the FDA has long claimed authority to regulate laboratory-developed tests but has exercised its “enforcement discretion” to limit enforcement of in vitro diagnostic regulatory requirements on this category of products.
−Removed: The FDA has from time to time appeared to increase its attention to the marketing of pharmacogenetic tests.
−Removed: For example, in late 2018, the FDA issued a safety communication regarding “genetic tests that claim results can be used to help physicians identify which antidepressant medication would have increased effectiveness or side effects compared to other antidepressant medications.” This safety communication explained that the FDA had reached out to several firms marketing such pharmacogenetic tests where the FDA believed the relationship between genetic variations and a medication’s effects had not been established, including a warning letter to Inova Genomics Laboratory.
−Removed: In early 2019, we provided the FDA with clinical evidence and other information to support our GeneSight Psychotropic test.
−Removed: Later that year, the FDA requested changes to the GeneSight test offering.
−Removed: Although we disagreed that changes to the test were required, we submitted a proposal regarding the reporting of GeneSight test results to healthcare providers that we believed addressed the FDA’s principal concerns and would not affect the benefits that we believe are provided by the GeneSight test.
−Removed: Since submitting our proposal to the FDA, we engaged with our trade association in their efforts to defend the offering of pharmacogenomic tests as LDTs and to monitor broader developments across the stakeholder community.
−Removed: In response to public letters from the national laboratory trade association and patient groups, on February 20, 2020, the FDA announced a new “collaboration between FDA’s Center for Devices and Radiological Health and Center for Drug Evaluation and Research intended to provide the agency’s view of the state of the current science in pharmacogenetics.” Although the announcement again asserted that some of these test offerings may be potentially dangerous, the agency also acknowledged that pharmacogenetic testing “offers promise for informing the selection or dosing of some medications for certain individuals.” In conjunction with the announcement, the FDA also released an updated “Table of Pharmacogenetic Associations,” which lists gene-drug interactions that the agency believes are supported by FDA-approved drug labeling and/or “sufficient scientific evidence based on published literature.” The Table has been updated periodically since that time.
−Removed: Based on our discussions with the agency and these recent developments, we have not implemented our earlier proposal.
−Removed: While we see these developments as signaling a positive shift in the FDA’s approach to regulating pharmacogenetic tests, we cannot predict with certainty the outcome of this matter or its timing, or whether the ultimate form of the GeneSight Psychotropic test offering will have an adverse effect on our revenues from the test.
−Removed: Failure to comply with laws and regulations related to submission of claims for our services could result in significant monetary damages and penalties and exclusion from the Medicare and Medicaid programs and corresponding foreign reimbursement programs.
−Removed: We are subject to laws and regulations governing the submission of claims for payment for our services, such as those relating to:
−Removed: coverage of our services under Medicare, Medicaid and other state, federal and foreign health care programs;
−Removed: the amounts that we may bill for our services;
−Removed: and the party to which we must submit claims.
−Removed: Our failure to comply with applicable laws and regulations could result in our inability to receive payment for our services or in attempts by state and federal health care programs, such as Medicare and Medicaid, to recover payments already made.
−Removed: Submission of claims in violation of these laws and regulations can result in recoupment of payments already received, substantial civil monetary penalties, and exclusion from state and federal health care programs, and can subject us to liability under the federal False Claims Act and similar laws.
−Removed: The failure to report and return an overpayment to the Medicare or Medicaid program within 60 days of identifying its existence can give rise to liability under the False Claims Act.
−Removed: Further, a government agency could attempt to hold us liable for causing the improper submission of claims by another entity for services that we performed if we were found to have knowingly participated in the arrangement at issue.
+Added: Our actual or perceived failure to comply with data protection laws and regulations could lead to government enforcement actions, private litigation and/or adverse publicity and could negatively affect our business.
+Added: We are subject to domestic and international data protection laws and regulations that address privacy and data security and may affect our collection, use, storage, and transfer of personal information.
+Added: The legislative and regulatory landscape for data protection continues to evolve, and in recent years there has been an increasing focus on privacy and data security issues with the potential to affect our business.
+Added: In the U.S., numerous federal and state laws and regulations, including state data breach notification laws, state health information privacy laws and federal and state consumer protection laws govern the collection, use, disclosure and protection of health-related and other personal information.
+Added: Failure to comply with data protection laws and regulations, where applicable, could result in government enforcement actions, which could include civil or criminal penalties, private litigation and/or adverse publicity and could negatively affect our operating results and business.
+Added: For example, California has enacted the California Consumer Privacy Act, or CCPA, which went into effect in January of 2020.
+Added: The CCPA establishes a new privacy framework for covered businesses by creating an expanded definition of personal information, establishing new data privacy rights for California residents, and creating a new and potentially severe statutory damages framework for violations of the CCPA and for businesses that fail to implement reasonable security procedures and practices to prevent data breaches.
+Added: Additionally in 2020, California voters passed the California Privacy Rights Act, or CPRA, effective January 1, 2023.
+Added: The CPRA significantly amends the CCPA, potentially resulting in further uncertainty, additional costs and expenses in an effort to comply and additional potential for harm and liability for failure to comply.
+Added: Among other things, the CPRA established a new regulatory authority, the California Privacy Protection Agency, which is tasked with enacting new regulations under the CPRA and will have expanded enforcement authority.
+Added: Effective in 2023, Virginia, Colorado, Connecticut, and Utah will have similar data protection laws, and other U.S.
+Added: states have proposals under consideration, increasing the regulatory compliance risk.
+Added: Numerous other countries have, or are developing, laws governing the collection, use and transmission of personal information as well.
+Added: For example, the European Union’s General Data Protection Regulation (GDPR), became effective in 2018 and imposed a broad data protection framework that expanded the scope of EU data protection law, including to non-EU entities meeting the jurisdictional requirements that process, or control the processing of, personal data relating to individuals located in the EU, including clinical trial data.
+Added: The GDPR sets out a number of requirements for controllers and/or processors, as applicable, that must be complied with when handling the personal data of EU based data subjects, including:
+Added: providing expanded disclosures about how their personal data will be used;
+Added: higher standards for organizations to demonstrate that they have obtained valid consent or have another legal basis in place to justify their data processing activities;
+Added: the obligation to appoint data protection officers in certain circumstances;
+Added: new rights for individuals to be “forgotten” and rights to data portability, as well as enhanced current rights (e.g., access requests);
+Added: the principal of accountability and demonstrating compliance through policies, procedures, training and audit;
+Added: and a new mandatory data breach regime.
+Added: In particular, medical or health data, genetic data and biometric data are all classified as “special category” data under the GDPR and afford greater protection and require additional compliance obligations.
+Added: Further, EU member states have a broad right to impose additional conditions—including restrictions—on these data categories.
+Added: This is because the GDPR allows EU member states to derogate from the requirements of the GDPR mainly in regard to specific processing situations (including special category data and processing for scientific or statistical purposes).
+Added: The GDPR is applicable to part of our business and has increased our responsibility and liability in relation to personal data that we process, and we may be required to put in place additional procedures to comply.
+Added: The GDPR is complex and regulatory guidance continues to evolve.
+Added: Furthermore, national GDPR variations, including the fields of clinical study and other health-related information may raise our costs of compliance and result in greater legal risks.
+Added: We are also subject to evolving GDPR requirements on data export, because we transfer data to third countries outside of the EU that are not deemed “adequate.” The GDPR only permits exports of personal data outside of the EU to “non-adequate” countries where there is a suitable data transfer mechanism in place to safeguard personal data (e.g., the EU Commission approved Standard Contractual Clauses).
+Added: On July 16, 2020, the Court of Justice of the EU, or the CJEU, issued a landmark opinion in the case Maximilian Schrems vs.
+Added: Facebook (Case C-311/18) (Schrems II).
+Added: This decision calls into question certain data transfer mechanisms as between the EU member states and the U.S.
+Added: The CJEU is the highest court in Europe and the Schrems II decision heightens the burden to assess U.S.
+Added: national security laws on their business, and future actions of EU data protection authorities are difficult to predict at this time.
+Added: Consequently, there is some risk of any data transfers from the EU being halted.
+Added: If we have to rely on third parties to carry out services for us, including processing personal data on our behalf, we are required under GDPR to enter into contractual arrangements to flow down or help ensure that these third parties only process such data according to our instructions and have sufficient security measures in place.
+Added: Any security breach or non-compliance with our contractual terms or breach of applicable law by such third parties could result in enforcement actions, litigation, fines and penalties or adverse publicity and could cause customers to lose trust in us, which would have an adverse impact on our reputation and business.
+Added: Any contractual arrangements requiring the processing of personal data from the EU to us in the U.S.
+Added: will require greater scrutiny and assessments as required under Schrems II and may have an adverse impact on cross-border transfers of personal data, or increase costs of compliance.
+Added: The GDPR provides an enforcement authority to impose large penalties for noncompliance, including the potential for fines of up to €20 million or 4% of the annual global revenues of the noncompliant company, whichever is greater.
+Added: Applicable data privacy and data protection laws may conflict with each other, and by complying with the laws or regulations of one jurisdiction, we may find that we are violating the laws or regulations of another jurisdiction.
+Added: Despite our efforts, we may not have fully complied in the past and may not in the future.
+Added: That could require us to incur significant expenses, which could significantly affect our business.
+Added: Failure to comply with data protection laws may expose us to risk of enforcement actions taken by data protection authorities or other regulatory agencies, private rights of action in some jurisdictions, and potential significant penalties if we are found to be non-compliant.
+Added: Furthermore, the number of government investigations related to data security incidents and privacy violations continue to increase and government investigations typically require significant resources and generate negative publicity, which could harm our business and reputation.
We may from time to time be subject to government investigation(s), the unfavorable outcome of which may have a material adverse effect on our financial condition, results of operations and cash flows.
We may from time to time be subject to government investigations, which may divert management resources and attention, cause us to incur substantial costs, and/or result in negative publicity, and any unfavorable outcome arising from such investigation may have a material adverse effect on our financial condition, results of operations and cash flows.
−Removed: In June 2016, our wholly-owned subsidiary, Crescendo Bioscience, LLC (formerly known as Crescendo Bioscience, Inc.) (“CBI”), received a subpoena from the Office of Inspector General of the Department of Health and Human Services requesting that CBI produce documents relating to entities that received payment from CBI for the collection and processing of blood specimens for testing, including a named unrelated company, healthcare providers and other third party entities.
−Removed: On January 30, 2020, the United States District Court for the Northern District of California unsealed a qui tam complaint, filed on April 16, 2016 against CBI, alleging violations of the Federal and California False Claims Acts and the California Insurance Fraud Prevention Act.
+Added: For example, in June 2016, our wholly-owned subsidiary, Crescendo Bioscience, LLC (formerly known as Crescendo Bioscience, Inc.) (CBI), received a subpoena from the Office of Inspector General of the Department of Health and Human Services requesting that CBI produce documents relating to entities that received payment from CBI for the collection and processing of blood specimens for testing, including a named unrelated company, healthcare providers and other third-party entities.
+Added: On January 30, 2020, the U.S.
+Added: District Court for the Northern District of California unsealed a qui tam complaint, filed on April 16, 2016 against CBI, alleging violations of the federal and California False Claims Acts and the California Insurance Fraud Prevention Act (CIFPA).
On January 22, 2020, after a multi-year investigation into CBI’s and the Company’s alleged conduct, the United States declined to intervene.
On January 27, 2020, the State of California likewise filed its notice of declination.
−Removed: The Company was not aware of the complaint until after it was unsealed.
−Removed: On April 16, 2020, CBI filed a motion to dismiss the action with prejudice.
−Removed: On May 23, 2020, the court denied that motion.
−Removed: We have accrued $48.0 million for a potential settlement of this qui tam lawsuit against CBI and the Company, which is included in Accrued liabilities in the Company's Consolidated Balance Sheet.
−Removed: If no settlement is reached, we intend to continue to vigorously defend against this action, but we cannot predict with any degree of certainty the ultimate resolution of this matter or determine whether, or to what extent, any loss with respect to this matter may exceed the amount that we have accrued.
+Added: On April 1, 2022, we settled the qui tam lawsuit pursuant to which we paid a total of $45.25 million to the United States and the State of California and $2.75 million to relator's counsel.
+Added: The qui tam lawsuit was formally dismissed by the U.S.
+Added: District Court for the Northern District of California on May 4, 2022.
We may be subject to future claims or investigations under the Federal False Claims Act or a similar state law, and any unfavorable outcome arising from such claims or investigation could have a material adverse effect on our financial condition, results of operations and cash flows.
+Added: Changes in health care policy could increase our costs, decrease our revenues and impact sales of and reimbursement for our tests.
+Added: In March 2010, the Patient Protection and Affordable Care Act, as amended by the Health Care and Education Affordability Reconciliation Act, collectively called the ACA, became law.
+Added: This law substantially changed the way health care is financed by both government and private third-party payors and continues to significantly impact our business and operations in ways we cannot currently predict.
+Added: Since its enactment, there have been judicial and Congressional challenges to certain aspects of the ACA, and as a result, certain sections of the ACA have not been fully implemented or were effectively repealed.
+Added: However, following several years of litigation in the federal courts, in June 2021, the U.S.
+Added: Supreme Court upheld the ACA when it dismissed a legal challenge to the ACA’s constitutionality.
+Added: Further legislative and regulatory changes under the ACA remain possible.
+Added: The federal administration under President Biden has signaled that it plans to build on the ACA and expand the number of people who are eligible for health insurance subsidies under it.
+Added: Future changes or additions to the ACA or the Medicare and Medicaid programs, such as changes stemming from other health care reform measures, especially with regard to health care access, financing or other legislation in individual states, could have a material adverse effect on the health care industry in the United States.
+Added: The uncertainty around the future of the ACA, and in particular the impact to reimbursement levels and the number of insured individuals, may lead to delay in the purchasing decisions of our customers, which may in turn negatively impact our product sales.
+Added: Further, if reimbursement levels are inadequate, our business and results of operations could be adversely affected.
+Added: In addition to the ACA, there will continue to be proposals by legislators at both the federal and state levels, regulators and private third-party payors to reduce costs while expanding individual health care benefits.
+Added: Certain of these changes could impose additional limitations on the prices we will be able to charge for our tests or the amounts of reimbursement available for our tests from governmental agencies or private third-party payors.
+Added: Any future changes to legal or regulatory requirements or new cost containment initiatives could have a materially adverse effect on our business, financial condition, results of operation, and cash flows.
Our business could be harmed by the loss, suspension, or other restriction on a license, certification, or accreditation, or by the imposition of a fine or penalties, under CLIA, its implementing regulations, or other state, federal and foreign laws and regulations affecting licensure or certification, or by future changes in these laws or regulations.
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Historically, the FDA has exercised enforcement discretion with respect to most LDTs and has generally not required laboratories that furnish LDTs to comply with the agency’s requirements for medical devices (e.g., establishment registration, device listing, quality systems regulations, premarket clearance or premarket approval, and post-market controls).
+Added: As of December 31, 2022, none of our products other than MyChoice CDx and BRACAnalysis CDx are marketed by us under the FDA's requirements for medical devices.
In recent years, however, the FDA publicly announced its intention to regulate certain LDTs and issued two draft guidance documents that set forth a proposed phased-in risk-based regulatory framework that would apply varying levels of FDA oversight to LDTs.
−Removed: However, these guidance documents were not finalized, and the framework was abandoned and replaced by an informal discussion paper reflecting some of the feedback that FDA had received on LDT regulation.
+Added: However, these guidance documents were not finalized, and the framework was abandoned and replaced by an informal discussion paper reflecting some of the feedback that FDA had received on the proposed LDT regulation.
The FDA acknowledged that the January 2017 discussion paper does not represent the formal position of the FDA and is not enforceable.
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Notwithstanding the discussion paper, the FDA continues to exercise enforcement discretion and may attempt to regulate certain LDTs on a case-by-case basis at any time, which could result in delay or additional expense in offering our tests and tests that we may develop in the future.
−Removed: In addition to potential enforcement priority changes from the FDA, in December 2018, bipartisan members of Congress released a discussion draft of a legislation to regulate in vitro clinical tests including LDTs under a shared FDA/CMS framework, and provided opportunities for stakeholders to comment on the proposed legislation.
−Removed: In 2020, the Verifying Accurate, Leading-edge IVCT Development (“VALID”) Act was formally introduced in both chambers of Congress, and it was reintroduced in revised form for the 117th Congress in July 2021.
+Added: In addition to potential enforcement priority changes from the FDA, for several years bipartisan members of Congress have been negotiating legislation with the FDA and industry stakeholders to regulate in vitro clinical tests including LDTs under a shared FDA/CMS framework.
+Added: Most recently, reform legislation entitled the Verifying Accurate, Leading-edge IVCT Development (VALID) Act has received increasing congressional support.
If enacted, the VALID Act would codify into law the term “in vitro clinical test” (IVCT) to create a new medical product category separate from medical devices that includes products currently regulated as in vitro diagnostics (IVDs) as well as LDTs.
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It is unclear whether the VALID Act will be passed by Congress in its current form or signed into law by the President.
−Removed: Until the FDA finalizes its regulatory position regarding LDTs, or the VALID Act or other legislation is passed reforming the federal government’s regulation of LDTs, it is unknown how the FDA may attempt to regulate our tests in the future and what testing and data may be required to support any required clearance or approval of our tests by the agency.
−Removed: If the VALID Act is implemented as drafted it could have an adverse material impact on our results of operations.
+Added: Until the FDA finalizes its regulatory position regarding LDTs through formal notice-and-comment rulemaking, or the VALID Act or other legislation is passed reforming the federal government’s regulation of LDTs, it is unknown how the FDA may attempt to regulate our tests in the future and what testing and data may be required to support any required clearance or approval of our tests by the agency.
+Added: If the VALID Act is implemented as drafted, or if the FDA were to promulgate regulations governing the development and marketing of LDTs, it could have a materially adverse impact on our results of operations.
+Added: FDA regulation of our GeneSight Psychotropic test could be disruptive to our business.
+Added: As described further above, the FDA has long claimed authority to regulate laboratory-developed tests but has exercised its “enforcement discretion” to limit enforcement of in vitro diagnostic regulatory requirements on this category of products.
+Added: The FDA has from time to time appeared to increase its attention to the marketing of pharmacogenetic tests.
+Added: For example, in late 2018, the FDA issued a safety communication regarding “genetic tests that claim results can be used to help physicians identify which antidepressant medication would have increased effectiveness or side effects compared to other antidepressant medications.” This safety communication explained that the FDA had reached out to several firms marketing such pharmacogenetic tests where the FDA believed the relationship between genetic variations and a medication’s effects had not been established, including a warning letter to Inova Genomics Laboratory.
+Added: In early 2019, we provided the FDA with clinical evidence and other information to support our GeneSight Psychotropic test.
+Added: Later that year, the FDA requested changes to the GeneSight test offering.
+Added: Although we disagreed that changes to the test were required, we submitted a proposal regarding the reporting of GeneSight test results to healthcare providers that we believed addressed the FDA’s principal concerns and would not affect the benefits that we believe are provided by the GeneSight test.
+Added: Since submitting our proposal to the FDA, we engaged with our trade association in their efforts to defend the offering of pharmacogenomic tests as LDTs and to monitor broader developments across the stakeholder community.
+Added: In response to public letters from the national laboratory trade association and patient groups, on February 20, 2020, the FDA announced a new “collaboration between FDA’s Center for Devices and Radiological Health and Center for Drug Evaluation and Research intended to provide the agency’s view of the state of the current science in pharmacogenetics.” Although the announcement again asserted that some pharmacogenetic test offerings may be potentially dangerous, the agency also acknowledged that pharmacogenetic testing “offers promise for informing the selection or dosing of some medications for certain individuals.” In conjunction with the announcement, the FDA also released an updated “Table of Pharmacogenetic Associations,” which lists gene-drug interactions that the agency believes are supported by FDA-approved drug labeling and/or “sufficient scientific evidence based on published literature.” The Table has been updated periodically since that time.
+Added: Based on our discussions with the agency and these developments, we have not implemented our proposal to the FDA regarding the GeneSight test.
+Added: While we see these developments as signaling a positive shift in the FDA’s approach to regulating pharmacogenetic tests, we cannot predict with certainty the outcome of this matter or its timing, or whether the ultimate form of the GeneSight Psychotropic Mental Health Medication test offering, if it must be changed, will have an adverse effect on our revenues from the test.
Companion and complementary diagnostic tests require FDA approval, and we may not be able to secure such approval in a timely manner or at all.
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• result in limitations on the indicated uses of products.
−Removed: Although we have successfully achieved FDA approval for some tests (e.g., our BRAC Analysis CDx and MyChoice CDx tests), we cannot predict whether or when we will be able to obtain FDA approval for other companion diagnostics that we are developing.
+Added: Although we have successfully received FDA approval for some tests (e.g., our BRACAnalysis CDx and MyChoice CDx tests), we cannot predict whether or when we will be able to obtain FDA approval for other companion diagnostics that we are developing.
+Added: Our companion diagnostic tests are subject to ongoing regulatory compliance obligations and continued regulatory review and the failure to comply with such obligations could result in regulatory enforcement and/or penalties.
+Added: Companion diagnostic tests such as BRACAnalysis CDx and MyChoice CDx are subject to ongoing FDA and comparable foreign regulatory authority requirements for manufacturing, labeling, packaging, storage, distribution, quality, safety, sale, marketing, advertising, promotion, sampling, record-keeping, export, import, conduct of post-marketing studies and submission of safety, efficacy or other post-market information.
+Added: In addition, we are subject to continued compliance with regulatory requirements applicable to medical devices and in vitro diagnostics.
+Added: The FDA or other regulatory authorities may take regulatory enforcement or other legal action or may impose consent decrees or withdraw approval if compliance with regulatory requirements and standards is not maintained or if problems occur with our marketed products.
+Added: We also cannot predict the likelihood, nature or extent of government regulation that may arise from future legislation or administrative or executive action, either in the United States or abroad.
+Added: If we are slow or unable to adapt to changes in existing requirements or the adoption of new requirements or policies, or if we are not able to maintain regulatory compliance, we may lose any marketing approval that we may have obtained, and be subject to financial penalties or administrative action.
+Added: Our business involves environmental risks that may result in liability for us.
+Added: In connection with our research and development activities, we are subject to federal, state and local laws, rules, regulations and policies governing the use, generation, manufacture, storage, air emission, effluent discharge, handling and disposal of certain materials, including hazardous materials, biological specimens, chemicals and waste.
+Added: The cost of compliance with these laws and regulations may become significant and could negatively affect our operating results.
+Added: Although we believe that we have complied with the applicable laws, regulations and policies in all material respects and have not been required to correct any material noncompliance, we may be required to incur significant costs to comply with environmental and health and safety regulations in the future.
+Added: Although we believe that our safety procedures for handling and disposing of controlled materials comply with the standards prescribed by state and federal regulations, accidental contamination or injury from these materials may occur.
+Added: In the event of such an occurrence, we could be held liable for any damages that result and any such liability could exceed our resources or any applicable insurance coverage we may have.
Risks Related to Our Common Stock
Our stock price is highly volatile, and our stock may lose all or a significant part of its value.
−Removed: The market prices for securities of molecular diagnostic companies have been volatile.
+Added: The market prices for securities of relevant testing companies have been volatile.
This volatility has significantly affected the market prices for these securities for reasons frequently unrelated to the operating performance of the specific companies.
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The market price for our common stock has fluctuated significantly since public trading commenced in October 1995, and it is likely that the market price will continue to fluctuate in the future.
−Removed: In the year ended December 31, 2021, our stock price has ranged from $19.92 per share to $36.66 per share.
+Added: In the year ended December 31, 2022, our stock price ranged from $13.92 per share to $28.45 per share.
In addition, the stock market in general has experienced extreme price and volume fluctuations.
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• failure of any of our recently launched tests and any new test candidates to achieve commercial success;
−Removed: • failure to sustain revenue growth or margins in our molecular diagnostic business;
−Removed: • changes in the structure of healthcare payment systems and changes in governmental or private insurer reimbursement levels for our molecular diagnostic tests;
+Added: • failure to achieve and sustain revenue growth or margins in our business;
+Added: • changes in the structure of healthcare payment systems and changes in governmental or private insurer reimbursement levels for our tests;
• introduction of new commercial tests or technological innovations by competitors;
−Removed: • termination of the licenses underlying our molecular diagnostic tests;
+Added: • termination of the licenses underlying our tests;
• delays or other problems with operating our laboratory facilities;
• failure of any of our research and development programs;
−Removed: • changes in intellectual property laws or the enforcement or validity of our patents in the United States and foreign countries;
+Added: • changes in intellectual property laws or the enforcement, validity or expiration of our patents in the United States and foreign countries;
• developments or disputes concerning patents or other proprietary rights involving us directly or otherwise affecting the industry as a whole;
• missing or changing the financial guidance we provide;
−Removed: • changes in estimates or recommendations by securities analysts relating to our common stock or the securities of our competitors;
+Added: • failure of analysts to initiate or maintain coverage of our company;
+Added: • negative publicity, including misinformation, about our company, our tests or the industry in which we operate;
• changes in the government regulatory approval process for our existing and new tests;
• failure to meet estimates or recommendations by securities analysts that cover our common stock;
+Added: • issuance of new securities analysts reports or changes in estimates or recommendations by securities analysts relating to our common stock or the securities of our competitors;
• public concern over our approved tests and any test candidates;
−Removed: • litigation;
+Added: • litigation, including the outcome of existing and new litigation against us;
• government and regulatory investigations;
+Added: • our ability to raise additional funds if and when needed;
• future sales or anticipated sales of our common stock by us or our stockholders;
• the timing and amount of any repurchases of our common stock;
−Removed: • general market conditions;
+Added: • general market conditions, including as a result of changes in the rate of inflation and interest rates;
• seasonal slowness in sales, particularly in the quarters ending September 30th and March 31st, the effects of which may be difficult to understand during periods of growth;
−Removed: • general perception of the molecular diagnostic industry and our products;
+Added: • general perception of the industry and our products;
• economic, health care and diagnostic trends, disasters or crises and other external factors;
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These and other external factors may cause the market price and demand for our common stock to fluctuate substantially, which may limit or prevent investors from readily selling their shares of common stock and may otherwise negatively affect the liquidity of our common stock.
−Removed: In addition, securities class action litigation such as the current stockholder suit pending against the Company discussed elsewhere in this section and certain related matters may affect the market price and demand for our common stock.
−Removed: If any of our other stockholders brought another lawsuit against us, we could incur substantial costs defending the lawsuit regardless of the outcome.
−Removed: Such a lawsuit could also divert the time and attention of our management.
−Removed: We have identified two material weaknesses in our internal control over financial reporting related to our income tax provision process and our general information technology controls and such weaknesses led to a conclusion that our internal control over financial reporting and disclosure controls and procedures were not effective as of December 31, 2021.
−Removed: Our inability to remediate these material weaknesses, our discovery of any additional weaknesses, or our inability to achieve and maintain effective disclosure controls and procedures and internal control over financial reporting could adversely affect our results of operations, our stock price and investor confidence in us.
+Added: In addition, securities class action litigation such as the current stockholder suit pending against the Company discussed elsewhere in this Annual Report on Form 10-K and certain related matters may affect the market price and demand for our common stock.
+Added: Such litigation may cause us to incur substantial costs defending the lawsuit regardless of the outcome and could also divert the time and attention of our management.
+Added: We also may decide to settle lawsuits on unfavorable terms, including above any insurance coverage that may be available.
+Added: Any such negative outcome could result in payments of substantial damages or fines, damage to our reputation or adverse changes to our offerings or business practices.
+Added: Furthermore, during the course of litigation, there could be negative public announcements of the results of hearings, motions or other interim proceedings or developments, which could have a material adverse effect on the market price of our common stock.
+Added: Our inability to achieve and maintain effective disclosure controls and procedures and internal control over financial reporting could adversely affect our results of operations, our stock price and investor confidence in us.
Section 404 of the Sarbanes-Oxley Act of 2002 requires that companies evaluate and report on the effectiveness of their internal control over financial reporting.
−Removed: In addition, we regularly engage our independent registered public accounting firm to report on its evaluation of those controls.
−Removed: As disclosed in more detail under Item 9A, “Controls and Procedures” below, during the preparation of our condensed consolidated quarterly financial statements as of September 30, 2021, management concluded that a material weakness in internal control over financial reporting existed related to our income tax provision process.
−Removed: Specifically, we did not provide adequate review and control with respect to the completeness and accuracy of inputs used in the gain/loss calculation related to a divestiture within the interim consolidated income tax provision and related accrual.
−Removed: While we have taken steps to remediate the material weakness, including steps to design and implement enhanced controls over the review of information underlying discrete transactions in the income tax provision, and we plan to continue taking additional steps to remediate the material weakness, this material weakness has not been remediated as of December 31, 2021.
−Removed: Management also concluded that a material weakness in internal control over financial reporting exists related to general information technology controls for information systems that are relevant to the preparation of the financial statements.
−Removed: Specifically, the material weakness resulted from the aggregation of control deficiencies related to systems supporting our internal control processes.
−Removed: Due to the material weaknesses in our internal control over financial reporting, we have also concluded that our disclosure controls and procedures were not effective as of December 31, 2021.
Failure to have effective internal control over financial reporting and disclosure controls and procedures could impair our ability to produce accurate financial statements on a timely basis and could lead to a restatement of our financial statements.
If, as a result of the ineffectiveness of our internal control over financial reporting and disclosure controls and procedures, we cannot provide reliable financial statements, our business decision processes may be adversely affected, our business and results of operations could be harmed, investors could lose confidence in our reported financial information, and our ability to obtain additional financing, or additional financing on favorable terms, could be adversely affected.
−Removed: In addition, failure to maintain effective internal control over financial reporting could result in investigations or sanctions by regulatory authorities.
−Removed: Our management has taken steps to remediate the material weakness related to our income tax provision process and our management will take steps to remediate the material weaknesses, including continuing to take steps to design and implement enhanced controls over the review of information underlying discrete transactions in the income tax provision, implementing improved IT policies, procedures and control activities for key systems which impact our financial reporting, and increasing resources dedicated to monitoring general information technology controls related to financial reporting to ensure compliance with policies and procedures.
−Removed: We intend to remediate these material weaknesses as soon as possible, but we cannot be certain as to when remediation will be completed.
−Removed: Additional details regarding the remediation efforts are disclosed under Item 9A, “Controls and Procedures” below.
−Removed: In addition, we may in the future identify additional internal control deficiencies that could rise to the level of a material weakness or uncover other errors in financial reporting.
+Added: Although we determined that our internal controls over financing reporting were effective as of December 31, 2022, we may in the future identify internal control deficiencies that could rise to the level of a material weakness or uncover other errors in financial reporting.
During the course of our evaluation of these material weaknesses, we may identify areas requiring improvement and may be required to design additional enhanced processes and controls to address issues identified through this review.
−Removed: In addition, there can be no assurance that such remediation efforts will be successful, that our internal control over financial reporting will be effective as a result of these efforts or that any such future deficiencies identified may not be material weaknesses that would be required to be reported in future periods.
+Added: There can be no assurance that such remediation efforts will be successful, that our internal control over financial reporting will be effective as a result of these efforts or that any such future deficiencies identified may not be material weaknesses that would be required to be reported in future periods.
In addition, we cannot assure you that our independent registered public accounting firm will be able to attest that such internal controls are effective when they are required to do so.
−Removed: If we fail to remediate the material weaknesses and maintain effective disclosure controls and procedures or internal control over financial reporting, you may not be able to rely on the integrity of our financial results, which could result in inaccurate or late reporting of our financial results, as well as delays or the inability to meet our reporting obligations or to comply with SEC rules and regulations.
+Added: If we fail to remediate any future material weaknesses and maintain effective disclosure controls and procedures or internal control over financial reporting, you may not be able to rely on the integrity of our financial results, which could result in inaccurate or late reporting of our financial results, as well as delays or the inability to meet our reporting obligations or to comply with the rules and regulations of the Securities and Exchange Commission.
Any of these could result in delisting actions by the Nasdaq Stock Market, investigation and sanctions by regulatory authorities, stockholder investigations and lawsuits, and could adversely affect our business and the trading price of our common stock.
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The provisions in a stockholders’ rights plan, as well as Section 203, may discourage certain types of transactions in which our stockholders might otherwise receive a premium for their shares over the then-current market price, and may limit the ability of our stockholders to approve transactions that they think may be in their best interests.
+Added: Future sales and issuances of our common stock would result in dilution of the percentage ownership of our stockholders and could cause the price of our common stock to decline.
+Added: From time to time, we may issue additional securities or sell common stock, convertible securities or other securities in one or more transactions at prices and in a manner we determine.
+Added: We also plan to continue to grant equity awards that convert into our common stock to employees and directors pursuant to our equity incentive plan.
+Added: If we sell or issue common stock, convertible securities or other equity securities, or common stock is issued pursuant to equity incentive plans, holders of our common stock may be materially diluted.
+Added: In addition, we may issue common stock or other equity securities in connection with an acquisition or other strategic transaction, which would cause dilution to our existing stockholders.
+Added: New investors in such transactions could gain rights, preferences and privileges senior to those of holders of our common stock.
We do not intend to pay dividends on our common stock so any returns will be limited to changes in the value of our common stock.
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We do not have any control over these analysts.
−Removed: If few analysts commence coverage of us, the trading of our stock would likely decrease.
−Removed: Even if we do obtain sufficient analyst coverage, there can be no assurance that analysts will provide favorable coverage.
+Added: If few analysts continue coverage of us, the trading of our stock would likely decrease.
+Added: Even if we do maintain sufficient analyst coverage, there can be no assurance that analysts will provide favorable coverage.
If one or more of the analysts who covers us downgrades our stock or publishes inaccurate or unfavorable research about our business, our stock price may decline.
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Our restated bylaws provide that a state court located within the State of Delaware is the sole and exclusive forum for certain types of actions and proceedings that may be initiated by our stockholders, which could limit our stockholders’ ability to obtain a favorable judicial forum for disputes with us or our directors, officers or employees.
−Removed: Our restated bylaws provide that a state court located within the State of Delaware (or, if no state court located within the State of Delaware has jurisdiction, the federal district court for the District of Delaware) is the sole and exclusive forum for any derivative action or proceeding brought on our behalf, any action asserting a claim of breach of fiduciary duty, any action asserting a claim against us arising pursuant to the Delaware General Corporation Law, our certificate of incorporation or our restated bylaws, or any action asserting a claim against us governed by the internal affairs doctrine.
+Added: Our restated bylaws provide that a state court located within the State of Delaware (or, if no state court located within the State of Delaware has jurisdiction, the federal district court for the District of Delaware) is the sole and exclusive forum for any derivative action or proceeding brought on our behalf, any action asserting a claim of breach of fiduciary duty, any action asserting a claim against us arising pursuant to the Delaware General Corporation Law, our restated certificate of incorporation or our restated bylaws, or any action asserting a claim against us governed by the internal affairs doctrine.
This exclusive forum provision may limit a stockholder’s ability to bring a claim in a judicial forum that it finds favorable for disputes with us or our directors, officers or other employees and may discourage these types of lawsuits.
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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.