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• 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: • Our financial condition and results of operations could be adversely affected by adverse public health developments.
−Removed: • If our SneakPeek Early Gender DNA Test does not perform as expected, we may not realize the expected benefits of our acquisition of Gateway (as defined below).
−Removed: • 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, our business operations and financial condition could be adversely affected.
+Added: • Security breaches, loss of data and other disruptions, including from cyberattacks and other cybersecurity incidents, could compromise personal, confidential, or other sensitive or proprietary 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.
+Added: • If we experience a significant disruption in our information technology systems, or those of third-parties upon which we rely, including cloud-based services, our business operations and financial condition could be adversely affected.
+Added: • Artificial intelligence introduces emerging risks and challenges to our business.
• 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.
−Removed: • Our inability to, or delay in, transitioning certain of our laboratory operations to new laboratory facilities in west Salt Lake City, Utah and South San Francisco, California could adversely affect our business.
−Removed: • We depend on a limited number of third parties, or, in some cases, single-source suppliers, for equipment, reagents and other supplies.
−Removed: If these supplies become unavailable or are disrupted, then we may not be able to successfully perform our research or operate our business on a timely basis or at all.
+Added: • We depend on a limited number of third parties, or, in some cases, single-source suppliers, for equipment, reagents, other supplies, and specimen collection services.
+Added: If these supplies or services become unavailable or are disrupted, then we may not be able to successfully perform our research, operate our business, or perform our tests on a timely basis or at all.
• Our international business exposes us to business, regulatory, political, operational, financial, and economic risks associated with doing business outside of the United States.
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• We rely on commercial courier delivery services to transport biological materials to our facilities in a timely and cost-efficient manner and if these delivery services are disrupted, our business will be harmed.
+Added: • Our financial condition and results of operations could be adversely affected by adverse public health developments.
• We face risks associated with currency exchange rate fluctuations, which could adversely affect our operating results.
• Impairment in the value of our goodwill or other intangible assets could have a material adverse effect on our operating results and financial condition.
−Removed: • Our estimates of actionable market size and forecasts of market growth may prove to be inaccurate, and even if the market in which we compete achieves the forecasted growth, our business could fail to grow at similar rates.
+Added: • Our estimates of actionable market size and forecasts of market growth may prove to be inaccurate, and even if the market in which we compete achieves the forecasted growth, our business could fail to grow at expected rates.
• Our ability to use our net operating loss carryforwards and certain other tax attributes may be limited.
+Added: • Changes in tax laws or in their implementation or interpretation may adversely affect our business and financial condition.
Risks Related to the Development and Commercialization of Our Tests and Test Candidates
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• 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.
−Removed: • 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: • Our actual or perceived failure to comply with data protection laws and regulations could lead to complaints, 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.
−Removed: • Changes in health care policy could increase our costs, decrease our revenues and impact sales of and reimbursement for our tests.
+Added: • Changes in health care policy could increase our costs, decrease our revenue 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.
−Removed: • 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: • Planned changes in the way the FDA regulates tests performed by laboratories like ours will result in delay and/or additional expense in offering our tests and tests that we may develop in the future.
• FDA regulation of our GeneSight Psychotropic test could be disruptive to our business.
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• If securities or industry analysts do not publish research or publish inaccurate or unfavorable research about our business, our stock price and trading volume could decline.
−Removed: • Increasing scrutiny and evolving expectations from regulators, business partners, investors, and other stakeholders with respect to our ESG practices may impose additional costs on us or expose us to new or additional risks.
−Removed: • Our restated certificate of incorporation and our restated bylaws designate specific state or federal courts as the 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.
+Added: • Increasing scrutiny and evolving expectations from regulators, business partners, investors, and other stakeholders with respect to our environmental, social, and governance practices may impose additional costs on us or expose us to new or additional risks.
+Added: • Our certificate of incorporation and our bylaws designate specific state or federal courts as the 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.
Risks Related to Our Business and Our Strategy
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 tests to additional patients within the United States, to expand into new markets, to develop and commercialize new tests and to maintain or obtain reimbursement for our tests.
+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 product markets, to develop and commercialize new tests and to maintain or obtain reimbursement for our tests.
However, we may not be able to generate sufficient revenue, from our existing tests and launching and commercializing new tests, to be profitable.
+Added: For the year ended December 31, 2024, our net loss was $127.3 million and we expect to continue to incur net losses in future years.
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.
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.
−Removed: Our average reimbursement rate per test may also decline, which may cause our revenues to decrease.
−Removed: 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: Our average reimbursement rate per test may also decline, which may cause our revenue to decrease.
+Added: Our pipeline of new test candidates, such as FirstGene, Precise Liquid, 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.
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.
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We must generate significant revenue to achieve profitability.
−Removed: 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: Even if we succeed in marketing our existing tests to physicians for use in new patients and in developing and commercializing any new tests, we may not be able to generate sufficient revenue to be profitable.
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.
−Removed: We are currently executing upon a multi-year strategic growth plan in which we intend to continue growing by articulating our clinical differentiation, raising awareness with patients who we believe would benefit from our testing products, and innovation that improves clinical outcomes, ease of use, and access.
+Added: We are currently executing upon a multi-year strategic growth plan in which we intend to continue growing by accelerating our EMR integrations, expanding our sales channels, including into large health systems, cross selling our portfolio of testing products to providers, enhancing our testing products within medical guidelines, demonstrating our clinical differentiation and value against the standard of care, and optimizing our revenue cycle processes.
+Added: For example, in June 2024, we launched the Universal Plus Panel to our Foresight Carrier Screen Test, which is an expanded carrier screening test.
+Added: We also continue to invest in clinical evidence development to support the growth of our existing products and launch of new products, such as FirstGene, Precise Liquid, and Precise MRD, which we expect will help us continue to grow.
Our future performance and growth depend 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.
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• the expiration of the patents covering our products;
−Removed: • the outcome of outstanding or new litigation;
• potential obsolescence of our tests;
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• global or local economic conditions;
+Added: • protectionist laws and business practices, including trade restrictions, tariffs, export controls, quotas and other trade barriers, including China-U.S., Mexico-U.S.
+Added: and Canada-U.S trade policies;
• increased regulatory requirements;
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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: We do not receive reimbursement from third-party payers or payment from patients for many of the tests we perform.
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.
−Removed: Historically, we have not received reimbursement from third-party payors or payment from patients for many of our tests.
+Added: For example, UnitedHealthcare updated its medical policy for pharmacogenetic testing to no longer provide coverage for certain multi-gene panel pharmacogenetic tests, including our GeneSight test, under its commercial and individual exchange benefit plans and certain managed Medicaid plans.
+Added: The change took effect for commercial and individual exchange benefit plans on January 1, 2025, and is expected to take effect for impacted managed Medicaid plans during the first half of 2025.
+Added: For the year ended December 31, 2024, we recognized approximately $45.0 million of revenue for GeneSight testing from UnitedHealthcare, consisting of approximately $40.0 million for UnitedHealthcare commercial and approximately $5.0 million for impacted UnitedHealthcare managed Medicaid plans.
+Added: We anticipate that the change in UnitedHealthcare coverage will negatively impact our revenue, profitability and cash flow in 2025 and thereafter.
+Added: While we intend to continue our engagement with UnitedHealthcare regarding its decision to change its GeneSight coverage policy, there is no guarantee that our efforts will be successful or that our GeneSight test will be covered by UnitedHealthcare in the future.
+Added: If unchanged, UnitedHealthcare's updated medical policies will prevent us from sustaining previous GeneSight revenue or profitability levels and may materially and adversely affect our business and financial results as a whole and could lead to coverage changes in other UnitedHealthcare plans and at other payors.
+Added: In addition, the lack of reimbursement for our GeneSight test may discourage providers from ordering it for their patients.
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.
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Since December 2019, Congress has passed a series of laws to modify PAMA’s statutory requirements related to the data reporting period and phase-in of payment reductions under the CLFS for CDLTs that are not ADLTs.
−Removed: Most recently, the Further Continuing Appropriations and Other Extensions Act of 2024 (Pub.L.
−Removed: 118-22, enacted on November, 16, 2023) further delayed the reporting requirement as well as the application of the 15% phase-in reduction.
+Added: Most recently, the Further Continuing Appropriations and Extensions Act, 2025 (Pub.L.
+Added: 118-83, enacted on September 26, 2024) further delayed the reporting requirement as well as the application of the 15% phase-in reduction.
Under these statutory provisions, the next data reporting period for CDLTs that are not ADLTs will be January 1, 2026 through March 31, 2026.
−Removed: The same series of laws modified the phase-in of payment reductions resulting from private payor rate implementation so that a 0.0 percent reduction limit was applied for calendar years 2021 through 2023, as compared to the payment amounts for a test the preceding year.
−Removed: The Further Continuing Appropriations and Other Extensions Act of 2024 further applied a 0.0 percent reduction limit for calendar year 2024.
+Added: The same series of laws modified the phase-in of payment reductions resulting from private payor rate implementation so that a 0.0 percent reduction limit was applied for calendar years 2021 through 2024.
+Added: The Further Continuing Appropriations and Extensions Act, 2025 further applied a 0.0 percent reduction limit for calendar year 2025.
Consequently, payment may not be reduced by more than 15 percent per year for calendar years 2026 through 2028 as compared to payment amount established for a test the prior year.
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: Third-party payors may also impose prior authorization requirements, 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: Third-party payors may also impose prior authorization requirements, 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 change our revenue estimates for previously delivered tests or refund reimbursements already received.
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: 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 payment from our testing.
We also periodically receive and respond to requests for recoupment from third-party payors in the ordinary course of business.
−Removed: 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.
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.
We may also continue to negotiate and settle with third-party payers in order to resolve allegations of overpayment.
+Added: As part of our revenue recognition process, we estimate the expected amount of consideration to be received from our tests using all the information (historical, current, and forecast) that is reasonably available to identify possible consideration amounts.
+Added: The estimate of revenue is affected by, among other factors, changes in payor mix, payor collections, current customer contractual requirements, experience with collections from third-party payors, and changes in medical policies.
+Added: We have experienced, and may continue to experience, positive and negative changes in our revenue estimates for previously delivered tests as a result of third-party payors disputing our bills or denying payment for tests that we have performed or from changes in the estimated transaction price due to contractual adjustments, obtaining updated information from payors and patients that was unknown at the time the performance obligation was met and settlements with third-party payors.
+Added: While we believe our revenue recognition process is reasonable and performed in accordance with applicable accounting standards, we cannot guarantee that our revenue estimates for our tests will be accurate or equal the amount of cash actually collected or that we will not continue to recognize positive or negative changes in our revenues for tests performed in prior periods.
+Added: For example, we have one third-party payor that represents 18% and 12% of our total accounts receivable balance as of December 31, 2024 and December 31, 2023.
+Added: If the actual amount of cash collected from this payor differs from our current estimates, our revenue may be materially impacted.
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.
−Removed: 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.
−Removed: 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.
−Removed: As we are not a participating laboratory under the PNS Program, we would have been prohibited from offering or performing our Prequel screening test in California.
−Removed: 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.
−Removed: 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.
−Removed: 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.
−Removed: On December 17, 2022, we filed jointly with Labcorp a motion for judgment on our writ, through which we sought a permanent injunction to enjoin the implementation and enforcement of the new exclusivity regulation.
−Removed: On April 28, 2023, the Superior Court issued an order granting our motion for a permanent injunction to enjoin the implementation and enforcement of the new exclusivity regulation.
−Removed: On June 1, 2023, the Superior Court issued a final judgment and writ of mandate enjoining the implementation and enforcement of the new exclusivity regulation.
−Removed: The CDPH did not file a notice of appeal.
+Added: For example, in September 2022, the California Department of Public Health (CDPH) implemented regulatory amendments making the California Prenatal Screening (PNS) Program the exclusive provider of cell-free DNA (cfDNA) trisomy screening in California.
+Added: These regulatory amendments set reimbursement rates significantly below prior levels and barred non-participating laboratories from offering or performing cfDNA trisomy screening in California.
+Added: As we were not a participating laboratory under the PNS Program, we would have been prohibited from offering or performing our Prequel screening test in California.
+Added: However, 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, seeking to block the exclusivity regulation.
+Added: The Superior Court granted a preliminary injunction on November 2, 2022, and later issued a permanent injunction on April 28, 2023, preventing enforcement of the regulation.
+Added: A final judgment was entered on June 1, 2023, and CDPH did not appeal.
As a result of the foregoing, we expect to continue to be able to offer and perform our Prequel screening test in California.
−Removed: However, the possibility that we might not be able to continue to offer our Prequel screening test in California had a chilling effect on sales of our Prequel screening test in California.
+Added: However, the possibility that we might not have been able to continue to offer our Prequel screening test in California had a chilling effect on sales of our Prequel screening test in California.
and foreign governments continue to propose and pass legislation designed to reduce the cost of health care.
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If we do not generate sufficient cash flow from operations and are unable to secure additional funding, we may have to reduce our operations.
−Removed: While we believe that our existing cash, cash equivalents and marketable securities, future cash flow from operations, and amounts available for borrowing under our ABL Facility (as defined below) will be sufficient to meet our anticipated cash requirements for at least the next 12 months, 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: While we believe that our existing cash and cash equivalents, future cash flow from operations, and amounts available for borrowing under our ABL Facility (as defined below) will be sufficient to meet our anticipated cash requirements for at least the next 12 months, 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.
On June 30, 2023, we entered into an asset-based revolving credit facility (the ABL Facility) with an initial maximum principal amount of $90.0 million with JPMorgan Chase Bank, N.A.
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As of December 31, 2024, we had $40.5 million of outstanding borrowings under the ABL Facility.
−Removed: The ABL Facility limits our ability to incur additional indebtedness and requires us to comply with certain minimum liquidity and minimum availability covenants.
−Removed: In addition, during November 2023, we completed an underwritten public offering of our common stock in which we sold 7,441,176 shares of our common stock at a price of $17.00 per share for proceeds of $117.6 million, net of offering expenses and underwriting discounts.
+Added: The ABL Facility limits our ability to incur additional indebtedness and requires us to comply with certain minimum liquidity and availability covenants.
+Added: The ABL Facility matures on June 30, 2026, and there is no guarantee that the ABL 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.
If we do not generate sufficient cash from operations, if our capital resources are consumed more rapidly than expected, or if we no longer have access to additional funds under our ABL Facility and are unable to secure additional funding, on acceptable terms or at all, 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.
+Added: For example, in recent years, we have generated cash outflows from operations.
+Added: Although we expect to generate cash inflows in the near future, our forecasts may be inaccurate.
If any of these events occur, our ability to achieve our development and commercialization goals could be adversely affected.
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• the costs to satisfy our current and future obligations.
+Added: In addition, we anticipate that UnitedHealthcare’s recent update to its medical policy for pharmacogenetic testing to no longer cover certain multi-gene panel tests, including our GeneSight test, under it commercial, individual exchange, and certain managed Medicaid plans will negatively impact our revenue, profitability, and cash flow in 2025 and thereafter.
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.
1 unchanged sentence
These restrictions may prohibit or place limitations on, among other things, our ability to incur liens, incur indebtedness, dispose of assets, make investments, make certain restricted payments, merge or consolidate and enter into certain speculative hedging arrangements.
−Removed: We are also required to maintain minimum liquidity of $60.0 million and minimum availability of $25.0 million at all times before achieving a fixed charge coverage ratio of 1.0 to 1.0 and thereafter, to maintain a fixed charge coverage ratio of 1.0 to 1.0 until achieving availability under the ABL Facility of greater than the greater of (a) $10.6 million and (b) 12.5% of the lesser of the maximum commitment amount and the borrowing base for a period of 30 consecutive days.
+Added: We are also required to maintain a fixed charge coverage ratio of at least 1.0 to 1.0 if availability under the ABL Facility is less than the greater of (a) $10.6 million and (b) 12.5% of the lesser of the maximum commitment amount and the borrowing base.
In addition, the ABL Facility includes a number of customary events of default.
1 unchanged sentence
If our existing capital resources and expected net cash to be generated from sales of our tests is not sufficient for us to maintain our currently planned operations, we may find it necessary to raise additional funding, which may not be available on favorable terms, or at all.
−Removed: We believe that our existing cash, cash equivalents and marketable securities of $140.9 million as of December 31, 2023, our expected cash flow from operations, and our availability to borrow will be sufficient to meet our anticipated cash requirements for at least the next 12 months.
+Added: We believe that our existing cash and cash equivalents of $102.4 million as of December 31, 2024, our expected cash flow from operations, and our availability to borrow will be sufficient to meet our anticipated cash requirements for at least the next 12 months.
However, we base this expectation on our current operating plan, which may change.
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In addition, we have incurred, and may continue to incur, substantial costs in defending and settling legal proceedings.
−Removed: In connection with the settlement of the Ravgen (as defined below) litigation, we may be required to pay Ravgen $21.25 million in five annual installments beginning no earlier than January 1, 2026 if certain conditions are satisfied.
−Removed: We may also be required to pay an additional $25.0 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.
−Removed: If adequate funds are not available, we may be required to raise additional funds.
−Removed: Sources of potential additional capital resources may include, but are not limited to, public or private equity financings, or selling convertible or non-convertible debt securities.
+Added: Sources of potential additional capital resources may include, but are not limited to, additional indebtedness, public or private equity financings, or selling convertible or non-convertible debt securities.
Any additional funding, if necessary, may not be available to us on reasonable terms, or at all.
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Pursuant to the terms of the settlement, we paid a settlement amount of $77.5 million in cash.
+Added: On April 30, 2024, we entered into a stipulation of settlement to resolve certain stockholder derivative actions, which was subsequently approved by the Court of Chancery of the State of Delaware on November 26, 2024.
+Added: As part of the settlement, we agreed to adopt or implement certain corporate governance reforms and we paid an award of attorneys' fees and expenses to the plaintiffs in the amount of $950,000.
We also may be subject to future securities class action and stockholder derivative claims.
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If we were successfully sued for product or professional liability claims or in connection with future securities class action and stockholder derivative claims, we could face substantial losses that exceed our insurance coverage and our other resources.
−Removed: For example, we depleted our director and officer's insurance coverage for the recently settled securities class action lawsuit and no insurance proceeds were available to us to pay the settlement amount.
+Added: For example, we depleted our director and officer's insurance coverage for the securities class action lawsuit that we settled in 2023, and no insurance proceeds were available to us to pay the settlement amount.
If we are not successful in our defense of any future litigation, 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.
6 unchanged sentences
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 short-term incentive and equity award programs, may not be successful in attracting new employees and retaining and motivating our existing employees.
+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, particularly in instances where the value of our common stock has declined since the time that incentive awards were granted.
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.
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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.
+Added: On February 24, 2025, Paul J.
+Added: Diaz, our current President and Chief Executive Officer, announced that he will step down from those positions on April 30, 2025.
+Added: Our Board of Directors appointed Samraat S.
+Added: Raha, our current Chief Operating Officer, to succeed Mr.
+Added: Diaz as our President and Chief Executive Officer on April 30, 2025.
+Added: Our Board of Directors also appointed Mark S.
+Added: Verratti, our current Chief Commercial Officer, as our Chief Operating Officer as of April 30, 2025 to succeed Mr.
+Added: Raha in this position.
+Added: A search for a new Chief Commercial Officer is underway.
+Added: Although we have taken steps to help ensure a smooth and successful transition of our senior leadership, there can be no assurance that these steps will be successful.
+Added: The transition of our senior leadership team or the loss of any member of our senior management team may create uncertainty, involve a diversion of resources and management attention, or cause us to experience difficulties in competing effectively, developing our technologies, and implementing our business strategies.
+Added: In addition, there is no guarantee we will be successful in recruiting a suitable new Chief Commercial Officer.
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.
1 unchanged sentence
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: For example, on February 1, 2024, we acquired the Precise Tumor Test, the Precise Liquid Test, and a CLIA certified laboratory from Intermountain Healthcare.
−Removed: However, these acquisitions may not generate a positive return on our investment.
−Removed: 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.
+Added: For example, on February 1, 2024, we acquired the Precise Tumor Test, the Precise Liquid Test, and a CLIA certified laboratory from Intermountain Healthcare and on November 1, 2022, we acquired Gateway Genomics, LLC (Gateway), a personal genomics company and developer of consumer genetic tests that gives families genetic insight into their future children.
+Added: These acquisitions may not generate a positive return on our investment and we may not realize, and in certain cases, have not realized, all of the benefits that we expected to achieve from these acquisitions.
+Added: 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, or successfully integrate personnel or assets that we acquire.
We may also experience increased expenses, distraction of our management, and personnel and customer uncertainty as a result of our acquisition activities.
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The process of negotiating acquisitions and integrating acquired tests, services, technologies, personnel or businesses might result in operating difficulties and expenditures and might require significant management attention that would otherwise be available for ongoing development of our business, whether or not any such transaction is ever consummated.
−Removed: Moreover, we might never realize the anticipated benefits of any acquisition such as increase in our scale, diversification, cash flows and operational efficiency and meaningful accretion to our diluted earnings per share.
+Added: Moreover, we might never realize the anticipated benefits of any acquisition such as increase in our scale, diversification, cash flows and operational efficiency and meaningful accretion to our earnings per share.
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.
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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: 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.
−Removed: 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: For example, we completed the sale of our EndoPredict business on August 1, 2024.
+Added: The prices that we receive for such assets may not be high and, in some cases, has been lower than the amount we invested in or paid for such assets.
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.
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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.
−Removed: Our financial condition and results of operations could be adversely affected by adverse public health developments.
−Removed: Any outbreak of contagious disease or adverse public health development could have a material and adverse effect on our business operations, financial condition, or results of operations.
−Removed: Such adverse effects have included, and may in the future include, diversion or prioritization of health care resources away from the conduct of testing, limitations on patients' access to our products, and disruptions or restrictions affecting the ability of our laboratories to process our tests.
−Removed: 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.
−Removed: To the extent that any disease affects individuals and businesses around the globe, we may experience 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 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 or the spread of another disease 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 in the future be, subject to disruption as a result of COVID-19 or another disease and responses to it.
−Removed: If the supplies and components necessary to manufacture our products become unavailable or are disrupted as a result of a 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.
−Removed: If our SneakPeek Early Gender DNA Test does not perform as expected, we may not realize the expected benefits of our acquisition of Gateway.
−Removed: On November 1, 2022, we acquired Gateway Genomics, LLC ("Gateway"), a personal genomics company and developer of consumer genetic tests that gives families insight into their future children.
−Removed: Gateway offers and sells the SneakPeek Early Gender DNA Test in the U.S.
−Removed: direct to consumers via sneakpeektest.com and Amazon.com, through various clinical channels, such as OBGYN offices, midwives, birth centers and ultrasound clinics and laboratories, and in certain retail locations.
−Removed: The SneakPeek Early Gender DNA Test is also sold internationally through distributors in the United Kingdom, Canada, Australia and certain other countries.
−Removed: 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.
−Removed: 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.
−Removed: 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.
−Removed: 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.
−Removed: 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.
−Removed: 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.
−Removed: 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.
−Removed: 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 and customers, intellectual property, and proprietary business information, including that of our customers, payors and collaboration partners.
−Removed: We manage and maintain our applications and data utilizing on-site, remote, or cloud-based systems.
−Removed: These applications and data encompass a wide variety of business-critical information including research and development information, commercial information and business and financial information.
+Added: Security breaches, loss of data and other disruptions, including from cyberattacks and other cybersecurity incidents, could compromise personal.
+Added: confidential, or other sensitive or proprietary 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.
+Added: In the ordinary course of our business, we, and the third parties upon which we rely, process personal, confidential, or other sensitive or proprietary data.
+Added: This information includes, but is not limited to, patient health information, credit card information, personally identifiable information about our employees, customers and other third-parties, intellectual property, research and development information, financial information, commercial information, and proprietary business information, including that of our customers, payors and collaboration partners.
+Added: We manage and maintain our applications and data utilizing on-site, remote, or cloud-based systems, some of which is provided or managed by third party vendors and as a result, we and the third parties upon which we rely face a variety of evolving threats which could cause cybersecurity incidents.
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 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.
−Removed: 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, altered, lost or stolen.
−Removed: We have measures in place that are designed to prevent, and if necessary, to detect and respond to such cybersecurity incidents and breaches of privacy and security mandates.
−Removed: While we have experienced unauthorized accesses to our information technology systems and infrastructure in the past, which may occur again in the future, our security measures have been able to detect, respond to and prevent any material adverse effect to our information systems and business operations from such breaches.
−Removed: However, in the future, any such access, disclosure or other loss, or alteration of information could result in legal claims or proceedings, liability under laws that protect the privacy of personal information, such as HIPAA, government enforcement actions and civil or even criminal penalties.
−Removed: Unauthorized access, loss, alteration, or dissemination could also disrupt our operations, including our ability to process samples, provide test results, bill payors or patients, provide customer support services, conduct research and development activities, process and prepare company financial information, and manage various general and administrative aspects of our business, and may damage our reputation, any of which could adversely affect our business, financial condition and results of operations.
−Removed: In addition, we face increased cybersecurity risks and potential disruption to our technology infrastructure due to the number of employees that are working remotely as a result of remote work policies and other hybrid work arrangements.
−Removed: 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, our business operations and financial condition could be adversely affected.
+Added: The operation of, and our access to the data stored on, these systems could be interrupted by cyberattacks as well as natural disasters, terrorism, war, telecommunications and other electrical failures, any of which could have a material negative impact on our business and financial condition.
+Added: Despite our implementation of security measures, our internal computer systems and those of our collaborators, contractors, consultants, or other third parties upon which we rely are vulnerable to a variety of cybersecurity incidents, cyberattacks, computer viruses, malware, bugs, worms, or other malicious code, software or hardware failures, loss of data or other information technology assets, phishing or other unauthorized access, and other similar threats.
+Added: Such threats are prevalent and continue to rise, are increasingly difficult to detect, and come from a variety of sources, including traditional computer “hackers,” threat actors, “hacktivists,” organized criminal threat actors, personnel, such as through theft or misuse, sophisticated nation states, and nation-state-supported actors.
+Added: In particular, ransomware attacks, including those from organized criminal threat actors, nation-states and nation-state supported actors, are becoming increasingly prevalent and severe and can lead to significant interruptions, delays, or outages in our operations, loss of data, including sensitive customer information, loss of income, significant extra expenses to restore data or systems, reputational loss and the diversion of funds.
+Added: To alleviate the negative impact of a ransomware attack, it may be preferable to make payments to the threat actor(s), but we may be unwilling or unable to do so, including, for example, if applicable laws or regulations prohibit such payments.
+Added: In addition, developments in artificial intelligence and machine learning provide threat actors with the capability to use more sophisticated means to attack our systems and may exacerbate cybersecurity risk.
+Added: Some threat actors also now engage and are expected to continue to engage in cyber attacks, including without limitation nation-state actors, for geopolitical reasons and in conjunction with military conflicts and defense activities.
+Added: During times of war and other major conflicts, we, the third parties upon which we rely, and our customers may be vulnerable to a heightened risk of these attacks, including retaliatory cyber attacks, that could materially disrupt our systems and operations, supply chain and ability to produce, sell and distribute our goods and services.
+Added: In addition to experiencing a cybersecurity incident, third parties may gather, collect, or infer sensitive information about us from public sources, data brokers, or other means that reveals competitively sensitive details about our organization and could be used to undermine our competitive advantage or market position.
+Added: Additionally, remote work has become more common and has increased risks to our information technology systems and data, as more of our employees utilize network connections, computers and devices outside our premises or network, including working at home, while in transit and in public locations.
+Added: While we take steps to detect and remediate vulnerabilities, we may not be able to detect and remediate all vulnerabilities because the threats and techniques used to exploit such vulnerabilities change frequently and are often sophisticated in nature.
+Added: Therefore, such vulnerabilities could be exploited but may not be detected until after a cybersecurity incident has occurred, if at all.
+Added: Further, we may experience delays in developing and deploying remedial measures designed to address any such identified vulnerabilities.
+Added: We rely on third-party service providers and critical business information technology systems that we or our third-party providers operate to process, transmit and store personal, confidential, sensitive, and proprietary information in our day-to-day operations.
+Added: We also rely on third-party service providers to assist with our products or services, or otherwise to operate our business.
+Added: Our ability to monitor these third parties’ information security practices is limited, and these third parties may not have adequate information security measures in place.
+Added: If our third-party service providers experience a cybersecurity incident or other interruption, we could experience adverse consequences.
+Added: While we may be entitled to damages if our third-party service providers fail to satisfy their privacy or security-related obligations to us, any award may be insufficient to cover our damages, or we may be unable to recover such award.
+Added: In addition, supply-chain attacks have increased in frequency and severity, and we cannot guarantee that third parties and infrastructure in our supply chain or our third-party partners’ supply chains have not been compromised or that they do not contain exploitable defects or bugs that could result in a breach of or disruption to our information technology systems, including our services, or the third-party information technology systems that support us and our products and services.
+Added: Any of the previously identified or similar threats could cause a cybersecurity incident or other interruption that could result in unauthorized, unlawful, or accidental acquisition, modification, destruction, loss, alteration, encryption, disclosure of, or access to our sensitive data or our information technology systems, or those of the third parties upon whom we rely.
+Added: A cybersecurity incident or other interruption could disrupt our ability, and that of third parties upon whom we rely, to provide our products and services and otherwise disrupt our business.
+Added: The costs related to significant cybersecurity incidents or disruptions could be material and cause us to incur significant expenses.
+Added: If the information technology systems of our collaborators, and other contractors, consultants, or third parties become subject to disruptions or cybersecurity incidents, we may have insufficient recourse against such third parties and we may have to expend significant resources to mitigate the impact of such an event, and to develop and implement protections to prevent future events of this nature from occurring.
+Added: If such an event were to occur and cause interruptions in our operations, it could result in a disruption of our development programs and our business operations, financial loss, a loss of our trade secrets or other proprietary information and damage to our reputation and otherwise negatively impact us.
+Added: To the extent that any disruption or cybersecurity incident were to result in a loss of, or damage to, our data or applications, or inappropriate disclosure of confidential, sensitive, or proprietary information, we could incur liability, our competitive position could be harmed and the further development and commercialization of our products and services could be delayed.
+Added: Applicable data privacy and security obligations may require us to notify relevant stakeholders, regulatory authorities, and other individuals of cybersecurity incidents, and take other remedial measures.
+Added: Such disclosures and measures are costly, and the disclosure or the failure to comply with such requirements could lead to adverse consequences.
+Added: Any such event could also result in legal claims or proceedings, liability under laws that protect the privacy of personal information and significant regulatory penalties, and damage to our reputation and a loss of confidence in us.
+Added: If we experience a significant disruption in our information technology systems, or those of third-parties upon which we rely, including cloud-based services, our business operations and financial condition could be adversely affected.
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 IT and communication systems.
−Removed: 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.
−Removed: 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.
−Removed: In addition, we may not be able to maintain operational effectiveness of our IT and communication systems due to insufficient technology infrastructure, aging components, accumulated technical debt and gaps in our software release processes.
−Removed: 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.
−Removed: 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: The availability of our products and services and fulfillment of our customer contracts depends on the continuing operation of these systems.
+Added: In addition to our internally managed IT and communication systems, we rely on third-party IT and communication systems, some of which include cloud-based services, including data center hosting facilities.
+Added: Our IT and communication systems, and those of third-parties upon which we rely, may be susceptible to damage, disruptions or shutdowns due to power outages, hardware failures, computer viruses, attacks by computer hackers, telecommunication failures, user errors, natural disasters, or other unforeseen events.
+Added: Our IT and communication systems, and those of third-parties upon which we rely, 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: In addition, we may face challenges in maintaining the operational effectiveness of such IT and communication systems due to aging, accumulated technical debt, and gaps in our software release processes.
+Added: If we were to experience a prolonged IT system disruption involving our interactions with customers, providers or suppliers, it could result in material adverse effects on our business.
+Added: Furthermore, cybersecurity incidents impacting our IT systems, and those of third-parties upon which we rely, could result in the misappropriation or unauthorized disclosure of personal, sensitive, proprietary or other confidential information relating to us, our employees, partners, customers, suppliers, or other third-parties, which could result in our suffering significant financial or reputational damage .
+Added: Additionally, any disruption, failure, or breach of our IT and communications systems, or those of third-parties upon which we rely, could significantly impact our operations.
+Added: For instance, if a key third party vendor experiences a cybersecurity incident, it could compromise our data security and lead to financial losses, regulatory penalties, and reputational damage.
+Added: Additionally, any operational disruptions from our third party vendors, such as delays in supply chain deliveries, could adversely affect our ability to meet customer demands and maintain business continuity.
+Added: Artificial intelligence introduces emerging risks and challenges to our business.
+Added: Artificial intelligence (AI) is increasingly shaping industries worldwide, including life sciences and healthcare.
+Added: We have implemented certain AI technologies into our operations to improve efficiency and drive innovation, and we may further expand our use of AI as the technology continues to evolve.
+Added: However, AI innovation also introduces risks and challenges that could impact our business.
+Added: AI algorithms may be flawed, datasets may be insufficient or biased, and ineffective AI development or deployment could lead to compliance violations, cybersecurity risks, and other adverse consequences.
+Added: Potential risks include breaches of confidentiality and privacy obligations, noncompliance with applicable laws and regulations, threats to intellectual property rights, including not only the leakage of our proprietary information but also the risk that AI-generated outputs may infringe third-party intellectual property rights, and the misuse of personally identifiable information, including protected health information.
+Added: Additionally, overreliance on AI or dependence on a specific model or vendor may limit our flexibility, increase costs, or expose us to operational risks if the AI provider modifies or discontinues its services or increases its costs.
+Added: Any of these issues could materially and adversely affect our business, financial condition, and results of operations.
+Added: AI technologies, including generative AI, are complex and rapidly evolving, and we face competition from other companies as well as an evolving regulatory landscape.
+Added: Several jurisdictions around the globe, including Europe and the United States, have already proposed or enacted laws governing AI, and we may need to commit significant resources to maintain business practices that comply with the evolving regulatory landscape.
+Added: Our competitors or other third parties may incorporate AI into their products more quickly and successfully than us, which could impair our ability to compete effectively and adversely affect our results of operations.
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.
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a CLIA-certified laboratory in South San Francisco, California to perform our Foresight and Prequel tests;
−Removed: a CLIA-certified laboratory in St.
−Removed: George to perform our Precise Tumor test;
−Removed: a single laboratory facility in Cologne, Germany to perform and produce our EndoPredict test kits;
a CLIA-certified laboratory in Mason, Ohio to perform our GeneSight test;
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We currently have no backup or redundant facility to perform each of our tests.
−Removed: 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: 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, fire, 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.
According to the U.S.
−Removed: Environmental Protection Agency, heat waves and large storms are likely to become more frequent or more intense with human-induced climate change, which could impact our operations.
+Added: Environmental Protection Agency, heat waves and large storms are likely to become more frequent or more intense with climate change, which could impact our operations.
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.
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If our business were interrupted, it would seriously harm our business.
−Removed: Our inability to, or delay in, transitioning certain of our laboratory operations to new laboratory facilities in west Salt Lake City, Utah and South San Francisco, California could adversely affect our business.
−Removed: We are in the process of transitioning our laboratory operations in Salt Lake City, Utah, where most of our tests are performed, and South San Francisco, California, where our Foresight and Prequel tests are performed, to new laboratory facilities in west Salt Lake City, Utah, and South San Francisco, California, respectively.
−Removed: The inability to transition our existing laboratory operations to our new laboratories in South San Francisco, California and west Salt Lake City, Utah, delays in transitioning our laboratory operations to 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.
−Removed: We depend on a limited number of third parties, or, in some cases, single-source suppliers, for equipment, reagents and other supplies.
−Removed: If these supplies become unavailable or are disrupted, then we may not be able to successfully perform our research or operate our business on a timely basis or at all.
+Added: We depend on a limited number of third parties, or, in some cases, single-source suppliers, for equipment, reagents, other supplies, and specimen collection services.
+Added: If these supplies or services become unavailable or are disrupted, then we may not be able to successfully perform our research, operate our business, or perform our tests on a timely basis or at all.
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.
We believe that currently there are limited alternative suppliers of the equipment, robots, reagents and certain other supplies that we use in our business.
−Removed: The equipment, robots, reagents or other supplies may not remain available in commercial quantities at acceptable costs.
+Added: The equipment, robots, reagents or other supplies may not remain available in commercial quantities at acceptable costs, or at all.
In addition, we rely upon a limited number of commercial delivery services to provide us with laboratory supplies, and the disruption of such delivery services could adversely impact our business.
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.
−Removed: 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.
−Removed: In addition, the spread of disease 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 have been subject to disruption as a result of COVID-19 and responses to it.
−Removed: We have experienced and may in the future 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 a global pandemic and responses to it.
−Removed: Political, administrative, legislative, legal or regulatory actions in response to a global pandemic 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, then we may not be able to successfully perform our research or operate our business on a timely basis or at all.
+Added: In addition, any loss of, 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: Furthermore, we rely on third-party laboratories and phlebotomy clinics to perform specimen collection services for us for patients taking some of our tests such as our Prequel non-invasive prenatal screening test.
+Added: In some locations, we rely on a limited number of third-party laboratories and phlebotomy clinics to perform these specimen collection services for us.
+Added: The inability or refusal of a third-party laboratory or phlebotomy clinic to provide these services to us could significantly impede our ability to test patients and, consequently, could adversely affect our business.
+Added: In addition, the consolidation of large laboratories and phlebotomy clinics may decrease the specimen collection facility options that are available to us, thus amplifying the risk if access to the remaining laboratories and phlebotomy clinics is denied or delayed.
Further, disruption in the global supply chain related to hostilities in Ukraine and the Middle East could impact our supply chain.
−Removed: For example, Houthi forces have recently begun attacking freighters in the Red Sea due to the ongoing conflict between Israel and Gaza.
+Added: For example, Houthi forces have attacked freighters in the Red Sea due to the ongoing conflict between Israel and Gaza.
While we have not experienced material supply chain disruptions related to these global hostilities to date, we are unable to predict how these conflicts will develop or guarantee that we will not experience material supply chain disruptions in the future.
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 and have active sales operations in Germany, France, and Japan and production operations in Germany.
−Removed: We also distribute our SneakPeek Early Gender DNA Test through distributors in the United Kingdom, Australia, Canada and certain other countries.
+Added: As part of our business strategy, we operate in international markets and have active sales operations in Japan.
+Added: We also distribute certain of our products through international distributors.
We may establish additional operations or acquire additional properties outside the United States in order to advance our international sales.
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 privacy laws such as the EU GDPR, regulatory requirements and other governmental approvals, permits and licenses;
+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's General Data Protection Regulation (GDPR), regulatory requirements and other governmental approvals, permits and licenses;
• failure by us to obtain regulatory approvals or adequate reimbursement for the use of our tests in various countries;
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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 or another disease and responses to it.
+Added: • risks related to the disruptions caused by an infectious disease and responses to it.
Any of these factors could significantly harm our international operations and, consequently, our revenues, and results of operations.
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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.
Ethical, legal and social concerns related to the use of genetic information could reduce demand for our tests.
Genetic testing has raised ethical, legal and social issues regarding privacy rights and the appropriate uses of the resulting information.
−Removed: Governmental authorities could, for social or other purposes, limit or regulate the use of genetic information or genetic testing or prohibit testing for genetic predisposition to certain conditions, particularly for those that have no known cure.
+Added: Governmental authorities could, for social or other purposes, limit or further regulate the use of genetic information or genetic testing or prohibit testing for genetic predisposition to certain conditions, particularly for those that have no known cure.
Similarly, these concerns may lead patients to refuse to use, or clinicians to be reluctant to order, genomic tests even if permissible;
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We rely on commercial courier delivery services to transport biological materials to our facilities in a timely and cost-efficient manner and if these delivery services are disrupted, our business will be harmed.
−Removed: Our core business depends on our ability to quickly and reliably deliver test results to our customers.
+Added: Our core business depends on our ability to quickly and reliably receive biological material from patients and deliver test results to our customers.
We typically receive biological material for analysis at our laboratory facilities within days of collection from the patient.
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We also rely on commercial courier delivery services to transport some of our tests 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.
+Added: Our financial condition and results of operations could be adversely affected by adverse public health developments.
+Added: Any outbreak of contagious disease or adverse public health development could have a material and adverse effect on our business operations, financial condition, or results of operations.
+Added: Such adverse effects have included, and may in the future include, diversion or prioritization of health care resources away from the conduct of testing, limitations on patients' access to our products, and disruptions or restrictions affecting the ability of our laboratories to process our tests.
+Added: Any 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 any disease affects individuals and businesses around the globe, we may experience 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 spread of COVID-19, H5N1 bird flu (for which California declared a state of emergency in December 2024), or another disease globally could continue to adversely affect our manufacturing and supply chain.
+Added: For example, parts of our direct and indirect supply chain are located overseas and both international and domestic components have been, and may in the future be, subject to disruption as a result of COVID-19 or another disease and responses to it.
+Added: Political, administrative, legislative, legal or regulatory actions in response to a global pandemic 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 as a result of a 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.
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 U.S.
−Removed: dollar, such as the Japanese Yen, Euro, the Swiss franc, and the British pound.
+Added: We receive a portion of our revenue and pay a portion of our expenses in currencies other than the U.S.
+Added: dollar, such as the Japanese Yen, the Euro, and the Swiss franc.
As a result, we are at risk for exchange rate fluctuations between such foreign currencies and the U.S.
dollar, which could affect the results of our operations.
−Removed: dollar strengthens against foreign currencies, the translation of these foreign currency denominated transactions will result in decreased revenues and operating expenses.
−Removed: During the year ended December 31, 2023, our revenues were not materially impacted due to foreign currency fluctuations, but may be in the future.
−Removed: We may not be able to offset adverse foreign currency impact with increased revenues.
+Added: dollar strengthens against foreign currencies, the translation of these foreign currency denominated transactions will result in decreased revenue and operating expenses.
+Added: During the year ended December 31, 2024, our revenue was not materially impacted due to foreign currency fluctuations, but may be in the future.
+Added: We may not be able to offset adverse foreign currency impact with increased revenue.
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.
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Intangible assets with definite lives are reviewed for impairment when events or circumstances indicate that their carrying value may not be recoverable.
−Removed: Declines in operating results, divestitures, sustained market declines and other factors that impact the fair value of our reporting unit could result in an impairment of goodwill or intangible assets and, in turn, a charge to net income.
−Removed: Any such charges could have a material adverse effect on our results of operations or financial condition.
−Removed: Our estimates of actionable market size and forecasts of market growth may prove to be inaccurate, and even if the market in which we compete achieves the forecasted growth, our business could fail to grow at similar rates.
+Added: Declines in operating results, divestitures, sustained market declines and other factors that impact the fair value of an asset could result in an impairment of goodwill or intangible assets and, in turn, a charge to net income.
+Added: For example, we recognized $43.0 million of impairment expense during the twelve months ended December 31, 2024 after UnitedHealthcare updated its medical policy for pharmacogenetic testing to no longer provide coverage for certain multi-gene panel pharmacogenetic tests, including our GeneSight test, under its commercial, individual exchange, and certain managed Medicaid plans.
+Added: This impairment expense and any other such charges could have a material adverse effect on our results of operations or financial condition.
+Added: Our estimates of actionable market size and forecasts of market growth may prove to be inaccurate, and even if the market in which we compete achieves the forecasted growth, our business could fail to grow at expected rates.
Our actionable market size opportunity estimates and growth forecasts for our products are subject to significant uncertainty and are based on assumptions and estimates that may not prove to be accurate.
Our publicly announced estimates and forecasts relating to the size and expected growth of the market for our products may prove to be inaccurate.
−Removed: Even if the markets in which we compete meet our size estimates and forecasted growth for such markets, our business could fail to grow at similar rates.
+Added: Even if the markets in which we compete meet our size estimates and forecasted growth for such markets, our business could fail to grow at expected rates.
Our ability to use our net operating loss carryforwards and certain other tax attributes may be limited.
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Pursuant to the Tax Cuts and Jobs Act (H.R.1) of 2017, federal NOLs arising in tax years beginning after December 31, 2017 have an indefinite carryover period and may only be used to offset 80% of current year taxable income.
−Removed: Federal NOLs prior to this enactment were subject to a 20-year carry-forward limitation.
+Added: Federal NOLs prior to this enactment were limited to a 20-year carry-forward period.
Further, under Section 382 of the Internal Revenue Code of 1986, as amended (the Code), if a corporation undergoes an “ownership change” (generally defined as a greater than 50% change, by value, in equity ownership over any three-year period), the corporation’s ability to use its pre-change NOL carryforwards and other pre-change tax attributes to offset its post-change income or taxes may be limited.
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These limitations may result in our NOLs, tax credits, or other similar tax attributes expiring before we have the ability to use them.
+Added: Changes in tax laws or in their implementation or interpretation may adversely affect our business and financial condition.
+Added: We are subject to tax in multiple U.S.
+Added: tax jurisdictions and in foreign tax jurisdictions.
+Added: The rules governing U.S.
+Added: federal, state, and local income taxation are subject to ongoing review by lawmakers, the Internal Revenue Service, and the U.S.
+Added: Treasury Department.
+Added: Changes in, or interpretations of, tax laws, including those with retroactive effect, could adversely impact our business and financial condition.
+Added: We cannot predict the timing, form, or effective dates of future tax laws, regulations, or rulings, nor their potential to increase our tax liability or necessitate operational changes to mitigate such impacts.
Risks Related to the Development and Commercialization of Our Tests and Test Candidates
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• 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;
−Removed: • 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;
+Added: • our ability to market current and future products in new and existing channels;
• our ability to collaborate with biotechnology and pharmaceutical companies to develop and commercialize companion diagnostic tests for their therapeutic drugs and drug candidates;
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Our inability to successfully do so would harm our business.
−Removed: 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.
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.
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Clinical development requires large numbers of patient specimens and, for certain products, require large, prospective, and controlled clinical trials.
−Removed: 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.
−Removed: 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.
−Removed: 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: 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 or trial 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 or trial.
+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, studies and clinical trials, as well as delays in the review, acceptance and publication process.
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.
+Added: In addition, for any of the foregoing reasons or otherwise, our anticipated timeline to launch new test offerings, such as First Gene, Precise Liquid, and Precise MRD, may not occur at the time we expect, which could negatively impact our ability to gain commercial market acceptance or successfully commercialize any new test offerings.
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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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.
−Removed: 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.
+Added: We may also not be able to keep pace with the rapid technological changes in our industry, or properly leverage new technologies, such as AI, to achieve or sustain competitive advantages in our tests, systems and processes.
We also expect to encounter significant competition with respect to any tests that we may develop or commercialize.
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If a third party files a patent application with claims to subject matter we have invented, the U.S.
−Removed: Patent and Trademark Office (USPTO) may declare interference between competing patent applications.
+Added: Patent and Trademark Office, or USPTO, may declare interference between competing patent applications.
If an interference is declared, we may not prevail in the interference.
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We believe that there has been, and may continue to be, significant litigation in the industry regarding patent and other intellectual property rights.
−Removed: On December 21, 2020, Ravgen, Inc.
+Added: For example, on December 21, 2020, Ravgen, Inc.
(Ravgen) filed a lawsuit against us and our wholly owned subsidiary, Myriad Women's Health, Inc., in the U.S.
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Pursuant to the terms of the settlement agreement, we agreed to pay Ravgen a minimum of $12.75 million in three installment payments of $5 million, $5 million, and $2.75 million on or before October 31, 2023, October 31, 2024, and October 31, 2025, respectively.
−Removed: We may also be required to pay Ravgen $21.25 million in five annual installments beginning no earlier than January 1, 2026 if certain conditions are satisfied.
+Added: We also agreed to pay Ravgen $21.25 million in five annual installments beginning no earlier than January 1, 2026 if certain conditions are satisfied but we do not currently believe that those conditions will be satisfied.
Any intellectual property litigation that we may become involved with in the future could consume a substantial portion of our managerial and financial resources.
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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.
−Removed: These licenses impose various royalty payments, milestones, and other obligations on us.
+Added: For example, we license the rights from Eurobio Scientific to sell EndoPredict as a laboratory developed test outside of the European Union.
+Added: These licenses may impose various royalty payments, milestones, and other obligations on us.
If we fail to comply with any of these obligations, the licensor may have the right to terminate the license.
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These laws and regulations currently include, among other things:
−Removed: • Clinical Laboratory Improvement Amendments of 1988 and the implementing regulations, which requires that laboratories obtain certification from the federal government, and state licensure laws and regulations;
−Removed: Food and Drug Administration laws and regulations that apply to medical devices such as our companion diagnostics and other IVDs;
−Removed: • 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;
+Added: • CLIA and the implementing regulations, which require that laboratories obtain certification from the federal government, and state licensure laws and regulations;
+Added: • FDA laws and regulations that apply to medical devices such as our companion diagnostics and other IVDs as well as LDTs, following the July 2024 effective date of the agency's LDT final rule;
+Added: • 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 federal Anti-Kickback Statute, which prohibits knowingly and willfully offering, paying, soliciting, or receiving remuneration, directly or indirectly, in exchange for or to induce either the referral of an individual, or the furnishing, arranging for, or recommending of an item or service that is reimbursable, in whole or in part, by a federal health care program;
−Removed: • 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;
+Added: • 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;
• the federal physician self-referral prohibition (Stark Law or the Physician Self-Referral Law), which, absent an exception, prohibits a physician from making a Medicare 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;
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• other federal and state fraud and abuse laws, such as anti-kickback laws, prohibitions on self-referral and fee-splitting, 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, other health care professionals, 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, 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;
+Added: • the federal Physician Payments Sunshine Act, which requires medical device manufacturers to track and report to the federal government certain payments and other transfers of value made to physicians, other health care professionals, and 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 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.
government officials for the purpose of obtaining or retaining business or securing any other improper advantage;
−Removed: • state laws that impose reporting and other compliance-related requirements;
+Added: • state laws that impose reporting and other compliance-related requirements or restrict medical device manufacturers from providing gifts or other items of value to health care professionals;
• similar foreign laws and regulations that apply to us in the countries in which we operate.
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.
−Removed: 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: Various federal and state laws, such as the Physician Payments Sunshine Act and state gift bans, that apply to medical device manufacturers could extend to our laboratory facilities now that LDTs are treated by FDA as medical devices pursuant to the 2024 final rule and clinical laboratories furnishing LDTs are considered to be device manufacturers as a result.
+Added: We have begun the process of evaluating whether and to what extent those kinds of medical device-specific state requirements may be applicable to our operations.
+Added: As a clinical laboratory, our business practices may face heightened scrutiny from government enforcement agencies such as the Department of Justice, OIG, and CMS.
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.
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Any of the foregoing consequences could seriously harm our business and our financial results.
−Removed: 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.
−Removed: 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.
−Removed: 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.
−Removed: 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.
−Removed: 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.
−Removed: For example, California has enacted the California Consumer Privacy Act, or CCPA, which went into effect in January of 2020.
−Removed: The CCPA established a new privacy framework for covered businesses by creating an expanded definition of personal information, establishing new data privacy rights for California residents, requiring covered businesses to provide new disclosures to 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.
−Removed: Additionally in 2020, California voters passed the California Privacy Rights Act, or CPRA, which went into effect on January 1, 2023.
−Removed: 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.
−Removed: 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.
−Removed: In addition to California, more U.S.
+Added: Our actual or perceived failure to comply with data protection laws and regulations could lead to complaints, government enforcement actions, private litigation, and/or adverse publicity and could negatively affect our business.
+Added: We are, and may become, subject to numerous 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 rapidly 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 United States, numerous federal and state laws and regulations, including state data breach notification laws, state genetic testing 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 and protected health information.
+Added: Implementation standards and enforcement practices are likely to remain uncertain for the foreseeable future, which may create uncertainty in our business, affect our or our service providers’ ability to operate in certain jurisdictions or to collect, store, transfer, use and share personal data, result in liability, or impose additional compliance or other costs on us.
+Added: Failure, or perceived failure, to comply with these laws and regulations, where applicable, could result in government enforcement actions, which could include civil or criminal penalties, private litigation and/or adverse publicity, diversion of management time and effort, and could negatively affect our operating results and business.
+Added: states now regulate the processing of personal information.
+Added: For example, California was the first of an increasing number of states to enact comprehensive state privacy legislation with the California Consumer Privacy Act (CCPA), which went into effect in January of 2020.
+Added: The CCPA established a privacy framework for covered businesses by creating an expanded definition of personal information, establishing data privacy rights for California residents, requiring covered businesses to provide disclosures to California residents, and creating a statutory damages framework with the potential for severe damages for violations of the CCPA and for businesses that fail to implement reasonable security procedures and practices to prevent data breaches, as well as a private right of action for certain data breaches.
+Added: Additionally in 2020, California voters passed the California Privacy Rights Act (CPRA), which went into effect on January 1, 2023.
+Added: The CPRA significantly amended 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 enacts new regulations under the CPRA and has expanded enforcement authority.
states are enacting similar legislation, increasing compliance complexity and increasing risks of failures to comply.
−Removed: In 2023, comprehensive privacy laws in Virginia, Colorado, Connecticut, and Utah all took effect, and laws in Montana, Oregon, and Texas will take effect in 2024.
−Removed: In addition, laws in other U.S.
−Removed: states are set to take effect beyond 2024, and additional U.S.
+Added: In 2023, comprehensive privacy laws in Virginia, Colorado, Connecticut, and Utah all took effect, and laws in Montana, Oregon, and Texas took effect in 2024.
+Added: Laws in a number of other U.S.
+Added: states took effect, or are set to take effect, in 2025, 2026, and beyond.
+Added: Additional U.S.
states have proposals under consideration, all of which are likely to increase our regulatory compliance costs and risks, exposure to regulatory enforcement action, and other liabilities.
−Removed: Numerous other countries have, or are developing, laws governing the collection, use and transmission of personal information as well.
−Removed: 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.
−Removed: 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: Likewise, the Federal Trade Commission and state attorneys general have been actively enforcing laws that protect consumers from unfair and deceptive acts or practices, including with respect to privacy and security.
+Added: If our public statements regarding collection, use, storage or disclosure of personal information are or are perceived to be inconsistent with our actual practices, we may face claims under Section 5 of the Federal Trade Commission Act or state law equivalents.
+Added: Numerous other countries have, or are developing, laws governing the collection, use and transmission of personal data as well.
+Added: For example, the EU's 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: 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:
providing expanded disclosures about how their personal data will be used;
−Removed: 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: higher standards for organizations to demonstrate that they have a legal basis to justify their data processing activities;
the obligation to appoint data protection officers in certain circumstances;
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and a new mandatory data breach regime.
−Removed: 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: In particular, medical or health data, genetic data and biometric data are all classified as “special category” data under GDPR and afford greater protection and require additional compliance obligations.
Further, EU member states have a broad right to impose additional conditions—including restrictions—on these data categories.
−Removed: 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).
−Removed: 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.
−Removed: The GDPR is complex and regulatory guidance continues to evolve.
+Added: This is because GDPR allows EU member states to derogate from the requirements of GDPR mainly in regard to specific processing situations (including special category data and processing for scientific or statistical purposes).
+Added: 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: GDPR is complex and regulatory guidance continues to evolve.
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.
−Removed: 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 or certification under the newly-adopted Data Privacy Framework).
−Removed: 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: Relatedly, following Brexit and the expiry of the Brexit transition period, which ended on December 31, 2020, the EU GDPR has been implemented in the United Kingdom (as the UK GDPR).
+Added: The UK GDPR sits alongside the United Kingdom Data Protection Act 2018 which implements certain derogation in the GDPR into UK law.
+Added: Under the UK GDPR, companies not established in the United Kingdom but who process personal data in relation to the offering of goods or services to individuals in the United Kingdom, or to monitor their behavior will be subject to the UK GDPR – the requirements of which are (at this time) largely aligned with those under the GDPR and as such, may lead to similar compliance and operational costs with potential fines of up to £17.5 million or 4% of global turnover.
+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.” 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 or certification under the newly-adopted Data Privacy Framework).
+Added: On July 16, 2020, the Court of Justice of the EU (CJEU) issued a landmark opinion in the case Maximilian Schrems vs.
Facebook (Case C-311/18) (Schrems II).
−Removed: This decision calls into question certain data transfer mechanisms as between the EU member states and the U.S.
−Removed: The CJEU is the highest court in Europe and the Schrems II decision heightened the burden to assess U.S.
−Removed: national security laws on their business, and future actions of EU data protection authorities are difficult to predict at this time.
+Added: This decision calls into question certain data transfer mechanisms as between the EU member states and the United States.
+Added: The CJEU is the highest court in Europe and the Schrems II decision heightened the burden to assess United States national security laws on their business, and future actions of EU data protection authorities are difficult to predict at this time.
While the newly-adopted Data Privacy Framework was meant to address the concerns raised by the CJEU in Schrems II, it will likely be subject to future legal challenges.
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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.
−Removed: 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: 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.
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.
−Removed: Despite our efforts, we may not have fully complied in the past and may not in the future.
−Removed: That could require us to incur significant expenses, which could significantly affect our business.
+Added: Despite our efforts, we may not have fully complied with all applicable data privacy and data protection laws in the past and we may not do so in the future.
+Added: Compliance with such laws and regulations could require us to incur significant expenses or modify our practices, each of which could adversely affect our business.
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.
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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: 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: For example, in June 2016, our wholly-owned subsidiary, Crescendo Bioscience, LLC (formerly known as Crescendo Bioscience, Inc.) (CBI), received a subpoena from the OIG 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.
On January 30, 2020, the U.S.
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).
−Removed: On January 22, 2020, after a multi-year investigation into CBI’s and the Company’s alleged conduct, the United States declined to intervene.
+Added: On January 22, 2020, after a multi-year investigation into CBI’s and our alleged conduct, the United States declined to intervene.
On January 27, 2020, the State of California likewise filed its notice of declination.
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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.
−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.
+Added: Changes in health care policy could increase our costs, decrease our revenue 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, which was upheld by the U.S.
+Added: Supreme Court in 2021.
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 may not be able to 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.
−Removed: 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.
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.
−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.
+Added: The impact to reimbursement levels and the number of insured individuals under the ACA may lead to delay in the purchasing decisions of our customers, which may in turn negatively impact our product sales.
Further, if reimbursement levels are inadequate, our business and results of operations could be adversely affected.
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Some states have enacted state licensure laws that are more stringent than CLIA.
−Removed: We are also subject to laws and regulations governing our reference laboratory in Germany.
Changes in state or foreign licensure laws that affect our ability to offer and provide diagnostic services across state or foreign country lines could materially and adversely affect our business.
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If the CLIA certificate of any one of our laboratories is revoked, CMS could seek revocation of the CLIA certificates of our other laboratories based on their common ownership or operation, even though they are separately certified.
−Removed: 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.
−Removed: Historically, the FDA has exercised enforcement discretion with respect to most laboratory developed tests (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: Planned changes in the way the FDA regulates tests performed by laboratories like ours will result in delay and/or additional expense in offering our tests and tests that we may develop in the future.
+Added: Historically, the FDA had exercised enforcement discretion with respect to most LDTs and 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: However, in May 2024, the FDA issued a final rule to regulate LDTs under the current medical device framework and phasing out its existing enforcement discretion policy for this category of diagnostic tests over several years.
+Added: The effective date of the agency’s final rule was July 5, 2024.
+Added: The agency’s final rule provides that the LDT enforcement policy phase-out process will occur in gradual stages over a total period of four years, with premarket approval applications for high-risk tests to be submitted by the 3.5-year mark.
+Added: Moderate-risk and low-risks tests are expected to be in compliance at the 4-year mark, although FDA has stated that if premarket submissions are pending review it will continue to exercise enforcement discretion with respect to those tests.
As of December 31, 2024, none of our products other than MyChoice CDx and BRACAnalysis CDx are marketed by us under the FDA's requirements for medical devices.
−Removed: In recent years, 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 in 2017, the FDA issued an informal discussion paper reflecting some of the feedback that FDA had received on the proposed LDT regulatory system.
−Removed: Subsequently, in October 2023, FDA issued a proposed rule to regulate LDTs under the current medical device framework and proposed to phase out the current enforcement discretion policy;
−Removed: the public comment period ended in early December 2023.
−Removed: The proposal envisions that the LDT enforcement policy phase-out process would occur in gradual stages over a total period of four years, with premarket approval applications for high-risk tests to be submitted by the 3.5-year mark, although more details are expected to be provided with the upcoming final rule.
−Removed: The likelihood of the FDA finalizing the proposed rule in April 2024 (as currently projected), as well as potential litigation challenging its authority to take such action, is uncertain at this time.
−Removed: Affected stakeholders continue to press for a comprehensive legislative solution to create a harmonized paradigm for oversight of LDTs by both the FDA and CMS, instead of implementation of the proposed administrative agency action, which may be disruptive to the industry and to patient access to certain diagnostic tests.
−Removed: Until any administrative rulemaking is finalized and regulatory changes become effective, the FDA is expected to continue to exercise enforcement discretion;
−Removed: although it 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, 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.
−Removed: Most recently, reform legislation entitled the Verifying Accurate, Leading-edge IVCT Development (VALID) Act received increasing congressional support.
−Removed: As drafted and re-introduced for consideration by the current Congress, 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.
−Removed: If enacted, the VALID Act's regulatory framework would give the FDA the authority to ensure IVCTs are both analytically and clinically valid.
−Removed: While CMS would retain the authority to ensure the quality of operations within laboratories.
−Removed: All LDTs on the market prior to enactment of the legislation would be grandfathered and not subject to the new regulation.
−Removed: The FDA’s recent publication of an LDT proposed rule that would apply the existing medical device framework to laboratory-developed products may renew stakeholder calls for a more targeted approach to modernizing federal oversight of clinical diagnostic tests.
−Removed: It remains possible that congressional action in this area could displace the need for the FDA to complete its recently proposed rulemaking.
−Removed: It is unclear whether the VALID Act or other diagnostic reform legislation will be passed by Congress or signed into law by the President.
−Removed: 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.
−Removed: If the VALID Act is implemented as drafted, or if the FDA were to finalize the proposed rule to regulate most LDTs as medical devices, it could have a materially adverse impact on our results of operations.
+Added: The FDA’s final rule is complex and, concurrently, the agency announced several exceptions from the requirement to comply with full medical device regulatory controls, depending upon the specific nature of the LDT and the clinical laboratory that is offering such LDT for use by health care providers.
+Added: Of potential relevance is the agency’s position on LDTs that were marketed prior to the official publication date of the final rule.
+Added: Such “currently marketed” tests are subject to many of the device regulatory controls but are exempted from the premarket review and FDA authorization requirements (unless or until significant modifications are made to such “currently marketed” tests).
+Added: Similarly, the FDA has created a partial enforcement discretion policy for tests approved by New York’s Clinical Laboratory Evaluation Program whereby such tests also do not need to undergo FDA premarket review but must come into compliance with all other device general controls in a stagged fashion between 2025 and 2027.
+Added: We have begun the process of evaluating the final rule's potential impact on our tests, our operations, and our business more generally.
+Added: On May 29, 2024, the ACLA and one of its members filed a complaint against the FDA in the Eastern District of Texas, alleging that the agency does not have authority to promulgate the LDT final rule and seeking to vacate the FDA’s action.
+Added: A second lawsuit was also filed against FDA by the AMP on August 19, 2024 in the Southern District of Texas, and subsequently the two cases were consolidated into a single action pending in the Eastern District of Texas.
+Added: Briefing is ongoing in the consolidated case, and the outcome of such litigation is uncertain.
+Added: The litigation could potentially affect FDA’s plans to implement these new LDT requirements, making the potential implementation timeline somewhat uncertain, although no preliminary injunction has been issued to date.
+Added: Accordingly, the agency has continued its implementation efforts by actively providing guidance and training to clinical laboratories on how to comply with medical device general controls.
+Added: Affected stakeholders also continue to press for a comprehensive legislative solution to create a harmonized paradigm for oversight of LDTs by both the FDA and CMS, instead of implementation of the FDA's final rule, which may be disruptive to the industry and to patient access to certain diagnostic tests.
+Added: However, this FDA rulemaking was initiated after years of failed congressional attempts to harmonize the regulatory paradigms applicable to LDTs and other IVDs, making it unclear whether any legislative efforts would be successful going forward.
+Added: If FDA prevails in the Texas litigation and is able to fully implement the multi-year phase-in plan for the LDT final rule or Congress enacts comprehensive legislation to regulate in vitro diagnostics that moots the need for the LDT final rule, it could have a materially adverse impact on our results of operations.
+Added: Failure to comply with any applicable FDA requirements could trigger a range of enforcement actions by the FDA, including warning letters, civil monetary penalties, injunctions, criminal prosecution, recall or seizure, operating restrictions, partial suspension or total shutdown of operations and denial of or challenges to applications for clearance or approval, as well as significant adverse publicity.
FDA regulation of our GeneSight Psychotropic test could be disruptive to our business.
−Removed: 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.
−Removed: In October 2023, FDA issued a proposed rule to regulate LDTs under the current medical device framework and proposed to phase out the current enforcement discretion policy.
−Removed: Further, 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.
+Added: As described further above, the FDA has long claimed authority to regulate LDTs but had exercised its “enforcement discretion” to limit enforcement of in vitro diagnostic regulatory requirements on this category of products.
+Added: In May 2024, the FDA issued a final rule to regulate LDTs under the current medical device framework and phasing out the historical enforcement discretion policy over several years.
+Added: Further, the FDA has from time to time appeared to increase its attention to the marketing of pharmacogenomic 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 pharmacogenomic 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 test.
Later that year, the FDA requested changes to the GeneSight test offering.
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 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” when there is sufficient evidence demonstrating a relationship between how a person's genes may impact their metabolism of a drug or how they may respond to the drug.
−Removed: 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 developments, we have not implemented our proposal to the FDA regarding the GeneSight test.
−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 Mental Health Medication test offering, if it must be changed, will have an adverse effect on our revenues from the 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 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 pharmacogenomics.”
+Added: Although the announcement again asserted that some pharmacogenomic test offerings may be potentially dangerous, the agency also acknowledged that pharmacogenomic testing “offers promise for informing the selection or dosing of some medications for certain individuals” when there is sufficient evidence demonstrating a relationship between how a person's genes may impact their metabolism of a drug or how they may respond to the drug.
+Added: In conjunction with the announcement, the FDA also released an updated “Table of Pharmacogenomic 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 our GeneSight test.
+Added: While we see these developments as signaling a positive shift in the FDA’s approach to regulating pharmacogenomic tests, we cannot predict with certainty the outcome of this matter, its timing or whether the ultimate form of the GeneSight 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.
−Removed: Our companion and complementary diagnostic products, marketing, sales and development activities and manufacturing processes are subject to extensive and rigorous regulation by the FDA pursuant to the federal Food, Drug, and Cosmetic Act (FDCA), by comparable agencies in foreign countries, and by other regulatory agencies and governing bodies.
−Removed: Under the FDCA, companion diagnostics must receive FDA clearance or approval before they can be commercially marketed in the U.S.
+Added: Our companion and complementary diagnostic products, marketing, sales and development activities and manufacturing processes are subject to extensive and rigorous regulation by the FDA pursuant to the federal FDCA, by comparable agencies in foreign countries, and by other regulatory agencies and governing bodies.
+Added: Under the FDCA, companion diagnostics must receive FDA clearance or approval before they can be commercially marketed in the United States.
The process of obtaining marketing approval or clearance from the FDA or by comparable agencies in foreign countries for new products could:
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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.
−Removed: In addition, we are subject to continued compliance with regulatory requirements applicable to medical devices and in vitro diagnostics.
+Added: In addition, we are subject to continued compliance with regulatory requirements applicable to medical devices and IVDs.
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.
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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: Risks Related to Our Common Stock
+Added: General Risks and 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.
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• failure to achieve and sustain revenue growth or margins in our business;
−Removed: • major market events, such as the market’s reaction to the COVID-19 pandemic generally and its specific impact on the Company;
• failure of any of our recently launched tests and any new test candidates to achieve commercial success;
−Removed: • changes in the structure of healthcare payment systems and changes in governmental or private insurer reimbursement levels for our tests;
+Added: • changes in the structure of healthcare payment systems and changes in governmental or private insurer reimbursement levels for our tests, including UnitedHealthcare's decision to no longer provide coverage for certain multi-gene panel genetic tests, including our GeneSight test, under its commercial, individual exchange, and certain managed Medicaid plans;
• introduction of new commercial tests or technological innovations by competitors;
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• delays or other problems with operating our laboratory facilities;
−Removed: • failure of any of our research and development programs;
+Added: • failure of any of our research and development programs, including the failure to achieve favorable results from our clinical studies or receive sufficient favorable exposure for our tests in peer-reviewed publications;
• changes in intellectual property laws or the enforcement, validity or expiration of our patents in the United States and foreign countries;
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• 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;
−Removed: • public concern over our approved tests and any test candidates;
+Added: • general perception of, and public concern over the industry and our approved tests and any test candidates;
• litigation, including the outcome of existing and new litigation against us;
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• potential seasonal slowness in sales, particularly in the quarters ending September 30 and March 31, the effects of which may be difficult to understand during periods of growth;
−Removed: • 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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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: 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.
−Removed: 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: Although we determined that our internal controls over financing reporting were effective as of December 31, 2023, 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.
+Added: 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, 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.
+Added: Any of these events could result in delisting actions by the Nasdaq Stock Market, investigations and sanctions by regulatory authorities, and stockholder lawsuits, in addition to adversely affecting our business and the trading price of our common stock.
+Added: In addition, 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.
+Added: Although we determined that our internal controls over financial reporting were effective as of December 31, 2024, we may in the future identify internal control deficiencies that could rise to the level of a material weakness or we may uncover other errors in our 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.
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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 maintain effective disclosure controls and procedures or internal control over financial reporting or remediate any future material weaknesses, 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.
−Removed: Any of these events could result in delisting actions by the Nasdaq Stock Market, investigation and sanctions by regulatory authorities, and stockholder investigations and lawsuits, in addition to adversely affecting our business and the trading price of our common stock.
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.
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We are subject to the provisions of Section 203 of the General Corporation Law of Delaware, which prohibits us from engaging in certain business combinations, unless the business combination is approved in a prescribed manner.
−Removed: In addition, our restated certificate of incorporation and restated bylaws also contain certain provisions that may make a third-party acquisition of us difficult, including:
+Added: In addition, our certificate of incorporation and bylaws also contain certain provisions that may make a third-party acquisition of us difficult, including:
• a classified Board of Directors, with three classes of directors each serving a staggered three-year term;
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• the inability of our stockholders to call a special meeting or act by written consent;
−Removed: • only our Board of Directors can fill vacancies on the Board.
−Removed: In the past, we implemented a stockholders’ rights plan, also called a poison pill, which could make it uneconomical for a third party to acquire the Company on a hostile basis.
+Added: • requiring advance notice in accordance with our bylaws for stockholder proposals that can be acted upon at annual stockholder meetings and nomination to our Board of Directors;
+Added: • only our Board of Directors can fill vacancies on the Board of Directors.
+Added: In the past, we implemented a stockholders’ rights plan, also called a poison pill, which could make it uneconomical for a third party to acquire us on a hostile basis.
Although the plan expired in July 2011, our Board of Directors could adopt a new plan at any time.
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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.
−Removed: For example, in November 2023, we sold approximately 7.4 million shares of our common stock in an underwritten public offering.
−Removed: We also plan to continue to grant equity awards that convert into shares of our common stock to employees and directors pursuant to our equity incentive plan.
+Added: We plan to continue to grant equity awards that convert into shares of our common stock to employees and directors pursuant to our equity incentive plan and issue common stock under our employee stock purchase plan.
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.
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In addition, the terms of our ABL Facility restrict our ability to pay dividends.
−Removed: Any determination to pay dividends in the future will be at the discretion of our Board of Directors and will depend on our financial condition, operating results, capital requirements, general business conditions and other factors that our Board of Directors may deem relevant.
−Removed: As a result, capital appreciation, if any, of our common stock will be the sole source of gain for the foreseeable future.
+Added: Any determination to pay dividends in the future will be made at the discretion of our Board of Directors and will depend on our financial condition, operating results, capital requirements, general business conditions and other factors that our Board of Directors may deem relevant.
+Added: As a result, capital appreciation, if any, of our common stock will be the sole source of gain for our stockholders for the foreseeable future.
If securities or industry analysts do not publish research or publish inaccurate or unfavorable research about our business, our stock price and trading volume could decline.
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We do not have any control over these analysts.
−Removed: If few analysts continue coverage of us, the trading of our stock would likely decrease.
+Added: If only a few analysts provide coverage of us, the trading of our stock would likely decrease.
Even if we do maintain sufficient analyst coverage, there can be no assurance that analysts will provide favorable coverage.
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If one or more of these analysts ceases coverage of us or fails to publish reports on us regularly, demand for our stock could decrease, which might cause our stock price and trading volume to decline.
−Removed: Increasing scrutiny and evolving expectations from regulators, business partners, investors, and other stakeholders with respect to our environmental, social, and governance (“ESG”) practices may impose additional costs on us or expose us to new or additional risks.
+Added: Increasing scrutiny and evolving expectations from regulators, business partners, investors, and other stakeholders with respect to our environmental, social, and governance, or ESG, practices may impose additional costs on us or expose us to new or additional risks.
Companies across many industries are facing increasing scrutiny related to their ESG practices and disclosure.
−Removed: With this increased focus, public reporting regarding ESG practices is becoming more broadly expected.
−Removed: Any failure or perceived failure to accomplish or accurately track and report on our ESG initiatives on a timely basis or to meet stakeholder expectations could adversely affect our business, the willingness of our partners to do business with us, employee retention efforts, and our brand and reputation.
−Removed: In addition, we expect there will likely be increasing levels of regulation, disclosure-related and otherwise, with respect to ESG matters.
−Removed: For example, during 2022, the SEC proposed rules that require companies to provide significantly expanded climate-related disclosures in their periodic reporting, which may require us to incur significant additional costs to comply, including the implementation of significant additional internal controls processes and procedures regarding matters that have not been subject to such controls in the past, and impose increased oversight obligations on our management and Board of Directors.
−Removed: Furthermore, changing laws and regulations and evolving stakeholder expectations may further increase our compliance and other costs necessary to meet those expectations.
−Removed: In addition, California has recently enacted climate disclosure laws that may require us to report on our greenhouse gas emissions, climate-related financial risks, and other climate-related matters.
−Removed: Furthermore, industry and market practices, as well as requirements of our business partners, may further develop to become even more robust than what is required under any new laws and regulations, and we may have to expend significant efforts and resources to keep up with market trends, stay competitive among our peers, and comply with such requirements, which could result in higher associated compliance costs and penalties for failure to comply with such laws and regulations.
−Removed: Our restated certificate of incorporation and our restated bylaws designate specific state or federal courts as the 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 restated certificate of incorporation or our restated bylaws, or any action asserting a claim against us governed by the internal affairs doctrine.
−Removed: Our restated certificate of incorporation provides that the federal district courts of the United States of America are the exclusive forum for the resolution of any claims under the Securities Act of 1933, as amended.
+Added: We are subject to evolving ESG-related disclosure obligations from governmental and regulatory organizations, which may impact our business.
+Added: These disclosure obligations are often complex and not always consistent, making compliance difficult and uncertain.
+Added: For example, in 2022, the SEC proposed rules requiring companies to provide significantly expanded climate-related disclosures in their periodic reporting, the final adoption of which is uncertain.
+Added: Additionally, California has enacted climate disclosure laws that may require us to report on our greenhouse gas emissions, climate-related financial risks, and other climate-related matters.
+Added: Compliance with such regulations may require us to incur significant additional costs, including for the implementation of significant additional internal controls processes and procedures regarding matters that have not been subject to such controls in the past, and impose increased oversight obligations on our management and Board of Directors.
+Added: Furthermore, industry and market practices, as well as expectations from our business partners, may further develop to become even more robust than what is required under any new laws and regulations, and we may have to expend significant efforts and resources to keep up with market trends, stay competitive among our peers, and comply with such requirements, which could result in higher associated compliance costs and penalties for failure to comply with such laws and regulations.
+Added: At the same time, stakeholders and regulators have increasingly expressed or pursued opposing views, legislation and investment expectations regarding ESG initiatives, including the enactment or proposal of anti-ESG legislation or policies.
+Added: We could face criticism for the scope or nature of our ESG initiatives or for making adjustments to these initiatives.
+Added: Any failure or perceived failure to meet evolving stakeholder expectations and standards related to our ESG initiatives, accurately track and report ESG-related progress, or comply with environmental regulations and disclosure requirements, as well as our inability to satisfy all stakeholders with divergent views, could adversely affect our business, the willingness of our partners to do business with us, employee retention efforts, and our brand and reputation.
+Added: Our certificate of incorporation and our bylaws designate specific state or federal courts as the 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.
+Added: Our 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 General Corporation Law of Delaware, our certificate of incorporation or our bylaws, or any action asserting a claim against us governed by the internal affairs doctrine.
+Added: Our restated certificate of incorporation provides that the federal district courts of the United States of America are the exclusive forum for the resolution of any claims under the Securities Act of 1933, as amended (the Securities Act).
These exclusive forum provisions 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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