What changed in this filing

/stocks — the workspaceLOADING

Item 1A. Risk Factors

2021-03-16 compared with 2020-03-25 · 391 added, 284 removed, 811 unchanged (45% of the section changed)

4 unchanged sentences

The risks described below are not the only ones that we may face, and additional risks or uncertainties not known to us or that we currently deem immaterial may also impair our business and future prospects.

Summary Risk Factors

The risk factors described below are a summary of the principal risk factors associated with an investment in us.

These are not the only risks we face.

You should carefully consider these risk factors, together with the risk factors set forth in this Item 1A:

• Our business is subject to risks arising from epidemic diseases, such as the global pandemic of the COVID-19 coronavirus;

• We have a history of losses, we expect to incur net losses in the future and we may not be able to generate sufficient revenue to achieve and maintain profitability;

• In the near-term, we expect that our financial results will depend primarily on sales of our testing products, and we will need to generate sufficient revenue from these testing products to grow our business;

• Our future growth depends, in part, on our ability to execute on our strategy of integrating the promotion of our existing and future proprietary testing products with the promotion of therapeutics, and we may be unsuccessful in our promotion efforts for SIMPONI ® , which could adversely affect our ability to implement this strategy;

• We may be unable to manage our ongoing growth effectively, which could make it difficult to execute our business strategy;

• If we lose or are unable to secure partners for our integrated testing and therapeutics strategy, or if our partners do not apply adequate resources to their relationships with us or are unable to provide, on a timely basis, an adequate and reliable supply of the therapeutics that we promote, our potential for profitability may be adversely affected;

• Our commercial success depends on attaining and maintaining significant market acceptance of our testing products and promoted therapeutics among rheumatologists, patients, third-party payors and others in the medical community;

• We rely on sole suppliers for some of the reagents, equipment and other materials used in our testing products, and we may not be able to fund replacements or transition to alternative suppliers;

• If we are unable to support demand for our current testing products or any of our future testing products or solutions, our business could suffer;

• If third-party payors do not provide coverage and adequate reimbursement for our testing products, or they breach, rescind or modify their contracts or reimbursement policies or delay payments for our testing products or promoted therapeutics, or if we or our partners are unable to successfully negotiate payor contracts, our commercial success could be compromised;

• If we are unable to compete successfully, we may be unable to increase or sustain our revenue or achieve profitability;

• Developing new testing products involves a lengthy and complex process, and we may not be able to commercialize on a timely basis, or at all, other testing products we are developing;

• If our sole laboratory facility becomes damaged or inoperable, we are required to vacate our existing facility or we are unable to expand our existing facility as needed, we will be unable to perform our testing services and our business will be harmed;

• We may require substantial additional capital to finance our planned operations, which may not be available to us on acceptable terms or at all.

Our failure to obtain additional financing when needed on acceptable terms, or at all, could force us to delay, limit, reduce or eliminate our product development programs, commercialization efforts or other operations;

• If we are unable to maintain intellectual property protection our competitive position could be harmed;

• If we fail to comply with our obligations in the agreements under which we license intellectual property rights from third parties or otherwise experience disruptions to our business relationships with our licensors, we could lose license rights that are important to our business.

Risks Related to Our Business and Strategy

Our business is subject to risks arising from epidemic diseases, such as the global pandemic of the COVID-19 coronavirus.

The current COVID-19 worldwide pandemic has presented substantial public health challenges and is affecting our employees, patients, physicians and other healthcare providers, communities and business operations, as well as the U.S.

and global economies and financial markets.

International and U.S.

governmental authorities in impacted regions are taking actions in an effort to slow the spread of COVID-19, including issuing varying forms of "stay-at-home" orders, restricting business functions outside of one's home, restricting gatherings, restricting travel, and mandating social distancing and face coverings.

Certain jurisdictions have begun re-opening only to return to restrictions due to increases in new COVID-19 cases.

Even in areas where "stay-at-home" restrictions have been lifted and the number of COVID-19 cases have declined, many individuals remain cautious about resuming activities such as preventative-care medical visits.

A pandemic, including COVID-19 or other public health epidemic, poses the risk that we or our employees, contractors, suppliers, third-party shipping carries, government and third-party payors and other partners may be prevented from conducting business activities for an indefinite period of time, including due to spread of the disease within these groups or due to shutdowns that may be requested or mandated by governmental authorities.

As a result of COVID-19 related limitations and reordering of priorities across the U.S.

healthcare system, a reduction in patient flow occurred and our test volumes began to decrease in the second half of March 2020.

We experienced an AVISE ® CTD volume decrease of approximately 5% in the year ended December 31, 2020 as compared to 2019.

By the end of the third quarter of 2020, the number of AVISE ® CTD tests delivered substantially recovered to pre-COVID-19 AVISE ® CTD tests reported in the first quarter of 2020, and in the fourth quarter of 2020, the number of AVISE ® CTD tests delivered exceeded our pre-COVID-19 AVISE ® CTD tests reported in the first quarter of 2020.

For the three months ended December 31, 2020 as compared to the same period in 2019, we experienced a AVISE ® CTD volume increase of approximately 5%.

However, the continued spread of COVID-19 may adversely affect testing volumes in future periods, the extent of which is highly uncertain.

Healthcare providers and patients have canceled or delayed scheduling, and for an extended period of time may continue to cancel or delay scheduling, standard wellness visits and other non-emergency appointments and procedures, contributing to a decline in orders of our testing products.

The economic downturn may also result in closures of the practices of our primary customers.

As it relates to our promotion efforts of SIMPONI ® , we may experience decreased demand for or discontinued treatment with SIMPONI ® from patients who are infected by COVID-19 or who may be at higher risk of infection if it is determined that such patients should minimize exposure to immunosuppressant therapies.

In addition, we believe there are several other important factors that have impacted, and that we expect will impact our operating performance and results of operations, including shutdowns of our facilities and operations as well as those of our suppliers and courier services, disruptions to the supply chain of material needed for our tests, our

sales and commercialization activities and our ability to receive specimens and perform or deliver the results from our tests, delays in reimbursement and coverage decisions from Medicare and third-party payors and in interactions with regulatory authorities, as well as our inability to achieve or re-negotiate volume-based discounts with our key suppliers and to absorb fixed laboratory expenses.

For example, we have experienced delays in patient enrollment for ongoing and planned clinical studies involving our tests, which may delay or prevent launch of future test products.

Our salesforce has been, and for an extended period of time may continue to be limited to their in-person interactions with healthcare providers, and therefore, also limited their ability to engage in various types of healthcare provider education activities.

The portion of our workforce which has been working remotely in an effort to reduce the spread of COVID-19, may be infected from the virus or otherwise distracted.

We have also experienced delays in procurement of our testing supplies due to the resurgence of varying forms of "stay-at-home" orders in the fourth quarter of 2020, which may continue into the future, and our partners, including Janssen, may also experience a disruption in their ability to readily obtain supply.

We may also face increased competition for laboratory employees due to the increased demand in the industry for such personnel.

We may inaccurately estimate the duration or severity of the COVID-19 pandemic, which could cause us to misalign our staffing, spending, activities and precautionary measures with market current or future market conditions.

Our laboratory operations, including laboratory employees and medical directors, may be subject to closure or shut down, either due to the spread of the disease within these individuals, or as part of a larger scale government recommendation or mandate.

Any disruption in our laboratory operations would have a material adverse effect on our business and would impede our ability to process tests in a timely manner, or at all.

The occurrence of any of the foregoing events could have a material adverse effect on our business, financial condition and results of operations.

The COVID-19 pandemic and mitigation measures have had and may continue to have an adverse impact on global economic conditions which could have an adverse effect on our business and financial condition, including impairing our ability to raise capital on a timely basis or at all.

The extent to which the COVID-19 pandemic impacts our results will depend on future developments that are highly uncertain and cannot be predicted, including new information that may emerge concerning the severity of the virus and the actions to contain its impact.

COVID-19 may also have the effect of heightening many of the other risks described in this section.

We have a history of losses, we expect to incur net losses in the future and we may not be able to generate sufficient revenue to achieve and maintain profitability.

We have incurred net losses since our inception.

For the years ended December 31, 2019 and 2018, we incurred net losses of $12.0 and $8.0 million, respectively, and we expect to incur additional losses this year and in future years.

For the years ended December 31, 2020 and 2019, we incurred net losses of $16.7 and $12.0 million, respectively, and we expect to incur additional losses in 2021 and in future years.

As of December 31, 2020, we had an accumulated deficit of $181.3 million.

Over the next several years, we expect to continue to devote substantially all of our resources to increase adoption of, and reimbursement for, our testing products, to promote SIMPONI ® , to develop future testing products and to continue to execute our integrated testing and therapeutics strategy.

Over the next several years, we expect to continue to devote substantially all of our resources to increase adoption of, and reimbursement for, our testing products, to develop future testing products and to continue to execute our integrated testing and therapeutics strategy.

We have experienced and may continue to experience decreases in test volumes due to the impact of the COVID-19 pandemic.

We may not be able to generate sufficient revenue to achieve and maintain profitability.

Our failure to achieve and maintain profitability in the future could cause the market price of our common stock to decline.

We only recently began transitioning toward an integrated testing and therapeutics strategy.

We only recently began transitioning toward an integrated testing and therapeutics strategy, and have experienced material fluctuations in our ability to drive meaningful revenue from the promotion of therapeutics.

Consequently, any predictions about our future success, performance or viability may not be as accurate as they could be if we had a longer history of utilizing an integrated testing and therapeutics strategy in addition to the sale of our testing products.

6 unchanged sentences

While we have experienced revenue growth from the sale of our testing products, we may not be able to sustain this growth or maintain existing revenue levels.

Further, we cannot ensure the continued availability of our testing products in commercial quantities at acceptable costs.

Further, we cannot ensure the continued

availability of our testing products in commercial quantities at acceptable costs.

If we are unable to increase sales of our testing products, expand reimbursement for our testing products, or successfully develop and commercialize additional testing products, our revenue and our ability to achieve and sustain profitability would be impaired, and the market price of our common stock could decline.

4 unchanged sentences

Pursuant to the Janssen Agreement, we are entitled to receive a tiered promotion fee based on the total number of incremental prescriptions written above an established baseline.

Our ability to effectively co-promote SIMPONI® will require us to be successful in a range of activities, including hiring, training and deploying additional sales representatives and creating demand for SIMPONI® through our commercial and sales activities as well as those of Janssen Biotech, Inc., or Janssen.

Moreover, we may encounter difficulties in hiring effective sales representatives in furtherance of our promotion efforts for SIMPONI®, which could have a material impact on our ability to successfully generate co-promotion revenue.

If we encounter difficulties promoting SIMPONI®, our ability to generate significant revenue under the Janssen Agreement will be harmed.

Janssen also has the right to terminate the Janssen agreement with or without cause after 30-days’ notice.

Our ability to continue to effectively co-promote SIMPONI ® will require us to be successful in a range of activities, including creating demand for SIMPONI ® through our commercial and sales activities as well as those of Janssen.

Moreover, we may encounter difficulties in maintaining an effective salesforce in furtherance of our promotion efforts for SIMPONI ® , which could have a material impact on our ability to continue to successfully generate co-promotion revenue.

If we encounter difficulties promoting SIMPONI ® , our ability to generate significant revenue under the Amended Janssen Agreement will be harmed.

In addition, in June 2020 we amended the Janssen Agreement, pursuant to which the predetermined average baseline for each remaining quarter in 2020, starting with the quarter ended June 30, 2020, was adjusted to approximately 26,000 prescribed units per quarter, due in part to COVID-19 and subject to adjustment under certain circumstances.

In December 2020, we further amended the Janssen Agreement, pursuant to which the predetermined average baseline for total prescribed units of SIMPONI ® for the quarters ending December 31, 2020, March 31, 2021 and June 30, 2021, was adjusted to approximately 28,750 prescribed units per quarter, subject to further adjustment under certain circumstances.

Pursuant to the Amended Janssen Agreement, for each of the first and second quarters of 2021, we will receive a minimum promotion fee of $0.3 million and the fee will be capped at 10% above the adjusted predetermined baseline.

The quarterly tiered promotion fee for the remaining term of the Amended Janssen Agreement beginning with the quarter ended September 30, 2021 will revert to the terms set forth in the Janssen Agreement prior to the amendment, with no minimum promotion fee and no cap on predetermined baseline units.

However, based on the revised predetermined baseline we don't anticipate generating meaningful revenue beyond the minimum promotion fee for the first half of 2021, and may not generate any meaningful revenue thereafter.

The Janssen Agreement expires on December 31, 2021, unless extended by us for an additional 12 months upon 180 days written notice prior to the end of the current term.

Janssen also has the right to terminate the Janssen Agreement with or without cause after 30-days’ notice, including if we are unable to agree to a new baseline for 2022.

If Janssen were to exercise this right, we may be unable to recoup substantial investments we have made and intend to make in order to support the promotion of SIMPONI ® .

2 unchanged sentences

If we fail to successfully promote SIMPONI ® , our ability to implement our integrated testing and therapeutics strategy and generate sufficient revenue to grow and sustain our business, and our business, financial condition and results of operations, will be materially adversely affected.

This may also adversely affect our ability to secure additional therapeutic promotion opportunities.

We may be unable to manage our ongoing and future growth effectively, which could make it difficult to execute our business strategy.

In addition to the need to scale our testing capacity, our future growth plans will also impose significant added responsibilities on management, including the need to identify, recruit, train and integrate additional employees and the need to manage additional relationships with various partners, suppliers and other third parties.

In particular, we expanded our salesforce from 31 representatives as of December 31, 2018 to 50 representatives as of December 31, 2019, and expect to continue to expand our salesforce in 2020, which we believe will help increase reach and frequency and support our integrated promotion of testing products and therapeutics.

In particular, we have 53 representatives as of December 31, 2020 compared to 50 representatives as of December 31, 2019, and expect to continue to expand our salesforce in 2021, which we believe will help increase reach and frequency and support our integrated promotion of testing products and therapeutics.

In addition, rapid and significant growth may strain our administrative and operational infrastructure and require us to expand our financial, development, regulatory, manufacturing, marketing and sales capabilities or contract with third parties to provide these capabilities for us.

Our ability to manage our business and growth, as well as function as a public company, will require us to continue to improve our operational, financial and management controls, reporting systems and procedures.

Our ability to manage our business and growth, as well as function as a public company, will require us to

continue to improve our operational, financial and management controls, reporting systems and procedures.

The time and resources required to optimize these systems is uncertain, and failure to complete optimization in a timely and efficient manner could adversely affect our operations.

2 unchanged sentences

In addition to the Janssen Agreement, we plan to opportunistically evaluate, and may continue to enter into, additional agreements with pharmaceutical companies to integrate the promotion of our testing products with their therapeutics.

We have also entered into, and may continue to enter into, other agreements that leverage our testing products and data generated from such tests.

For example, we provide GSK our test result data to provide market insight into and help increase awareness of the benefits of an early and accurate diagnosis of SLE;

and our AVISE ® MTX test data is used by Horizon Therapeutics to report on levels of MTXPG in patients undergoing methotrexate therapy in combination with its anti-gout product, KRYSTEXXA ® , in an ongoing Phase 4 clinical trial.

We have also entered into, and may continue to enter into, other agreements that leverage our testing products and/or data generated from such tests.

For example, we provide GSK our test result data to provide market insight into and help increase awareness of the benefits of an early and accurate diagnosis of SLE and monitoring disease activity.

The amount and timing of resources applied by our current or potential future partners are largely outside of our control.

21 unchanged sentences

For example, potential partners, particularly those that are actively marketing their own therapeutics, may be unwilling to license commercialization rights to us or otherwise enter into terms that allow us to meaningfully participate in sales growth for their products, which could limit the potential availability and value to us of additional agreements to promote therapeutics.

The inability to enter into agreements for additional therapeutics could limit the overall growth of our business and adversely affect our business, financial condition and results of operations.

Disputes could also arise between us and our existing or future partners, as to a variety of matters,

including financial and intellectual property matters or other obligations under our agreements.

The inability to enter into agreements for additional therapeutics

could limit the overall growth of our business and adversely affect our business, financial condition and results of operations.

Disputes could also arise between us and our existing or future partners, as to a variety of matters, including financial and intellectual property matters or other obligations under our agreements.

These disputes would be both expensive and time-consuming and may result in delays in the success of therapeutics or could damage our relationship with a partner.

Our business is subject to risks arising from epidemic diseases, such as the recent global outbreak of the COVID-19 coronavirus.

The recent outbreak of the coronavirus, COVID-19, which has been declared by the World Health Organization to be a pandemic has spread across the globe and is impacting worldwide economic activity.

A pandemic, including COVID-19 or other public health epidemic, poses the risk that we or our employees, contractors, suppliers, third party shipping carries, government and third party payors and other partners may be prevented from conducting business activities for an indefinite period of time, including due to spread of the disease within these groups or due to shutdowns that may be requested or mandated by governmental authorities.

While it is not possible at this time to estimate the impact that COVID-19 could have on our business, the continued spread of COVID-19 and the measures taken by the governments of countries affected could disrupt, among other things, the supply chain and the manufacture or shipment of testing products, our ability to process tests and deliver results, delay coverage decisions from Medicare and third party payors, and delay ongoing and planned clinical trials involving our tests.

Additionally, we may experience a decrease or potential halt in shipments of our testing products as our suppliers may be required to focus their resources to manufacture testing kits in response to the COVID-19 outbreak, which could in turn result in decreased gross margins.

Any disruption in our laboratory operations would have a material adverse effect on our business and would impede our ability to process tests in a timely manner, or at all.

Additionally, the demand for our testing products, and the demand for therapeutics, may significantly decline or cease as COVID-19 continues to spread, including as a result of prioritization of hospital or clinical resources toward the outbreak or government imposed quarantines that impede patient movement or interrupt healthcare services or patients otherwise delaying or declining to seek treatment.

As it relates to our promotion efforts of SIMPONI, we may experience decreased demand for or discontinued treatment with SIMPONI from patients who are infected by COVID-19 or who may be at higher risk of infection if it is determined that such patients should minimize exposure to immunosuppressant therapies.

The occurrence of any of the foregoing events could have a material adverse effect on our business, financial condition and results of operations.

The COVID-19 outbreak and mitigation measures have had and may continue to have an adverse impact on global economic conditions which could have an adverse effect on our business and financial condition, including impairing our ability to raise capital when needed.

The extent to which the COVID-19 outbreak impacts our results will depend on future developments that are highly uncertain and cannot be predicted, including new information that may emerge concerning the severity of the virus and the actions to contain its impact.

We may experience limits on our revenue if rheumatologists decide not to order our testing products or our promoted therapeutics or if we are otherwise unable to create or maintain demand for our testing products and promoted therapeutics.

1 unchanged sentence

To generate increased demand, we will need to continue to educate rheumatologists about the benefits of our testing products through publications in peer-reviewed medical journals, presentations at medical conferences and other similar means.

For example, in the fourth quarter of 2019, we were featured in nine scientific presentations at the 2019 American College of Rheumatology's (ACR/ARHP) Annual Conference.

For example, in the fourth quarter of 2020, we were featured in six scientific presentations at the 2020 American College of Rheumatology's (ACR) Virtual Annual Conference, ACR Convergence 2020.

We will also need to generate demand for both our testing products and promoted therapeutics through one-on-one education by our salesforce.

We also plan to focus on educating patients about the benefits of these testing products and therapeutics, which we believe will be necessary to generate further demand.

In addition, our inability to obtain and maintain coverage and adequate reimbursement from third-party payers may limit adoption by rheumatologists.

With respect to SIMPONI ® in particular, if we are unable to generate sales above certain thresholds agreed to with Janssen, we will not receive any payments under the Janssen agreement.

In addition, our inability to obtain and maintain coverage and adequate reimbursement from third-party payors may limit adoption by rheumatologists, as well as third-party payors exerting pressure on rheumatologists and healthcare providers to order in-network testing products which could adversely affect our revenue.

With respect to SIMPONI ® in particular, if we are unable to generate sales above certain thresholds agreed to with Janssen, we will not generate meaningful revenue under the Amended Janssen Agreement.

Rheumatologists may rely on guidelines issued by industry groups regarding the diagnosis, prognosis, treatment and monitoring of autoimmune and autoimmune-related diseases, and the monitoring of the effectiveness of therapeutic drugs used to treat such diseases before utilizing any diagnostic test or monitoring solution.

Our commercial success depends upon attaining and maintaining significant market acceptance of our testing products and promoted therapeutics among rheumatologists, patients, third-party payers and others in the medical community.

Our success depends on our ability to continue to develop and market testing products and promote therapeutics that are recognized and accepted as safe, effective, reliable and cost effective, and any testing product or promoted therapeutic that we offer may not gain or maintain market acceptance among rheumatologists, third-party payers, patients and the medical community.

Market acceptance of our testing products and promoted therapeutics depends on a number of factors, including:

9 unchanged sentences

• publicity concerning our testing products and promoted therapeutics or competing products and treatments;

• the availability of coverage and adequate reimbursement by third-party payers, including government authorities;

• the availability of coverage and adequate reimbursement by third-party payors, including government authorities;

• relative convenience and ease of administration;

3 unchanged sentences

If any of the biomarkers in our AVISE ® CTD test were to encounter any issues, we may experience an impact in the overall success of AVISE ® CTD as a whole, including a reduction in average selling price or overall revenue, until such time as it can be remedied.

Moreover, if our testing products and promoted therapeutics do not achieve an adequate level of acceptance by rheumatologists, hospitals, third-party payers or patients, we may not generate sufficient revenue from that testing product or therapeutic and may not become or remain profitable.

Our efforts to educate the medical community and third-party payers regarding the benefits of our testing products and promoted therapeutics may require significant resources and may never be successful.

Moreover, if our testing products and promoted therapeutics do not achieve an adequate level of acceptance by rheumatologists, hospitals, third-party payors or patients, we may not generate sufficient revenue from that testing product or therapeutic and may not become or remain profitable.

Our efforts to educate the medical community and third-party payors regarding the benefits of our testing products and promoted therapeutics may require significant resources and may never be successful.

The sizes of the markets for our testing products and promoted therapeutics have not been established with precision, and may be smaller than we estimate.

6 unchanged sentences

Because we have limited financial and managerial resources, we focus on specific testing products and promoted therapeutics.

As a result, we may forego or delay pursuit of opportunities with others that could have had greater

commercial potential.

As a result, we may forego or delay pursuit of opportunities with others that could have had greater commercial potential.

Our resource allocation decisions may cause us to fail to capitalize on viable commercial products or profitable market opportunities.

5 unchanged sentences

• our ability to successfully market and sell our AVISE ® testing products and continue to promote SIMPONI ® ;

• the extent to which our current testing and future testing products, if any, are eligible for coverage and reimbursement from third-party payers;

• public health crises such as the recent COVID-19 outbreak;

• the extent to which our current testing and future testing products, if any, are eligible for coverage and reimbursement from third-party payors;

• public health crises such as the COVID-19 pandemic;

• the timing and cost of, and level of investment in, research, development, regulatory approval and commercialization activities relating to our testing products, which may change from time to time, and our ability to successfully commercialize new testing products;

4 unchanged sentences

• future accounting pronouncements or changes in our accounting policies;

• the rate and extent to which payers make an overpayment determination and require us to return all or some portion of payments which we received in a prior period;

• the rate and extent to which payors make an overpayment determination and require us to return all or some portion of payments which we received in a prior period;

• the timing and success or failure of competing products, or any other change in the competitive landscape of our industry, including consolidation among our competitors or partners.

10 unchanged sentences

We are not a major customer of some of our suppliers, and these suppliers may therefore give other customers’ needs higher priority than ours.

If our suppliers can no longer provide us with the materials we need to perform the tests that comprise our testing products, including as a result of the COVID-19 outbreak, if the materials do not meet our quality specifications, or if we cannot obtain acceptable substitute materials, an interruption in test processing could occur and, in certain circumstances, we may be required to amend or cancel test results we have issued.

For example, in November 2019 we identified a potential quality issue with reagents for Anti-CarP, a biomarker in our AVISE ® CTD test.

As a result, if we are unable to remedy the quality issue discovered, or otherwise find a supplier for this biomarker, we may experience difficulties obtaining market acceptance for our products.

Moreover, any issues with

quality may result in a change from time to time of the composition of our tests, including our AVISE ® CTD test, which could impact the average selling price and revenues received from sales of such test.

If our suppliers can no longer provide us with the materials we need to perform the tests that comprise our testing products, including as a result of the COVID-19 pandemic, if the materials do not meet our quality specifications, or if we cannot obtain acceptable substitute materials, an interruption in test processing could occur and, in certain circumstances, we may be required to amend or cancel test results we have issued.

For example, in November 2019, we identified a potential quality issue with reagents for Anti-CarP, a biomarker that can be ordered with our AVISE ® CTD test, that was resolved in September 2020.

However, if we are unable to remedy future potential quality issues with unique reagent suppliers, or otherwise find a supplier for future biomarkers with issues, we may experience difficulties obtaining market acceptance for our products.

Moreover, any issues with quality may result in a change from time to time of the composition of our tests, including our AVISE ® CTD test, which could impact the average selling price and revenues received from sales of such test.

In addition, if we should encounter delays or difficulties in securing the quality and quantity of equipment we require for our testing products, we may need to reconfigure our test processes, which could result in an interruption in sales.

10 unchanged sentences

We are also currently collaborating with third parties in an effort to implement multiplex technology in our laboratory.

We may experience difficulties securing a partner for this technology and integrating such technology into our existing laboratory operations, which could affect our ability to meet demand for our testing products.

If we encounter difficulty meeting market demand or quality standards, our reputation could be harmed and our future prospects and our business could suffer.

If third-party payers do not provide coverage and adequate reimbursement for our testing products, or they breach, rescind or modify their contracts or reimbursement policies or delay payments for our testing products or promoted therapeutics, or if we or our partners are unable to successfully negotiate payer contracts, our commercial success could be compromised.

Successful commercialization of our testing products depends, in large part, on the availability of coverage and adequate reimbursement from third-party payers, including government payers, such as Medicare and Medicaid and private insurers.

For the testing products that we develop and commercialize as well as the therapeutics we promote, each third-party payer decides whether to cover the product, the amount it will reimburse for a covered product and the specific conditions for reimbursement.

Reimbursement by third-party payers may depend on a number of factors, including the payer’s determination that tests using our technologies are:

If third-party payors do not provide coverage and adequate reimbursement for our testing products, or they breach, rescind or modify their contracts or reimbursement policies or delay payments for our testing products or promoted therapeutics, or if we or our partners are unable to successfully negotiate payor contracts, our commercial success could be compromised.

Successful commercialization of our testing products depends, in large part, on the availability of coverage and adequate reimbursement from third-party payors, including government payors, such as Medicare and Medicaid and private insurers.

For the testing products that we develop and commercialize as well as the therapeutics we promote, each third-party payor decides whether to cover the product, the amount it will reimburse for a covered product and the specific conditions for reimbursement.

Reimbursement by third-party payors may depend on a number of factors, including the payor’s determination that tests using our technologies are:

• not experimental or investigational;

5 unchanged sentences

• included in clinical guidelines.

If we are unable to provide third-party payers with sufficient evidence of the clinical utility and validity of our test, they may not provide coverage, or may provide limited coverage, which will adversely affect our revenue and our ability to succeed.

In addition, clinicians may be less likely to order a test unless third-party payers pay a substantial portion of the test price.

If we are unable to provide third-party payors with sufficient evidence of the clinical utility and validity of our test, they may not provide coverage, or may provide limited coverage, which will adversely affect our revenue and our ability to succeed.

In addition, clinicians may be less likely to order a test unless third-party payors pay a substantial portion of the test price.

Therefore, coverage determinations and reimbursement levels and conditions are critical to commercial success, and if we are not able to secure positive coverage determinations and reimbursement levels, our business will be materially adversely affected.

Moreover, the recent outbreak of COVID-19 may cause a delay in

coverage decisions from Medicare and third party payors, and delay ongoing and planned clinical trials involving our testing products, the occurrence of which may have a material adverse effect on our business.

Third-party payers and other entities also conduct technology assessments of new medical tests and devices and provide and/or sell the results of their assessments to other parties.

These assessments may be used by third-party payers and health care providers as grounds to deny coverage for or refuse to use a test or procedure.

In addition, third-party payers, have increased their efforts to control the cost, utilization and delivery of healthcare services.

Moreover, the COVID-19 pandemic may cause a delay in coverage decisions from Medicare and third-party payors, and have delayed ongoing and planned clinical trials involving our testing products, the occurrence of which may have a material adverse effect on our business.

Third-party payors and other entities also conduct technology assessments of new medical tests and devices and provide and/or sell the results of their assessments to other parties.

These assessments may be used by third-party payors and health care providers as grounds to deny coverage for or refuse to use a test or procedure.

In addition, third-party payors, have increased their efforts to control the cost, utilization and delivery of healthcare services.

These measures have resulted in reduced payment rates and decreased utilization for the diagnostics industry.

Effective April 25, 2012, Palmetto GBA, the Medicare molecular diagnostic services program’s, or MolDx Program’s, contractor, assigned the AVISE® MTX assay a unique identifier and determined that the test meets the applicable Medicare coverage criteria to support dose optimization and therapeutic decision making for patients diagnosed with RA on methotrexate.

Effective April 25, 2012, Palmetto GBA, the Medicare molecular diagnostic services program, or MolDx Program, contractor, assigned the AVISE ® MTX assay a unique identifier and determined that the test meets the applicable Medicare coverage criteria to support dose optimization and therapeutic decision making for patients diagnosed with RA on methotrexate.

Our current Medicare Administrative Contractor, Noridian Healthcare Solutions, LLC, or Noridian, has adopted this coverage policy.

Other third-party payers make their own decisions as to whether to establish a policy to reimburse our testing products, however, and because approvals must be sought on a payer by payer basis, establishing broad coverage is a time-consuming and costly process.

There are many third-party payers who have not yet established a coverage policy applicable to our testing products.

Other third-party payors make their own decisions as to whether to establish a policy to reimburse our testing products, however, and because approvals must be sought on a payor by payor basis, establishing broad coverage is a time-consuming and costly process.

There are many third-party payors who have not yet established a coverage policy applicable to our testing products.

In addition, several Blue Cross Blue Shield plans and Aetna issued non-coverage policies with respect to AVISE ® Lupus, determining that AVISE ® Lupus does not meet the medical criteria for coverage and is considered investigational and/or experimental.

While our testing products are reimbursed by a number of third-party payers, we do not currently have contracts with significant private payers.

We have in the past, and will likely in the future, experience delays and temporary interruptions in the receipt of payments from third-party payers due to changes in their internal processes, documentation requirements and other issues, which could cause our revenue to fluctuate from period to period.

If we are not successful in reversing existing non-coverage policies, or if other third-party payers issue negative coverage policies, these policies could have a material adverse effect on our business and operations.

Even if many third-party payers currently reimburse for our testing products, such payers may withdraw coverage at any time, review and adjust the rate of reimbursement, require co-payments from patients or stop paying for our testing products altogether, any of which would reduce our revenue.

While our testing products are reimbursed by a number of third-party payors, we do not currently have contracts with significant private payors.

We have in the past, and will likely in the future, experience delays and temporary interruptions in the receipt of payments from third-party payors due to changes in their internal processes, documentation requirements and other issues, which could cause our revenue to fluctuate from period to period.

If we are not successful in reversing existing non-coverage policies, or if other third-party payors issue negative coverage policies, these policies could have a material adverse effect on our business and operations.

Even if many third-party payors currently reimburse for our testing products, such payors may withdraw coverage at any time, review and adjust the rate of reimbursement, require co-payments from patients or stop paying for our testing products altogether, any of which would reduce our revenue.

Billing for our testing products is complex, and we must dedicate substantial time and resources to the billing process to be paid for our testing products.

Billing for our testing products is complex, time consuming and expensive.

Depending on the billing arrangement and applicable law, we bill various third-party payers, including Medicare and private insurance companies, as well as patients, all of which have different billing requirements.

We generally bill third-party payers for our testing products and pursue reimbursement on a case-by-case basis where pricing contracts are not in place.

Depending on the billing arrangement and applicable law, we bill various third-party payors, including Medicare and private insurance companies, as well as patients, all of which have different billing requirements.

We generally bill third-party payors for our testing products and pursue reimbursement on a case-by-case basis where pricing contracts are not in place.

We may also face increased risk in our collection efforts, including long collection cycles and potential delays in claims processing, which could adversely affect our business, results of operations and financial condition.

Several factors contribute to the complexity of the billing process, including:

• differences between the list price for our testing products and the reimbursement rates of third-party payers;

• differences between the list price for our testing products and the reimbursement rates of third-party payors;

• compliance with complex federal and state regulations related to billing Medicare;

• disputes among third-party payers as to which party is responsible for payment;

• differences in coverage among third-party payers;

• disputes among third-party payors as to which party is responsible for payment;

• differences in coverage among third-party payors;

• the effect of patient deductibles, co-payments or co-insurance;

• differences in information and billing requirements among third-party payers;

• differences in information and billing requirements among third-party payors;

• changes to billing codes used for our testing products;

4 unchanged sentences

If these codes were to change, there is a risk of an error being made in the claim adjudication process.

Such errors can occur with claims submission, third-party transmission or in the processing of the claim by the payer.

Such errors can occur with claims submission, third-party transmission or in the processing of the claim by the payor.

Claim adjudication errors may result in a delay in payment processing or a reduction in the amount of the payment received.

2 unchanged sentences

Our billing activities require us to implement compliance procedures and oversight, train and monitor our employees, and undertake internal audits to evaluate compliance with applicable laws and regulations as well as internal compliance policies and procedures.

When payers deny our claims, in order to obtain reimbursement for services that we provide, we may challenge coverage and payment denials.

Payers also conduct external audits to evaluate payments, which add further complexity to the billing process.

If the payer makes an overpayment determination, there is a risk that we may be required to return all or some portion of prior payments we have received.

Additionally, the Patient Protection and Affordable Care Act of 2010, as amended by the Health Care and Education Reconciliation Act of 2010, collectively the Affordable Care Act, or ACA, established a requirement for providers and suppliers to report and return any overpayments received from government payers under the Medicare and Medicaid programs within 60 days of identification.

When payors deny our claims, in order to obtain reimbursement for services that we provide, we may challenge coverage and payment denials.

Payors also conduct external audits to evaluate payments, which add further complexity to the billing process.

If the payor makes an overpayment determination, there is a risk that we may be required to return all or some portion of prior payments we have received.

Additionally, the Patient Protection and Affordable Care Act of 2010, as amended by the Health Care and Education Reconciliation Act of 2010, collectively the Affordable Care Act, or ACA, established a requirement for providers and suppliers to report and return any overpayments received from government payors under the Medicare and Medicaid programs within 60 days of identification.

Failure to identify and return such overpayments exposes the provider or supplier to liability under federal false claims laws.

Additionally, from time to time, third-party payers change processes that may affect timely payment.

These changes may result in uneven cash flow or impact the timing of revenue recognized with these payers.

Additionally, from time to time, third-party payors change processes that may affect timely payment.

These changes may result in uneven cash flow or impact the timing of revenue recognized with these payors.

With respect to payments received from governmental programs, factors such as a prolonged government shutdown could cause significant regulatory delays or could result in attempts to reduce payments made to us by federal government healthcare programs.

In addition, third-party payers may refuse to ultimately make payment if their processes and requirements have not been met on a timely basis.

In addition, third-party payors may refuse to ultimately make payment if their processes and requirements have not been met on a timely basis.

These billing complexities, and the related uncertainty in obtaining payment for our testing products could negatively affect our revenue and cash flow, our ability to achieve profitability, and the consistency and comparability of our results of operations.

In 2020, Noridian posted the calendar year 2021 Medicare Physician Fee Schedule, or MPFS, and Clinical Laboratory Fee Schedule, or CLFS, which establishes the reimbursement rates to be paid by Medicare for our jurisdiction for services performed on or after January 1, 2021.

We have estimated that the implementation of these reimbursement rates will result in an approximate 7.3% reduction in anticipated reimbursements from Medicare for our AVISE® CTD testing product from levels experienced in 2018.

Revenue from Medicare comprised 25% and 30% of our revenue for the years ended December 31, 2019 and 2018, respectively.

Revenue from the sale of our AVISE® CTD testing products comprised 82% of our revenue for the years ended December 31, 2019 and 2018.

We have estimated that the implementation of these reimbursement rates will not result in a reduction in anticipated reimbursements from Medicare for our AVISE ® CTD testing product compared to levels experienced in 2020.

On March 27, 2020, the CARES Act included the temporary suspension of Medicare sequestration of 2% during the period beginning on May 1, 2020 and ending on December 31, 2020.

The Consolidated Appropriations Act of 2021, signed into law on December 27, 2020, extends the suspension period to March 31, 2021.

Revenue from Medicare comprised 20% and 25% of our revenue for the

years ended December 31, 2020 and 2019, respectively.

Revenue from the sale of our AVISE® CTD testing products comprised 70% and 82% of our revenue for the years ended December 31, 2020 and 2019, respectively.

We also rely on a third-party provider to provide revenue cycle management software systems for certain processing and collection functions.

In the past, we have experienced delays in claims processing as a result of our third-party provider making changes to its invoicing system, as well as not submitting claims to payers within the timeframe required.

If claims for our testing products are not submitted to payers on a timely basis, or if we are required to switch to a different systems provider, it could have an adverse effect on our revenue and our business.

If claims for our testing products are not submitted to payors on a timely basis, or if we are required to switch to a different systems provider, it could have an adverse effect on our revenue and our business.

Our reliance on third parties requires us to share our trade secrets, which increases the possibility that a competitor will discover them or that our trade secrets will be misappropriated or disclosed.

8 unchanged sentences

Investigators may also conduct additional, and perhaps more extensive, studies.

If new safety or efficacy issues are reported or if new scientific information becomes available (including results of post-marketing Phase 4 trials), or if

governments change standards regarding safety, efficacy or labeling, our partners may be required to amend the conditions of use for a therapeutic.

If new safety or efficacy issues are reported or if new scientific information becomes available (including results of post-marketing Phase 4 trials), or if governments change standards regarding safety, efficacy or labeling, our partners may be required to amend the conditions of use for a therapeutic.

For example, a partner may voluntarily provide or be required to provide updated information on a therapeutics' label or narrow its approved indication, either of which could reduce the therapeutics' market acceptance.

5 unchanged sentences

If we are unable to maintain or expand our sales and marketing force to adequately address our customers’ and current or future partners’ needs, our business may be adversely affected.

We sell our testing products through our own specialized salesforce and have recently increased our salesforce in order to achieve the optimal reach and frequency and support our strategy of integrating the promotion of testing products and therapeutics.

We sell our testing products through our own specialized salesforce and have increased our salesforce in order to achieve the optimal reach and frequency and support our strategy of integrating the promotion of testing products and therapeutics.

Our testing products compete in a concentrated specialty market, that of autoimmune and autoimmune-related diseases, and utilizing a specialized salesforce is integral to our integrated testing and therapeutics strategy.

As such, we believe it is necessary to maintain a salesforce that includes sales representatives with specific technical backgrounds and industry expertise.

For example, to support the co-promotion of SIMPONI ® , we expanded our salesforce from 31 representatives as of December 31, 2018 to 50 representatives as of December 31, 2019 and expect to continue to expand our salesforce in 2020.

For example, we have a salesforce of 53 representatives as of December 31, 2020, and expect to continue to expand our salesforce in 2021.

Additional agreements for the promotion of therapeutics may require us to further expand our specialized salesforce.

Training of additional sales representatives can be costly and time consuming, particularly given the level of experience and sophistication we seek in our salesforce.

In addition, until recently, not all of our sales representatives have promoted therapeutics, including SIMPONI ® , as part of our organization, and they will need to complete additional training in order to effectively promote SIMPONI ® and any other therapeutics that we promote through additional agreements.

In addition, until recently, not all of our sales representatives have promoted therapeutics, including SIMPONI ® , as part of our organization, and they will need to complete additional

training in order to effectively promote SIMPONI ® and any other therapeutics that we promote through additional agreements.

If we are unable to effectively retain, train and integrate additional sales representatives, it may adversely affect our ability to effectively market and sell our testing products.

9 unchanged sentences

Additionally, we compete against regional clinical laboratories providing testing in the autoimmune and autoimmune-related disease field, including Rheumatology Diagnostics Laboratories, Inc.

Other potential competitors include companies that might develop diagnostic or disease or drug monitoring products, such as Myriad Genetics, Inc., Progentec Diagnostics Inc., Kypha, LLC, Genalyte Inc., Oncimmune plc, DxTerity Diagnostics Inc., HealthTell, Inc.

and Immunovia AB.

(acquired by Laboratory Corporation of America in June 2020).

Other potential competitors include companies that might develop diagnostic or disease or drug monitoring products, such as Myriad Genetics, Inc., Progentec Diagnostics Inc., Scipher Medicine Corporation, Genalyte Inc., Oncimmune plc, DxTerity Diagnostics Inc., and Immunovia AB.

In the future, we may also face competition from companies developing new products or technologies.

2 unchanged sentences

(biosimilar REMICADE ® ).

Additional competitors include companies with other

biologic drugs indicated for RA that have significant sales or sales potential.

Additionally, we are restricted from promoting any other biologic or Janus kinase inhibitor, or JAK inhibitor, used for treatment of indications covered by the Janssen Agreement without Janssen's consent.

Additional competitors include companies with other biologic drugs indicated for RA that have significant sales or sales potential.

Specifically, these include ORENCIA ® from Bristol-Myers Squibb Company, ACTEMRA ® from Roche, RITUXAN ® from Roche, XELJANZ ® from Pfizer, KEVZARA ® from Sanofi S.A., RINVOQ™ from Abbvie Inc.

11 unchanged sentences

Many of our potential competitors have widespread brand recognition and substantially greater financial, technical and research and development resources and selling and marketing capabilities than we do.

Others may develop products with prices lower than ours that could be viewed by rheumatologists and payers as functionally equivalent to our solution or offer solutions at prices designed to promote market penetration, which could force us to lower the list price of our products and affect our ability to achieve profitability.

Others may develop products with prices lower than ours that could be viewed by rheumatologists and payors as functionally equivalent to our solution or offer solutions at prices designed to promote market penetration, which could force us to lower the list price of our products and affect our ability to achieve profitability.

If we are unable to change clinical practice in a meaningful way or compete successfully against current and future competitors, we may be unable to increase market acceptance and sales of our products, which could prevent us from increasing our revenue or achieving profitability and could cause the market price of our common stock to decline.

3 unchanged sentences

We may not be able to develop testing products with the clinical utility necessary to be useful and commercially successful.

There are certain products for which a commercial launch would trigger additional payment obligations to licensors of the technology.

There are certain products for which a

commercial launch would trigger additional payment obligations to licensors of the technology.

In these cases, if the economic projections of the product do not outweigh the additional obligations, we may not launch these products.

17 unchanged sentences

Additionally, competitors may develop and commercialize competing products or technologies faster than us or at a lower cost.

enhancements to our current technologies, design improvements, cost savings, revenue or other expected benefits.

Developing new testing products and enhancements to our existing technologies is expensive and time consuming, and there is no assurance that such activities will result in significant new marketable testing products, enhancements to our current technologies, design improvements, cost savings, revenue or other expected benefits.

If we spend significant resources on research and development and are unable to generate an adequate return on our investment or divert resources away from other, more attractive growth opportunities, our business and results of operations may be materially and adversely affected.

10 unchanged sentences

To date, other than our acquisition of the medical diagnostics division of Cypress Bioscience, Inc.

in 2010, we have not acquired other companies or therapeutics and, except with respect to certain collaboration agreements executed in connection with our integrated testing and therapeutics strategy, we have limited experience with respect to the formation of strategic alliances and joint ventures.

limited experience with respect to the formation of strategic alliances and joint ventures.

If we make any acquisitions, we may not be able to integrate these acquisitions successfully into our existing business, and we could assume unknown or contingent liabilities.

14 unchanged sentences

Our testing products could become obsolete unless we continually innovate and expand our testing product offerings to include new clinical applications.

If we are unable to develop new testing products or to demonstrate the applicability of our testing

products for other diseases, our sales could decline and our competitive position could be harmed.

If we are unable to develop new testing products or to demonstrate the applicability of our testing products for other diseases, our sales could decline and our competitive position could be harmed.

In addition, if our promoted therapeutics become obsolete and we are unable to expand such agreements or find new partners, our sales could decline and our competitive position could be harmed.

3 unchanged sentences

Key opinion leaders are able to influence clinical practice by publishing research and determining whether new tests should be integrated into clinical guidelines.

We rely on key opinion leaders early in the development process to help ensure our clinical studies are designed and executed in a way that clearly demonstrates the benefits of our testing products to healthcare providers and payers.

Our failure to maintain or build new relationships with such key opinion leaders could affect rheumatologist and patient perception of our testing products and result in a loss of existing and future customers and therefore materially adversely impact our business and prospects.

5 unchanged sentences

Although we maintain professional liability insurance, we cannot assure you that our insurance would fully protect us from the financial impact of defending against these types of claims or any judgments, fines or settlement costs arising out of any such claims.

Any errors or omissions or professional liability claim brought against us, with or without merit, could increase our insurance rates or prevent us from securing insurance coverage in the future.

Any errors or omissions or professional liability claim brought against us, with or without merit, could increase our insurance rates or prevent us from securing

insurance coverage in the future.

Additionally, any product liability lawsuit could cause injury to our reputation or cause us to suspend sales of our testing products.

13 unchanged sentences

If we are not able to attract and retain the necessary personnel to accomplish our business objectives, we may experience constraints that could adversely affect our ability to support our research and development, clinical laboratory and sales efforts.

All of our employees are at-

will, which means that either we or the employee may terminate their employment at any time.

We do not carry key man insurance for any of our employees.

Our recent management changes create uncertainties and could have a material adverse impact on our business, results of operations and financial condition.

In December 2019, Thierry Dervieux, Ph.D.

resigned as our Chief Scientific Officer.

Executive leadership transitions can be inherently difficult to manage and may cause disruption to our business.

As a result of the recent changes in our management team, our existing management team has taken on additional responsibility, which has resulted in greater workload demands and could divert their attention away from certain key areas of our business.

In addition, management transition inherently causes some loss of institutional knowledge, which can negatively affect strategy and execution, and our results of operations and financial condition could suffer as a result.

The loss of services of one or more other members of senior management could have a material adverse effect on our business, operating results and financial condition.

All of our employees are at-will, which means that either we or the employee may terminate their employment at any time.

Other than with respect to Mr.

Rocca, we do not carry key man insurance for any of our employees.

If our sole laboratory facility becomes damaged or inoperable, we are required to vacate our existing facility or we are unable to expand our existing facility as needed, we will be unable to perform our testing services and our business will be harmed.

1 unchanged sentence

Vista is situated on or near earthquake fault lines.

Our facility and equipment could be harmed or rendered inoperable by natural or man-made disasters, including earthquake, fire, flood, power loss, communications failure or terrorism, or public health crises such as the COVID-19 outbreak.

In particular, we store all of our flow cytometers, the instrument we use to detect CB-CAPs on cells, at our Vista facility.

If all of our flow cytometers were rendered inoperable simultaneously pursuant to a natural or man-made disaster, we would be unable to perform these key tests as we do in the ordinary course of our business.

The inability to perform the tests contained in our testing products or to reduce the backlog of analyses that could develop if our facility is inoperable, for even a short period of time, including as a result of the COVID-19 outbreak, may result in the loss of customers or harm to our reputation, and we may be unable to regain those customers or repair our reputation in the future.

The inability to perform the tests contained in our testing products or to reduce the backlog of analyses that could develop if our facility is inoperable, for even a short period of time, including as a result of the COVID-19 pandemic, may result in the loss of customers or harm to our reputation, and we may be unable to regain those customers or repair our reputation in the future.

Additionally, we store our bio-repository of specimens, which were collected in collaboration with leading academic institutions and help us to further validate our testing products, at our Vista facility.

13 unchanged sentences

We carry insurance for damage to our property and the disruption of our business, but this insurance may not cover all of the risks associated with damage or disruption to our business, provide coverage in amounts sufficient to cover our potential losses or continue to be available to us on acceptable terms, if at all.

Business disruptions could seriously harm our future revenue and financial condition and increase our costs and expenses.

Our operations could be subject to earthquakes, power shortages, telecommunications failures, water shortages, floods, hurricanes, typhoons, fires, extreme weather conditions, medical epidemics and other natural or manmade disasters or business interruptions, for which we are predominantly self-insured.

We rely on third-party manufacturers to produce our testing products.

Our ability to obtain clinical supplies of our testing products could be disrupted if the operations of these suppliers were affected by a man-made or natural disaster or other business interruption.

In addition, our corporate headquarters is located in Vista, California near major earthquake faults and fire zones, and the ultimate impact on us of being located near major earthquake faults and fire zones and being consolidated in a certain geographical area is unknown.

The occurrence of any of these business disruptions could seriously harm our operations and financial condition and increase our costs and expenses.

Our testing process involves the use of sophisticated state-of-the-art equipment that requires precise calibration, and issues affecting such equipment may delay delivery or impact the quality of the test results to rheumatologists or otherwise adversely affect our operations.

4 unchanged sentences

Therefore, if we do not have other sufficient properly functioning flow cytometers due to failure to meet specifications or they otherwise become inoperable, our ability to process patient specimens in the required timeframe would be compromised and our business could be harmed.

If we use hazardous materials in a manner that causes contamination or injury, we could be liable for resulting damages.

We are subject to federal, state and local laws, rules and regulations governing the use, discharge, storage, handling and disposal of biological material, chemicals and waste.

We cannot eliminate the risk of accidental contamination or injury to employees or third parties from the use, storage, handling or disposal of these materials.

In the event of contamination or injury, we could be held liable for any resulting damages, remediation costs and any related penalties or fines, and any liability could exceed our resources or any applicable insurance coverage we may have.

The cost of compliance with these laws and regulations may become significant, and our failure to comply may result in substantial fines or other consequences, either of which could negatively affect our operating results.

Failure in our information technology, telephone or other systems could significantly disrupt our operations and adversely affect our business and financial condition.

24 unchanged sentences

Although we take measures to protect sensitive information from unauthorized access or disclosure, our information technology and infrastructure, and that of our third-party billing and collections provider, may be vulnerable to attacks by hackers or viruses or otherwise breached due to employee error, malfeasance or other activities.

While we have not experienced any such attack or breach, if such an event were to occur, our networks would be compromised and the information we store on those networks could be accessed by unauthorized parties, publicly disclosed, lost or stolen.

Any such access, disclosure or other loss of information could result in legal claims or proceedings, liability under laws that protect the privacy of personal information, such as 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 the HITECH Act, and their implementing regulations and regulatory penalties.

Unauthorized access, loss or dissemination could also disrupt our operations, including our ability to process tests, provide test results, bill payers or patients, process claims and appeals, provide customer assistance services, conduct research and development activities, collect, process and prepare company financial information, provide information about our products and other patient and rheumatologist education and outreach efforts through our website and manage the administrative aspects of our business and could damage our reputation, any of which could adversely affect our business.

Attacks upon information technology systems are increasing in their frequency, levels of persistence, sophistication and intensity, and are being conducted by sophisticated and organized groups and individuals with a wide range of motives and expertise.

Additionally, as a result of the COVID-19 pandemic, most of our employees are working remotely, which may increase the risk of security breaches, loss of data, and other disruptions as a consequence of more employees accessing sensitive and critical information from remote locations.

Because the techniques used to obtain unauthorized access to, or to sabotage, systems change frequently and often are not recognized until launched against a target, we may be unable to anticipate these techniques or implement adequate preventative measures.

We may also experience security breaches that may remain undetected for an extended period.

While we do not believe that we have experienced any such attack or breach, if such an event were to occur, our networks would be compromised and the information we store on those networks could be accessed by unauthorized parties, publicly disclosed, lost or stolen.

Unauthorized access, loss or dissemination could also disrupt our operations, including our ability to process tests, provide test results, bill payors or patients, process claims and appeals, provide customer assistance services, conduct research and development activities, collect, process and prepare company financial information, provide information about our products and other patient and rheumatologist education and outreach efforts through our website and manage the administrative aspects of our business and could damage our reputation, any of which could adversely affect our business.

In addition, the interpretation and application of federal and state consumer, health-related and data protection laws in the United States are often uncertain, contradictory and in flux.

2 unchanged sentences

Complying with these various laws could cause us to incur substantial costs or require us to change our business practices, systems and compliance procedures in a manner adverse to our business.

Additionally, in connection with the ongoing COVID-19 pandemic, most of our employees are working remotely, which may increase the risk of security breaches, loss of data, and other disruptions as a consequence of more employees accessing sensitive and critical information from remote locations.

Performance issues, service interruptions or price increases by our shipping carrier could adversely affect our business, results of operations and financial condition, and harm our reputation and ability to provide testing services on a timely basis.

Expedited, reliable shipping is essential to our operations.

While we have recently begun working with United Parcel Service, we still rely extensively on a single carrier, Federal Express Corporation for reliable and secure point-to-point transport of patient specimens to our laboratory and enhanced tracking of these patient specimens.

Should Federal Express, or any other carrier we may use in the future, encounter delivery performance issues such as loss, damage or destruction of a specimen, it may be difficult to replace our patient specimens in a timely manner and such occurrences may damage our reputation and lead to decreased utilization from rheumatologists for our testing services and increased cost and expense to our business.

In addition, any significant increase in shipping time or disruption to delivery service, whether due to bad weather, natural disaster, public health epidemics or pandemics (including, for example, the COVID-19 outbreak), terrorist acts or threats, or for other reasons, could adversely affect our ability to receive and process patient specimens on a timely basis.

If we or Federal Express were to terminate our relationship, we would be required to find another party to provide expedited, reliable point-to-point transport of our patient specimens.

We have been utilizing both United Parcel Service and Federal Express Corporation for reliable and secure point-to-point transport of patient specimens to our laboratory and enhanced tracking of these patient specimens.

Should Federal Express, United Parcel Service, or any other carrier we may use in the future, encounter delivery performance issues such as loss, damage or destruction of a specimen, it may be difficult to replace our patient specimens in a timely manner and such occurrences may damage our reputation and lead to decreased utilization from rheumatologists for our testing services and increased cost and expense to our business.

In addition, any significant increase in shipping time or disruption to delivery service, whether due to bad weather, natural disaster, public health epidemics or pandemics (including, for example, the COVID-19 pandemic), terrorist attacks or threats, or for other reasons, could adversely affect our ability to receive and process patient specimens on a timely basis.

If we, Federal Express, or United Parcel Service were to terminate our relationship, we would be required to find another party to provide expedited, reliable point-to-point transport of our patient specimens.

There are only a few other providers of such nationwide transport services, and there can be no assurance that we will be able to enter into arrangements with such other providers on acceptable terms, if at all.

Finding a new provider of transport services would be time-consuming and costly and result in delays in our ability to provide our testing services.

Even if we were to enter into an arrangement with any such provider, there can be no assurance that they will provide the same level of quality in transport services currently provided to us by Federal Express.

If any new provider does not provide, or if Federal Express does not continue to provide, the required quality and reliability of transport services at the same or similar costs, it could adversely affect our business, reputation, results of operations and financial condition.

If any new provider does not provide, or if Federal Express or United Parcel Service does not continue to provide, the required quality and reliability of transport services at the same or similar costs, it could adversely affect our business, reputation, results of operations and financial condition.

Our ability to utilize our net operating loss carryforwards and certain other tax attributes may be limited.

Under Sections 382 and 383 of the Internal Revenue Code of 1986, as amended, or the Code, if a corporation undergoes an “ownership change” (generally defined as a greater than 50 percentage-point change (by value) in its equity ownership by “5-percent shareholders,” as defined in the Code, over a three-year period), the corporation’s ability to use its pre-change net operating loss, or NOL, carryforwards and other pre-change tax attributes to offset its post-change federal taxable income and taxes, as applicable, may be limited.

Under recently enacted U.S.

tax legislation, federal NOL carryforwards generated in periods after December 31, 2017, may be carried forward indefinitely but may only be used to offset 80% of our taxable income annually.

We previously completed a study to assess whether an ownership change, as defined by Section 382 of the Code, had occurred from its formation through December 31, 2019.

Under Sections 382 and 383 of the Internal Revenue Code of 1986, as amended, or the Code, if a corporation undergoes an “ownership change” (generally defined as a greater than 50 percentage-point change (by value) in its equity ownership by “5-percent shareholders,” as defined in the Code, over a rolling three-year period), the corporation’s ability to use its pre-change net operating loss, or NOL, carryforwards and other pre-change tax attributes to offset its post-change federal taxable income and taxes, as applicable, may be limited.

We previously completed a study to assess whether an ownership change, as defined by Section 382 of the Code, had occurred from our formation through December 31, 2019.

Based upon this study, we determined that ownership changes had occurred in 2003, 2008, 2012, 2017 and 2019, and that our ability to use a significant portion of our NOL carryforwards is subject to limitation under Section 382 of the Code as a result of a prior ownership change.

1 unchanged sentence

Similar provisions of state tax law may also apply.

As a result, if we earn net taxable income, our ability to use such pre-change NOL carryforwards and other pre-change tax attributes to offset taxable income and taxes, as applicable, may be limited.

In addition, federal NOL carryforwards generated in periods after December 31, 2017, may be carried forward indefinitely but, in taxable years beginning after December 31, 2020, may only be used to offset 80% of our taxable income.

As a result of the foregoing, if we earn net taxable income, our ability to use NOL carryforwards and other tax attributes to offset taxable income and taxes, as applicable, may be limited.

tax legislation may materially adversely affect our financial condition, results of operations and cash flows.

13 unchanged sentences

There may be other material adverse effects resulting from the legislation that we have not yet identified.

While some of the changes made by the tax legislation may adversely affect us in one or more reporting periods and prospectively, other changes may be beneficial on a going forward basis.

While some of the changes made by the tax legislation may adversely affect us in one or more reporting periods and

prospectively, other changes may be beneficial on a going forward basis.

We continue to work with our tax advisors to determine the full impact that the recent tax legislation as a whole will have on us.

1 unchanged sentence

Our term loan contains restrictions that limit our flexibility in operating our business, and if we fail to comply with the covenants and other obligations under our loan agreement, the lenders may be able to accelerate amounts owed under the facility and may foreclose upon the assets securing our obligations.

In September 2017, we entered into the loan and security agreement with Innovatus Life Sciences Lending Fund I, LP, or Innovatus, and in November 2019, we entered into the first amendment, or the Loan Amendment, to our loan and security agreement, with Innovatus, which we collectively refer to as the Amended Loan Agreement.

In September 2017, we entered into the loan and security agreement with Innovatus Life Sciences Lending Fund I, LP, or Innovatus, which we subsequently amended in November 2019, or the Amended Loan Agreement.

The Amended Loan Agreement is collateralized by substantially all of our personal property, including our intellectual property.

The Amended Loan Agreement also subjects us to certain affirmative and negative covenants, including limitations on our ability to transfer or dispose of assets, merge with or acquire other companies, make investments, pay dividends, incur additional indebtedness and liens and conduct transactions with affiliates.

We are also subject to certain covenants that require us to maintain a minimum liquidity of at least $2.0 million and achieve certain minimum amounts of annual revenue, and are required under certain conditions to make mandatory prepayments of outstanding principal.

We are also subject to certain covenants that require us to maintain a minimum liquidity of at least $2.0 million and achieve certain minimum amounts of annual revenue, as measured on a rolling twelve-month basis, and are required under certain conditions to make mandatory prepayments of outstanding principal.

As a result of these covenants, we have certain limitations on the manner in which we can conduct our business, and we may be restricted from engaging in favorable business activities or financing future operations or capital needs until our current debt obligations are paid in full or we obtain the consent of Innovatus, which we may not be able to obtain.

The Loan Amendment (i) decreased the interest rate on all borrowings to 8.5%, of which 2.0% is paid in-kind and capitalized to the principal amount of the outstanding term loan on a monthly basis under December 2022;

after which interest accrues at an annual rate of 8.5%;

(ii) extended the interest only period to December 2022 and the maturity date to November 19, 2024;

(iii) revised the prepayment terms to (x) restrict prepayments for the initial year following the date of the Loan Amendment and (y) set the prepayment premium at 3% of the principal amount of any term loans prepaid prior to November 19, 2020, with such prepayment premium decreasing by 1% during each subsequent twelve-month period after November 2020;

and (iv) replaced the interest-only milestones with a financial covenant requiring that we achieve a specified level of revenue, as measured on a rolling twelve-month basis, and commencing with the quarter ending December 31, 2019, subject to exceptions based on achievement of performance milestones and the ability to cure any default thereof with the issuance of equity securities or subordinated indebtedness.

As of December 31, 2020, there was $25.0 million in principal outstanding under the term loan and an additional $1.8 million outstanding representing interest at 2.0% per annum payable in-kind by adding the amount to the outstanding principal balance of the term loans.

Under the Amended Loan Agreement, we are required to repay any outstanding principal and capitalized interest in monthly installments over a two-year period commencing on December 1, 2022.

Our revenues for the twelve-month period ended September 30, 2020 were lower than the specified targets in the Amended Loan Agreement, and as a result, we and Innovatus agreed on a new management plan and target to bring us back into compliance with the Amended Loan Agreement.

At December 31, 2020, we were in compliance with all covenants of the Amended Loan Agreement.

We cannot be certain that we will be able to generate sufficient cash flow or revenue to meet the financial covenants or pay the principal and accrued interest on our debt.

8 unchanged sentences

We have based this estimate on assumptions that may prove to be wrong, and we could use our capital resources sooner than we currently expect.

Our operating plans and other demands on our cash resources may change as a result of many factors currently unknown to us, including as a result of the COVID-19 outbreak, and we may need to seek additional funds sooner than planned, through public or private equity or debt financings or other sources, such as strategic collaborations.

from commercial third-party payers and government payers, or other risks described in this “Risk Factors” section, we may seek to raise additional capital through equity offerings, debt financings, collaborations or licensing arrangements.

In the case of the incurrence of further indebtedness, the Amended Loan Agreement, subject to certain customary exceptions, restricts our ability to incur additional indebtedness or encumber any of our property without the prior consent of Innovatus.

Our operating plans and other demands on our cash resources may change as a result of many factors currently unknown to us, including as a result of the COVID-19 pandemic, and we may need to seek additional funds sooner than planned, through public or private equity or debt financings or other sources, such as strategic collaborations.

If our available cash balances and anticipated future revenue are insufficient to satisfy our liquidity requirements, including because of lower demand for our testing products or promoted therapeutics or lower-than-expected rates of reimbursement from commercial third-party payors and government payors, or other risks described in this “Risk Factors” section, we may seek to raise additional capital through equity offerings, debt financings, collaborations or licensing arrangements.

In the case of the incurrence of further indebtedness, the Amended Loan Agreement, subject to

certain customary exceptions, restricts our ability to incur additional indebtedness or encumber any of our property without the prior consent of Innovatus.

Under the Amended Loan Agreement, we are required to make monthly interest payments at a rate equal to 8.5% (provided that 2.0% of the 8.5% is payable in-kind by adding the amount to the outstanding principal balance of the term loans).

18 unchanged sentences

The FDA may modify its enforcement discretion policy with respect to LDTs in a risk-based manner, and we may become subject to extensive regulatory requirements and may be required to conduct additional clinical trials prior to continuing to sell our existing tests or launching any other tests we may develop, which may increase the cost of conducting, or otherwise harm, our business.

The FDA has adopted a policy of enforcement discretion with respect to LDTs whereby the FDA does not actively enforce its regulatory requirements for such tests.

However, the FDA has stated its intention to modify its enforcement discretion policy with respect to LDTs.

If there are changes in FDA policy, or if the FDA disagrees that our marketed tests are LDTs or that we are marketing our tests outside the scope of the FDA’s current policy of enforcement discretion, our testing products may become subject to the FDA’s requirements for premarket review of medical devices, and we may be required to cease commercial sales of our testing products and conduct additional clinical testing prior to making submissions to the FDA to obtain premarket clearance or approval.

We currently market our in vitro diagnostic testing products in the United States as LDTs.

LDTs are in vitro diagnostic tests that are intended for clinical use and are designed, manufactured, and used within a single laboratory.

Although LDTs are classified as medical devices and the FDA has statutory authority to ensure that medical devices are safe and effective for their intended uses, the FDA has historically exercised enforcement discretion and has not enforced certain applicable FDA requirements, including premarket review, with respect to LDTs.

Moreover, in August 2020, the U.S.

Department of Health and Human Services, or HHS, announced that FDA will not require premarket review of LDTs absent notice-and-comment rulemaking.

Legislative and administrative proposals proposing to amend the FDA’s oversight of LDTs have been introduced in recent years and we expect that new legislative and administrative proposals will continue to be introduced from time to time.

It is possible that legislation could be enacted into law or regulations or guidance could be issued by the FDA which may result in new or increased regulatory requirements for us to continue to offer our LDTs or to develop and introduce new tests as LDTs.

For example, the FDA could modify its current approach to LDTs in a way that would subject our tests that we market as LDTs to the enforcement of additional regulatory requirements.

In recent years, the FDA has stated its intention to modify its enforcement discretion policy with respect to LDTs.

Specifically, on July 31, 2014, the FDA notified Congress of its intent to modify, in a risk-based manner, its policy of enforcement discretion with respect to LDTs.

On October 3, 2014, the FDA issued two draft guidance documents entitled “Framework for Regulatory Oversight of Laboratory Developed Tests (LDTs),” or the Framework Guidance, and “FDA Notification and Medical Device Reporting for Laboratory Developed Tests (LDTs),” or the Reporting Guidance.

The FDA halted finalization of the guidance in November 2016 to allow for further public discussion on an appropriate oversight approach to LDTs and to give congressional authorizing committees the opportunity to develop a legislative solution, and FDA issued a discussion paper on possible approaches to LDT regulation in January 2017.

In addition, the FDA and Congress have, for over the past decade, considered a number of proposals to end the FDA’s enforcement discretion policy for LDTs and subject LDTs to additional regulatory requirements.

For example, Congress has recently been working on legislation to create an LDT and in vitro diagnostic regulatory framework for all in vitro clinical tests, or IVCTs, that would be separate and distinct from the existing medical device regulatory framework.

In March 2020, members of the U.S.

House of Representatives formally introduced the VALID Act (Verifying Accurate Leading-edge IVCT Development Act of 2020) in the House and an identical version of the bill was introduced in the U.S.

If passed in its current form, the VALID Act would create a new category of medical products separate from medical devices called “in vitro clinical tests,” or IVCTs, and bring all such products within the scope of FDA’s oversight.

As proposed, the bill grandfathers many existing tests from the proposed premarket approval, quality systems, and labeling requirements, but would require such tests to comply with other regulatory requirements (for example, registration and notification, adverse event reporting).

The bill also provides for IVCTs introduced before the effective date (drafted to be approximately four years after the enactment date) to be transitional and remain on the market subject to certain conditions.

It is unclear whether the VALID Act or any other legislative proposals would be passed by Congress or signed into law by the President.

Depending on the approach adopted under any legislation, certain LDTs (likely those of higher risk) could become subject to some form of premarket review, potentially with a transition period for compliance and a grandfathering provision.

Even if the FDA does not modify its policy of enforcement discretion, whether due to changes in FDA policy or legislative action, the FDA may disagree that we are marketing our LDTs within the scope of its policy of enforcement discretion and may impose significant regulatory requirements, including the requirement for premarket review and clearance or approval.

We may also be required to conduct clinical studies to support our currently marketed products or planned product launches.

If we are required to conduct such clinical trials, delays in the commencement or completion of clinical testing could significantly increase our test development costs and delay commercialization of any currently-marketed tests that we may be required to cease selling or the commercialization of any future tests that we may develop.

4 unchanged sentences

Nevertheless, we would be responsible for ensuring that each of our trials is conducted in accordance with the applicable protocol, legal, regulatory and scientific standards, and our reliance on these third-parties would not relieve us of our regulatory responsibilities.

We and our third-party contractors are required to comply with good clinical practices, or GCPs, which are regulations and guidelines enforced by the FDA, the Competent Authorities of the Member States of the EEA, and comparable foreign regulatory authorities for products in clinical development.

When conducting clinical trials, we and our third-party contractors are required to comply with good clinical practices, or GCPs, which are regulations and guidelines enforced by the FDA, the Competent Authorities of the Member States of the EEA, and comparable foreign regulatory authorities for products in clinical development.

Regulatory authorities enforce these GCPs through periodic inspections of trial sponsors, principal investigators and trial sites.

8 unchanged sentences

The FDA requires medical device manufacturers to comply with, among other things, current good manufacturing practices for medical devices, known as the Quality System Regulation, which requires manufacturers to follow elaborate design, testing, control, documentation and other quality assurance procedures during the manufacturing process;

the medical device reporting regulation, which requires that manufacturers report to the FDA if their device may have caused or contributed to a death or serious injury or malfunctioned in a way that would likely cause or contribute to a death or serious injury if it were to recur;

contribute to a death or serious injury if it were to recur;

labeling regulations, including the FDA’s general prohibition against promoting products for unapproved or “off-label” uses;

13 unchanged sentences

In addition, the FDA’s and other regulatory authorities’ policies may change and additional government regulations may be enacted that could prevent, limit or delay regulatory approvals.

If we are slow or unable to adapt to changes in existing requirements or the adoption of new requirements or policies, or if we are not able to maintain regulatory compliance, we may lose any marketing authorization that we may have obtained and we may not achieve or sustain profitability, which would adversely affect our business, prospects, financial condition and results of operations.

For example, the results of the 2020 U.S.

Presidential Election may impact our business and industry.

Namely, the Trump administration took several executive actions, including the issuance of a number of Executive Orders, that could impose significant burdens on, or otherwise materially delay, the FDA’s ability to engage in routine oversight activities such as implementing statutes through rulemaking, issuance of guidance, and review and approval of marketing applications.

It is difficult to predict whether or how these orders will be implemented, or whether they will be rescinded and replaced under the Biden administration.

The policies and priorities of the new administration are unknown and could materially impact the regulations governing our product candidates.

Risks Related to Regulatory and Compliance Matters

Healthcare policy and payment changes may have a material adverse effect on our financial condition and results of operations.

Reimbursement to healthcare providers, such as specialized diagnostic service providers like us, is subject to continuing change in policies by third-party payers including governmental payers, such as Medicare and Medicaid, private insurers and other private payers, such as hospitals and private medical groups.

Reimbursement to healthcare providers, such as specialized diagnostic service providers like us, is subject to continuing change in policies by third-party payors including governmental payors, such as Medicare and Medicaid, private insurers and other private payors, such as hospitals and private medical groups.

Statutory and regulatory changes, retroactive rate adjustments and administrative rulings, and other policy changes may be implemented with little or no prior notice, all of which could materially decrease the range of services for which we are reimbursed or the reimbursement rates paid for our testing products.

1 unchanged sentence

Under the law, clinical laboratories must report laboratory test payment data for each Medicare-covered clinical diagnostic lab test that it furnishes.

The reported data must include the payment rate and the volume of each test that was paid by each private third-party payer.

Laboratories that fail to report the required payment information may be subject to substantial civil monetary penalties.

The reported data must include the payment rate and the volume of each test that was paid by each private third-party payor.

Laboratories that fail to report the required payment information may be subject to

substantial civil monetary penalties.

We bill Medicare for our testing products, and therefore we are subject to reporting requirements under PAMA.

The final PAMA ruling was issued June 17, 2016.

Data for reporting for the new PAMA process began in 2017, and in 2018, the Medicare payment rate for each clinical diagnostic lab test, with some exceptions, equaled the weighted median of the reported private third-party payer payment for the test, as calculated using data collected by applicable laboratories during the data collection period and reported to the Centers for Medicare and Medicaid Services, or CMS, during a specified data reporting period.

These revisions to the CLFS have altered payment rates for clinical diagnostic lab tests under the CLFS, with estimated reductions in Medicare reimbursement rates for AVISE® CTD of 7.3% and 10.1% in 2020 and 2019, respectively.

The PAMA ruling issued on June 17, 2016 included data for reporting for the new PAMA process began in 2017, and in 2018, the Medicare payment rate for each clinical diagnostic lab test, with some exceptions, equaled the weighted median of the reported private third-party payor payment for the test, as calculated using data collected by applicable laboratories during the data collection period and reported to the Centers for Medicare and Medicaid Services, or CMS, during a specified data reporting period.

At the beginning of 2020, these revisions to the CLFS have altered payment rates for clinical diagnostic lab tests under the CLFS, the estimated reduction in Medicare reimbursement rate for AVISE ® CTD of 7.3% compared to levels experienced in 2019.

Effective March 2020, as a result of our change in the composition of our AVISE ® CTD test, the estimated reduction to the Medicare reimbursement rate for AVISE ® CTD was 5.3% compared to levels experienced in 2019.

We do not expect the revisions to the CLFS to impact Medicare reimbursement rate for AVISE ® CTD in 2021 compared to levels experienced in 2020.

On March 27, 2020, the CARES Act delayed the next reporting period until 2022 resulting in a 0% reduction for 2021, and the 15% reduction limits would apply in 2022-2024.

We cannot be sure how revisions to the CLFS will affect reimbursement rates in the future.

Other laws make changes impacting clinical laboratories, many of which have already gone into effect.

The ACA, enacted in March 2010, requires each medical device manufacturer to pay an excise tax in an amount equal to 2.3% of the price for which such manufacturer sells its medical devices that are listed with the FDA.

Through a series of legislative amendments, the tax was suspended from 2016 through 2019.

On December 20, 2019, the Further Consolidated Appropriations Act, 2020, was signed into law repealing the medical device excise tax as of January 1, 2020.

The ACA, enacted in March 2010, among other things, include provisions regarding the coordination and promotion of research on comparative clinical effectiveness of different technologies and procedures, initiatives to revise Medicare payment methodologies, such as bundling of payments across the continuum of care by providers and physicians, and initiatives to promote quality indicators in payment methodologies.

Since its enactment, there have been judicial, executive and Congressional challenges to certain aspects of the ACA.

On December 14, 2018, a U.S.

2 unchanged sentences

Court of Appeals for the 5th Circuit upheld the District Court’s decision that the individual mandate was unconstitutional but remanded the case back to the District Court to determine whether the remaining provisions of the ACA are invalid as well.

It is unclear how these decisions, subsequent appeals, or other efforts to challenge, repeal or replace the ACA will impact the ACA and our business.

Other significant measures contained in the ACA include, for example, coordination and promotion of research on comparative clinical effectiveness of different technologies and procedures, initiatives to revise Medicare payment methodologies, such as bundling of payments across the continuum of care by providers and physicians, and initiatives to promote quality indicators in payment methodologies.

The ACA also includes significant new fraud and abuse measures, including required disclosures of financial arrangements with physician customers, lower thresholds for violations and increasing potential penalties for such violations.

There have been judicial and Congressional challenges to certain aspects of the ACA, as well as efforts by the current presidential administration to repeal and replace the ACA, and we expect that there will be additional challenges and amendments to the ACA in the future.

Supreme Court is currently reviewing the case, although it remains unclear how the Supreme Court will rule.

It is also unclear how other efforts, if any, to challenge, repeal or replace the ACA will impact the ACA or our business.

Further, it is possible that additional governmental action be taken in response to the COVID-19 pandemic.

We are monitoring the impact of the ACA in order to enable us to determine the trends and changes that may be necessitated by the legislation and that, in turn, may potentially impact our business over time.

Additionally, the Budget Control Act of 2011, among other things, resulted in aggregate reductions to Medicare payments to providers of 2% per fiscal year, beginning April 1, 2013, and due to additional legislative amendments to the statute, these reductions will remain in effect through 2029 unless additional congressional action is taken.

Additionally, the Budget Control Act of 2011, among other things, resulted in aggregate reductions to Medicare payments to providers of 2% per fiscal year, beginning April 1, 2013, and due to additional legislative amendments to the statute, these reductions will remain in effect through 2030, with the exception of a temporary suspension from May 1, 2020 through March 31, 2021, unless additional congressional action is taken.

On January 2, 2013, the American Taxpayer Relief Act of 2012 was signed into law, which, among other things, increased the statute of limitations period for the government to recover overpayments to providers from three to five years.

Some of our flow cytometry tests are reimbursed by the Medicare program under the MPFS.

On April 16, 2015, President Obama signed the Medicare Access and CHIP Reauthorization Act of 2015, or MACRA, which, among

other actions, repealed the previous statutory formula by which CMS established annual updates to MPFS rates.

On April 16, 2015, President Obama signed the Medicare Access and CHIP Reauthorization Act of 2015, or MACRA, which, among other actions, repealed the previous statutory formula by which CMS established annual updates to MPFS rates.

MACRA created the Merit-Based Incentive Payment System which, beginning in 2019, more closely aligns physician payments with composite performance on performance metrics similar to three existing incentive programs (i.e., the Physician Quality Reporting System, the Value-based modifier program and the Electronic Health Record Meaningful Use program) and incentivizes physicians to enroll in alternative payment methods.

At this time, we do not know whether these changes to the physician payment systems will have any impact on orders or payments for our testing products.

Medicare payments are significant to our business, not only because approximately 25% and 28% of the total payments we received from payers for the years ended December 31, 2019 and 2018, respectively, were derived from the Medicare program, but also because other payers often use the MPFS and CLFS amounts as a benchmark to develop their payment rates.

We cannot predict whether Medicare and other third-party payer reimbursement rates that mirror Medicare’s will be sufficient to make our testing products commercially attractive.

In addition, some third-party payers have implemented, or are in the process of implementing, laboratory benefit management programs, often using third-party benefit managers to manage these programs.

The stated goals of these programs are to help improve the quality of outpatient laboratory services, support evidence-based guidelines for patient care and lower costs.

Medicare payments are significant to our business, not only because approximately 23% and 25% of the total payments we received from payors for the years ended December 31, 2020 and 2019, respectively, were derived from the Medicare program, but also because other payors often use the MPFS and CLFS amounts as a benchmark to develop their payment rates.

We cannot predict whether Medicare and other third-party payor reimbursement rates that mirror Medicare’s will be sufficient to make our testing products commercially attractive.

In addition, some third-party payors have implemented, or are in the process of implementing, laboratory benefit management programs, often using third-party benefit managers to manage these programs.

The stated goals of these programs are to help improve the quality of outpatient laboratory services, support evidence-based guidelines

for patient care and lower costs.

The impact on laboratories, such as ours, of active laboratory benefit management by third parties is unclear, and we expect that it could have a negative impact on our revenue in the short term.

It is possible that third-party payers will resist reimbursement for testing products that we offer in favor of less expensive tests, may require pre-approval for our testing products or may impose additional pricing pressure on and substantial administrative burden for reimbursement for our testing products.

It is possible that third-party payors will resist reimbursement for testing products that we offer in favor of less expensive tests, may require pre-approval for our testing products or may impose additional pricing pressure on and substantial administrative burden for reimbursement for our testing products.

Product pricing by companies is currently, and is expected to continue to be, under close scrutiny.

1 unchanged sentence

At the state level, legislatures have increasingly passed legislation and implemented regulations designed to control product pricing, including price or patient reimbursement constraints, discounts, restrictions on certain product access and marketing cost disclosure and transparency measures.

We also cannot predict whether future healthcare initiatives will be implemented at the federal or state level or in countries outside of the United States in which we may do business in the future, or the effect any future legislation or regulation will have on us.

Although we cannot predict the full effect of the recent legislative changes discussed above, cost reduction measures, the expansion in government’s role in the U.S.

healthcare industry and PAMA’s changes to the reimbursement methodology under the CLFS, such changes individually or in the aggregate may result in decreased profits to us and/or lower reimbursement by third-party payers for our testing products, which may adversely affect our business, financial condition and results of operations.

healthcare industry and PAMA’s changes to the reimbursement methodology under the CLFS, such changes individually or in the aggregate may result in decreased profits to us and/or lower reimbursement by third-party payors for our testing products, which may adversely affect our business, financial condition and results of operations.

Complying with numerous regulations pertaining to our business is an expensive and time-consuming process, and any failure to comply could result in substantial penalties.

16 unchanged sentences

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

To the extent NYDOH identified any non-compliance and we are unable to implement satisfactory corrective actions to remedy such non-compliance, the State of New York could withdraw approval for our testing products.

New York law also mandates proficiency testing for laboratories licensed under New York state law, regardless of whether or not such laboratories are located in New York.

18 unchanged sentences

On June 25, 2014, the Office of Inspector General of the Department of Health and Human Services, or the OIG, released a Special Fraud Alert, expressing concern regarding laboratory payments made to referring physicians and physician group practices for blood specimen collection, processing, and packaging.

Specifically, the OIG expressed concern that such arrangements may implicate the Federal Anti-Kickback Statute when laboratories

make payments to physicians for services that are already covered and reimbursed by Medicare, or are not commercially reasonable or exceed fair market value, all in order to induce physicians to order tests from such laboratory.

Specifically, the OIG expressed concern that such arrangements may implicate the Federal Anti-Kickback Statute when laboratories make payments to physicians for services that are already covered and reimbursed by Medicare, or are not commercially reasonable or exceed fair market value, all in order to induce physicians to order tests from such laboratory.

Because the choice of laboratory and the decision to order laboratory tests is made or strongly influenced by the physician, with little or no input from patients, such payment may induce physicians to order more laboratory tests than are medically necessary, particularly when the payments are tied to, or take into account, the volume or value of business generated by the physician.

6 unchanged sentences

A claim includes “any request or demand” for money or property presented to the U.S.

In addition, private individuals have the ability to bring actions under these false claims laws in the name of the government alleging false and fraudulent claims presented to or paid by the government (or other violations of the statutes) and to share in any amounts paid by the entity to the government in fines or settlement.

In addition, private individuals have the ability to bring actions under these false claims laws in the name of the

government alleging false and fraudulent claims presented to or paid by the government (or other violations of the statutes) and to share in any amounts paid by the entity to the government in fines or settlement.

Such suits, known as qui tam actions, have increased significantly in the healthcare industry in recent years.

In addition, the federal 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 is false or fraudulent.

The majority of states also have statutes or regulations similar to the federal anti-kickback and false claims laws, which apply to items and services reimbursed under Medicaid and other state programs, or, in several states, apply regardless of the payer.

We are also subject to the federal physician self-referral prohibitions, commonly known as the Stark Law, which prohibits, among other things, physicians who have a financial relationship, including an investment, ownership or compensation relationship with an entity, from referring Medicare patients for designated health services, which include clinical laboratory services, unless an exception applies.

Similarly, entities may not bill Medicare or any other party for services furnished pursuant to a prohibited referral.

Many states have their own self-referral laws as well, which in some cases apply to all third-party payers, not just Medicare and Medicaid.

In addition, the government may assert that a claim including items or services resulting from a violation of the Stark Law constitutes a false or fraudulent claim for purposes of the false claims laws.

Many states have their own self-referral laws as well, which in some cases apply to all third-party payors, not just Medicare and Medicaid.

In addition, under the federal civil monetary penalties statute, a person is prohibited from offering or transferring 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.

2 unchanged sentences

The OIG emphasizes, however, that this exception should only be used occasionally to address special financial needs of a particular patient.

Although this prohibition applies only to federal healthcare program beneficiaries, the routine waivers of copayments and deductibles offered to patients covered by commercial payers may implicate applicable state laws related to, among other things, unlawful schemes to defraud, excessive fees for services, tortious interference with patient contracts and statutory or common law fraud.

Although this prohibition applies only to federal healthcare program beneficiaries, the routine waivers of copayments and deductibles offered to patients covered by commercial payors may implicate applicable state laws related to, among other things, unlawful schemes to defraud, excessive fees for services, tortious interference with patient contracts and statutory or common law fraud.

To the extent our patient assistance programs are found to be inconsistent with applicable laws, we may be required to restructure or discontinue such programs, or be subject to other significant penalties.

3 unchanged sentences

We cannot assure you, however, that our regulators, principally the federal government, will agree with our determination, and a determination that we have violated these laws and regulations, or a public announcement that we are being investigated for possible violations, could adversely affect our business, prospects, results of operations or financial condition.

It is possible that some of our business activities could be subject to challenge under one or more of such laws, including our promotion of SIMPONI®, which is subject to restriction of off-label use discussions Such a challenge,

regardless of the outcome, could have a material adverse effect on our business, business relationships, reputation, financial condition and results of operations.

It is possible that some of our business activities could be subject to challenge under one or more of such laws, including our promotion of SIMPONI ® , which is subject to restriction of off-label use discussions.

Such a challenge, regardless of the outcome, could have a material adverse effect on our business, business relationships, reputation, financial condition and results of operations.

Although an effective compliance program can mitigate the risk of investigation and prosecution for violations of these laws, the risks cannot be entirely eliminated.

4 unchanged sentences

and similar programs outside the U.S., a corporate integrity agreement or other agreement to resolve allegations of non-compliance with these laws, and the curtailment or restructuring of our operations, any of which could materially adversely affect our ability to operate our business and our financial results.

To the extent that any of our testing products are sold in a foreign country, we may be subject to similar foreign laws and regulations, which may include, for instance, applicable post-marketing requirements, including safety surveillance, anti-fraud and abuse laws, and implementation of corporate compliance programs and reporting of payments or transfers of value to healthcare professionals.

To the extent that any of our testing products are sold in a foreign country, we may be subject to similar foreign laws and regulations, which may include, for instance, applicable post-

marketing requirements, including safety surveillance, anti-fraud and abuse laws, and implementation of corporate compliance programs and reporting of payments or transfers of value to healthcare professionals.

Actual or perceived failures to comply with applicable data protection, privacy and security laws, regulations, standards and other requirements could adversely affect our business, results of operations, and financial condition.

Failure to comply with HIPAA, the HITECH Act, their implementing regulations, and similar comparable state laws and regulations affecting the transmission, security and privacy of health information could result in significant penalties.

Numerous federal and state laws and regulations, including HIPAA and the HITECH Act, govern the collection, dissemination, security, use and confidentiality of individually identifiable health information.

HIPAA and the HITECH Act require us to comply with standards for the use and disclosure of individually identifiable health information within our company and with third parties.

The Standards for Privacy of Individually Identifiable Health Information, or Privacy Standards, and the Security Standards for the Protection of Electronic Protected Health Information, or Security Standards, under HIPAA establish a set of basic national privacy and security standards for the protection of individually identifiable health information by health plans, healthcare clearinghouses and certain healthcare providers, referred to as covered entities, and the business associates with whom such covered entities contract for services.

Numerous federal, state and foreign laws and regulations, including HIPAA and the HITECH Act, govern the collection, dissemination, disclosure, security, use and confidentiality of individually identifiable health informationhealth-related and other personal information.

HIPAA and the HITECH Act require us to comply with standards for the use and disclosure of individually identifiable health information, or PHI, within our company and with third-parties.

The privacy, security and breach notification rules promulgated under HIPAA, as amended by the HITECH Act, Standards for Privacy of Individually Identifiable Health Information, or Privacy Standards, and the Security Standards for the Protection of Electronic Protected Health Information, or Security Standards, under HIPAA establish a set of basic national privacy and security standards for the protection of individually identifiable health information by health plans, healthcare clearinghouses and certain healthcare providers, referred to as covered entities, and the business associates with whom such covered entities contract for services.

HIPAA requires covered entities, such as us, to develop and maintain policies and procedures with respect to individually identifiable health information that is used or disclosed, including the adoption of administrative, physical and technical safeguards to protect such information.

HIPAA also requires us to provide individuals with certain rights with respect to their PHI.

If we engage a business associate to help us carry out health care activities and functions, we must have a written business associate contract or other arrangement with the business associate that establishes specifically what the business associate has been engaged to do and requires the business associate to comply with the requirements of HIPAA.

Further, in the event of a breach of unsecured PHI we must notify each individual whose PHI is breached as well as federal regulators and in some cases, must publicize the breach in local or national media.

Notably, whereas HIPAA previously directly regulated only these covered entities, the HITECH Act, which was signed into law as part of the stimulus package in February 2009, made certain of the Security Standards directly applicable to business associates.

3 unchanged sentences

Covered entities, such as certain health care providers, are required to conform to such transaction set standards, known as the Standards for Electronic Transactions, pursuant to HIPAA.

In the conduct of our business, we process, maintain, and transmit sensitive data, including PHI.

There can be no assurance that a breach of privacy or security will not occur.

If there is a breach, we could be subject to various lawsuits, penalties, and damages and may be required to incur costs to mitigate the impact of the breach on affected individuals.

Penalties for failure to comply with a requirement of HIPAA vary significantly depending on the nature of violation and could include civil monetary or criminal penalties.

HIPAA also authorizes state attorneys general to file suit under HIPAA on behalf of state residents.

Courts can 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 sue us in civil court for HIPAA violations, its standards have been used as the basis for a duty of care claim in state civil suits such as those for negligence or recklessness in the misuse or breach of PHI.

HIPAA requires covered entities to develop and maintain policies and procedures with respect to individually identifiable health information that is used or disclosed, including the adoption of administrative, physical and technical safeguards to protect such information.

The HITECH Act expands the notification requirement for breaches of individually identifiable health information, restricts certain disclosures and sales of individually identifiable health information and provides a tiered system for civil monetary penalties for HIPAA violations.

The Final HIPAA Omnibus Rule modifies the breach reporting standard in a manner that will likely make more data security incidents qualify as reportable breaches.

The Final HIPAA Omnibus Rule modifies the breach reporting standard in a manner that will likely make more data

security incidents qualify as reportable breaches.

The HITECH Act also increased the civil and criminal penalties that may be imposed against covered entities, business associates and possibly other persons and gave state attorneys general new authority to file civil actions for damages or injunctions in federal courts to enforce HIPAA and seek attorney fees and costs associated with pursuing federal civil actions.

3 unchanged sentences

The CCPA may increase our compliance costs and potential liability.

We are subject to U.S.

and certain foreign export and import controls, sanctions, embargoes, anti-corruption laws, and anti-money laundering laws and regulations.

Compliance with these legal standards could impair our ability to compete in domestic and international markets.

We can face criminal liability and other serious consequences for violations, which can harm our business.

We are subject to export control and import laws and regulations, including the U.S.

Export Administration Regulations, U.S.

Customs regulations, various economic and trade sanctions regulations administered by the U.S.

Treasury Department’s Office of Foreign Assets Controls, the U.S.

Foreign Corrupt Practices Act of 1977, as amended, or FCPA, the U.S.

domestic bribery statute contained in 18 U.S.C.

§ 201, the U.S.

Travel Act, the USA PATRIOT Act, and other state and national anti-bribery and anti-money laundering laws in the countries in which we conduct activities.

Anti-corruption laws are interpreted broadly and prohibit companies and their employees, agents, contractors, and other collaborators from authorizing, promising, offering, or providing, directly or indirectly, improper payments or anything else of value to recipients in the public or private sector.

We may engage third parties to sell our testing products outside the United States, to conduct clinical trials, and/or to obtain necessary permits, licenses, patent registrations, and other regulatory approvals.

We have direct or indirect interactions with officials and employees of government agencies or government-affiliated hospitals, universities, and other organizations.

We can be held liable for the corrupt or other illegal activities of our employees, agents, contractors, and other collaborators, even if we do not explicitly authorize or have actual knowledge of such activities.

Any violations of the laws and regulations described above may result in substantial civil and criminal fines and penalties, imprisonment, the loss of export or import privileges, debarment, tax reassessments, breach of contract and fraud litigation, reputational harm, and other consequences.

Further, the CPRA recently passed in California, which will impose additional data protection obligations on covered businesses, including additional consumer rights processes, limitations on data uses, new audit requirements for higher risk data, and opt outs for certain uses of sensitive data.

It will also create a new California data protection agency authorized to issue substantive regulations and could result in increased privacy and information security enforcement.

The majority of the provisions will go into effect on January 1, 2023, and additional compliance investment and potential business process changes may be required.

In the event that we are subject to or affected by HIPAA, the CCPA, the CPRA or other domestic privacy and data protection laws, any liability from failure to comply with the requirements of these laws could adversely affect our financial condition.

In Europe, the GDPR went into effect in May 2018 and imposes strict requirements for processing the personal data of individuals within the EEA.

Companies that must comply with the GDPR face increased compliance obligations and risk, including more robust regulatory enforcement of data protection requirements and potential fines for noncompliance of up to €20 million or 4% of the annual global revenues of the noncompliant company, whichever is greater.

Among other requirements, the GDPR regulates transfers of personal data subject to the GDPR to third countries that have not been found to provide adequate protection to such personal data, including the United States, and the efficacy and longevity of current transfer mechanisms between the EU and the United States remains uncertain.

For example, in 2016, the EU and United States agreed to a transfer framework for data transferred from the EU to the United States, called the Privacy Shield, but the Privacy Shield was invalidated in July 2020 by the Court of Justice of the European Union.

Further, from January 1, 2021, companies have to comply with the GDPR and also the United Kingdom GDPR, or the UK GDPR, which, together with the amended UK Data Protection Act 2018, retains the GDPR in UK national law.

The UK GDPR mirrors the fines under the GDPR, i.e., fines up to the greater of €20 million (£17.5 million) or 4% of global turnover.

The relationship between the United Kingdom and the European Union in relation to certain aspects of data protection law remains unclear, and it is unclear how United Kingdom data protection laws and regulations will develop in the medium to longer term, and how data transfers to and from the United Kingdom will be regulated in the long term.

Currently there is a four to six-month grace period agreed in the EU and United Kingdom Trade and Cooperation Agreement, ending June 30, 2021 at the latest, whilst the parties discuss an adequacy decision.

However, it is not clear whether (and when) an adequacy decision may be granted by the European Commission enabling data transfers from EU member states to the United Kingdom long term without additional measures.

These changes may lead to additional costs and increase our overall risk exposure.

Although we work to comply with applicable laws, regulations and standards, our contractual obligations and other legal obligations, these requirements are evolving and may be modified, interpreted and applied in an inconsistent manner from one jurisdiction to another, and may conflict with one another or other legal obligations with which we must comply.

Any failure or perceived failure by us or our employees, representatives, contractors, consultants, collaborators, or other third parties to comply with such requirements or adequately address privacy and security concerns, even if unfounded, could result in additional cost and liability to us, damage our reputation, and adversely affect our business and results of operations.

Our future growth may depend, in part, on our ability to operate in foreign markets, where we would be subject to additional regulatory burdens and other risks and uncertainties.

2 unchanged sentences

To obtain separate regulatory approval in many other countries, parties must comply with numerous and varying regulatory requirements regarding safety and efficacy and governing, among other things, clinical trials, commercial sales, pricing and distribution of our testing products.

If we or our partners obtain regulatory approval of our testing products and promoted therapeutics, and ultimately commercialize our testing products or promoted therapeutics in foreign markets, we would be subject to additional risks and uncertainties, including:

If we or our partners obtain regulatory approval of our testing products and promoted therapeutics, and ultimately commercialize our testing

products or promoted therapeutics in foreign markets, we would be subject to additional risks and uncertainties, including:

• different regulatory requirements for approval of drugs in foreign countries;

14 unchanged sentences

and foreign patents and patent applications, copyrights, trademarks and trademark applications, and contractual restrictions to protect our intellectual property rights.

We cannot be certain that the claims in our granted patents and pending patent applications covering our AVISE ® testing products will be considered patentable or enforceable by the United States

Patent and Trademark Office, or the USPTO, courts in the United States, or by patent offices and courts in foreign countries.

We cannot be certain that the claims in our granted patents and pending patent applications covering our AVISE ® testing products will be considered patentable or enforceable by the United States Patent and Trademark Office, or the USPTO, courts in the United States, or by patent offices and courts in foreign countries.

If we fail to protect our intellectual property, third parties may be able to compete more effectively against us and we may incur substantial litigation costs in our attempts to recover or restrict use of our intellectual property.

4 unchanged sentences

patent, two pending U.S.

patent applications, and certain corresponding foreign counterpart patents and patent applications relevant to our AVISE ® testing products.

patent applications, a pending PCT patent application, a pending U.S.

provisional patent application, and certain corresponding foreign counterpart patents and patent applications relevant to our AVISE ® testing products.

While we intend to pursue additional patent applications, it is possible that our pending patent applications and any future applications may not result in issued patents.

9 unchanged sentences

However, trade secrets can be difficult to protect.

While we use commercially reasonable efforts to protect our trade secrets, our licensors, employees, consultants, contractors and other advisors may unintentionally or willfully disclose such trade secret information to third parties and competitors.

While we use commercially reasonable efforts to protect our trade secrets, our licensors,

employees, consultants, contractors and other advisors may unintentionally or willfully disclose such trade secret information to third parties and competitors.

We attempt to protect our proprietary technology in large part by entering into confidentiality and non-disclosure agreements with our employees, consultants and other contractors.

9 unchanged sentences

We believe that using certain publicly available technology allows us to offer a better and more comprehensive testing product.

However, the publicly available technology which we rely upon is also used in, and may continue to be used in, products

which compete with our AVISE ® testing products.

However, the publicly available technology which we rely upon is also used in, and may continue to be used in, products which compete with our AVISE ® testing products.

Our competitors may independently develop competing diagnostic products and services that do not infringe our intellectual property.

24 unchanged sentences

or (iii) government action is necessary to meet requirements for public use under federal regulations (also referred to as “march-in rights”).

government also has the right to take title to these inventions if the grant recipient fails to disclose the invention to the government or fails to file an application to register the intellectual property within specified time limits.

government also has the right

to take title to these inventions if the grant recipient fails to disclose the invention to the government or fails to file an application to register the intellectual property within specified time limits.

Intellectual property generated under a government funded program is also subject to certain reporting requirements, compliance with which may require us to expend substantial resources.

17 unchanged sentences

Consequently, we may not be able to prevent third parties from practicing our inventions in all countries outside the United States.

Competitors may use our technologies in jurisdictions where we have not

obtained patent protection to develop their own products and further, may export otherwise infringing products to territories where we have patent protection but enforcement of such patent protection is not as strong as that in the United States.

Competitors may use our technologies in jurisdictions where we have not obtained patent protection to develop their own products and further, may export otherwise infringing products to territories where we have patent protection but enforcement of such patent protection is not as strong as that in the United States.

These products may compete with our AVISE ® testing products and our patents or other intellectual property rights may not be effective or sufficient to prevent them from competing.

13 unchanged sentences

As a licensee of third parties, we rely on third parties to file and prosecute patent applications and maintain patents and otherwise protect the licensed intellectual property under some of our license agreements.

We have not had and do not have primary control over these activities for certain of our patents or patent applications and other intellectual property rights.

We have not had and do not have primary control over these activities for certain of our patents or patent applications and other

intellectual property rights.

We cannot be certain that such activities by third parties have been or will be conducted in compliance with applicable laws and regulations or will result in valid and enforceable patents or other intellectual property rights.

1 unchanged sentence

We cannot be certain that our licensors will allocate sufficient resources or prioritize their or our enforcement of such patents or defense of such claims to protect our interests in the licensed patents.

Even if we are not a party to these legal actions, an adverse outcome could harm our business because it may permit other parties to compete with us If any of our licensors or any of our future licensors or future collaborators fail to appropriately prosecute and maintain patent protection for patents covering any of our testing products, our ability to develop and commercialize those testing products may be adversely affected and we may not be able to prevent competitors from making, using and selling competing products.

Even if we are not a party to these legal actions, an adverse outcome could harm our business because it may permit other parties to compete with us.

If any of our licensors or any of our future licensors or future collaborators fail to appropriately prosecute and maintain patent protection for patents covering any of our testing products, our ability to develop and commercialize those testing products may be adversely affected and we may not be able to prevent competitors from making, using and selling competing products.

In addition, even where we have the right to control patent prosecution of patents and patent applications we have acquired or licensed from third parties, we may still be adversely affected or prejudiced by actions or inactions of our predecessors or licensors and their counsel that took place prior to us assuming control over patent prosecution.

17 unchanged sentences

The USPTO and various foreign governmental patent agencies require compliance with a number of procedural, documentary, fee payment and other similar provisions during the patent process.

Periodic maintenance fees, renewal fees, annuity fees and various other governmental fees on any issued patents and/or applications are due to be paid to the USPTO and foreign patent agencies in several stages over the lifetime of the patents and/or applications.

Periodic maintenance fees,

renewal fees, annuity fees and various other governmental fees on any issued patents and/or applications are due to be paid to the USPTO and foreign patent agencies in several stages over the lifetime of the patents and/or applications.

Our outside counsel has systems in place to monitor deadlines to pay these fees and to remind us of these fees, and our outside counsel employs an outside firm to pay these fees due to the USPTO and to foreign patent agencies based on our instructions.

9 unchanged sentences

Because our programs may involve additional products that require the use of proprietary rights held by third parties, the growth of our business will likely depend in part on our ability to acquire, in-license or use these proprietary rights.

We may be unable to acquire or in-license proprietary rights that we identify as being necessary for our AVISE® testing products, and our partner may be unable to acquire any

necessary rights for our promoted therapeutics.

We may be unable to acquire or in-license proprietary rights that we identify as being necessary for our AVISE ® testing products, and our partner may be unable to acquire any necessary rights for our promoted therapeutics.

Even if we are able to obtain a license to such proprietary rights, it may be non-exclusive, thereby giving our competitors access to the same technologies licensed to us.

15 unchanged sentences

We cannot assure you that any of our current or future AVISE ® testing products will not infringe existing or future patents.

Although we are not aware of any issued patents that will prevent us from marketing our AVISE® testing products, there may be third-party patents of which we are currently unaware with claims to materials or methods of manufacture related to the use or manufacture of our AVISE® testing products.

Although we are not aware of any issued patents that will prevent us from marketing our AVISE ® testing products, there may be third-party patents of which we are currently unaware with claims to materials or methods of

manufacture related to the use or manufacture of our AVISE ® testing products.

If a third party that owns such a patent asserts it successfully against one of our current or future AVISE ® testing products, we may be unable to market our product, which could materially harm our business and because patent applications can take many years to issue and may be confidential for 18 months or more after filing, there may be currently pending third-party patent applications which may later result in issued patents that our AVISE ® testing products or our technologies may infringe, or which such third parties claim are infringed by the use of our technologies.

8 unchanged sentences

In addition to infringement claims against us, if third parties have prepared and filed patent applications in the United States that also claim technology to which we have rights, we may have to participate in interference proceedings in the USPTO to determine the priority of invention.

Third parties may also attempt to initiate

reexamination, post grant review or inter partes review of our patents in the USPTO.

Third parties may also attempt to initiate reexamination, post grant review or inter partes review of our patents in the USPTO.

We may also become involved in similar proceedings in the patent offices in other jurisdictions regarding our intellectual property rights with respect to our AVISE ® testing products and technology.

16 unchanged sentences

Because of the expense and uncertainty of litigation, we may conclude that even if a third party is infringing our patents or other intellectual property rights, the risk-adjusted cost of bringing and enforcing such a claim or action may be too high or not in the best interest of our company or our stockholders.

We are not aware of any third-party infringement of our intellectual property rights that would have a materially adverse impact on our business.

We are not aware of any third-party

infringement of our intellectual property rights that would have a materially adverse impact on our business.

In addition, there can be no assurance that our licensors will be willing to bring and enforce claims to prevent third parties from infringing intellectual property that is licensed to us, particularly if the affected intellectual property is less important to the licensor’s business than to ours.

15 unchanged sentences

• announcements by us or our competitors of new products, strategic partnerships or capital commitments;

• changes in reimbursement by current or potential third-party payers;

• changes in reimbursement by current or potential third-party payors;

• issuance of new securities analysts’ reports or changed recommendations for our stock;

7 unchanged sentences

• future sales of our common stock by our executive officers, directors and other stockholders;

• general economic conditions and slow or negative growth of our markets, including as a result of the COVID-19 outbreak.

• general economic conditions and slow or negative growth of our markets, including as a result of the COVID-19 pandemic.

In addition, the stock market in general, and the market for stock of life sciences companies in particular, has experienced extreme price and volume fluctuations that have often been unrelated or disproportionate to the operating performance of those companies.

4 unchanged sentences

Any adverse determination in any such litigation or any amounts paid to settle any such actual or threatened litigation could require that we make significant payments.

Future sales of shares by existing stockholders could cause our stock price to decline.

Sales of a substantial number of shares of our common stock in the public market or the perception that these sales might occur could significantly reduce the trading price of our common stock and impair our ability to raise adequate capital through the sale of additional equity securities.

In addition, our directors and executive officers may establish programmed selling plans under Rule 10b5-1 of the Exchange Act for the purpose of effecting sales of our common stock.

Any sales of securities by directors and executive officers, or the perception that those sales may occur, including the entry into such programmed selling plans, could have a material adverse effect on the trading price of our common stock.

In addition, the holders of 5,167,230 shares of common stock and holders of warrants to purchase 426,827 shares of common stock are entitled to rights with respect to registration of such shares under the Securities Act pursuant to an investors’ rights agreement between such holders and us.

If such holders, by exercising their registration rights, sell a large number of shares, they could adversely affect the market price for our common stock.

If we file a registration statement for the purpose of selling additional shares to raise capital and are required to include shares held by these holders pursuant to the exercise of their registration rights, our ability to raise capital may be impaired.

Provisions in our charter documents and under Delaware law could discourage a takeover that stockholders may consider favorable and may lead to entrenchment of management.

Our amended and restated certificate of incorporation and amended and restated bylaws contain provisions that could significantly reduce the value of our shares to a potential acquiror or delay or prevent changes in control or changes in our management without the consent of our board of directors.

The provisions in our charter documents include the following:

• a classified board of directors with three-year staggered terms, which may delay the ability of stockholders to change the membership of a majority of our board of directors;

• no cumulative voting in the election of directors, which limits the ability of minority stockholders to elect director candidates;

• the exclusive right of our board of directors, unless the board of directors grants such right to the stockholders, to elect a director to fill a vacancy created by the expansion of the board of directors or the resignation, death or removal of a director, which prevents stockholders from being able to fill vacancies on our board of directors;

• the required approval of at least 66-2/3% of the shares entitled to vote to remove a director for cause, and the prohibition on removal of directors without cause;

• the ability of our board of directors to authorize the issuance of shares of preferred stock and to determine the price and other terms of those shares, including preferences and voting rights, without stockholder approval, which could be used to significantly dilute the ownership of a hostile acquiror;

• the ability of our board of directors to alter our amended and restated bylaws without obtaining stockholder approval;

• the required approval of at least 66-2/3% of the shares entitled to vote to adopt, amend or repeal our amended and restated bylaws or repeal the provisions of our amended and restated certificate of incorporation regarding the election and removal of directors;

• a prohibition on stockholder action by written consent, which forces stockholder action to be taken at an annual or special meeting of our stockholders;

• an exclusive forum provision providing that the Court of Chancery of the State of Delaware will be the exclusive forum for certain actions and proceedings;

• the requirement that a special meeting of stockholders may be called only by the board of directors, which may delay the ability of our stockholders to force consideration of a proposal or to take action, including the removal of directors;

• advance notice procedures that stockholders must comply with in order to nominate candidates to our board of directors or to propose matters to be acted upon at a stockholders’ meeting, which may discourage or deter a potential acquiror from conducting a solicitation of proxies to elect the acquiror’s own slate of directors or otherwise attempting to obtain control of us.

We are also subject to the anti-takeover provisions contained in Section 203 of the Delaware General Corporation Law.

Under Section 203, a corporation may not, in general, engage in a business combination with any holder of 15% or more of its capital stock unless the holder has held the stock for three years or, among other exceptions, the board of directors has approved the transaction.

Our amended and restated certificate of incorporation provide that the Court of Chancery of the State of Delaware will be the exclusive forum for substantially all disputes between us and our stockholders, which could limit our stockholders’ ability to obtain a favorable judicial forum for disputes with us or our directors, officers or employees.

Our amended and restated certificate of incorporation provide that the Court of Chancery of the State of Delaware is the exclusive forum for any derivative action or proceeding brought on our behalf, any action asserting a breach of fiduciary duty, any action asserting a claim against us arising pursuant to the Delaware General Corporation Law, our amended and restated certificate of incorporation, or any action asserting a claim against us that is governed by the internal affairs doctrine;

provided, that, this provision would not apply to suits brought to enforce a duty or liability created by Securities Act or the Exchange Act or any other claim for which the federal courts have exclusive jurisdiction.

To the extent that any such claims may be based upon federal law claims, Section 27 of the Exchange Act creates exclusive federal jurisdiction over all suits brought to enforce any duty or liability created by the Exchange Act or the rules and regulations thereunder.

Furthermore, Section 22 of the Securities Act creates concurrent jurisdiction for federal and state courts over all suits brought to enforce any duty or liability created by the Securities Act or the rules and regulations thereunder.

These choice of forum provisions may limit a stockholder’s ability to bring a claim in a judicial forum that it finds favorable for disputes with us or our directors, officers or other employees, which may discourage such lawsuits against us and our directors, officers and other employees.

By agreeing to this provision, however, the stockholders will not be deemed to have waived our compliance with the Federal Securities laws and rules and regulations thereunder.

Furthermore, the enforceability of similar choice of forum provisions in other companies’ certificates of incorporation has been challenged in legal proceedings, and it is possible that a court could find these types of provisions to be inapplicable or unenforceable.

If a court were to find the choice of forum provisions in our amended and restated certificate of incorporation to be inapplicable or unenforceable in an action, we may incur additional costs associated with resolving such action in other jurisdictions, which could adversely affect our business and financial condition.

Our executive officers, directors and principal stockholders, if they choose to act together, have the ability to control or significantly influence all matters submitted to stockholders for approval.

As of December 31, 2020, our executive officers, directors and greater than 5% stockholders, in the aggregate, own approximately 74% of our outstanding capital stock.

As a result, such persons, acting together, have the ability to control or significantly influence all matters submitted to our stockholders for approval, including the election and removal of directors and approval of any significant transaction, as well as our management and business affairs.

This concentration of ownership may have the effect of delaying, deferring or preventing a change in control, impeding a merger, consolidation, takeover or other business combination involving us, or discouraging a potential acquiror from making a tender offer or otherwise attempting to obtain control of our business, even if such a transaction would benefit other stockholders.

We have never paid dividends on our capital stock, and we do not anticipate paying dividends in the foreseeable future.

Your ability to achieve a return on your investment will depend on appreciation, if any, in the price of our common stock.

We have never declared or paid any cash dividends on our common stock and do not intend to pay any cash dividends in the foreseeable future.

We currently intend to retain any future earnings to fund the growth of our business.

In addition, our Amended Loan Agreement restricts our ability to pay cash dividends on our common stock and we may also enter into credit agreements or other borrowing arrangements in the future that will restrict our ability to declare or pay cash dividends on our common stock.

Any determination to pay dividends in the future will be at the discretion of our board of directors and will depend on our financial condition, operating results, capital requirements, general business conditions and other factors that our board of directors may deem relevant.

As a result, capital appreciation, if any, of our common stock will be the sole source of gain for the foreseeable future.

An active, liquid trading market for our common stock may not be maintained

Prior to our IPO, there had been no public market for our common stock.

Our common stock only recently began trading on the Nasdaq Global Market, or Nasdaq, but we can provide no assurance that we will be able to develop and sustain an active trading market for our common stock.

Even if an active trading market is developed, it may not be sustained.

The lack of an active market may impair your ability to sell your shares at the time you wish to sell them or at a price that you consider reasonable.

An inactive market may also impair our ability to raise capital by selling shares and may impair our ability to acquire other businesses or technologies using our shares as consideration, which, in turn, could materially adversely affect our business.

General Risk Factors

Our failure to meet the continued listing requirements of the Nasdaq Global Market, or Nasdaq, could result in a delisting of our common stock.

8 unchanged sentences

If one or more equity research analysts cease coverage of our company, we could lose visibility in the market, which in turn could cause our stock price to decline.

Future sales of shares by existing stockholders could cause our stock price to decline.

Prior to our initial public offering, or IPO, sell, or indicate an intention to sell, substantial amounts of our common stock in the public market after the lock-up and other legal restrictions on resale discussed in the prospectus for the IPO lapse, the trading price of our common stock could decline.

In addition, our directors and executive officers may establish programmed selling plans under Rule 10b5-1 of the Exchange Act for the purpose of effecting sales of our common stock.

In addition, the holders of 8,418,257 shares of common stock and holders of warrants to purchase 436,581 shares of common stock are entitled to rights with respect to registration of such shares under the Securities Act pursuant to an investors’ rights agreement between such holders and us.

If such holders, by exercising their registration rights, sell a large number of shares, they could adversely affect the market price for our common stock.

We are an emerging growth company and a smaller reporting company, and the reduced disclosure requirements applicable to emerging growth companies and smaller reporting companies may make our common stock less attractive to investors.

15 unchanged sentences

We may continue to be a smaller reporting company even after we are no longer an emerging growth company.

We may take advantage of certain of the scaled disclosures available to smaller reporting companies and will be able to take advantage of these scaled disclosures for so long as our voting and non-voting common stock held by non-affiliates is less than $250.0 million measured on the last business day of our second fiscal quarter, or our annual revenue is less than $100.0 million during the most recently completed fiscal year and our voting and non-voting common stock held by non-affiliates is less than $700.0 million measured on the last business day of our second fiscal quarter.

We may take advantage of certain of the scaled disclosures available to smaller reporting companies and will be able to take advantage of these scaled

disclosures for so long as our voting and non-voting common stock held by non-affiliates is less than $250.0 million measured on the last business day of our second fiscal quarter, or our annual revenue is less than $100.0 million during the most recently completed fiscal year and our voting and non-voting common stock held by non-affiliates is less than $700.0 million measured on the last business day of our second fiscal quarter.

We incur significant costs as a result of operating as a public company, and our management will be required to devote substantial time to compliance initiatives.

22 unchanged sentences

Failure to remedy any material weakness in our internal control over financial reporting, or to implement or maintain other effective control systems required of public companies, could also restrict our future access to the capital markets.