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Item 1. Business

2023-03-16 compared with 2022-03-14 · 466 added, 592 removed, 28 unchanged (97% of the section changed)

We are a patient-centered, health intelligence company with a mission to use artificial intelligence, or AI, and machine learning to enable personalized medicine for all.

Our integrated information platform leverages longitudinal patient data, AI-driven predictive modeling, and genomics in combination with other molecular and high-dimensional data in our efforts both to deliver better outcomes for patients and to transform the practice of medicine, including how disease is diagnosed, treated, and prevented.

We have established one of the largest, most comprehensive, and fastest growing integrated health information platforms, collecting and leveraging genomic and clinical data in partnership with patients, healthcare providers and an extensive ecosystem of life science industry contributors.

We are now generating and processing over 47 petabytes of data per month, growing by more than 1 petabyte per month, and maintaining a database that includes approximately 12 million de-identified clinical records, including more than 500,000 with genomic profiles, integrated in a way that enables physicians to proactively diagnose and manage disease.

This expanding database is a virtuous cycle of data:

new data enables us to further develop, train, and refine predictive models and drive differentiated insights, which models and insights we deploy through our next generation diagnostic and research solutions and portals to support clinicians and researchers and engage patients, all of which interactions generate more data to continue the cycle.

Today, by providing differentiated insights through diagnostic testing solutions to physicians and patients across the United States, or U.S., in areas such as reproductive health, or Women’s Health, population health, and oncology, or Oncology, we are reimbursed by payors, providers, and patients for providing these services.

In collaboration with pharmaceutical and biotech, or Biopharma, companies, we receive payments for a broad range of services relating to the aggregated data on our information platform, such as consenting and recontacting patients, the development and implementation of a wide range of predictive models, including drug discovery programs, conducting real-world evidence studies, and aiding in the identification and recruitment of patients into clinical trials.

Over the next several years, we expect to focus on expanding the revenue from our health system and Biopharma partners, while also working to continue to grow the volumes and revenues from our diagnostics test solutions.

While there are many companies seeking to harness the potential of “big data” to address the challenges within the healthcare ecosystem, we believe that few have the scale of our company combined with our revenue-generating diagnostics testing business and origins as a company conceived and nurtured within a world-class health system.

These characteristics have enabled us to build a significant and highly differentiated technological and informational asset positioned to drive precision medicine solutions into the standard of care in an unparalleled way.

Our World Class Team and Unique Origins

Sema4 was founded by Eric Schadt, Ph.D.

as part of Icahn School of Medicine at Mount Sinai’s Department of Genetics and Genomic Sciences and the Icahn Institute for Genomics and Multiscale Biology.

Schadt is a world-renowned expert on constructing predictive models of disease that link molecular data to physiology to enable clinical medicine.

He has published more than 450 peer-reviewed papers in leading scientific journals, with a public citation or h-index of 137, and contributed to discoveries relating to the genetic basis of common human diseases such as cancer, diabetes, obesity, and Alzheimer’s disease.

As of December 31, 2021, we have approximately 1200 employees, including over 160 Ph.D.-level data scientists whose collective work has been recognized in areas such as data science, network modeling, multiscale biotechnology and genomics.

Sema4 was established out of the Mount Sinai Health System (which we refer to together with our related entities as Mount Sinai) and commenced operations in June 2017 as a commercial entity that could effectively engage diverse patient populations and health care institutions at scale, founded on the idea that more information,

deeper AI-driven learning, and increased engagement of patients and their providers will improve diagnosis, treatment, and prevention of disease.

We have since established and deployed our comprehensive and integrated genomics and information platforms, and intend to continue to expand our scale and reach through organic and inorganic growth.

Our Purpose-Built, Flexible Platforms Address Immediate and Untapped Market Opportunities

With the rapid decline in next generation sequencing costs and the increased accessibility of large scale, commoditized computer hardware and storage information products through the cloud, we expect that our core information platform, Centrellis®, supported and fueled by our genomic analysis platform, Traversa™, will be well-positioned to drive improved clinical outcomes competitively in the healthcare market.

Our information platform was built to be highly adaptable to different data types and different diseases and health conditions, with the aim to deliver precision medicine and improved health outcomes across a patient’s entire life cycle.

Accordingly, we expect our platforms to capitalize on a wide range of growth opportunities, and we intend to apply capital over time to make targeted acquisitions to accelerate our ability to reach a wider range of patients, integrate more deeply into clinical workflows, and address the significant, unaddressed white space for health intelligence in the healthcare ecosystem.

These include a broad range of therapeutic segments, beyond our existing focus of our diagnostics solutions for Women’s Health, and Oncology, where we believe there is an immediate need for precision medicine solutions such as in autoimmune disorders, where medical care represented over $100 billion of spend in the U.S.

in 2011, rare diseases, which is estimated to cost the U.S.

healthcare system over $400 billion annually, and cardiovascular disease, where direct medical spend represents approximately $200 billion annually.

By combining our data-driven approach and our deep understanding of health system workflows, we have developed a holistic health information platform, Centrellis, to transform the disease diagnosis and treatment paradigm for the entire healthcare ecosystem:

patients, physicians, health systems, payers, and Biopharma companies.

The Centrellis platform is comprised of a data management backend that supports a wide array of databases, data warehouses, and knowledge bases, a data analytics layer to mine the data and construct predictive models that provide differentiated insights, and a series of application programmable interfaces to enable tool and software applications to access the data and models.

Centrellis serves as the underlying foundation of our precision medicine solution and comprises a sophisticated data management and analytics engine.

In the data management layer, our platform processes and stores data in a highly structured and accessible way, which is then analyzed by an advanced insights engine in the analytics layer that deploys state-of-the-art AI, probabilistic causal reasoning and machine learning approaches, and complementary analytics capabilities to deliver increasingly accurate insights to patients, providers, and researchers across a broad range of applications.

Centrellis is designed to transform treatment decisions across multiple therapeutic areas by engaging large-scale, high-dimensional data and querying the predictive models of disease and wellness using patient-specific data to derive highly personalized, clinically actionable insights.

Centrellis supports various applications, such as delivery of personalized and actionable treatment insights into clinical reports, clinical trial matching, real-world evidence trials and clinical decision support, through an advanced programmable interface, or API, layer.

We have also developed a comprehensive genomic platform, Traversa™, to serve as the backbone of our screening and diagnostic products and with the capacity to deliver molecular data that can be re-accessed, analyzed and delivered throughout a patient’s lifetime.

Traversa is designed to simultaneously assay at clinical-grade coverage all known medically relevant regions of the genome, as well as survey the entirety of the human genome, to surface signals that might be medically relevant to a patient in the future.

Traversa is integrated with the Centrellis information platform and is designed to adapt at the rate of learning and to match the significant pace of information and knowledge growth, especially in the genomics arena, to allow us to provide actionable, accurate, and cutting-edge insights from complex and comprehensive data assets.

We also expect this platform to enable us to scale our operations and to improve our margins in generating secondary insights for patients and providers.

We Are Building Richer Longitudinal Data Through Deeper Patient and Provider Engagement

We engage with patients, physicians, and health systems as partners and based on principles of transparency, choice, and consent.

Driven by our direct engagement with patients and strategic relationships with multiple health systems, the database we have built contains extensive electronic medical record, or EMR, data, totaling approximately 12 million de-identified clinical records, many with genomic profiles, and has been designed to enable Centrellis to draw from our extensive data assets in a way that enables physicians to proactively diagnose and manage disease.

We expect our current and targeted strategic relationships will provide us with access to additional active patient cohorts and datasets to fuel this growth and perpetuate our iterative, data-driven business model, including by rapidly scaling our diagnostic test solutions franchise with physicians and patients through direct engagement with multiple health system partners.

In addition to providing a majority of our current revenue and generating hundreds of thousands of genomic profiles, our established diagnostic test solutions also allow us to engage patients directly as partners, both as part of their clinical care and also acting on their behalf, with appropriate informed consent, to acquire, organize and manage any health data generated on them through the course of their care, all of which contributes to the further development of our genomics and information platforms.

Further, we have demonstrated patients’ willingness to partner with us.

For example, over 80% of diagnostics solutions patients and users who engaged with our patient portal have given us their informed consent to retrieve, organize, and manage their health records and data, and to facilitate their access to and sharing of that data, as well as additional data that patients share and create through their use of our expanding suite of digital experience products.

Our Established Diagnostic Solutions Are Scaling Rapidly

We currently operate a mature diagnostic business that generates revenue and engages with patients through our varied and sophisticated diagnostics and screening offerings.

Our population health offerings are designed to run through our Traversa platform and give us the ability to inform on thousands of diseases and conditions, from rare disorders, to drug safety, to risk profiles across a broad range of common human diseases of significant public health concern.

We have developed an array of diagnostic and screening solutions to inform across a patient’s life course, ranging from reproductive health and newborn screening to drug safety and oncology.

Our Women’s Health solutions sequence and analyze an industry-leading number of genes, and use Centrellis’ interpretive information tools to translate raw sequencing and clinical data efficiently and accurately into digestible clinical reports that guide decision making by patients and physicians.

Our Oncology diagnostic solutions feature both somatic tumor profiling and hereditary cancer screenings, along with a foundational whole exome and whole transcriptome sequencing approach.

Centrellis enables the complex interpretations of these data to identify key driver genes, activated and suppressed pathways, molecular subtypes, therapeutic interventions and matching to clinical trials.

We believe our array of diverse diagnostic solutions, built on our differentiated grounding in scientific excellence and coupled with an end-to-end full-service model, have led to our rapidly growing customer bases in Women’s Health and Oncology and increasing traction with health systems, as well as deep, trusting engagement with patients.

We Are Embedding Our Solutions Through Innovative, Deep Relationships

Our origins in and subsequent work with Mount Sinai have provided us with an extensive understanding of health systems, patient, and physician workflows as well as the complex interconnectivities that define patient-physician relationships.

We have used this knowledge to develop our integrated health system collaboration model, where we have the capabilities necessary to integrate across health system workflows as a holistic health intelligence partner in order to deploy our comprehensive genomics and information platforms, our data curation and harmonization capabilities, and our patient and provider engagement software applications.

Our solutions support our health system partners across their operations, helping them integrate a new standard of care and creating a deep relationship with us that helps both partners realize the potential of the relationship.

In addition to creating diagnostic revenue and a clinical relationship with our health system partners and their patients, this engagement provides us with access to insights informed by analyzed and processed EMRs from the health system, as well as the expansive molecular information we generate from our genomics platform as the health system’s precision medicine

Learning from our long-standing relationship with Mount Sinai, we have refined a health system engagement model that is both operational and economic and designed to maximize both our and our health system partner’s value from the relationship.

We are currently activating and expanding our relationships with several leading health systems that will expand our access to data and that we expect will position our platforms for rapid growth and broad commercial opportunities, and have recently signed contracts with three new health systems in support of this strategy.

These systems include:

AdventHealth, Avera Health, and Northshore University HealthSystem.

Our AdventHealth partnership builds upon the current AdventHealth Genomics and Personalized Health Program to offer genomic solutions to patients across a number of services and specialties.

Together, we will conduct data structuring and curation of the combined genomic and clinical data to enable clinicians and scientists to advance research and discovery to improve patient care.

We are initially focused on accelerating research in the central Florida division, which includes 18 hospitals and emergency departments, and accounts for more than two million patient visits annually.

Nationally, AdventHealth has 51 hospitals and over 100 care sites across 9 states.

Our Avera Health partnership initially focuses on advancing oncology care, enabling Avera Health’s providers and patients to benefit from data-driven insights that inform targeted cancer treatments.

Avera Health’s providers will be able to leverage Centrellis, to curate, structure and integrate clinical and genomic data to support both cancer research and clinical care at Avera Health.

We will deliver predictive disease network models and clinically actionable insights, empowering Avera Health’s providers to further improve the prevention, detection, and treatment of cancer for their patients.

We are also offering digital tools, which give Avera Health’s providers the ability to readily search for cohorts of patients based on clinical criteria, view a patient’s treatment history that is contained in the curated data as an interactive timeline, and more systematically match patients to clinical trials.

At NorthShore University HealthSystem, we are enabling a data-driven genomics program to help clinicians and patients detect, and treat diseases at an early stage, when they are most treatable.

As part of the program, NorthShore University HealthSystem’s clinicians and patients will have access to our information-rich genomic solutions for hereditary cancer, population health, pharmacogenomics, and rare expanded carrier screening.

Importantly, by combining clinical information with genomic analysis, physicians will be better positioned to administer more personalized, holistic care plans by both drawing insights on how genetic variants will impact patients’ chances of developing disease and determining the most appropriate treatment options.

In addition to guiding clinicians, the program is expected to make it easier for NorthShore University HealthSystem patients to understand the implications of genomic findings.

Centered on Centrellis and Traversa, we have also established and continue to seek strategic relationships with Biopharma companies to enable innovation across the entire drug lifecycle, from next generation drug discovery and development, to post-market efficacy surveillance, to informing on bioavailability, toxicity, tolerability, and other features critical to drug development.

We have demonstrated the ability to integrate across all aspects of the next generation therapeutic and drug development process, including:

biomarker identification as part of early stage drug discovery;

identification, validation and prioritization of drug targets;

clinical trial patient recruitment;

real-world evidence studies;

and identifying new markets and indications for existing assets.

We believe our solutions allow our Biopharma partners to harness the potential of big data to enable the development of next generation precision medicine therapeutics.

Our Health Information Platform Solution

patients, physicians, health systems, payers, and Biopharma companies.

Centrellis is the culmination of our critical competencies and goals as a company:

• technologies aimed at patient and provider engagement,

• the generation, aggregation and standardization of multi-dimensional data, and

• the modeling and generation of differentiated, domain-specific insights

Driven by the virtuous cycle and interconnection of our clinical diagnostics products, rich data assets, database engineering and data science applications, we continue to evolve and deploy our platform to facilitate a better understanding of disease and wellness and improve the standard of care through information driven knowledge and understanding.

Provider Engagement Technologies:

Our Next Generation Tools

We have built comprehensive solutions in Centrellis that enable clinicians, researchers, and patients to engage with the relevant structured health data and to leverage our predictive models of disease and wellness and produce clinically actionable insights.

For clinicians and researchers, we have designed Centrellis’s adaptive learning capabilities and tools to enable health systems and clinicians to manage their patient care, research, and health data in one place and to adapt to rapidly changing scientific and clinical norms through an advanced programmable interface, or API, layer, including:

• Integration and on-boarding for health systems and practices that connects data from EMRs and disparate and varied databases,

• Searching and analyzing cohorts of patients, allowing an assessment of their patient populations and quality of care in real-time,

• Enabling clinical decision support and personalized and actionable treatment insights into clinical reports,

• Identifying patients who are candidates for certain clinical genomic analyses,

• Managing the clinical analysis ordered for their patients, from ordering, tracking, resulting, and reanalyzing based on new findings,

• Supporting clinical care and research by matching patients to available clinical trials based on highly personalized inclusion and exclusion metrics, and

• Informing on administrative decisions including as they relate to patient growth, total cost of care, and risk identification and mitigation.

Patient Engagement Technologies:

Building Trust and Providing Value Through Clinical Partnership

We are dedicated to giving patients control of their own health data, and in support of this goal, we have designed patient access to Centrellis through our patient portal.

Patients have demonstrated their trust by engaging with us and providing consent for us to collect and store their EMR data.

After creating an account, patients are able to manage and track the clinical analysis that we are performing for them, including by being able to track, receive, and understand the initial insights into their clinical tests and data (including expanded carrier screening, or ECS, tests, and hereditary cancer tests), and to access our supporting clinical services, such as genetic counseling.

Our patient portal also provides patients with the opportunity to partner with us to collect, manage, and regularly update their health data from their disparate healthcare providers, and help participants engage with their data through user-friendly applications, such as their genomic ancestry, personalized residual risk calculations, and other clinical and educational insights and information through important health events, like their pregnancy journey.

For patients who have indicated their willingness to participate in research studies, our platform also provides integrated digital informed consenting and research program participation, through transparent, institutional review board approved processes, including targeted clinical trials offerings that provide relevant alternatives and access to the latest scientific trials.

Activating Data Through Generation, Curation and Engineering

We designed Centrellis to create an accessible and usable database that can support interpretation consistently across patient populations represented within the broad healthcare ecosystem.

Centrellis aggregates large-scale and diverse data, abstract and structure informative unstructured data, and finally integrate the data into an accessible, web-scalable data warehouse that employs a common data model across a broad series of databases.

Unstructured data derived from EMR and associated data are run through multiple pipelines leveraging machine learning-enabled natural language processing, augmented as needed by human annotators, to extract information and knowledge from that data and then structure and implement extensive quality assurance processes for the resulting annotations.

Our multiscale, integrative strategy allows us to connect the processed EMR data with complex biological data from many sources, such as the genome, proteome, transcriptome, epigenome, and microbiome.

Our standardization of the genomic and EMR data also allows us to pursue strategic relationships in the Biopharma industry, connecting Biopharma companies with clinicians and researchers to create computational models of disease, discover and validate targets and biomarkers, help design clinical trials and recruit patients, and support the collection of real-world data and evidence.

We not only collect data from external sources, but also generate clinical-grade genomic datasets in our clinical and research processes, which further fuels the richness of the data from which Centrellis draws.

Our genomic infrastructure enables us to convert bio-samples into datasets that span a range of genomic modalities, from DNA and RNA sequencing to epigenomic profiling, as well as different next generation sequencing technologies, including long-read, single molecule sequencing, low pass whole genome sequencing, and additional transformative technologies.

Together with our diagnostic solutions, we use this multi-technology approach to ensure we generate data to comprehensively cover clinically actionable insights from and common variation in the genome, enabling the diagnosis of rare conditions and diseases or risk of passing on mutations to offspring that may cause severe disease, predicting risks of developing diseases such as cancer, predicting tolerability of various therapeutics, and creating broad genomic health profiles through the use of polygenic risk scores.

Our Advanced Domain-Specific AI Informatics for Insight Generation

Finally, we believe our informatics and analysis capabilities form a meaningful connection between the web of databases that we have created in our data warehouse and the utility of Centrellis to our users.

Based on our informatics engine, Centrellis generates deep interpretive insights derived from large-scale, multi-omic data, taking advantage of our deeper data generation capabilities, and provides actionable treatment recommendations and innovative research findings.

These insights are provided to patients, clinicians, researchers, and partners through the tools described above.

We are also continuing to develop these models and insights.

Our researchers have developed a methodology to integrate diverse multi-omics data, including genomic, transcriptomic, and proteomic data, into causal probabilistic networks that help us to understand disease processes and identify key biomarkers through advanced network analysis.

Our scientists have pioneered the use of DNA variation information to statistically infer causal relationships among any number of traits that have common genetic variance components.

These approaches allow our teams to infer directed causal relationships among a pair of traits with shared genetic variance components, which then can be more systematically applied to traits to infer probabilistic causal network structures that can be mined for a broad range of discoveries.

We also designed Centrellis with a high degree of flexibility to allow the platform to adjust to the rapidly changing and advancing health information landscape, highlighted by our Traversa genomic analysis platform, which we believe will lead to improved cost profiles over time as assays transition to whole genome sequencing at increasing resolutions.

As we collect and analyze additional datasets, our platform enables the virtuous cycle of data, and we are able to further refine our products and hone our capabilities to provide enhanced analysis of these data.

More data and more insights generate further data and insights to support our models.

We have constructed automated pipelines to continuously search the literature and research repositories to expand and distill our knowledge graphs, which are in turn queried to provide the interpretations and insights delivered to users of our systems.

To support our interpretations and insights, we utilize internal experts as needed to help resolve conflicting findings to improve upon the actionable insights we deliver to physicians and patients.

Our Genomics Platform for Optimizing Screening and Diagnostic Genomics Products and Population Health Initiatives

Traversa is our comprehensive genomics platform that has been designed to serve as the backbone of our genomic analysis products, and we are in the process of transitioning all of our genomic analyses to this platform.

For products on the Traversa platform, we generate data on all known medically relevant regions of the genome at clinical-grade coverage, as well as low-pass whole genome data to span all common variation in the genome.

We also ask for the patient’s consent to biobank the corresponding samples for future clinical testing.

While we report on the specific genes analyzed at the request of the clinician and patient, these baseline data and bio-banked samples allow us to respond to requests for additional analysis quickly by generating “in silico” interpretations on genomic data already existing on a patient and to surface signals that might be medically relevant across a patient’s life course.

When deployed at across an entire health system, as we intend with our health system partners, Traversa will enable data driven collaborations and initiatives with health systems by establishing comprehensive clinical and genomic data profiles with patient consent.

Particularly where integrated with EMR data, Traversa provides health systems with a unique opportunity to deploy population health management programs because of the robust data from which those programs will draw and because of the efficiencies it will create across the health ecosystem by eliminating the repetition of the most time-consuming and costly aspects of genomic analysis, including sample collection and preparation and the generation of sequence data.

Using Traversa, clinicians and health systems will have the freedom to advance patient care by allowing clinicians to establish clinical utility and drive adoption of new analysis products, which we believe will consequently expedite improved reimbursements against lower total production costs for those offerings.

We Collect and Manage Rich, Longitudinal Data Built from Diverse Sources

The health information database that we have created draws from many complementary sources, which we manage in accordance with patient consent and preferences, our regulatory obligations, and our transparent privacy policy and practices.

These data are housed in a complex, cloud-based data lake that allows us to manage the various rights and obligations for each dataset at a granular level, including patient-specific requests with regard to their data.

This database includes data generated in the performance of our clinical services to patients and clinicians, including Women’s Health and Oncology testing, as well as additional data that patients provide to us through their engagement with our patient portal and research programs.

In addition, we participate in health information exchanges and public database programs, including through the National Institutes of Health.

We also generate and collect data by collaborating with our research partners and provide sequencing and analysis services in connection with research programs.

We further leverage the data rights provided by patients and secured through our strategic relationships, such as our oncology information partnership with VieCure that by the end of 2022 is expected to provide us with access to multiple cancer centers and data from all of their active cancer patients, with the number of newly diagnosed active cancer patients growing substantially each year.

Additionally, we support health systems and other clinical service providers by applying our Centrellis tools to their clinical workflows and medical record databases, and we receive certain rights to work with anonymized datasets and to partner with the health systems in their ongoing clinical and research programs.

We have provided such services extensively for Mount Sinai and are in the process of expanding this program with additional health systems, including Advent Health, Avera and NorthShore.

For more information regarding our data arrangements with Mount Sinai, see “ Certain Relationships and Related Party Transactions—Related Party Transactions—Sema4 ”.

Our Established Diagnostics Solutions

Our existing diagnostics solutions business centers around Women’s Health and Oncology and our industry-leading diagnostic solutions are powered by Centrellis and delivered through a full-service model that efficiently integrates into provider workflows.

Currently, we derive the majority of our revenue from these established diagnostic test solutions.

Our Elements Women’s Health Solutions

Our deep foundation in Women’s Health began before Sema4’s formation within Mount Sinai, where our lab—then called the “Mount Sinai Genetics Testing Lab”—pursued the goal of providing compassionate patient care to a highly diverse population while advancing science through education, research, and outreach.

We pioneered accurate and precise pre-conception genetic screening, and we have continued to build upon that work, expanding our focus into a multi-generational and pan-ethnic view of the health of individual women and their families.

Sema4 Elements™, our portfolio of data-science driven products and services to support reproductive and generational health, highlights our continued focused effort to accelerate the expansion of genomic diagnostic solutions, secondary insights, platform solutions and enriching health system value to drive continued growth in our Women’s Health business, including by leveraging our state-of-the-art genomic infrastructure and Centrellis platform.

Carrier Screening:

Deriving population-health insights from genomic data to differentiate our industry-leading tests

Our Expanded Carrier Screen, or ECS, test is one of the most comprehensive and accurate carrier screening tests available in the market, covering up to 502 genes.

We provide a comprehensive solution to physician practices to enable them not only to deliver sophisticated differential insights and care management guidance in support of the clinician’s care plan for the patient, but to also do so with minimal impact on the practice’s operation, helping to ensure physician offices are not overwhelmed by the amount of information and follow up that can be necessitated by carrier screening.

Our ECS solution uses proprietary technology to identify a patient’s molecular ancestry on a genome-wide level for personalized residual risk assessments by analyzing patient-specific genealogical information that is critical to better understand a patient’s chance for passing on inherited disease.

This technology has been designed to increase the accuracy of the residual risks reported to patients, in comparison to competing products that determine residual risk based on using self-reported ancestry information that does not reflect the population groups represented in the patient’s genome.

Our solution also provides patients with personalized residual risk education, along with the option to view their molecular ancestry report in the Sema4 patient portal.

Our Non-invasive Prenatal Testing Solutions

Our Noninvasive Prenatal Testing is a comprehensive noninvasive prenatal test, that screens for autosomal and sex chromosome aneuploidies.

Our advanced sequencing technology has been designed to provide reliable results down to approximately 2% fetal fraction, the amount of fetal cell-free DNA in the maternal blood sample, and has been designed to have a low failure rate, which helps reduce the need for redraws, limits unnecessary invasive procedures, and improves time to results.

Expansive development in prenatal screening allows our team to advance scientific efforts to deliver Genome Wide Screening and includes the ability to detect additional whole chromosome aneuploidies and copy number variations, or CNVs.

We believe an updated bioinformatics pipeline will help to further reduce false positives.

We expect to release new versions of our code in 2022, which we believe will help improve the positive predictive value for CNV calling through fetal fraction enrichment and CNV normalization through nucleosome positioning and fragment characteristics.

We are developing these future test versions to enable the detection of single gene disorders, such as cystic fibrosis and sickle cell disease.

This testing may be used for at risk couples to screen a pregnancy for genomic analysis of a specific disorder or as a general screening tool with a panel of diseases.

We believe these code enhancements will also facilitate validation of polyploidy, fetal zygosity and molar pregnancy detection, all of which are important aspects of screening pregnancies for chromosomal abnormalities and are not widely available through non-invasive testing.

Our Natalis Newborn Screening Solutions

Our Natalis test is an extension of our screening portfolio allowing for detection of heritable conditions from pre-conception, pregnancy and childhood.

Newborn Screening, or NBS, detects heritable conditions that are amenable to medical management in newborns and young children.

Natalis screens for 193 conditions where

knowledge of the condition by the pediatrician may result in prescribing treatment with medications, dietary modifications, or other therapies to improve the baby’s health.

All positives are confirmed using biochemical and molecular analysis.

Natalis screens for up to five times as many conditions as the newborn screening programs run by certain state governments.

Our Signal Precision Oncology Solutions

We believe that our Centrellis platform, combined with our comprehensive whole exome and whole transcriptome tumor profiling and hereditary cancer and pharmacogenomics genomic testing solutions, will make a meaningful difference in transforming cancer care.

We have developed the “Sema4 Signal®” portfolio to be leveraged individually or as part of a holistic solution for precision oncology care.

The Sema4 Signal portfolio features the integration of our germline and somatic tests with our informatics and data science tools, enabled by customized services to meet patient and provider needs to help drive more personalized care.

The Sema4 Signal products include our oncology genomic test solutions, our molecular and clinical data curation and annotation capabilities to inform on the genomic information in the context of the patient’s previous and current medical records, and various software applications to enable engagement of these data and complex results to facilitate clinical decisions, research discoveries and drug development.

The Sema4 Signal Hereditary Cancer Solution

Our Sema4 Signal Hereditary Cancer solution determines if a patient carries an inherited genetic change that increases the risk of cancer or informs on cancer treatment.

It is used to inform personalized medical management decisions to aid early detection and prevention of cancer, as well as to determine the most appropriate treatment approaches if cancer occurs, and strategies to reduce risk of additional cancers.

We offer one of the most comprehensive sets of panels on the U.S.

market, and deliver this solution supported by the Traversa platform to enable us to adapt our panels as new discoveries on clinically actionable variants are made, so we can adapt at the rate of learning.

Our solution includes tools to enable testing at the point of care or outside the office, including a digital family screening questionnaire to identify individuals who would benefit from testing, digital ordering via an EMR portal, video-based education, saliva procurement in the patient’s home, proactive billing investigation, pre-and post-test genetic counselling and family outreach to enable cascade testing.

Our Hereditary Cancer Solution is a unique product in our portfolio in that it is sold in connection with our Oncology, Women's Health and population health solutions.

For affected cancer patients, integrating hereditary cancer with our Sema4 Signal Whole Exome and Transcriptome and our informatics offerings, which incorporating real world evidence, integrates available data needed to better personalized clinical care decisions.

For unaffected patients, our Sema4 Signal Hereditary Cancer solution is incorporated into both our Women’s Health and Population Health products and services to support early identification and treatment of cancer risk.

Our Signal Whole Exome and Transcriptome Solution

We believe our Sema4 Signal Whole Exome and Transcriptome solution is one of the most comprehensive molecular profiling solutions from a commercial entity to receive New York State approval.

Our profiling platform integrates tumor-normal matched whole exome sequencing, or “WES”, with whole transcriptome sequencing, or WTS, to deliver clinically actionable information about somatic and germline alterations in solid tumors and hematologic malignancies.

This solution provides for access to a holistic view of a patient’s genome and insights into novel fusions, splice variants, and molecular pathways.

It also provides for germline findings for cancer and non-cancer genes, as per American College of Medical Genetics guidelines, with relevance to comorbidities, such as familial hypercholesterolemia, and certain drug interactions.

We deliver the WES/WTS solution using a number of proprietary tools housed in Centrellis, including our cancer knowledge-base, which contains comprehensive structured data and learnings on clinically relevant variants, including curated maps that link relevant clinical trials to variants that serve as eligibility biomarkers for the trials, as annotated by Ph.D.

oncology experts.

Our variant interpretation station for oncology automates clinical reporting by managing the variant curation process and recommending suitable therapies.

This AI-driven genomic platform is

updated regularly with recent medical literature and prioritizes clinically-significant variants, enabling providers to quickly review and leverage actionable insights.

Sema4 Signal Informatics Solutions

To complement the genomics diagnostic solutions, the Sema4 Signal products leverage Centrellis’s provider engagement technologies, described above, including to automatically abstract, annotate, and combine oncology specific datasets, including clinical medical record data, imaging, and genomics.

This clinical-genomic data set is provided back to health systems and providers and is powered by our digital applications to drive better personalized care for patients, including clinical trial recruitment, improved system-wide quality of care and increased financial and research activity.

Regulatory and Payer Relations Strategy

We have developed and are advancing our strategy to drive increased reimbursement and higher average selling prices, or ASPs, for our Sema4 Signal Oncology solutions.

As part of this strategy, we will take advantage of a Medicare Administrative Contractor (MAC), National Government Services (NGS), update to a Local Coverage Decision (LCD) titled Genomic Sequence Analysis Panels in the Treatment of Solid Organ Neoplasms under which qualifying CGP tests are covered for patients insured by Medicare, who are living with advanced cancer and meet other clinical criteria.

In addition, we are expanding our presence in select markets where Palmetto GBA is the MAC and the MolDx program they administer provides opportunities to apply for coverage under existing or future LCDs.

Specifically, we have, or intend to, submit Technical Assessments for coverage and reimbursement of WES/WTS and other tumor profiling solutions based on existing MolDx LCDs.

Beyond the testing, we are exploring the regulatory and market access landscape as it relates to the governance and reimbursement of real-world evidence and AI driven clinical decision-making tools.

As we demonstrate the clinical utility of information driven solutions, these emerging areas will become relevant.

Our COVID-19 Testing Initiative

In response to the outbreak of the worldwide COVID-19 pandemic, in the first quarter of 2020, we rapidly leveraged our existing technologies and infrastructure capabilities, supplemented by a requisite set of technologies and services, to offer a comprehensive COVID-19 diagnostic testing service for our customers.

However, on December 15, 2021, we announced that we decided to discontinue COVID-19 testing services by March 31, 2022 and began notifying our COVID-19 testing solutions customers of this decision.

Nationwide and regional lab capacity for COVID-19 testing has increased since we entered the market for COVID-19 testing in the first half of 2020.

Management believes it is the appropriate time to discontinue this line of services and dedicate all of our efforts and resources to our core mission to transform healthcare by using artificial intelligence to enable the delivery of precision medicine as the standard of care.

Our Solution for Health Systems and Providers

Our origins within a large academic medical center helped us establish our integrated health system collaboration model, where we seek to integrate our platform across numerous health system workflows to enable precision medicine solutions using Centrellis, from Women’s Health, to Oncology, to patient wellness.

Our provider and health system engagement offerings include patient and provider portals, facilitating scheduling of patient appointments, patient consenting, pre-test and post-test genetic counseling, results delivery and patient record management, among other tools and applications that are designed to allow physicians to better engage contextualized information around their patients to improve decision making.

Our Health System Engagement Model

We believe we have developed a compelling value proposition for our initial health system partners, with distinguishing features including our focus on serving local community populations, our track-record of delivering digital or technology-enabled standards of care, and our investment in precision medicine and adoption of genomic diagnostic solutions, with our desire to have predictive insights permeate all service lines and the general patient experience in their system.

In addition to our deep relationship with Mount Sinai, we have contracted to deploy Centrellis in additional health systems, which we expect will expand our impact and reach.

We have refined a health system engagement model designed to maximize both our and our partner health system’s value from the relationship.

We balance clinical-grade and research-based projects in order to deliver value in an economically sustainable manner and establish health and economic performance metrics that form the basis of quarterly steering committee reviews with the program’s executive sponsors.

Our model focuses on:

• Embedding our genomic analyses as a standard of care for Women’s Health, Oncology and/or specific diseases, which includes our full-service model including patient and provider education, patient engagement, genetic counseling and integration with the health systems’ clinical workflow and EMR,

• Enhancing existing health system data sets by leveraging our data curation capabilities for both structured and unstructured data to identify clinical utility that can be used by health system providers, researchers and administration,

• Developing software applications to facilitate deeper engagement of the enhanced health system data we produce, such as reconstructing and visualizing patient health journeys, identifying patient cohorts based on any number of filter criteria, and characterizing outcomes of patients in response to different treatments prescribed,

• Establishing population health programs where health system patients are invited to broad population genetic screening, and

• Developing mutually beneficial research collaboration programs that leverage the strengths of our and our health system partners.

Our Solutions Create Mutually Beneficially Value for Us and Our Health System Partners

We pursue strategic relationships with health systems that evaluate financial returns on a holistic basis.

We evaluate success on a long-term basis and recognize that the primary aim of every health system is to provide superior patient care with improved health economics.

As such, we continue to use the proceeds from our July 2021 business combination and related private placement financing (which we refer to as the “Prior PIPE Investment”) to accelerate growth in our health system relationships by further investing in research-oriented projects, as well as data curation, platform integrations, and building standards of care to operationalize our testing programs.

Starting with Mount Sinai and extending throughout our network, we intend to cross-validate and scale our technologies across health systems, as we seek to enable patients by leveraging data and tools across systems and patient populations in a network model so each partner can benefit from what is being learned across the healthcare ecosystem.

We Act as a Broker and Catalyst for Commercial Engagement Between Health System and Biopharma Companies

While health systems and Biopharma companies have an established ability to collaborate effectively and will continue to partner directly, we believe that our network in both segments of the healthcare ecosystem and ability to add value to these relationships through data engineering makes us well-positioned as a valued collaborator for both types of organizations.

Biopharma collaborations are often not the focus for health systems, as they have high start-up costs to develop relationships that extend to patient care.

We can support our health system partners by working more collaboratively with them to understand their capabilities and how those capabilities are complemented by our enhancement of a health systems’ data assets and clinical-genomic data generation capabilities, and by facilitating solutions that can be provided jointly to Biopharma companies.

Our Biopharma Solutions Engage and Enable Our Partners

We have established and continue to seek strategic relationships with Biopharma companies to enable drug discovery, development, and commercialization.

We have demonstrated the ability to integrate across the pharmaceutical life cycle as a result of the unique data and patient and provider engagements developed in our health system relationships and information-driven diagnostics solutions, combined with our powerful analytics capabilities and software solutions.

The Biopharma industry has become increasingly competitive as it moves toward the more precise targeting of patients in crowded disease segments, and we believe this trend positions us as a key partner for Biopharma companies to build a competitive advantage by unlocking the power of big data and enabling next generation precision medicine.

We Strive for Interconnected Strategic Relationships

We serve our Biopharma customers through a unique combination of clinical testing services, clinical and research study design and execution, and advanced data and analytics capabilities.

Our competitive advantage in this space comes from leveraging comprehensive data generated via testing, integrating these deep molecular profiles with clinical patient information, and representing this comprehensive patient data in the Centrellis platform.

This enables us to create direct and real time integration of clinical and genetic data with providers connected to drug discovery research, real world evidence studies, and other therapy development opportunities.

We are also able to utilize our solutions and unique data assets to enroll patients into clinical trials and to connect Biopharma partners to patient populations matching eligibility criteria for their trials, to facilitate patients receiving novel therapies still under development, and to perform broad genomic and transcriptomic sequencing on health system partner sample banks in collaboration with Biopharma partners.

In our engagement with Biopharma customers, we are focused on a range of disease conditions, including oncology, autoimmune and inflammatory disorders, and rare diseases.

Our disease-agnostic approach provides us with the flexibility to support our Biopharma partners across varied therapeutic areas.

We continue to work with our Biopharma partners to identify their specific needs and broaden the scope of our disease coverage accordingly.

We believe that, because of our core capabilities and differentiated approach, we are well-positioned to support next-generation drug discovery, development, and commercialization.

We further believe our ability to generate deep, clinical-grade multi-omic datasets renders us a valuable genomic testing solution provider for precision medicine Biopharma products.

Through direct engagement of providers and patients, we assist Biopharma partners in a patient-centric approach to research and clinical development.

By obtaining and curating high-dimensional data in our Centrellis platform, we deliver novel insights that help to de-risk the development of next generation therapeutics, provide for pharmacologic proof of concept via the integration of genomic and clinical data support, reduce development costs, enhance the patient experience, and increase speed to market.

Sema4’s Solutions for BioPharma Customers

We engage with our Biopharma customers to develop and deliver unique goods and services for the particular issues that each customer faces.

We believe that our Biopharma partners can realize significant value when collaborating with our team to utilize a more integrated, end-to-end solution that leverages our core set of capabilities, including longitudinal patient data, AI-driven predictive modeling, and genomics.

We have demonstrated the ability to develop these deep, integrated strategic relationships with Biopharma companies.

For example, our five-year collaborative study with Sanofi S.A., or Sanofi, is centered on discovery of new insights into the biological mechanisms and other factors implicated in asthma to help drive Sanofi’s next generation of asthma targets as well as to enhance Sanofi’s understanding of the relevant populations for both its current and in-development therapies and the therapies marketed by others.

This asthma study is currently recruiting nearly 1,200 patients, and involves comprehensive clinical characterization of patients and controls, longitudinal monitoring of patient conditions through various applications and devices, collection of biological samples for molecular profiling and generation and integration of DNA and RNA sequencing data with clinical and device acquired data.

The study is also leveraging the integrated, longitudinal data to construct models of asthma to stratify patients into subtypes,

and seeking to better understand treatments relevant to different subtypes or where there is unmet need for further drug discovery efforts.

Along with Sanofi, we will collect traditional clinical data, genomics, immunological, environmental, and sensor data from mobile devices to enable sophisticated analyses and to include advanced causal network modeling.

In general, our Biopharma strategy focuses on three main offering areas:

• Genomic Testing and Analysis Solutions:

We serve as a comprehensive clinical testing lab, offering a broad menu of molecular, cytogenic and biochemical testing services for our Biopharma partners.

Our technology development group enables us to apply innovative profiling technologies such as long-read, single-cell and spatial molecular profiling approaches to help address our Biopharma partners’ challenges.

The data generated by these capabilities, when combined with our analytics services, can produce insights that inform on disease biology, improve and accelerate the drug development process, and help ensure that patients can be made aware of relevant treatment options.

• Data and Analytics Solutions:

Centrellis enables us to provide our Biopharma partners with unique, data-driven insights that can help to accelerate the development of precision medicines, utilizing HIPAA-compliant, de-identified datasets.

Using advanced analytics and causal network modeling, we work with partners to organize high-dimensional data in ways that facilitate the identification of statistically-inferred causal relationships that enable the identification, validation and prioritization of biomarkers and targets;

identify molecular subtypes of disease;

and predict patient disease progression, prognosis, drug response, adverse events, and other clinical outcomes.

We believe that one of our particular strengths is our data science team, which is comprised of experts published in leading scientific journals.

We work with collaborators, researchers, and key opinion leaders to build new models of disease and deliver insights to Biopharma partners that can further optimize their operations.

• Clinical Trial Enablement Solutions:

We believe that Centrellis, combined with our active, direct engagement of patients and providers in our Women’s Health and, by extension, rare disorders, Oncology, and population health solutions, positions us well to assist Biopharma partners in their clinical development activities.

We have developed a number of software as a service, or SaaS, products to enable Biopharma clinical development, including a clinical trial patient matching product and a clinical trial design product that work with our longitudinal clinic-genomic dataset.

Given our patient consent structure, we have the ability to re-contact patients who may benefit from a Biopharma sponsor’s trial.

We have developed novel, technology-enabled workflows and solutions that allow us to search for and identify relevant patients in a manner that fully maintains patient confidentiality, and work with providers to assess and enroll these patients in clinical trials.

The breadth of search and precision of this method of patient recruitment can substantially improve trial timelines versus traditional recruitment methods.

We also assist prominent Biopharma partners seeking to use high-quality genomic analysis to assess patient eligibility for clinical trials.

We believe our clinical testing services and data solutions make us a key partner for supporting efficient clinical trials.

We are pursuing a new strategic direction focused on our exome and genome sequencing business coupled with our Centrellis® data platform.

We completed the exit of our reproductive and women’s health testing business, during the first quarter of 2023, and we also completed the exit of the somatic tumor testing business during the fourth quarter of 2022.

For more information, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” Unless the context otherwise requires, the description of our business and operations below assumes the completion of the exits from the somatic tumor testing and the reproductive and women’s health testing businesses.

We operate with conviction that what is best for patients must be embedded in every aspect of our work.

At GeneDx, we believe:

• genomic information has broad utility, and every person should have access to their genome—delivered expertly, ethically and responsibly—to guide health decisions throughout life;

• exome and Whole Genome Sequencing (“WGS”) will facilitate a transition from hypothesis-based to genome-guided healthcare which will improve outcomes for patients and healthcare systems that benefit society as a whole;

• the ability to curate and combine genomic information with clinical and electronic medical record (“EMR”) data will transform therapeutic development, bringing better therapies to patients, faster;

• patients should control and have the ability to direct the use of their genomic information to both benefit themselves and advance scientific understanding that helps others.

In support of these beliefs, we value equitability, simplicity and transparency.

Through this value system, we aim to deliver personalized and actionable health insights to inform diagnosis, direct treatment and improve drug discovery, bringing better health from genomics to patients around the world.

GeneDx is focused on delivering personalized and actionable health insights to inform diagnosis, direct treatment and improve drug discovery.

We sit at the intersection of diagnostics and data science, pairing decades of genomic expertise with an ability to interpret clinical data at scale.

We believe we are well-positioned to accelerate the use of genomics and leverage large-scale clinical data to enable precision medicine as the standard of care.

Our initial focus is in pediatric and rare diseases, two areas in which we believe we have competitive advantage and can deliver on our vision today.

GeneDx was founded in 2000 by scientists from the National Institutes of Health whose mission was making genetic testing accessible for patients with rare diseases.

The company quickly became a leader in genomics, creating the foundation for how to provide genomic information at scale and pioneering exome and genome sequencing for rare and ultra-rare genetic pediatric disorders.

More than 20 years later, we have amassed one of the world’s largest rare disease data sets and remain a leader in genomics.

In May 2022, GeneDx was acquired by and integrated with Sema4 Holdings, adding Legacy Sema4’s Centrellis®, a highly innovative health information platform to our portfolio of solutions.

Centrellis® integrates digital tools and artificial intelligence, allowing our scientists to ingest and synthesize clinical and genomic data to deliver better, more comprehensive health insights.

Today, we are powered by our industry-leading genomic interpretation platform and Centrellis®.

We believe exome and genome testing will become the standard for diagnosis of genetic disease, with the potential to transform healthcare and improve patients’ quality of life for generations by sequencing once and analyzing for a lifetime.

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Industry Background

Targeted genetic tests and panel testing make up the vast majority of diagnostics tests ordered today.

While panel testing can be immensely valuable, it has an increasing limitation as we move towards genetic-based healthcare.

Panels only allow you to test for insights that physicians predefine based on symptoms, which can lead to inconclusive results and an inefficient process.

It is hypothesis-based medicine based on symptoms that may overlap across diseases.

We firmly believe that an affordable, scalable and actionable genome is the future of medicine.

The barrier to having actionable information from a genomic sequence is significant—and not just due to costs, which are coming down.

The less-discussed barrier to having actionable information lies in the ability to process a genome’s worth of information—quickly and scalably—and to deliver both a result that a clinician can easily act upon to help a patient and a robust dataset that enables clinicians to drive precise diagnosis and researchers to develop and advance therapeutics.

Most companies in today’s genetics industry are taking a test-by-test approach to cross the chasm from genetics early adopters to genome guided healthcare in the mainstream market.

We believe that driving clinician and patient awareness and influencing policy decisions may facilitate uptake within the industry.

In addition, making genetics part of mainstream medicine requires advancing the technology to provide personalized and actionable health insights.

It also will require having a robust, well-characterized dataset that can maximize answers and minimize unknowns and that can drive a new era of discovery.

Exome and whole genome sequencing provide the broadest view into the genomic variant—we are looking comprehensively into over 20,000 genes, while panels look at anywhere from two to a few hundred genes.

While most companies in the industry have grown through a focus on panels, we have focused on exome and whole genome developing structured gene-disease knowledge curated by our team of experts to power automated interpretation and reporting.

The genome is composed of 3 billion “letters”, or base pairs, of DNA.

The exome is a portion of the genome that encodes proteins, which are involved in many different types of cellular functions.

Changes in the genome and exome can change the way proteins are formed or are utilized by the cell, potentially causing disease.

When patients present with complex issues, a genetic diagnosis may be available, but a traditional genetic panel test may be too narrow to identify the cause.

Some genetic disorders present with very specific symptoms, so tests that read the “letters” of a single gene or a small panel of genes, may make sense for physicians to use in diagnosis.

But for many other genetic diseases, patients can present with overlapping symptoms so finding the correct

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diagnosis is not always straightforward and may require multiple tests, costly evaluations, invasive procedures, and long hospital stays.

Exome and genome sequencing can find different genetic alterations, or variants, that more targeted tests miss and are especially useful when the timing is critical to directing or altering medical management.

With over 20 years of operation, GeneDx has a proven track record of expertise in genetic testing.

We launched the industry’s first commercially available next generation sequencing panels in 2008, pioneered exome sequencing in 2012 and have sequenced over 400,000 exomes to date.

We have performed over a million genetic tests and worked tirelessly to develop the following:

• A curated database of disease-associated genomic variants.

• Proprietary bioinformatics and variant interpretation pipelines.

• Rapid exome and whole genome sequencing testing options.

The status quo of genetic testing requires repeated and fragmented testing, which in many cases, is conducted too late for physicians to use in treatment of patients.

Targeted genetic tests and panels have been largely commoditized leaving physicians, healthcare partners and patients searching for deeper answers and enhanced utility.

The scalable exome and whole genome interpretation that we can deliver at speed do not require a long, complex, expensive, expert-guided search and may make most other genetic tests obsolete.

In addition, using whole genome testing is incredibly simple:

it’s designed to be Just One Test.

Advanced Technology with a Human Touch

Our team includes approximately 250 genetic counselors, physicians, scientists, and clinical and molecular genomics specialists.

We believe we are one of the industry’s leading genetic testing experts.

We share the same goal as healthcare providers, patients, and families:

to provide personalized and actionable health insights.

Our years of exome and genome sequencing experience have provided us with a substantial dataset, including over 2.7 million structured phenotypes with nearly 60% of all exomes to date processed as parent-child trios.

We have invested resources over time to annotate the phenotypes and sequence the parents of patients, because their genetic sequences can often provide additional diagnostic information, potentially improving the precision of genetic analysis.

In addition, the data from more families allows us to continually improve interpretation of genetic code and variants that may cause disease.

We believe we have more expertly annotated disease-causing variants than the largest public archive.

Internally developed with over one million sequenced specimens, our database is designed to lead to increasingly reliable diagnostic test results.

The structured gene-disease knowledge curated by our team of experts is powering automated interpretation and reporting built to handle genomic data at scale.

Combined with our proprietary, state-of-the-art variant identification software, our ability to deliver highly accurate test results makes finding definitive diagnoses, even in complex cases, possible.

Implemented with expert oversight, our advanced interpretation methods incorporate automation, bioinformatics, and cloud-based machine learning, enabling efficient discovery of genetic differences at previously undetectable levels.

As the number of new patients we test grows, so does our database, as new data increases the potential for greater insights.

Comparing new cases against the data from previous cases helps to confirm whether a genetic variant is significant.

Once new findings are identified, we aim to proactively reach out to healthcare providers and offer to reanalyze their patients’ previous results.

Over time, our objective is to fully automate this reanalysis process in a convenient, easy to understand, efficient method.

In this new world of “one test,” people may be able to carry their genomic data—their DNA blueprints—with them throughout their life.

GeneDx intends to assist in providing new answers from within, decoding more insights over time.

As we capture more genomic and phenotypic data, we hope to fuel a positive feedback cycle of discovery that continuously delivers more value for patients, providers and healthcare partners.

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Delivering Health Insights

Centrellis®, our health information platform, is supported and fueled by genomic information from our diagnostic business and combined with an ever growing population of clinical health records and data.

We engage with patients, physicians, health systems, and other partners based on principles of transparency, choice, and consent.

Driven by our direct engagement with patients and strategic relationships with multiple health systems, the database we have built contains extensive Electronic Medical Record (EMR) data, totaling approximately 3.1 million patient health records, and has been designed to enable Centrellis® to draw from its extensive data assets in a way that enables physicians to proactively diagnose and manage disease.

Our datasets include over 20 years of records abstracted from approximately 56 million clinical documents, 47 million phenotypes and 8 million disease diagnoses.

We expect our current and targeted strategic relationships will provide us with access to additional active patient cohorts and datasets to continue to build our information base and enable our iterative, data-driven business model, including our genomic test solutions franchise.

Market Opportunity

Our primary growth engine in the short term will be expanding our current market-leading exome sequencing capabilities in the Neonatal Intensive Care Units (“NICU”) and Pediatric Developmental Disorder setting, as well as providing interpretation and information services for customers that sequence locally but look to GeneDx for analysis and interpretation, and providing our Centrellis® platform services to biopharmaceutical (“biopharma”) partners.

We believe we are particularly well-suited for helping rare disease and pediatric developmental disorder patients, their care teams and biopharma companies today.

This is a large market with immense unmet medical need.

There are nearly 7,000 individual diseases affecting nearly 10% of the total population in the United States, of which 50% are children.

As a result, there are over 700 medicines in development for these diseases, with a regulatory pathway facilitated by the Orphan Drug Act of 1983.

By providing the precise genetic diagnosis of patients with rare disease, our expertise and technology may provide researchers and biopharma companies with the information needed to develop and commercialize a new treatment for the disease.

Our longer-term growth strategy is the expansion into whole genome testing for Adult Disorders and Newborn Screening, supported with the launch of a new customer experience platform for non-geneticists, patients and caregivers, and evidence generation to establish the clinical and economic benefits of screening.

By unlocking the value of the products, our knowledge base, network of relationships, and expertise, our team is well positioned to lead what we believe is a nearly $30 billion global market opportunity.

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We believe that the span and depth of our experience and dataset allows us to return more positive findings and thus clinical utility both immediately and over time through reanalysis.

Importantly, we believe that we return fewer uncertain findings compared to public data sets, which makes our analysis easier to interpret outside of the medical genetics community.

At the same time, we have improved quality and speed to delivery of exome and genome tests and have significantly lowered exome sequencing costs since 2013.

Much of this decline was driven by reduced sequencing costs shared across the industry;

however, we have reduced costs in the interpretation layer through accumulating data and experience, and we expect further decline in costs going forward.

Leveraging these capabilities, we aim to be the global market leader in the development and delivery of reliable, actionable, scalable exome and genome sequencing and interpretation and information services.

Our strategy focuses on the following objectives:

• Expand the utilization of exome and genome sequencing as the first- or second-tier test over most other genetically targeted tests by leveraging decades of earned trust amongst expert geneticists;

• Expand the utilization of industry-leading exome and genome sequencing beyond the genetic experts into the non-expert setting, potentially creating a new standard of care which enables faster diagnoses, reduces suffering, and helps healthcare systems save money.

In the near term, our principal target markets will be settings with the most vulnerable patients who can benefit the most including, but not limited to, NICU and patients with Pediatric Developmental Disorders.

To achieve these objectives, we plan to:

• Complete the build out of our commercial footprint to nearly 60 field-based sales representatives in 2023, and construct an industry-leading brand, product, marketing, communications and market access platform by leveraging decades of earned trust across the genetics community.

• Partner with leaders across health systems, manufacturers, commercial and governmental payers and advocacy groups.

We aim to collaborate on programs to establish definitive clinical and economic case for broad use of genomic-guided medicine.

Such programs will focus on:

◦ support for rapid whole genome sequencing in the NICU and Pediatric Developmental Disorder settings;

◦ diagnosis of disease and prevention of chronic conditions in adults;

◦ use of rapid whole genome sequencing for broad newborn screening.

• Open new markets and geographies and unlock the value of our dataset with independently scalable cloud-based interpretation and information service offerings.

This will enable healthcare partners to incorporate genetics into clinical care by accessing our analysis and interpretation capabilities remotely while sequencing locally to reduce complexity, logistics cost and wait times, and align to local restrictions where applicable;

• Launch a new provider and patient experience with the eventual goal of providing lifelong access and portability of genomic information.

At initial sequence, rapid results provide clinicians simple, actionable, easy to understand results for non-geneticists and tailored resources for patients and caregivers.

On an ongoing basis, reanalysis unlocks a renewable source of insight, replacing any future germline screening.

We will sequence once, and analyze for life.

• Optimize Centrellis® to become a solutions provider of choice for biopharma.

Such solutions will focus on three value-added services:

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Finding rare disease patients for clinical trial recruitment and/or delivery of targeted therapeutics, eventually moving into other disease areas such as cardiology and oncology.

◦ UNDERSTAND:

Supporting research and development for targeted therapies with analytic reports leveraging clinicogenomics data across multiple therapeutic areas with an initial emphasis in rare disease and oncology.

In the long term, providing a therapeutic area agnostic platform to access to data, patients and insights for real world evidence and data to support end-to-end drug discovery pipeline.

Research and Development

We have invested a substantial amount of time and expense into research and development for our technology and test offerings, which requires the continuous improvement of software capabilities to analyze data and process customer orders.

Our research and development efforts focus on several key areas, including multiscale biotechnology, assay development across sequencing technologies, data science and engineering, and the development of network-based models.

We expect our research and development activities to increase as we innovate and expand the application of our current and future platforms including Traversa and Centrellis.

Our internationally recognized research team includes leaders in data science, network modeling, multiscale biotechnology and genomics.

As noted above, our CEO, Eric Schadt, is a world-renowned expert on constructing predictive models of disease that link molecular biology to physiology to enable clinical medicine.

He has published more than 450 peer-reviewed papers in leading scientific journals, with a public citation or “h-” index of 137, and has contributed to discoveries relating to the genetic basis of common human diseases such as cancer, diabetes,

obesity, and Alzheimer’s disease.

Under the leadership of our CEO, our research team comprises more than 160 Ph.D.-level scientists, complemented by additional physician scientists and certified technicians as of December 31, 2021.

Ongoing collaborations with scientists and clinicians at the Mount Sinai and other healthcare systems allows our research to remain patient-centered and clinically relevant.

Our research and development activities include information technology, product development, customer experience, medical affairs, collaborations and research.

These activities are principally focused on our efforts to develop and improve the software we use to analyze data, process genomic test orders, deliver reports, and improve customer experience.

We are also participating in several collaborative studies aimed to provide evidence of the clinical and economic benefit for exome and whole genome sequencing.

Two such studies currently underway include the SeqFirst study—in collaboration with Seattle Children’s Hospital and University of Washington—which is designed to demonstrate the broad utility of rapid whole genome sequencing for critically ill newborns and, the Genomic Uniform-Screening Against Rare Diseases In All Newborns (“GUARDIAN”) study—in collaboration with New York-Presbyterian, Columbia University, New York State Department of Health and Illumina—which is designed to assess whole genome sequencing to screen newborns for more conditions than those currently included in standard newborn screening in the United States.

The goals of these studies are to drive earlier diagnosis and treatment to improve the health of the newborns who participate in such studies, generate evidence to support the expansion of newborn screening through genomic sequencing, and characterize the prevalence and natural history of rare genetic conditions.

Our competitors include companies that offer molecular genetic testing and consulting services, including specialty and reference laboratories that offer traditional single- and multi-gene tests and biopharmaceutical companies.

In addition, there are a large number of new entrants into the market for genetic information ranging from informatics and analysis pipeline developers to focused, integrated providers of genetic tools and services for health and wellness, including Illumina, Inc., which is also one of our suppliers.

In addition to the companies that currently offer traditional genetic testing services and research centers, other established and emerging healthcare, information technology and service companies may commercialize competitive products including informatics, analysis, integrated genetic tools and services for health and wellness.

Principal competitors include companies such Baylor, Centogene, Exact Sciences, Invitae as well as other commercial and academic labs.

Customers and Seasonality

We receive payment for our products and services from third-party payers, patients, business-to-business clients, and from other healthcare partners.

Substantially all of our revenue for the year ended December 31, 2022 has been primarily derived from diagnostic test reports and we expect this trend to continue in the near-term.

During the year ended December 31, 2022, 94% of pediatric specialists in the United States who order exome testing have ordered from GeneDx.

We expect over time to achieve a mix of revenue from diagnostic tests, data and information solutions, newborn screening products and information and interpretation services.

Less than 5% of our revenues today are derived from referral sources outside of the United States.

We expect over time to increase rest of world revenue as knowledge and understanding of the benefits of exome and whole genome sequencing continue to expand.

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We have historically experienced higher revenue in our fourth quarter compared to other quarters in our fiscal year due in part to seasonal demand of our tests from patients who have met their annual insurance deductible.

However, changes in our product and payer mix might cause these historical seasonal patterns to be different than future patterns of revenue or financial performance.

For information regarding our customer concentration in relation to certain of the Company’s third-party payors, see Note 2, “Summary of Significant Accounting Policies” in the notes to our audited consolidated financial statements.

We expect incrementally less concentration among third-party payors following the exits from reproductive health and somatic tumor testing.

Raw Materials and Suppliers

We rely on a limited number of suppliers, including Illumina, Inc., Integrated DNA Technologies Incorporated, Agilent Technologies, Roche Holdings Ltd., QIAGEN, Inc.

and Twist Biosciences, for certain laboratory reagents, as well as sequencers and other equipment and materials, which we use in our laboratory operations.

Our operations could be interrupted if we encounter delays or difficulties in securing reagents, sequencers or other equipment or materials, and if we cannot obtain an acceptable substitute.

Any such interruption could significantly affect our business, financial condition, results of operations and reputation.

We believe that there are only a few other manufacturers that are currently capable of supplying and servicing the equipment necessary for our operations, including sequencers and various associated reagents and enzymes.

The use of equipment or materials provided by these replacement suppliers would require us to alter our operations.

Transitioning to a new supplier would be time consuming and expensive, may result in interruptions in operations, could affect the performance specifications of our laboratory operations or could require that we revalidate our tests.

We cannot be certain that we will be able to secure alternative equipment, reagents and other materials, or bring such equipment, reagents and materials on-line and revalidate them without experiencing interruptions in our workflow.

If we encounter delays or difficulties in securing, reconfiguring or revalidating equipment and materials, our business and reputation could be adversely affected.

Intellectual Property

We have intellectual property rights pertaining to all elements of our platforms and solutions.

Our success and ability to compete depend in part on securing and preserving enforceable patent, trade secret, trademark and other intellectual property rights;

operating without having competitors infringe, misappropriate or otherwise circumvent these rights;

operating without infringing the proprietary rights of others;

and obtaining and maintaining licenses for technology development or product commercialization.

The fields of genomic and health information analysis present limited opportunities for patent protection, based on well-known legal precedents.

As result, our patent protection strategy is to protect our non-gene specific technology and our specific biomarkers.

In this regard, as of December 31, 2021, we have four pending utility patent applications and one provisional patent application.

The pending utility patent applications include a U.S.

We rely on a combination of intellectual property rights, including trade secrets, copyrights, trademarks, customary contractual protections to protect our core technology and intellectual property.

The fields of genomic and health information analysis present limited opportunities for patent protection, based on current legal precedents.

Our patent protection strategy has focused on seeking protection for certain of our non-gene specific technology and our specific biomarkers.

In this regard, as of January 23, 2023, we have six pending non-provisional utility patent applications and one provisional patent application.

The utility patent applications include a U.S.

patent application related to a genome annotation software platform for annotating genomic intervals that are clinically relevant for analysis, a U.S.

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If patents are issued from the currently pending applications, the earliest patents will begin expiring in 2040, subject to potential extensions of the patent term that will be calculated based on the length of the patent examination process.

The claim scope of any potentially issued patents stemming from the present applications may be narrowed from initial filings due to any amendments that may arise throughout their prosecution.

We do not presently have any patents or patent applications directed to the sequences of specific genes or variants of such genes, nor do we currently rely on any in-licensed gene patent rights of any third party.

We may, in time, seek additional patent protection to protect technology that is not gene-specific and that provides us with a potential competitive advantage as we focus on making comprehensive genetic information less expensive and more broadly available to our customers.

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Trade secrets

We rely on trade secrets, including unpatented know-how, technology and other proprietary information, to maintain and develop our competitive position.

We have a trade secrecy program to prevent disclosure of our trade secrets to others, except under stringent conditions of confidentiality when disclosure is critical to our business.

We protect trade secrets and know-how by establishing confidentiality agreements and invention assignment agreements with our employees, consultants, scientific advisors, contractors, and collaborators.

These agreements provide that all confidential information developed or made known during the course of an individual or entities’ relationship with us must be kept confidential during and after the relationship.

These agreements also provide that all inventions resulting from work performed for us or relating to our business and conceived or completed during the period of employment or assignment, as applicable, will be our exclusive property.

In addition, we take other appropriate precautions, such as physical and technological security measures, to guard against misappropriation of our proprietary information by third parties.

Although we take steps to protect our proprietary information and trade secrets, including through contractual means with our employees and consultants, third parties may independently develop substantially equivalent proprietary information and techniques or otherwise gain access to our trade secrets or disclose our technology.

Our valuable trade secrets relate to proprietary bioinformatic tools such as:

• custom data processing methods and analytical pipelines for NGS, aCGH, MLPA, Sanger, and other genomic data, optimized and validated to the highest performance standards;

• a novel detection method to uncover notoriously difficult to detect sequence variants called mobile element insertions and partial-exon deletions;

• custom variant analysis platforms built from the ground up for exome and genome-scale data interpretation.

Although we take steps to protect our proprietary information and trade secrets, including through contractual means with our employees and consultants, these steps may be circumvented, or third parties may independently develop substantially equivalent proprietary information and techniques or otherwise gain access to our trade secrets or disclose our technology.

Accordingly, we may not be able to meaningfully protect our trade secrets.

For more information regarding the risks related to our intellectual property, see the section entitled “ Risk Factors — Risks Related to Our Intellectual Property .”

We own various trademarks, applications and unregistered trademarks in the U.S and other commercially important markets, including our company name, product and service names and other trade or service marks.

We own or are applying for various trademarks, service marks, trade names, and product service names in the U.S and other commercially important markets.

We intend to invest significant resources in the growth and protection of our reputation and trademarks.

Our trademark portfolio is designed to protect the brands for our products and services, both current and in the pipeline.

Reimbursement

Patients who have diagnostic tests ordered or are prescribed treatments by providers performing the prescribed services, generally rely on third-party payors to reimburse all or part of the associated healthcare costs.

Sales of our products and services will therefore depend substantially on the extent to which the costs of our products and services will be paid by third-party payors, including health maintenance, managed care and similar healthcare management organizations, or reimbursed by government health administration authorities, such as Medicare and Medicaid and private health insurers.

In the United States, our ability to commercialize and the commercial success of our product and service offerings will depend in part on the extent to which governmental payor programs at the federal and state levels, including Medicare and Medicaid, private health insurers and other third-party payors provide coverage for and establish adequate reimbursement levels for these offerings.

Government authorities, private health insurers and other organizations generally decide which devices they will pay for and establish reimbursement levels for healthcare.

Medicare is a federally funded program for the elderly and disabled managed by Centers for Medicare & Medicaid Services, or CMS, through local contractors that administer coverage and reimbursement for certain healthcare items and services.

Medicaid is an insurance program for certain categories of patients whose income and assets fall below state defined levels, and is funded jointly by federal and state governments and managed by each state.

Similarly, the federal government manages other healthcare programs, including the Veterans Health Administration, the Indian Health Service, and Tricare, the healthcare program for military personnel, retirees, and related beneficiaries.

Many states have also created pharmacy assistance programs for individuals who do not qualify for federal programs.

In the U.S., private health insurers and other third-party payors often provide reimbursement for products and services based in part on the coverage and payment rates set by the Medicare or Medicaid programs.

Federal programs in the U.S.

also sometimes impose price controls through mandatory ceiling prices on purchases by federal agencies and federally funded hospitals and clinics and mandatory rebates on retail pharmacy prescriptions paid by Medicaid and Tricare.

These restrictions and limitations influence the purchase of healthcare services and products.

Legislative proposals to reform healthcare or reduce costs under government programs may result in lower reimbursement for our products and services or exclusion of our products and services from coverage.

In addition, government programs like Medicaid include what are in effect substantial penalties for increasing commercial prices of certain products over the rate of inflation which can affect realization and return on investment.

Increasing efforts by governmental and third-party payors to cap or reduce healthcare costs may cause such organizations to limit both coverage and level of reimbursement for newly approved healthcare products.

At the state level, legislatures are increasingly passing legislation and implementing regulations designed to control pharmaceutical and biological program pricing, including price or patient reimbursement constraints, discounts, restrictions on certain product access and marketing cost disclosure and transparency measures, and, in some cases, designed to encourage importation from other countries and bulk purchasing.

As a result of the above trends, we may need to conduct expensive studies in order to demonstrate the medical necessity and cost effectiveness of our products and services, in addition to the costs required to obtain FDA approvals.

Our products and services may not be considered medically necessary or cost effective, or the discount percentages required to secure coverage may not yield an adequate margin over cost.

Many hospitals implement a controlled and defined process for covering and approving diagnostic tests and medical devices.

Any marketing efforts that are determined to have violated such policies could result in the denial or removal of our products from that hospital’s list of approved products.

Moreover, a payor’s decision to provide coverage for a diagnostic product does not imply that an adequate reimbursement rate will be approved.

Adequate third-party reimbursement may not be available to enable us to maintain price levels sufficient to realize an appropriate return on our investment in device development.

Legislative proposals to reform healthcare or reduce costs under government insurance programs may result in lower

reimbursement for our products and services or exclusion of our products and services from coverage.

The cost containment measures that healthcare payor and providers are instituting and any healthcare reform could significantly reduce our revenue from the sale of any approved products and services.

We cannot provide any assurances that we will be able to obtain and maintain third-party coverage or adequate reimbursement for our products and services in whole or in part.

In addition, amendments to the False Claims Act impose severe penalties for the knowing and improper retention of overpayments collected from governmental payors.

Within 60 days of identifying and quantifying an overpayment, a provider is required to notify CMS or the Medicare contractor of the overpayment and the reason for it and return the overpayment.

These amendments could subject our procedures for identifying and processing payments to greater scrutiny.

Overpayments may occur from time to time in the healthcare industry without any fraudulent intent.

For example, overpayments may result from mistakes in reimbursement claim forms or from improper processing by governmental payor.

We maintain protocols intended to identify any overpayments.

From time to time, we may identify overpayments and be required to refund those amounts to governmental payors.

Clinical Laboratory Improvement Act

Our clinical reference laboratories in Connecticut are required to hold certain federal certificates to conduct our business.

Under the Clinical Laboratory Improvement Act of 1988, or CLIA, we are required to hold a certificate applicable to the type of laboratory examinations we perform and to comply with standards covering personnel, facilities administration, inspections, quality control, quality assurance and proficiency testing.

As of December 31, 2021, we have a current certificate under CLIA to perform testing at our laboratory locations in Stamford and Branford, Connecticut.

To renew this CLIA certificate, we are subject to survey and inspection every two years to assess compliance with program standards.

Moreover, CLIA inspectors may make random inspections of our clinical reference laboratories.

Human Capital Resources

We aim to recruit, develop, and retain diverse, high-quality talent.

We had 1,100 team members as of January 20, 2023 who are champions of not only our organization, but our patients, providers and partners.

Our values guide our interactions.

Our model represents the interconnectedness of sometimes opposing values, where both are required to accomplish our mission.

These values are:

• Bravery & Humility

• Openness & Accountability

• Equitability & Integrity

• Rigorous & Efficient Development

• Simplicity & Curiosity

Diversity and Inclusion

We believe that a diverse and inclusive workforce is important.

Our JEDI (Justice, Equity, Diversity and Inclusion) initiatives enable us to build a diverse and inclusive workplace that help make progress in our belief of equitability.

Every team has a JEDI goal to ensure we are accountable to one another and this commitment.

Talent Development

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We are committed to developing our workforce.

Our talent development programs provide employees with the resources they need to achieve their career goals, build management skills and lead their teams.

Managers coach and hold conversations with employees’ regarding their career and development plans, thereby staying true to our belief in accountability and openness.

Total Rewards

We offer competitive compensation to attract and retain high quality talent, and we care for our people so they can focus on our mission.

Our employees' total compensation package includes competitive salary, bonuses or sales incentives, equity and a 401(K) plan with matching opportunities.

Equity participation is provided for certain positions because ownership in the company drives commitment to our long-term success.

We provide programs including healthcare and insurance benefits, health savings and flexible spending accounts, paid time off, family leave, flexible work schedules, fertility, adoption and surrogacy assistance, employee assistance and wellness support, among many others.

Government Regulation

Our business and the services (both current and in the pipeline) we provide are subject to and impacted by extensive and frequently changing laws and regulations in the United States (at both the federal and state levels) and internationally.

Failure to comply with the applicable laws and regulations can subject us to repayment of amounts previously paid to us, significant civil and criminal penalties, loss of licensure, certification, or accreditation, or exclusion from state and federal health care programs.

The significant areas of regulation are summarized below:

Clinical Laboratory Improvement Amendments of 1988 and State Regulation

Our clinical laboratories must hold certain federal , state and local licenses, certifications and permits to conduct our business.

Laboratories in the United States that perform testing on human specimens for the purpose of providing information for the diagnosis, prevention, or treatment of disease or impairment, or the assessment of health are subject to the Clinical Laboratory Improvement Amendments of 1988, as amended, and its implementing regulations (“CLIA”).

CLIA requires such laboratories to be certified by the federal government and mandates compliance with various operational, personnel, facilities administration, inspections, quality control, quality assessment and proficiency testing requirements intended to ensure that testing services are accurate, reliable and timely.

CLIA certification also is a prerequisite to be eligible to bill state and federal health care programs, as well as many commercial third-party payers, for laboratory testing services.

Our laboratory located in Gaithersburg, Maryland is CLIA certified to perform high complexity tests.

Laboratories performing high complexity testing are required to meet more stringent requirements than laboratories performing less complex tests.

The regulatory and compliance standards applicable to the testing we perform may change over time, and any such changes could have a material effect on our business.

If our clinical reference laboratory is out of compliance with CLIA requirements, we may be subject to sanctions such as suspension, limitation or revocation of our CLIA certificate, as well as directed plan of correction, state on-site monitoring, civil money penalties, civil injunctive suit or criminal penalties.

We must maintain CLIA compliance and certification to be eligible to bill for diagnostic services provided to Medicare and Medicaid beneficiaries.

If we were to be found out of compliance with CLIA requirements and subjected to sanction, our business could be harmed.

State Laboratory Testing

We are is required to maintain a license to conduct testing in Connecticut.

Connecticut laws establish standards for day-to-day operations of our laboratories in Stamford and Branford, Connecticut.

If our clinical reference laboratories are out of compliance with Connecticut standards, the Connecticut Department of Health Services, or CDHS, may suspend, restrict or revoke our license to operate our clinical reference laboratories, assess substantial civil money penalties, or impose specific corrective action plans.

Any such actions could materially affect our business.

As of December 31, 2021, we maintain a current license in good standing with CDHS.

However, we cannot provide assurance that CDHS will at all times in the future find us to be in compliance with all such laws.

Several states require the licensure of out-of-state laboratories that accept specimens from those states.

For example, New York requires a laboratory to hold a permit which is issued after an on-site inspection and approval of testing methodology and has various requirements over and above CLIA and the College of American Pathologists, or CAP, Laboratory Accreditation Program, including those for personnel qualifications, proficiency testing, physical facility, equipment, and quality control standards.

Our laboratory holds the required licenses for California, New York, Maryland, Pennsylvania, and Rhode Island.

Each of our clinical reference laboratories in Connecticut is required to be licensed on a test-specific basis by New York State as an out of state laboratory and our products, as laboratory-developed tests, or LDTs, must be approved by the New York State Department of Health, or NYDOH, before they are performed on samples from New York.

Each Sema4 laboratory is licensed by New York, and we are currently approved for testing samples from

We are subject to periodic inspection by the NYDOH and we are required to demonstrate ongoing compliance with NYDOH regulations and standards.

Other states may adopt similar licensure requirements in the future, which may require us to modify, delay or stop our operations in such jurisdictions.

Complying with licensure requirements in new jurisdictions may be expensive, time-consuming, and subject us to significant and unanticipated delays.

If we identify any other state with such requirements, or if we are contacted by any other state advising us of such requirements, we intend to follow instructions from the state regulators as to how we should comply with such requirements.

Food and Drug Administration

Laboratory Developed Tests

As a condition of CLIA certification, our laboratory is subject to survey and inspection every two years to assess compliance with program standards, in addition to being subject to additional random inspections.

The biennial survey is conducted by the Centers for Medicare & Medicaid Services (“CMS”), a CMS agent (typically a state agency), or a CMS-approved accreditation organization.

Our Gaithersburg and Stamford laboratories have been accredited by the College of American Pathologists (“CAP”), which means that our laboratories have been certified as following CAP guidelines in operating the laboratory and in performing tests that ensure the quality of our results.

Because our laboratories are accredited by CAP, which is a CMS-approved accreditation organization, CMS does not perform these biennial surveys and inspections and relies on our CAP surveys and inspections.

We may also be subject to additional unannounced inspections.

CLIA provides that a state may adopt laboratory regulations that are not inconsistent with those under federal law, and a number of states have implemented their own (sometimes more stringent) laboratory regulatory requirements.

CLIA does not preempt state laws that have established laboratory quality standards that are at least as stringent as the federal law requirements under CLIA.

State laws may require that nonresident laboratories, or out-of-state laboratories, maintain a laboratory license to perform tests on samples from patients who reside in that state.

As a condition of state licensure, these state laws may require that laboratory personnel meet certain qualifications, specify certain quality control procedures or facility requirements, or prescribe record maintenance requirements.

We maintain state laboratory licenses for our Gaithersburg and Stamford facilities in Maryland, New York,

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California, Pennsylvania and Rhode Island;

our Stamford laboratory also maintains a Connecticut clinical laboratory permit.

In addition to having laboratory licenses in New York, our laboratories are also required to obtain approval on a test-specific basis for the tests they run as laboratory developed tests (“LDTs”) by the New York Department of Health before specific testing is performed on samples from New York.

If any states currently have or adopt similar licensure requirements in the future, we may be required to modify, delay or stop our operations in those states.

If a laboratory is out of compliance with state laws or regulations governing licensed laboratories or with CLIA, penalties may include suspension, limitation or revocation of the license or CLIA certificate, assessment of civil monetary penalties or fines, civil injunctive suit or criminal penalties.

Failure to comply with CLIA could also result in a directed plan of correction and state on-site monitoring.

Loss of a laboratory’s CLIA certificate or state license may also result in the inability to receive payments from state and federal health care programs as well as private third-party payers.

We believe that we are in material compliance with CLIA and all applicable licensing laws and regulations.

CLIA and state laws and regulations, operating together, sometimes limit the ability of laboratories to offer consumer-initiated testing (also known as “direct access testing”).

CLIA certified laboratories are permitted to perform testing only upon the order of an “authorized person,” defined as an individual authorized under state law to order tests or receive test results, or both.

Many states do not permit persons other than licensed healthcare providers to order tests.

We currently do not offer direct access testing and our CLIA tests may only be ordered by authorized healthcare providers.

Diagnostic Products and FDA Oversight of Laboratory Developed Tests

FDA Oversight of Laboratory Developed Tests

We provide our tests as LDTs.

CMS and certain state agencies regulate the performance of LDTs (as authorized by CLIA and state law, respectively).

Historically, the FDA, has exercised enforcement discretion with respect to most LDTs and has 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).

Under the FDA’s regulatory framework, in vitro diagnostic devices (IVDs) are a type of medical device, including tests that can be used in the diagnosis or detection of diseases, such as cancer, or other conditions.

The FDA considers LDTs to be a subset of IVDs that are intended for clinical use and are designed, manufactured, and used within a single laboratory that is certified under CLIA.

Such LDT testing is primarily under the purview of CMS and state agencies that provide oversight over clinical laboratory operations.

Although the FDA has taken the position that it has statutory authority to assure that medical devices, including certain LDTs, are safe and effective for their intended use, the FDA has historically exercised enforcement discretion with respect to most LDTs and has not required laboratories that furnish LDTs to comply with the agency's requirements for medical devices (e.g., establishment registration, device listing, premarket clearance or approval, quality systems regulations, and post-market controls).

In recent years, the FDA has stated it intends to end its policy of general enforcement discretion and regulate certain LDTs as medical devices.

For example, in 2014 the FDA issued two draft guidance documents that set forth a proposed risk-based regulatory framework that would apply varying levels of FDA oversight to LDTs.

These documents have not been finalized to date.

Subsequently, in August 2020, the U.S.

Department of Health and Human Services – the parent agency of the FDA – announced that the FDA will not require premarket review of LDTs absent notice-and-comment rulemaking, as opposed to through guidance documents and other informal issuances.

In November 2021, the Biden Administration rescinded this policy.

At this time, it is unclear when, or if, the FDA will finalize its plans to end enforcement discretion, and even then, the new regulatory requirements are expected to be phased-in over time.

Nevertheless, the FDA may decide to regulate certain LDTs on a case-by-case basis at any time.

Legislative proposals addressing the FDA's oversight of LDTs have been introduced in previous Congresses, and we expect that new legislative proposals will be introduced from time-to-time.

Legislative proposals addressing the FDA's oversight of LDTs have also been introduced in previous Congresses, and we expect that new legislative proposals will be introduced from time- to- time.

For example, versions of the Verifying Accurate Leading-edge IVCT Development (“VALID”) Act have been introduced in Congress several times in recent years, but the VALID Act has not been enacted.

The VALID Act, as most recently proposed, would create a new category of medical products separate from medical devices called “in vitro clinical tests,” or IVCTs.

As most recently proposed, the VALID Act would modify the Federal Food, Drug, and Cosmetic Act (the “FDCA”) and establish a risk-based approach to imposing requirements related to premarket review, quality systems, and labeling requirements on all IVCTs, including LDTs, but a grandfathering provision would create exemptions from certain requirements for certain LDTs offered for clinical use within 45 days of enactment of the bill.

The likelihood that Congress will pass such legislation and the extent to which such legislation may affect the FDA's plans to regulate certain LDTs as medical devices is difficult to predict at this time.

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If the FDA ultimately regulates certain LDTs as medical devices, whether via final guidance, final regulation, or as instructed by Congress, our tests may be subject to certain additional regulatory requirements.

Complying with the FDA's requirements for medical devices can be expensive, time-consuming, and subject us to significant or unanticipated delays.

Insofar as we may be required to obtain premarket clearance or approval to perform or continue performing an LDT, we cannot assure you that we will be able to obtain such authorization.

Insofar as we may be required to obtain premarket clearance or approval to perform or continue performing an LDT, we cannot be sure that we will be able to obtain such authorization.

Even if we obtain regulatory clearance or approval where required, such authorization may not be for the intended uses that we believe are commercially attractive or are critical to the commercial success of our tests.

As a result, the application of the FDA's medical device requirements to our tests could materially and adversely affect our business, financial condition, and results of operations.

Failure to comply with applicable FDA regulatory requirements may 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.

Pre-Market Approval

We may obtain FDA premarket approval, or PMA, for some of our tests including its matched whole exome sequencing, or WES, and whole transcriptome sequencing, or WTS, tests.

Devices subject to FDA regulation must undergo premarket review prior to commercialization unless the device is exempt from such review, and we expect that we will be required to perform non-inferiority studies showing comparable results between the Sema4 Signal WES/WTS LDT and third party, FDA-approved tests with regard to certain therapeutic drugs prescribed to ovarian cancer patients, colorectal cancer patients, and non-small cell lung cancer patients.

We are currently evaluating an updated pre-submission letter to the FDA with regard to the studies necessary for ovarian cancer and is working to secure access to the subjects necessary to perform this study.

With regard to the studies necessary for colorectal cancer patients and non-small cell lung cancer patients, we submitted our pre-submission package and held a pre-submission meeting with the FDA in 2020, and are working to secure access to the subjects necessary to perform this study.

Further, the regulations governing the approvals place substantial restrictions on how the tests will be marketed and sold, specifically, by prescription only.

In addition, as a condition of Sema4’s FDA approval, we may be required to conduct post-approval studies.

Additionally, manufacturers of medical devices must comply with various regulatory requirements under the Food, Drug, and Cosmetic Act, or FDCA, and regulations thereunder, including, but not limited to, quality system regulations, unless they are exempt, facility registration, product listing, labeling requirements, and certain post-market surveillance requirements.

Entities that fail to comply with FDA requirements can be liable for criminal or civil penalties, such as recalls, detentions, orders to cease manufacturing, and restrictions on labeling and promotion, among other potential sanctions.

We may develop new diagnostic products and services that are regulated by the FDA as medical devices.

The regulatory review and approval process for medical devices can be costly, timely, and uncertain.

This process may involve, among other things, successfully completing additional clinical trials and submitting a premarket clearance notice or filing a premarket approval application with the FDA.

If premarket review is required by the FDA, there can be no assurance that our tests will be cleared or approved on a timely basis, if at all.

In addition, there can be no assurance that the labeling claims cleared or approved by the FDA will be consistent with our current claims or adequate to support continued adoption of and reimbursement for our products.

Ongoing compliance with FDA regulations could increase the cost of conducting our business, subject us to FDA inspections and other regulatory actions, and potentially subject us to penalties in the event we fail to comply with such requirements.

HIPAA and HITECH

Under the administrative simplification provisions of the Health Insurance Portability and Accountability Act of 1996, or HIPAA, as amended by the Health Information Technology for Economic and Clinical Health Act, or HITECH, the U.S.

Department of Health and Human Services issued regulations that establish uniform standards governing the conduct of certain electronic healthcare transactions and protecting the privacy and security of protected health information used or disclosed by most healthcare providers and other covered entities and their business associates, including the business associates' subcontractors.

We perform activities that may implicate HIPAA, such as providing clinical laboratory testing services and entering into specific kinds of relationships with covered entities and business associates of covered entities.

As a covered entity and as a business associate of other covered entities (with whom we have entered into business associate agreements), we are required to comply with the four principal regulations with which have been issued in final form under HIPAA and HITECH:

privacy regulations, security regulations, the breach notification rule, and standards for electronic transactions, which establish standards for common healthcare transactions.

The HITRUST CSF was developed to address the multitude of security, privacy, and regulatory challenges facing organizations.

By including federal and state regulations, standards, frameworks, and incorporating a risk-based approach, the HITRUST CSF helps organizations address these challenges through a comprehensive and flexible framework of prescriptive and scalable security and privacy controls.

The HITRUST CSF Includes, harmonizes, and cross-references existing, globally recognized standards, regulations, and business requirements, including ISO, EU GDPR, NIST, and PCI.

On December 10, 2021, we met the HITRUST Assurance Program requirements for the CSF v9.4 Risk-based, 2-year (r2) certification criteria for our Centrellis Platform, for hosting and curating Patient data.

The privacy regulations cover the use and disclosure of protected health information by covered entities as well as business associates, which are defined to include subcontractors that create, receive, maintain, or transmit protected health information on behalf of a business associate.

They also set forth certain rights that an individual has with respect to his or her protected health information maintained by a covered entity, including the right to access or amend certain records containing protected health information, or to request restrictions on the use or disclosure of protected health information.

The security regulations establish requirements for safeguarding the confidentiality, integrity, and availability of protected health information that is electronically transmitted or electronically stored.

HITECH, among other things, established certain health information security breach notification requirements.

A covered entity must notify any individual whose protected health information is breached according to the specifications set forth in the breach notification rule.

The HIPAA privacy and security regulations establish a uniform federal "floor" and do not supersede state laws that are more stringent or provide individuals with greater rights with respect to the privacy or security of, and access to, their records containing protected health information or insofar as such state laws apply to personal information that is broader in scope than

protected health information as defined under HIPAA.

Massachusetts, for example, has a state law that protects the privacy and security of personal information of Massachusetts residents.

There are significant civil and criminal fines and other penalties that may be imposed for violating HIPAA.

A covered entity or business associate is also liable for civil money penalties for a violation that is based on an act or omission of any of its agents, including a downstream business associate, as determined according to the federal common law of agency.

Additionally, to the extent that we submit electronic healthcare claims and payment transactions that do not comply with the electronic data transmission standards established under HIPAA and HITECH, payments to us may be delayed or denied.

Federal and State Fraud and Abuse Laws

In the U.S., there are various fraud and abuse laws with which we must comply, and we are potentially subject to regulation by various federal, state and local authorities, including CMS, other divisions of the U.S.

Department of Health and Human Services including the Office of Inspector General, the U.S.

Department of Justice, and individual U.S.

Attorney offices within the Department of Justice, and state and local governments.

In the U.S., the federal Anti-Kickback Statute prohibits, among other things, knowingly and willfully offering, paying, soliciting or receiving remuneration, directly or indirectly, overtly, covertly, in cash or in kind to induce or in return for the furnishing, arranging for the furnishing of, purchasing, leasing, ordering or arranging for or recommending purchasing, leasing or ordering of any good, facility, service or item for which payment may be made in whole or in part by a federal healthcare program.

Courts have stated that a financial arrangement may violate the Anti-Kickback Statute if any one purpose of the arrangement is to encourage patient referrals or other federal healthcare program business, regardless of whether there are other legitimate purposes for the arrangement.

The definition of "remuneration" has been broadly interpreted to include anything of value, including gifts, discounts, credit arrangements, payments of cash, consulting fees, waivers of co-payments, ownership interests, and providing anything at less than its fair market value.

Although the Anti-Kickback Statute contains several exceptions, it is broad and may technically prohibit many innocuous or beneficial arrangements within the healthcare industry.

Further, the U.S.

Department of Health and Human Services issued a series of regulatory "safe harbors." These safe harbor regulations set forth certain provisions, which, if met, will assure healthcare providers and other parties that they will not be prosecuted under the federal Anti-Kickback Statute.

Although full compliance with the statutory exceptions or regulatory safe harbors ensures against prosecution under the federal Anti-Kickback Statute, the failure of a transaction or arrangement to fit within a specific statutory exception or regulatory safe harbor does not necessarily mean that the transaction or arrangement is illegal or that prosecution under the federal Anti-Kickback Statute will be pursued.

Penalties for federal anti-kickback violations are severe, and include imprisonment, criminal fines, civil money penalties, and exclusion from participation in federal healthcare programs.

Many states also have anti-kickback statutes, some of which may apply to items or services reimbursed by any third-party payor, including commercial insurers.

There are also federal laws related to healthcare fraud and false statements, among others, relating to healthcare matters.

The healthcare fraud statute prohibits knowingly and willfully executing a scheme to defraud any healthcare benefit program, including private payors.

A violation of this statute is a felony and may result in fines, imprisonment, or exclusion from governmental payor programs such as the Medicare and Medicaid programs.

The false statements statute prohibits knowingly and willfully falsifying, concealing, or covering up a material fact, or making any materially false, fictitious, or fraudulent statement in connection with the delivery of or payment for healthcare benefits, items, or services.

A violation of this statute is a felony and may result in fines, imprisonment, or exclusion from governmental payor programs.

Another development affecting the healthcare industry is the increased enforcement of the federal False Claims Act and, in particular, actions brought pursuant to the False Claims Act's "whistleblower" or "qui tam" provisions.

The False Claims Act imposes liability on any person or entity that, among other things, knowingly presents, or causes to be presented, a false or fraudulent claim for payment by a federal governmental payor program.

The qui tam provisions of the False Claims Act allow a private individual to bring actions on behalf of the federal government alleging that the defendant has defrauded the federal government by submitting a false claim to the

federal government and permit such individuals to share in any amounts paid by the entity to the government in fines or settlement.

When an entity is determined to have violated the False Claims Act, it may be required to pay up to three times the actual damages sustained by the government, plus civil penalties ranging from $5,500 to $11,000 for each false claim.

In addition, various states have enacted false claim laws analogous to the federal False Claims Act, although many of these state laws apply where a claim is submitted to any third-party payor and not merely a governmental payor program.

Additionally, the civil monetary penalties statute imposes penalties against any person or entity that, among other things, is determined to have presented or caused to be presented a claim to a federal health program that the person knows or should know is for an item or service that was not provided as claimed or for a claim that is false or fraudulent.

This law also prohibits the offering or transfer of remuneration to a Medicare or state healthcare program beneficiary if the person knows or should know it is likely to influence the beneficiary's selection of a particular provider, practitioner, or supplier of services reimbursable by Medicare or a state healthcare program, unless an exception applies.

On October 25, 2018, the Substance Use-Disorder Prevention that Promoted Opioid Recovery and Treatment for Patients and Communities Act of 2018, or the SUPPORT Act, was enacted.

The SUPPORT Act included the Eliminating Kickbacks in Recovery Act of 2018, or EKRA, which establishes an all-payor anti-kickback prohibition that extends to arrangements with recovery homes, clinical laboratories and clinical treatment facilities.

EKRA includes a number of statutory exceptions, and directs agencies to develop further exceptions.

Current exceptions in some cases reference and in others differ from the Anti-Kickback Statute safe harbors.

Significantly, the prohibitions apply with respect to the soliciting or receipt of remuneration for any referrals to recovery homes, clinical treatment facilities, or clinical laboratories, whether or not related to treating substance use disorders.

Further, the prohibitions cover the payment or offer of remuneration to induce a referral to, or in exchange for, an individual using the services of, such providers.

This law creates additional risk that relationships with referral sources could be problematic.

Physician Referral Prohibitions

Under a federal law directed at "self-referral," commonly known as the "Stark Law," there are prohibitions, with certain exceptions, on referrals for certain designated health services, including laboratory services, that are covered by the Medicare program by physicians who personally, or through an immediate family member, have a financial relationship with the entity to which the referrals for designated health services are made.

The prohibition also extends to payment for any testing referred in violation of the Stark Law.

A person who engages in a scheme to circumvent the Stark Law's referral prohibition may be fined up to $100,000 for each such arrangement or scheme.

In addition, any person who presents or causes to be presented a claim to the Medicare program in violation of the Stark Law is subject to civil monetary penalties of up to $15,000 per service, an assessment of up to three times the amount claimed and possible exclusion from participation in federal healthcare programs.

In addition, any person who presents or causes to be presented a claim to the Medicare program in violation of the Stark Law is subject to civil monetary penalties of up to $15,000 per service, an assessment of up to three times the amount claimed, and possible exclusion from participation in federal or state health care programs.

Bills submitted in violation of the Stark Law may not be paid by Medicare, and any person collecting any amounts with respect to any such prohibited bill is obligated to refund such amounts.

Many states have comparable laws that are not limited to Medicare referrals.

The Stark Law also prohibits state receipt of Federal Medicaid matching funds for prohibited referrals, but this provision of the Stark Law has not been implemented by regulations.

In addition, some courts have held that the submission of claims to Medicaid that would be prohibited as self-referrals under the Stark Law for Medicare could implicate the False Claims Act.

As a result, the application of the FDA's oversight to our tests could materially and adversely affect our business, financial condition, and results of operations.

We will continue to monitor changes to all LDT regulatory policy so as to ensure compliance with the current regulatory scheme.

The FDA in the course of enforcing the FDCA may subject a company to various sanctions for violating FDA regulations or provisions of the FDCA, including requiring recalls, issuing Warning Letters, seeking to impose civil money penalties, seizing devices that the agency believes are non-compliant, seeking to enjoin distribution of a specific device, seeking to revoke a clearance or approval, seeking disgorgement of profits and/or seeking to criminally prosecute a company and its officers and other responsible parties.

Additionally, certain of our diagnostic products in development may be subject to regulation by the FDA and similar international health authorities.

For these products, we would have an obligation to adhere to the FDA’s current Good Manufacturing Practices (“cGMP”) and diagnostic product regulations, including providing for an establishment and product listing with the FDA.

Additionally, we would be subject to periodic FDA inspections, quality control procedures, and other detailed validation procedures.

If the FDA finds deficiencies in the validation of our manufacturing and quality control practices, it may impose restrictions on marketing specific products until corrected.

Regulation by governmental authorities in the U.S.

and other countries may be a significant factor in how we develop, test, produce and market our diagnostic test products.

Corporate Practice of Medicine

Numerous states have enacted laws prohibiting business corporations, such as Sema4, from practicing medicine and employing or engaging physicians to practice medicine, generally referred to as the prohibition against the corporate practice of medicine.

These laws are designed to prevent interference in the medical decision-making

process by anyone who is not a licensed physician.

Numerous states prohibit business organizations from practicing medicine or employing or engaging physicians to practice medicine, which prohibitions are generally referred to as the prohibition against the corporate practice of medicine.

These laws are intended to prevent interference in the medical decision-making process by anyone who is not a licensed physician.

For example, California's Medical Board has indicated that determining what diagnostic tests are appropriate for a particular condition and taking responsibility for the ultimate overall care of the patient, including providing treatment options available to the patient, would constitute the unlicensed practice of medicine if performed by an unlicensed person.

Violation of these corporate practice of medicine laws may result in civil or criminal fines, as well as sanctions imposed against us and/or the professional through licensure proceedings.

Typically, such laws are only applicable to entities that have a physical presence in the state.

Violation of these corporate practice of medicine prohibitions may result in civil or criminal fines, as well as sanctions imposed against us and/or the professional through licensure proceedings.

Other Regulatory Requirements

We are subject to laws and regulations related to the protection of the environment, the health and safety of employees and the handling, transportation and disposal of regulated medical waste, hazardous waste and biohazardous waste, including chemical, biological agents and compounds, blood and bone marrow samples and other human tissue, and radioactive materials.

For example, the U.S.

Occupational Safety and Health Administration (“OSHA”) has established extensive requirements relating specifically to workplace safety for healthcare employers in the U.S.

For purposes of transportation, some biological materials and laboratory supplies are classified as hazardous materials and are subject to regulation by one or more of the following:

Department of Transportation, the U.S.

Public Health Service, the United States Postal Service, the Office of Foreign Assets Control and the International Air Transport Association.

We generally use third-party vendors to dispose of regulated medical waste, hazardous waste and radioactive materials and contractually require them to comply with applicable laws and regulations.

These vendors are licensed or otherwise qualified to handle and dispose of such wastes.

Federal and State Healthcare Fraud & Abuse Laws

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Federal and State Physician Self-Referral Prohibitions

We are subject to the federal physician self-referral prohibitions, commonly known as the Stark Law.

These restrictions generally prohibit a physician who has (or whose immediate family member has) a financial relationship, such as an ownership or investment interest in or compensation arrangement with us, from making referrals for “designated health services”, including clinical laboratory services, if payment for the services may be made under Medicare.

If such a financial relationship exists, referrals are prohibited unless a statutory or regulatory exception applies.

The Stark Law also prohibits us from billing for any such prohibited referral.

These prohibitions apply regardless of any intent by the parties to induce or reward referrals or the reasons for the financial relationship and the referral.

Several Stark Law exceptions are relevant to many common financial relationships involving clinical laboratories and referring physicians and may be relied upon if all of the elements of the applicable exception are satisfied.

Penalties for violating the Stark Law include the return of funds received for all prohibited referrals, fines, civil monetary penalties and possible exclusion from federal health care programs.

In addition, violations of the Stark Law may also serve as the basis for liability under the federal False Claims Act (the “FCA”), which can result in additional civil and criminal penalties.

Several states have enacted comparable self-referral laws which may be broader in scope and apply regardless of payer.

Federal and State Anti-Kickback Laws

The federal Anti-Kickback Statute (the “AKS”), makes it a felony for a person or entity, including a clinical laboratory, to, among other things, knowingly and willfully offer, pay, solicit or receive any remuneration, directly or indirectly, overtly or covertly, in cash or in kind, in order to induce or reward either the referral of an individual for, or the purchase, order or recommendation of, any good or service, for which payment may be made under federal health care programs.

The government may also assert that a claim that includes items or services resulting from a violation of the AKS constitutes a false or fraudulent claim under the FCA, which is discussed in greater detail below.

Additionally, a person or entity does not need to have actual knowledge of the statute or specific intent to violate it in order to have committed a violation.

Although the AKS applies only to items and services reimbursable under any federal health care program, a number of states have passed statutes substantially similar to the AKS that apply to all payers or to state program payers.

Penalties for violations of such laws include imprisonment and significant monetary fines and, in the case of the AKS, exclusion from federal health care programs.

Federal and state law enforcement authorities scrutinize arrangements between health care providers and potential referral sources to ensure that the arrangements are not designed as a mechanism to induce patient care referrals or induce the purchase or prescribing of particular products or services.

Generally, courts have taken a broad interpretation of the scope of the AKS, holding that the statute may be violated if merely one purpose of a payment arrangement is to induce referrals or purchases.

In addition to statutory exceptions to the AKS, regulations provide for a number of safe harbors.

If an arrangement meets the conditions of an applicable exception or safe harbor, it is deemed not to violate the AKS.

An arrangement must fully meet each condition of an applicable exception or safe harbor in order to qualify for protection.

Failure to meet the conditions of a safe harbor, however, does not render an arrangement illegal.

Rather, the government may evaluate such arrangements on a case-by-case basis, taking into account all facts and circumstances.

In addition, the federal Eliminating Kickbacks in Recovery Act (the “EKRA”), prohibits knowingly and willfully soliciting or receiving any remuneration (including any kickback, bribe or rebate) directly or indirectly, overtly or covertly, in cash or in kind, in return for referring a patient or patronage to a laboratory;

or paying or offering any remuneration (including any kickback, bribe or rebate) directly or indirectly, overtly or covertly, in cash or in kind, to induce a referral of an individual to a laboratory and certain other entities or in exchange for an individual using the services of such entities.

The EKRA applies to all payers including commercial payers and government payers, and EKRA violations result in significant fines and/or up to 10 years in jail, separate and apart from existing AKS liability.

Several EKRA exceptions are relevant to many common financial relationships involving clinical laboratories and may be relied upon if all of the elements of the applicable exception are satisfied.

Failure to meet the requirements of an exception, however, does not render an arrangement illegal.

Rather, the government may evaluate such arrangements on a case-by-case basis, taking into account all facts and circumstances.

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Other Federal and State Fraud & Abuse Healthcare Laws

In addition to the requirements discussed above, several other health care fraud and abuse laws could have an effect on our business.

The FCA prohibits, among other things, a person from knowingly presenting, or causing to be presented, a false or fraudulent claim for payment or approval and from, making, using, or causing to be made or used, a false record or statement material to a false or fraudulent claim in order to secure payment or retaining an overpayment by the federal government.

Under the FCA, a person acts knowingly if he or she has actual knowledge of the information or acts in deliberate ignorance or in reckless disregard of the truth or falsity of the information.

Specific intent to defraud is not required.

FCA violations can result in penalties of up to three times the actual damages sustained by the government, plus civil penalties for each false claim.

In addition to actions initiated by the government itself, the statute authorizes actions to be brought on behalf of the federal government by a private party having knowledge of the alleged fraud.

Because the complaint is initially filed under seal, the action may be pending for some time before the defendant is even aware of the action.

If the government intervenes and is ultimately successful in obtaining redress in the matter or if the plaintiff succeeds in obtaining redress without the government’s involvement, then the plaintiff will receive a percentage of the recovery.

Several states have enacted comparable false claims laws which may be broader in scope and apply regardless of payer.

The Social Security Act includes civil monetary penalty provisions that impose penalties against any person or entity that, among other things, is determined to have presented or caused to be presented a claim to a federal health program that the person knows or should know is for an item or service that was not provided as claimed or is false or fraudulent.

Several states have enacted comparable laws which may be broader in scope and apply regardless of payer.

In addition, a person who offers or provides to a Medicare or Medicaid beneficiary any remuneration, including waivers of co-payments and deductible amounts (or any part thereof), that the person knows or should know is likely to influence the beneficiary’s selection of a particular provider, practitioner or supplier of Medicare or Medicaid payable items or services may be liable under the civil monetary penalties law.

Moreover, in certain cases, providers who routinely waive copayments and deductibles for Medicare and Medicaid beneficiaries, can also be held liable under the civil monetary penalty provisions and certain other laws, such as the AKS and FCA.

One of the statutory exceptions to the civil monetary penalty prohibition is non-routine, unadvertised waivers of copayments or deductible amounts based on individualized determinations of financial need or exhaustion of reasonable collection efforts.

The Office of Inspector General of the U.S.

Department of Health and Human Services (“HHS”), emphasizes, however, that this exception should only be used occasionally to address special financial needs of a particular patient.

States may have similar prohibitions.

Other Federal and State Healthcare Laws

In addition to the fraud and abuse laws discussed above, our business potentially is subject to the following additional healthcare regulatory laws:

Laws Governing Genetic Counseling Services

Our genetic counseling partner may provide services via electronic means that could subject it to various federal, state and local certification and licensing laws, regulations and approvals, relating to, among other things, the adequacy of health care, the practice of medicine and other health professions (including the provision of remote care and cross-coverage practice), equipment, personnel, operating policies and procedures and the prerequisites for ordering laboratory tests.

Some states have enacted regulations specific to providing services to patients via telehealth.

Such regulations include, among other things, informed consent requirements that some states require providers to obtain from their patients before providing telehealth services.

Health professionals who provide professional services using telehealth modalities must, in most instances, hold a valid license to practice the applicable health profession in the state in which the patient is located.

In addition, certain states require a physician providing telehealth to be physically located in the same state as the patient.

Any failure to comply with these laws and regulations could result in civil or criminal penalties against telehealth providers.

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Clinical and Human Subjects Research Regulations

We may collaborate or support ongoing clinical or other human subjects research that could subject us to a number of laws and regulations pertaining to such research, including, but not limited to the Federal Policy for Protection of Human Subjects (as set forth in the implementing regulations of any signatory federal department or agency), the FDCA and its applicable implementing regulations at 21 C.F.R.

Parts 11, 50, 54, 56, 58 and 812 and all equivalent legal requirements in other jurisdictions.

Privacy and Security Laws

Health Insurance Portability and Accountability Act

Under the Health Insurance Portability and Accountability Act of 1996 (“HIPAA”), as amended by the Health Information Technology for Economic and Clinical Health Act (“HITECH”), HHS has issued regulations to protect the privacy and provide for the security of protected health information (“PHI”) used or disclosed by covered entities, including most health care providers and their respective business associates, as well as the business associates’ subcontractors.

HIPAA also regulates standardization of data content, codes, and formats used in certain health care transactions and standardization of identifiers for health plans and providers.

Four principal regulations with which we are required to comply have been issued in final form under HIPAA and HITECH:

privacy regulations, security regulations, breach notification regulations, and standards for electronic transactions, which establish standards for common healthcare transactions.

The privacy regulations cover the use and disclosure of PHI by covered entities as well as business associates, which are persons or entities that perform certain functions for or on behalf of a covered entity that involve the creation, receipt, maintenance, or transmission of PHI.

Business associates are defined to include a subcontractor to whom a business associate delegates a function, activity, or service, other than in the capacity of the business associate’s workforce.

As a general rule, a covered entity or business associate may not use or disclose PHI except as permitted or required under the privacy regulations.

The privacy regulations also set forth certain rights that an individual has with respect to his or her PHI maintained by a covered entity or business associate, including the right to access or amend certain records containing his, her or their PHI, request restrictions on the use or disclosure of his, her or their PHI, or request an accounting of disclosures of his or her PHI.

Covered entities and business associates also must comply with the security regulations, which establish requirements for safeguarding the confidentiality, integrity, and availability of PHI that is electronically transmitted or electronically stored.

In addition, HITECH, among other things, established certain PHI breach notification requirements with which covered entities and business associates must comply.

In particular, a covered entity must notify any individual whose unsecured PHI is breached according to the specifications set forth in the breach notification rule.

A covered entity must also notify the Secretary of HHS and, under certain circumstances, the media of a breach of unsecured PHI.

The HIPAA privacy, security, and breach notification regulations establish a uniform federal “floor” and do not preempt state laws that are more stringent or provide individuals with greater rights with respect to the privacy or security of, and access to, their records containing PHI or insofar as such state laws apply to personal information that is broader in scope than PHI.

In addition, individuals (or their personal representatives, as applicable) generally have the right to access test reports directly from laboratories and to direct that copies of those reports be transmitted to persons or entities designated by the individual.

HIPAA authorizes state attorneys general to file suit on behalf of their residents for violations.

Courts are able to award damages, costs, and attorneys’ fees related to violations of HIPAA in such cases.

While HIPAA does not create a private right of action allowing individuals to file suit against us in civil court for violations of HIPAA, its standards have been used as the basis for duty of care cases in state civil suits such as those for negligence or recklessness in the misuse or breach of PHI.

In addition, violations of HIPAA could result in significant penalties imposed by the HHS’s Office for Civil Rights.

HIPAA also mandates that the Secretary of HHS conduct periodic compliance audits of HIPAA covered entities, such as us, and their business associates for compliance with the

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HIPAA privacy and security standards.

It also tasks HHS with establishing a methodology whereby harmed individuals who were the victims of breaches of unsecured PHI may receive a percentage of the civil monetary penalty paid by the violator.

Further, there are a number of state laws regarding the privacy and security of health information and personal data that are applicable to our clinical laboratories.

We believe that we have taken the steps required of us to comply with health information privacy and security statutes and regulations in all jurisdictions, both state and federal, and we intend to continue to comprehensively protect all personal information and to comply with all applicable laws regarding the protection of such information.

However, these laws constantly change, and we may not be able to maintain compliance in all jurisdictions where we do business.

Failure to maintain compliance, including in connection with changes in state or federal laws regarding privacy or security, could result in civil and/or criminal penalties as well as significant reputational damage and could also have a material adverse effect on our business.

California Consumer Privacy Act

The California Consumer Privacy Act, as amended by the California Privacy Rights Act (“CPRA,” and together with the California Consumer Privacy Act, the “CCPA”), confers to California consumers, among other things, the right to receive notice of the categories of personal information that will be collected by a business, how the business will use and share the personal information, and the categories of third parties who will receive the personal information.

The CCPA also confers rights to access, delete, correct, or request a portable data set, the right to limit processing of “sensitive personal information,” and the right to receive equal service and pricing from a business after exercising a consumer right granted by the CCPA.

In addition, the CCPA allows California consumers the right to opt out of the “sale” of their personal information, which the CCPA defines broadly as any disclosure of personal information to a third party in exchange for monetary or other valuable consideration.

The CCPA also allows California consumers to opt out of the “sharing” of information, which restricts a company’s use of personal information for cross-context behavioral advertising.

The CCPA also requires a business to implement reasonable security procedures to safeguard personal information against unauthorized access, use, or disclosure and imposes purpose limitation, data minimization, data retention and other security compliance obligations on regulated businesses.

The CCPA requires businesses to include specific provisions in contracts with third parties that process data on a business’s behalf regarding the third party’s processing and management of such data.

The CCPA does not apply to personal information that is PHI under HIPAA and that is collected by a business associate or covered entity under HIPAA.

The CCPA also exempts patient information that is processed by a covered entity and maintained in the same manner as PHI.

Accordingly, the CCPA will not apply to much of the genetic testing and patient information we collect and process.

However, we are required to comply with the CCPA insofar as we collect other categories of California consumers’ personal information, such as information about California-based employees, contractors, business contacts and website visitors.

The CCPA is enforceable through administrative fines of up to $2,500 for each violation, or $7,500 for intentional violations or where we have actual knowledge that the personal information relates to an individual under 16 years of age.

In addition to the CCPA, four new state privacy laws have gone or will go into effect in 2023, including the Virginia Consumer Data Protection Act, the Utah Consumer Privacy Act, the Colorado Privacy Act, and the Connecticut Data Privacy Act.

In 2023, a number of other states are considering similar consumer privacy laws.

These new state privacy laws and any potential federal consumer privacy law will and would impose additional data protection obligations on covered businesses, including additional consumer rights, limitations on data uses, new audit requirements for higher risk data and opt outs for certain uses of sensitive data.

The new and proposed privacy laws may result in further uncertainty and may require us to incur additional expenditures to comply.

These regulations and legislative developments have potentially far-reaching consequences and may require us to modify our data management and data use practices and incur substantial compliance expense.

Our failure to comply with applicable laws and regulations or other obligations to which we may be subject relating to personal data, or to protect personal data from unauthorized access, use, or other processing, could result in enforcement actions and regulatory investigations against us, claims for damages by customers and other affected individuals, fines, damage

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to our reputation, and loss of goodwill, any of which could have a material adverse effect on our operations, financial performance, and business.

Genetic Privacy and Testing Laws

We are subject to myriad laws designed to establish safeguards regarding the conduct of genomic testing and analysis and to protect against the misuse of genetic information and human biological specimens, collectively, “samples”, from which genetic information can be derived.

We are subject to myriad laws that require us to establish safeguards for the conduct of genomic testing and analysis and to protect against the misuse of genetic information and human biological specimens (“samples”) from which genetic information can be derived.

These laws vary in their scope and in the nature of their requirements and restrictions.

For example, certain genetic privacy laws prohibit the retention of samples after performing a genomic analysis in addition to prohibiting the use or disclosure of genetic information for certain purposes, such as research, without appropriate informed consent from the individual or without sufficient anonymization.

The applicability of such informed consent requirements may also depend on the identifiability of the genetic information or sample and the purposes of which it is used.

Other laws may impose additional requirements, including requirements regarding institutional review board review and approval for certain research uses of genetic information or samples requirements to implement certain security controls in connection with the transfer of genetic information.

For example, certain genetic privacy laws prohibit the retention of samples after performing a genomic analysis and prohibit the collection, use or disclosure of genetic information or samples for certain purposes, such as research, without appropriate informed consent from the individual or unless the genetic information or samples are appropriately de-identified.

Other laws may impose additional requirements, including requirements regarding institutional review board review and approval for certain research uses of genetic information or samples or requirements to implement certain security controls in connection with the transfer of genetic information.

We must comply with such genetic privacy and testing laws in our collection, use, disclosure and retention of genetic information and samples.

Other Health and Medical Regulations

The federal physician payment transparency requirements, or Physician Payments Sunshine Act, and its implementing regulations, which requires applicable manufacturers of covered drugs, devices, biologics and medical supplies for which payment is available under Medicare, Medicaid or the State Children’s Health Insurance Program, with certain exceptions, to annually report to HHS information related to certain payments or other transfers of value made or distributed to physicians, defined to include doctors, dentists, optometrists, podiatrists and chiropractors, and teaching hospitals, or to entities or individuals at the request of, or designated on behalf of, the physicians and teaching hospitals, as well as ownership and investment interests held by physicians and their immediate family members.

The SUPPORT Act, under a provision entitled “Fighting the Opioid Epidemic with Sunshine,” extends the Physician Payments Sunshine Act to payments and transfers of value to physician assistants, nurse practitioners and other mid-level healthcare providers, with reporting requirements going into effect in 2022 for payments and transfers of value made to these practitioners in 2021.

In addition to its comprehensive regulation of health and safety in the workplace in general, the Occupational Safety and Health Administration has established extensive requirements aimed specifically at laboratories and other healthcare-related facilities.

In addition, because our operations require employees to use certain hazardous chemicals, we also must comply with regulations on hazard communication and hazardous chemicals in laboratories.

These regulations require us, among other things, to develop written programs and plans, which must address methods for preventing and mitigating employee exposure, the use of personal protective equipment, and training.

Our commercialization activities subject us to regulations of the Department of Transportation, the U.S.

Postal Service, and the Centers for Disease Control and Prevention that apply to the surface and air transportation of clinical laboratory specimens.

We are also subject to applicable state billing laws.

Some states require that payment be made only to the person or entity who performed or supervised the service, while other states have passed anti-mark up and disclosure laws, an alternative but less enforceable approach to direct billing.

Under these laws the non-performing person or entity is allowed to bill the client, but is prohibited from marking up the service, and required to disclose each charge to the patient, or patient’s insurer.

Additionally, some states have strictly passed disclosure laws that require the non-performing person or entity to disclose to patients or the patient’s insurer the actual charges for all laboratory services.

Privacy and Data Protection Laws

There are a growing number of jurisdictions all over the world that have privacy and data protection laws.

These laws are typically triggered by a company’s establishment or physical location in the jurisdiction, data processing activities that take place in the jurisdiction, and/or the processing of personal information about individuals located in that jurisdiction.

Certain international privacy and data protection laws, such as those in the European Union, can be more restrictive and prescriptive than those in the U.S., while other jurisdictions can have laws less restrictive or prescriptive than those in the U.S.

Enforcement of these laws vary from jurisdiction to jurisdiction, with a variety of civil or criminal penalties, or private rights of action.

The European Union’s General Data Protection Regulation, or GDPR, took effect on May 25, 2018.

The GDPR extraterritorially applies to a business outside the European Union that offers goods or services to, or monitors the behavior of individuals who are located in the European Union.

The GDPR imposes strict requirements on controllers and processors of personal data, including enhanced protections for “special categories” of personal data, which includes sensitive information such as health and genetic information of data subjects in the European Union.

The GDPR also grants individuals various rights in relation to their personal data including the rights of access, rectification, objection to certain processing and deletion.

The GDPR provides an individual with an express right to seek legal remedies if the individual believes his or her rights have been violated.

Failure to comply with the requirements of the GDPR or the related national data protection laws of the member states of the European Union, which may deviate from or be more restrictive than the GDPR, may result in significant administrative fines issued by European Union regulators.

As of December 31, 2020, The United Kingdom of Great Britain and Northern Ireland, or UK, are no longer subject to EU law.

Therefore, the GDPR will be brought into UK law as the ‘UK GDPR’ via a statutory instrument which will make technical amendments to the GDPR so that it works in a UK-only context.

In Europe, there are also national laws that provide additional controls around the processing of health data.

The Payment Card Industry Data Security Standard, or PCI DSS, was issued by the Payment Card Industry Security Standards Council and establishes industry standards for the processing of payment card information.

While the PCI DSS requirements do not have the force of law, the penalties for noncompliance could include exclusion from payment card systems.

To the extent that we collect payment card information when receiving payments of insurance premiums or payments for our products or services, we comply with PCI DSS as applicable to our payment environment and PCI DSS merchant level, which is determined by our volume of payment card transactions per year.

As an entity regulated by the Federal Trade Commission, or FTC, we are subject to the FTC’s enforcement power under Section 5 of the Federal Trade Commission Act, or FTC Act.

The FTC has policed privacy and data security through its broad power under Section 5 of the FTC Act.

Under Section 5, “unfair or deceptive acts or practices in or affecting commerce, are hereby declared unlawful.” Deceptive trade practices are defined by the FTC as material representations, omissions or practices that are likely to mislead a consumer acting reasonably in the circumstances to the consumer’s detriment.

The FTC defines an “unfair” trade practice as one that “causes or is likely to cause substantial injury to consumers which is not reasonably avoidable by consumers themselves and is not outweighed by countervailing benefits to consumers or competition.”

The FTC has refrained from providing a checklist of uniformly acceptable data security practices or focusing on one single practice as actionable.

Instead, the FTC has taken a holistic approach and relied on industry standards and other norms to identify a particular set of practices that, taken together, constitute adequate security practices for companies collecting personal information.

In evaluating whether a data security practice is unfair, the FTC focuses largely on “substantial injury to consumers.” The harm need not be monetary or physical, though such injuries are commonly considered “substantial.” Further, the harm can consist of a risk rather than an actual loss.

The Controlling the Assault of Non-Solicited Pornography and Marketing Act of 2003, or CAN-SPAM Act, establishes rules for commercial electronic mail messages, gives recipients the right to opt out of certain messages, and establishes penalties for violations.

We comply with the CAN-SPAM Act in connection with our transmittal of commercial electronic mail messages, or Commercial Email Messages.

Commercial Email Messages do not include emails that are informational or are transactional or relationship messages.

The Telephone Consumer Protection Act of 1991, or TCPA, restricts the making of telemarketing calls and the use of automatic telephone dialing systems, artificial or prerecorded voice messages, SMS text messages, and facsimile transmissions.

It also specifies several technical requirements for fax machines, autodialers, and voice messaging systems, principally with provisions requiring identification and contact information of the entity using the device to be contained in the message.

We comply with TCPA in connection with our transmittal of automated, artificial, or prerecorded phone calls, SMS text messages, facsimile transmissions, and push notifications.

California Consumer Privacy Act

The California Consumer Privacy Act, or CCPA, is a comprehensive consumer privacy law that took effect on January 1, 2020, and regulates how certain for-profit businesses that do business in California collect, use, and disclose the personal information of consumers who reside in California.

Among other things, the CCPA confers to California consumers the right to receive notice of the categories of personal information to be collected by a business, how the business will use and share the personal information, and the third parties who will receive the personal information;

the rights to access, delete, or transfer personal information;

and the right to receive equal service and pricing from a business after exercising a consumer right granted by the CCPA.

The CCPA also requires a business to implement reasonable security procedures to safeguard personal information against unauthorized access, use, or disclosure.

The CCPA does not apply to personal information that is Protected Health Information under HIPAA.

The CCPA also does not apply to a HIPAA Covered Entity to the extent that the Covered Entity maintains patient information in the same manner as Protected Health Information.

We are subject to the CCPA with respect to personal information we collect from California consumers that is neither PHI under HIPAA nor patient information that we maintain in the same manner as Protected Health Information.

The California Attorney General has authority to enforce the CCPA and its implementing regulations against covered businesses beginning on July 1, 2020.

The CCPA provides for civil penalties for violations, as well as private right of action for data breaches that result from a business’ failure to implement reasonable security procedures.

Our competitors include companies that offer molecular genetic testing and other clinical diagnostic, life science research, drug discovery services, data services and healthcare analytics, and consumer genetics products.

Principal competitors include companies such as Myriad Genetics, Inc., Ambry Genetics Corporation, Color Genomics, Inc., Invitae Corporation, Natera, Inc., Tempus Labs, Inc., Quest Diagnostics, Inc., Laboratory Corporation of America Holdings (or LabCorp), Exact Sciences Corp., 10x Genomics, Inc., Guardant Health, Inc., and Adaptive Biotechnologies, Twist Biosciences Corp., and Schrödinger, Inc., as well as other commercial and academic diagnostic and analytic service providers.

We believe the principal competitive factors in our market are:

• Patient-centric approach;

• Breadth, depth, and quality of data assets;

• Price and quality of tests;

• Turnaround time of testing results;

• Coverage and reimbursement arrangements with third-party payors;

• Depth and clinical applicability of interpretive insights;

• Degree of utility of patient and provider facing applications;

• Breadth of interpretive insights beyond just one episode of care;

• Convenience of testing;

• Brand recognition of test provider;

• Additional value-added services and informatics tools;

• Accessibility of results;

• Client service;

• Quality of website content;

• Reliability

We believe that we compare favorably with our competitors on the basis of these factors.

However, many of our competitors and potential competitors have longer operating histories, larger customer bases, greater brand recognition and market penetration, substantially greater financial, technological and research and development resources and selling and marketing capabilities, more experience dealing with third-party payors.

As a result, they may be able to respond more quickly to changes in customer requirements, devote greater resources to the development, promotion and sale of their tests than Sema4 does, or sell their tests at prices designed to win significant levels of market share.

We may not be able to compete effectively against these organizations.

Environmental Matters

Sema4’s operations require the use of hazardous materials (including biological materials) that subject it to a variety of federal, state, and local environmental and safety laws and regulations.

Some of these regulations provide for strict liability, holding a party potentially liable without regard to fault or negligence.

We could be held liable for damages and fines as a result of our, or our partners’, business operations should contamination of the environment or individual exposure to hazardous substances occur.

We cannot predict how changes in laws or new regulations will affect our business operations or the cost of compliance.

Raw Materials and Suppliers

We rely on a limited number of suppliers, or, in some cases, sole suppliers, including Agilent Technologies, Inc., Illumina, Inc., Life Technologies Corporation, Agena Biosciences, Inc., MRC-Holland, Asuragen Inc., PerkinElmer Health Sciences, Inc., Fisher Scientific, Integra Biosciences Corporation, Thomas Scientific, Qiagen Inc., USA Scientific, Inc., Promega Corporation, Integrated DNA Technologies Incorporated, and Kapa Biosystems Inc., for certain laboratory reagents, as well as sequencers and other equipment and materials which we use in our laboratory operations.

Our laboratory operations could be interrupted if we encounter delays or difficulties in securing these reagents, sequencers or other equipment or materials, and if we cannot obtain an acceptable substitute.

Any such interruption could significantly affect our business, financial condition, results of operations

and reputation.

We believe that there are only a few other manufacturers that are currently capable of supplying and servicing the equipment necessary for our laboratory operations, including sequencers and various associated reagents.

The use of equipment or materials provided by these replacement suppliers would require us to alter our laboratory operations.

Transitioning to a new supplier would be time consuming and expensive, may result in interruptions in our laboratory operations, could affect the performance specifications of its laboratory operations or could require that we revalidate our tests.

We cannot assure you that we would be able to secure alternative equipment, reagents, and other materials, or bring such equipment, reagents, and materials online and revalidate them without experiencing interruptions in our workflow.

If we encounter delays or difficulties in securing, reconfiguring, or revalidating the equipment and reagents we require for our tests, our business and reputation could be adversely affected.

We provide our health information products and services to a broad range of customers, including health plans (including managed care organizations and other health insurance providers);

federally qualified health centers;

and Biopharma companies.

In addition, during 2020 and 2021, the customers for our COVID-19 tests included state governments.

Depending on the billing arrangement and applicable law, the clinician or healthcare entity that orders our products or services may not be responsible for paying for the products or services ordered for their patients.

In certain circumstances, the patient may be responsible for payment, and in others we seek payment from third party payers, such as a commercial health insurance company, Medicare or a Medicaid program, pursuant to contracts established between us and such third parties.

During 2021, reimbursement from health plans represented 79% and 76% of our diagnostic test revenue and total revenue, respectively.

In 2021, two health plans each represented 10% or more of our consolidated total revenue, and no other health plans or other customers represented 10% or more of our consolidated total revenue.

Human Capital

Sema4 is mission driven.

Our employees are passionate about changing healthcare and impacting lives.

We attract entrepreneurs who are comfortable with ambiguity and thrive on innovation and thoughtful discourse.

We empower our employees to iterate and rapidly execute on ideas.

It is our People Team’s mission to connect people to purpose.

We achieve this through enablement of excellence across the employment journey, through stewardship of an engaged and inclusive culture, by growing individual, team and organizational capability, in delivering simplification and innovation, and by sharing data-driven people insights that transform our organization.

All of this is in service of driving our business forward and optimizing patient health outcomes.

We are delivering a competitive package of compensation and benefits that aims to attract and retain strong talent, in a very competitive talent marketplace.

As of December 31, 2021, we had approximately 1,200 employees, of which 54% are women and 46% are men.

Our headcount grew by approximately 33% in 2021, and we hired approximately 500 employees in that timeframe, as a part of scaling our operations in connection with our transition to a public company and meeting our strategic priorities.

Our Diversity and Inclusion Council seeks to improve diversity, inclusion, equality, and global understanding by promoting dialogue, encouraging respectful understanding, providing information, participating in policy development, overseeing diversity education and training, and helping to foster respect for all employees.

In 2022, we will be hosting our inaugural BIPOC Initiative Genomics Symposium, inviting select Ph.D.

students and post doctorates for a two-day research symposium to strengthen our diverse hiring practices.

Each attendee will present their original research, and will learn about science and career opportunities at Sema4.

We believe that our corporate culture fosters innovation, creativity, and teamwork.

In this past year, we launched several programs and processes, which intend to help build a driven culture of alignment, development, compliance, and respect.

We are in our second year of formal performance management processes, which are used

to drive organizational alignment and includes tracking top-down business priorities and people development goals.

The launch of two promotion cycles focus and enable employee career growth and mobility.

We also implemented formal people manager learning, in order to build stronger people management skills for our leaders.

We have optimized processes and transformed our people management solution in order to have greater systems capability, access to robust reporting, and to strengthen our analytical horsepower.

We have implemented a comprehensive compliance infrastructure, which advises Sema4 individuals and business affiliates on how to prevent, detect, report, and resolve matters of fraud, waste, threats, and abuse related to institutional policies and federal, state, and local laws and regulations.

We have implemented various committees, councils and boards such as the Diversity & Inclusion Council, Data Governance Board, and IRB Review Board.

These groups provide guidance for our employees, to empower them to perform according to our legal and ethical standards.

We observe legal, regulatory, and industry trends and comprehensively adapt internal policies and practices as needed.

We educate our Board members, executives, and other key employees about conflicts of interest and advise how to prevent and detect potential or actual conflicts of interest to safeguard from inappropriate external influence or impropriety.

We look to further strengthen our people infrastructure in 2022 through enhanced engagement surveys, values and behaviors programming, and formal talent reviews, with development planning.

Other Data Protection Laws

There are a growing number of jurisdictions around the globe that have privacy and data protection laws that may apply to us as we enter or expand our business in jurisdictions outside of the United States.

Certain data protection laws, such as those in the European Union, (the “EU”) and United Kingdom, are comprehensive in nature and include significant requirements around the processing of personal information, while other jurisdictions may have laws less restrictive or prescriptive than those in the U.S.

Enforcement of these laws varies from jurisdiction to jurisdiction, with a variety of consequences, including civil or criminal penalties, litigation private rights of action, or damage to our reputation.

For example, the EU’s General Data Protection Regulation (“GDPR”), including as implemented and amended through the UK Data Protection Act 2018 (“UK GDPR”), applies to any data collection, use and sharing in the context of an establishment in the EU or UK as well as extraterritorially to any entity outside the EU and UK when they process personal information related to an offer of goods or services to, or monitoring the behavior of, individuals who are located in the EU or UK.

The GDPR and UK GDPR impose requirements on controllers and processors of personal data, including when personal information is transferred outside of the EU or the UK to another country and enhanced protections for “special categories” of personal data, which include sensitive information such as health and genetic information of data subjects.

The GDPR and UK GDPR also grant individuals various rights in relation to their personal data including the rights of access, rectification, objection to certain processing and deletion.

The GDPR and UK GDPR provide an individual with an express right to seek legal remedies if the individual believes his or her rights have been violated.

Failure to comply with the requirements of the GDPR or the related national data protection laws of the member states of the EU, which may deviate from or be more restrictive than the GDPR, or a failure to comply with the UK GDPR may result in significant administrative fines issued by EU or UK regulators.

Information Blocking Prohibition

On May 1, 2020, the Office of the National Coordinator for Health Information Technology promulgated final regulations under the authority of the 21st Century Cures Act to impose new conditions to obtain and maintain certification of certified health information technology and prohibit certain covered actors, including developers of certified health information technology, health information networks/health information exchanges, and health care providers, from engaging in activities that are likely to interfere with the access, exchange, or use of electronic health information (information blocking).

The final regulations further defined exceptions for activities that are permissible, even though they may have the effect of interfering with the access, exchange, or use of electronic health information.

The information blocking regulations became effective on April 5, 2021.

Under the 21st Century Cures Act, health care providers that violate the information blocking prohibition will be subject to appropriate

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disincentives, which the HHS has yet to establish through required rulemaking.

Developers of certified information technology and health information networks/health information exchanges, however, may be subject to civil monetary penalties of up to $1 million per violation.

The HHS Office of Inspector General has the authority to impose such penalties and on April 24, 2020, published a proposed rule to codify new authority in regulation, which the agency proposed would be effective 60 days after it issues a final rule but in no event before November 2, 2020.

The HHS Office of Inspector General has not yet issued a final rule.

Federal and State Consumer Protection Laws

The Federal Trade Commission (the “FTC”) is an independent U.S.

law enforcement agency charged with protecting consumers and enhancing competition across broad sectors of the economy.

The FTC’s primary legal authority with respect to data privacy and security comes from Section 5 of the FTC Act, which prohibits unfair or deceptive acts or practices in the marketplace.

The FTC has increasingly used this broad authority to police data privacy and security, using its powers to investigate and bring lawsuits.

Where appropriate, the FTC can seek a variety of remedies, such as but not limited to requiring the implementation of comprehensive privacy and security programs, biennial assessments by independent experts, monetary redress to consumers, and provision of robust notice and choice mechanisms to consumers.

In addition to its enforcement mechanisms, the FTC uses a variety of tools to protect consumers’ privacy and personal information, including pursuing enforcement actions to stop violations of law, conducting studies and issuing reports, hosting public workshops, developing educational materials and testifying before the U.S.

Congress on issues that affect consumer privacy.

Recently, the FTC has issued guidance emphasizing that their authority to prevent unfair or deceptive acts or practices extends to advertising and marketing claims for health care and health-related products.

The majority of data privacy cases brought by the FTC fall under the “deceptive” acts prong of Section 5.

These cases often involve a failure on the part of a company to adhere to its own privacy and data protection principles set forth in its policies or other statements made to consumers.

To avoid Section 5 violations, the FTC encourages companies to build privacy protections and safeguards into relevant portions of their business, and to consider privacy and data protection as the company grows and evolves.

In addition, privacy notices should clearly and accurately disclose the type(s) of personal information the company collects, how the company uses and shares that information, and the security measures used by the company to protect that information.

In recent years, the FTC’s enforcement under Section 5 related to data security has included alleged violations of the “unfairness” prong.

Many of these cases have alleged that companies were unfair to consumers because they failed to take reasonable and necessary measures to protect consumer data.

The FTC has not provided bright line rules defining what constitutes “reasonable and necessary measures” for implementing a cybersecurity program, but it has provided guidance, tips and advice for companies.

The FTC has also published past complaints and consent orders, which it urges companies use as guidance to help avoid an FTC enforcement action, even if a data breach or loss occurs.

In addition to the FTC Act, most U.S.

states have unfair and deceptive acts and practices statutes, known as UDAP statutes, that substantially mirror the FTC Act and have been applied in the privacy and data security context.

These vary in substance and strength from state to state.

Many have broad prohibitions against unfair and deceptive acts and practices.

These statutes generally allow for private rights of action and are enforced by the states’ Attorneys General.

Reimbursement and Billing

In April 2014, Congress passed the Protecting Access to Medicare Act of 2014 (“PAMA”), which included substantial changes to the way in which clinical laboratory services are paid under Medicare.

Under PAMA (as amended) and its implementing regulations, laboratories that realize at least $12,500 in Medicare Clinical Laboratory Fee Schedule (“CLFS”) revenues during the six month reporting period and that receive the majority of their Medicare revenue from payments made under the CLFS or the Physician Fee Schedule must report, beginning in 2017, and then in 2024 and every three years thereafter (or annually for “advanced diagnostic laboratory tests”), private payer payment rates and volumes for their tests.

None of our tests meet the current definition of advanced

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diagnostic laboratory tests, and therefore we believe we are required to report private payer rates for our tests on an every-three-years basis, starting next in 2024.

CMS uses the rates and volumes reported by laboratories to develop Medicare payment rates for the tests equal to the volume-weighted median of the private payer payment rates for the tests.

Laboratories that fail to report the required payment information may be subject to substantial civil money penalties.

As set forth under the regulations implementing PAMA, for tests furnished on or after January 1, 2018, Medicare payments for clinical diagnostic laboratory tests are paid based upon these reported private payer rates.

For clinical diagnostic laboratory tests that are assigned a new or substantially revised code, initial payment rates for clinical diagnostic laboratory tests that are not advanced diagnostic laboratory tests will be assigned by the cross-walk or gap-fill methodology, as under prior law.

Initial payment rates for new advanced diagnostic laboratory tests will be based on the actual list charge for the laboratory test.

The payment rates calculated under PAMA went into effect starting January 1, 2018.

Where applicable, reductions to payment rates resulting from the new methodology were limited to 10% per test per year in each of the years 2018 through 2020.

Rates were held at 2020 levels during 2021 and 2022 and will continue to be held at such levels in 2023.

Then, where applicable based upon median private payer rates reported in 2017 or 2024, reduced by up to 15% per test per year in each of 2024 through 2026 (with a second round of private payer rate reporting in 2024 to establish rates for 2025 through 2027).

PAMA codified Medicare coverage rules for laboratory tests by requiring any local coverage determination to be made following the local coverage determination process.

PAMA also authorizes CMS to consolidate coverage policies for clinical laboratory tests among one to four laboratory-specific Medicare Administrative Contractors (“MACs”).

These same contractors may also be designated to process claims if CMS determines that such a model is appropriate.

It is unclear whether CMS will proceed with contractor consolidation under this authorization.

PAMA also authorized the adoption of new, temporary billing codes and/or unique test identifiers for FDA-cleared or approved tests as well as advanced diagnostic laboratory tests.

The American Medical Association has created a section of billing codes, Proprietary Laboratory Analyses (“PLA”), to facilitate implementation of this section of PAMA.

These codes may apply to one or more of our tests if we apply for PLA coding.

Reimbursement and billing for diagnostic services is highly complex, and errors in billing potentially can result denied claims and/or in substantial obligations to repay overpayments to payors.

Laboratories must bill various payers, such as private third-party payers, including managed care organizations (“MCO”), and state and federal health care programs, such as Medicare and Medicaid, and each may have different billing requirements.

Additionally, the audit requirements we must meet to ensure compliance with applicable laws and regulations, as well as our internal compliance policies and procedures, add further complexity to the billing process.

Other factors that complicate billing include:

• variability in coverage and information requirements among various payers;

• patient financial assistance programs;

• missing, incomplete or inaccurate billing information provided by ordering physicians;

• billings to payers with whom we do not have contracts;

• disputes with payers as to which party is responsible for payment;

• disputes with payers as to the appropriate level of reimbursement.

Depending on the reimbursement arrangement and applicable law, the party that reimburses us for our services may be:

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• a third party who provides coverage to the patient, such as an insurance company or MCO;

• a state or federal healthcare program;

• the patient.

Available Information

We make our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to these reports, as well as our other SEC filings, available on our website, free of charge, as soon as reasonably practicable after they are electronically filed with or furnished to the SEC.

Our website address is www.sema4.com.

Our website address is www.genedx.com.

The information contained on our website is not incorporated by reference in this document.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 1. Business