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Item 1. Business

2025-03-11 compared with 2024-03-18 · 343 added, 384 removed, 508 unchanged (59% of the section changed)

Company Overview

Exagen exists to provide clarity in autoimmune disease decision making with the goal of improving patients' clinical outcomes.

We have developed and are commercializing a portfolio of innovative testing products, under our AVISE ® brand, which allow for the differential diagnosis, prognosis and monitoring of complex autoimmune and autoimmune-related diseases.

We believe our strong focus and extensive background in the field of rheumatology, combined with our commitment to exceptional customer service and support, position us well to respond to the needs of rheumatologists and the patients they serve.

We commercially launched our lead testing product, AVISE ® CTD, in 2012.

We are a medical technology company primarily focused on the design, development and commercialization of a next-generation portfolio of innovative testing products under our AVISE ® brand, which allow for the differential diagnosis, prognosis and monitoring of complex rheumatic, autoimmune and autoimmune-related disease including, among others, systemic lupus erythematosus (SLE) and rheumatoid arthritis (RA).

Our tests are used in a variety of clinical settings to provide clarity in autoimmune disease decision-making with the goal of improving patients' clinical outcomes.

We commercially launched our flagship testing product, AVISE ® CTD, in 2012.

AVISE ® CTD enables differential diagnosis for patients presenting with symptoms indicative of a wide variety of connective tissue diseases (CTDs) and other related diseases with overlapping symptoms.

The comprehensive nature of AVISE ® CTD allows for the testing of a number of relevant biomarkers in one convenient blood draw (as opposed to testing serially for individual biomarkers, which adds time and cost to the diagnostic process).

We believe AVISE ® CTD may provide clinical utility for more than 41 million individuals in the United States, encompassing patients with conditions like systemic lupus erythematosus (SLE);

rheumatoid arthritis (RA);

Sjögren’s syndrome, antiphospholipid syndrome (APS);

other autoimmune-related diseases, such as autoimmune thyroid;

and disorders that mimic these diseases, such as fibromyalgia.

There is an unmet need to add clarity for rheumatologists in their CTD clinical evaluations.

As a result, we believe there is a significant market opportunity for our tests, which enable the differential diagnosis of these diseases, particularly, for potentially life-threatening diseases such as SLE.

Included in AVISE ® CTD is our proprietary AVISE ® Lupus test, which enables the diagnosis of SLE based on levels of erythrocyte bound C4d (EC4d) and B cell C4d (BC4d);

along with anti-nuclear antibodies (ANA) and double-stranded DNA antibodies (ds-DNA).

AVISE ® Lupus provides rheumatologists and their patients with sensitive and specific results that allow for more accurate and potentially faster differential diagnosis of SLE, as compared to other currently-marketed testing methods.

Beyond SLE, AVISE ® CTD also allows rheumatologists to accurately diagnose other overlapping autoimmune and autoimmune-related diseases (including RA), with the same blood sample.

Our AVISE ® SLE Monitor test leverages CB-CAPs technology to measure biomarkers that offer insight into a patient’s disease activity.

This test is designed to enable rheumatologists to effectively assess and optimize therapeutic intervention in patients diagnosed with SLE.

Depending on disease severity, AVISE ® SLE Monitor may be utilized by patients multiple times a year throughout their lives.

Our RA testing products include AVISE ® MTX and AVISE ® Anti-CarP.

AVISE ® MTX is a drug monitoring test designed to aid in the optimization of methotrexate therapy, the standard of care and first-line therapy for patients with RA.

AVISE ® MTX is based on our methotrexate polyglutamate (MTXPG) technology that measures blood levels of MTXPGs, the active metabolite of methotrexate linked to disease control in RA patients.

Measuring MTXPGs allows rheumatologists to identify patients presenting with inadequate exposure to methotrexate, enabling them to optimize dosing and achieve therapeutic levels commensurate with adequate disease control.

AVISE ® Anti-CarP was developed by the Leiden University Medical Center and measures anti-carbamylated protein antibody (anti-CarP).

We introduced it as a biomarker-driven RA prognostic test, through a distribution agreement with Werfen USA, LLC, with the goal of identifying patients prone to more severe disease.

We market our AVISE ® testing products using our specialized sales force.

Since the launch of AVISE ® CTD in 2012 and through December 31, 2023, we have delivered approximately 887,000 of these tests.

For the year ended December 31, 2023, 137,650 AVISE ® CTD tests were delivered, representing an approximate 2% increase over 2022.

In the fourth quarter of 2023, the number of ordering healthcare providers reached 2,383 compared to 2,419 in the same period in 2022.

In addition, we continue to populate a growing proprietary database of de-identified patient test results from our clinical studies and our clinical laboratory.

We believe the insights from these results have the potential to unlock value for pharmaceutical and biotechnology companies in the development and commercialization of therapeutics.

We believe we also have the ability to further leverage our database to optimize patient selection in clinical trials for companies developing therapeutics for autoimmune and autoimmune-related diseases.

We address the unmet needs of those suffering from debilitating and chronic autoimmune disorders through aiding in differential diagnosis, prognosis, monitoring and therapeutic selection, to ultimately improve clinical outcomes for patients.

The key tenets of our business strategy include:

▪ Focus on our flagship product, AVISE ® CTD.

We have demonstrated a solid track record of commercial growth of our AVISE ® CTD test.

We believe we are uniquely positioned to continue expanding our commercial presence within the autoimmune disease market by leveraging our specialized sales force and expansive network of relationships with rheumatologists across the United States.

Using our specialty laboratory focused on rheumatology, we plan to build upon industry-leading quality, service and technology to support strong AVISE ® CTD adoption and continue to grow our ordering physician base.

▪ Continue developing innovative testing products, using clear criteria for R&D projects and commercialization milestones.

We intend to leverage our protein and molecular assay development capabilities, bioinformatic team and proprietary technologies to pursue the development of additional testing products designed to have superior clinical utility for CTDs.

We undertake research projects that have the potential for impactful results and address the top consumer needs in the rheumatology space.

The research projects we support are those that we believe will have a competitive advantage (such as using proprietary technology), a pathway for reimbursement and an established evidence development plan with sufficient market size.

Criteria for developed products that we ultimately commercialize include Medicare coverage (specific to patient population), proprietary value-based pricing, published clinical utility and a strategy for medical guideline inclusion.

▪ Maintain meaningful margin.

We seek to maintain meaningful margin by continuing to focus on increasing operating leverage through the implementation of certain internal initiatives, such as leveraging validation, utility and reimbursement-oriented clinical studies to facilitate payor coverage of our testing products.

We center our efforts on long-term reimbursement and average sales price (ASP) growth.

This strategy includes optimizing revenue cycle practices, focusing managed care efforts on medical policy expansion and continuing to educate insurance payors on the published, real-world evidence of the clinical utility of our testing products, demonstrating healthcare cost savings and reductions in time to diagnosis.

We also seek to improve our per-test costs by focusing on profitable, core test offerings, minimizing fixed costs and overhead, and focusing our laboratory resources on AVISE ® CTD optimization.

Additionally, we employ a streamlined salesforce covering territories which are designed to achieve the most efficient and effective reach and frequency for the promotion of AVISE ® CTD.

Autoimmune and Connective Tissue Diseases (CTDs)

Autoimmune diseases encompass a broad range of serious, chronic and debilitating conditions in which a person’s immune system creates antibodies that mistakenly react against normal healthy tissues, causing inflammation and irreversible tissue damage.

These antibodies are called autoantibodies and their detection through blood tests can help diagnose, prognose and monitor the course of autoimmune diseases.

However, knowing when to test and which autoantibody to test for is challenging due to the vagueness of symptoms, the unexplained flaring and remission of symptoms, and the many conditions which can mimic autoimmune disease.

Traditional screening methods often lack accuracy, resulting in repeat testing and delayed diagnosis.

With significant increases in autoimmune incidence in recent years, AVISE ® CTD provides unique biomarkers that empower clinicians to confidently and quickly diagnose various CTDs.

Since launching AVISE ® CTD, we have produced an extensive body of peer-reviewed literature supporting the test’s clinical validity and utility, demonstrating the importance of AVISE ® CTD in patient care.

Beginning in late 2022, w e revitalized our organization with the addition of key members to our senior leadership team, including our Chief Executive Officer, Chief Financial Officer, Vice President of Sales, Chief Medical Officer, and Medical and Laboratory Director.

By leveraging our team’s extensive experience to create clinically distinct solutions that improve patient lives, we have created a strong foundation for growth and believe that we are well-positioned to positively impact patient care and address unmet clinical needs in autoimmune disease .

We strive to become a partner of choice for doctors, hospitals, healthcare systems, and payors.

Under the leadership of our Chief Executive Officer, John Aballi, who joined Exagen in October 2022, we have been executing an operational turnaround of the business, which has resulted in a return to revenue growth and gross margin expansion while significantly reducing operating expenses and cash burn.

Comparing our financial results in fiscal 2024 to fiscal 2022, we have grown revenue by over 20%, expanded our AVISE ® CTD trailing twelve-month average selling price by over 40%, improved gross margin by over 1,200 basis points, reduced operating expenses by over 30% and reduced net loss by nearly 70%.

At the same time, we have nearly doubled our salesforce productivity and brought an intense focus to our Research and Development (R&D) investments - resulting in a 45% reduction in related expenses and prioritization of near-term pipeline opportunities.

We believe we are well positioned to deliver revenue growth and positive Adjusted EBITDA in the near term.

Recent Developments

In December 2024, we announced the completion of our 1,000,000 th AVISE ® CTD test, marking a significant milestone that underscores our dedication to supporting patients and clinicians managing CTDs and other rheumatic and autoimmune conditions.

In January 2025, we announced conditional approval by the New York State Department of Health (NYSDOH), and commercial launch, of our new SLE and RA biomarker assays on the AVISE ® CTD platform.

Collectively, we believe these new biomarkers will further improve the clinical utility of AVISE ® CTD and provide clinicians with the information they need to definitively diagnose patients and shorten their autoimmune diagnostic journeys.

We expect that the addition of these new biomarkers will lead to improvements in our AVISE ® CTD average selling price, gross margin expansion and increased demand while positioning us for profitability.

Our Current Market

Our testing products allow for the differential diagnosis, prognosis and monitoring of complex autoimmune and autoimmune-related diseases, including SLE and RA.

We leverage our sales channel to primarily target the approximately 6,000 rheumatologists across the United States to promote use of our product portfolio.

The National Institute of Environmental Health Sciences estimates that there are over 40 million patients in the United States with suspected cases of autoimmune diseases.

Autoimmune diseases encompass a broad range of serious, chronic and debilitating conditions in which a person’s immune system creates antibodies that mistakenly

react against normal healthy tissues, causing inflammation and irreversible tissue damage.

Detection of these antibodies through blood tests can help diagnose, prognose and monitor the course of autoimmune diseases.

However, knowing when to test and which autoantibody to test for is challenging due to the vagueness of symptoms, unexplained flaring and remission of symptoms, and many conditions which can mimic autoimmune disease.

Early and accurate diagnosis of the conditions causing these overlapping symptoms is critical, as an incorrect diagnosis can lead to toxicity from inappropriate medications, irreversible tissue damage and other comorbidities associated with uncontrolled disease.

There is no known cause or cure for these chronic conditions and current treatment interventions are targeted at managing symptoms and limiting disease progression.

Our flagship product, AVISE ® CTD, enables clinicians to more effectively diagnose complex autoimmune conditions such as lupus, rheumatoid arthritis, and Sjögren’s syndrome earlier and with greater accuracy, as compared to the current standard of care.

Our laboratory specializes in the testing of rheumatic diseases, delivering precise and timely results through our full suite of AVISE ® -branded tests for disease diagnosis, prognosis, and monitoring.

With a focus on research, innovation, education, and patient-centered care, we are dedicated to addressing the ongoing challenges of autoimmune disease management.

Connective Tissue Diseases

CTDs are a sub-category of autoimmune diseases involving inflammation of the joints, tissues and internal organs.

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These symptoms overlap among numerous CTDs, including SLE, one of the most severe CTDs, which historically has been difficult to rule out, as well as other autoimmune-related diseases and other disorders that mimic these diseases, such as fibromyalgia.

The National Institute of Environmental Health Sciences estimates that there are approximately 41 million patients in the United States with existing cases of autoimmune diseases.

Of these patients, we estimate approximately seven million are potentially referable to rheumatologists and would be candidates for an AVISE ® CTD test, representing a total addressable market of approximately $7.5 billion, based on the current Medicare allowable reimbursement rate.

We estimate the total addressable market for our AVISE ® testing products to be approximately $9.2 billion, based on estimated patient populations, the current Medicare allowable reimbursement rate and testing frequencies.

Systemic Lupus Erythematosus

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SLE is characterized by a rise in symptoms and/or abnormal laboratory test results.

varies in severity, from mild cases to those in which significant and potentially fatal damage occurs to vital organs such as the brain, heart, kidneys and lungs.

SLE varies in severity, from mild cases to those in which significant, and potentially fatal, damage occurs to vital organs such as the brain, heart, kidneys and lungs.

Detection of these autoantibodies can assist rheumatologists in the diagnosis of SLE.

Diagnosis of SLE allows rheumatologists to initiate the most appropriate therapy to minimize irreversible organ damage and reduce morbidity and mortality.

Current treatment for SLE involves the use of antimalarials, corticosteroids, immunosuppressants and biologic agents to prevent or suppress active disease or flares.

Standard laboratory tests for diagnosing SLE include measuring immunological biomarkers, such as ANA, anti-double stranded DNA (anti-dsDNA) and other autoantibody tests.

Standard laboratory tests for diagnosing SLE include measuring immunological biomarkers, such as antinuclear antibody (ANA), anti-double stranded DNA (anti-dsDNA) and other autoantibody tests.

ANA are a group of autoantibodies produced by a person’s immune system when it fails to adequately distinguish between self and non-self.

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However, the high sensitivity of ANA for SLE is counterbalanced by somewhat poor specificity.

According to Dinse et al.

(2022), who investigated the increasing prevalence of ANA in the United States using data from the National Health and Nutrition Examination Survey, approximately 0.7%–2.4% of individuals with a positive ANA test have SLE.

According to a study published in 2022 by Dinse et al., which investigated the increasing prevalence of ANA in the United States using data from the National Health and Nutrition Examination Survey, approximately 0.7%–2.4% of individuals with a positive ANA test have SLE.

This lack of specificity leads to many inappropriate non-autoimmune referrals to the rheumatologist from primary care physicians.

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Many people with SLE have a negative anti-dsDNA antibody test, reaffirming the need for an effective testing product which adds clarity to the rheumatologist’s clinical assessment.

Activation of the complement system is an integral part of the disease process of SLE.

Thus, rheumatologists measure components of the complement system, including serum levels of C3 and C4, to help diagnose SLE and monitor SLE disease activity.

In 2012, the Systemic Lupus Collaborating Clinics added low C3 and low C4 as immunologic criteria for classifying SLE.

In active SLE, C3 and C4 complement proteins are consumed and broken down to fragments, known as complement activation products.

Therefore, low levels of C3 and C4 suggest a diagnosis of SLE and that the disease is active.

However, variability in the levels of C3 and C4 can occur due to factors unrelated to SLE disease presence or disease activity, making them less reliable as biomarkers for SLE.

For example, C3 and C4 are acute-phase reactants and produced during inflammation.

As a result, many SLE patients have normal complement levels even when the disease is active.

Although relatively specific for SLE, low complement levels can also be seen in certain chronic infections, including non-lupus-related kidney inflammation, severe liver disease and other autoimmune diseases.

CB-CAPs are formed when the fragments of complement activation products from C4 bind permanently to circulating cells such as red blood cells, b-cells and platelets.

This binding lasts for the life of the cell and represents a more stable and reliable indicator of complement activation than measuring C3 and C4 alone.

In March 2011, the first new biologic targeting treatment of SLE in over 50 years, GSK’s Benlysta ® , was approved by the U.S.

Food and Drug Administration (the FDA).

In December 2020, the FDA approved this biologic drug for the treatment of adult patients with active lupus nephritis who are receiving standard therapy.

Since Benlysta ® 's approval, there have been a number of drug development programs that have failed in SLE, which may suggest that guidelines for classifying SLE patients and the endpoints used to determine clinical effectiveness have not adequately addressed the complexity of the disease process and its heterogeneous population.

Rheumatoid Arthritis

RA is a chronic, systemic autoimmune disease in which the immune system attacks the joints and can also affect other organ systems.

The annual incidence and prevalence of RA in the United States is estimated to be 135,000 and 1.5 million, respectively.

The annual incidence and prevalence of RA in the United States is estimated to be approximately 135,000 and 2 million, respectively.

Patients suffering from RA develop joint damage that is associated with painful inflammation and often progresses to irreversible damage of cartilage and bone, leading to significant disability and a reduction in quality of life and the ability to work.

Diagnosis of RA involves performing a complete medical history review with physical and/or radiographic examination of the number and distribution of swollen, tender and painful joints that have persisted for more than six weeks.

Laboratory testing for rheumatoid factor (RF), anti-cyclic citrullinated peptide (CCP) antibodies and testing for general, nonspecific inflammation with erythrocyte sedimentation rate (ESR) and C-reactive protein tests are used to assist in the diagnosis.

Early diagnosis and effective treatment of RA is critically important to prevent erosive bone or joint damage and disability.

Rheumatologists are compelled to reach a definitive diagnosis quickly and administer effective treatment.

Diagnosis of RA involves performing a complete medical history with physical and/or radiographic examination of the number and distribution of swollen, tender and painful joints that have persisted for more than six weeks.

Laboratory testing for rheumatoid factor (RF), anti-cyclic citrullinated peptide (CCP) antibodies and testing for

general, nonspecific inflammation with erythrocyte sedimentation rate (the ESR) and C-reactive protein tests are used to assist in the diagnosis.

The standard of care for the treatment of RA involves the use of Disease Modifying Anti-Rheumatic Drugs (DMARDs) which have shown, in clinical studies, the ability to slow or stop disease progression.

Methotrexate remains the most commonly used DMARD, due to its low cost and effectiveness, as well as the extensive clinical experience with its use.

It is estimated that approximately 90% of RA patients in the United States, or 1.3 million patients, are treated with methotrexate, either as a monotherapy or in combination with another DMARD.

Biologics DMARDs are proteins that have been genetically modified to target cellular components of the immune system that attack healthy tissues, causing the symptoms of RA.

They are a targeted form of therapy, which makes them different from traditional RA treatments, such as methotrexate.

The first FDA approved biologics for RA were the anti-TNFs.

The anti-TNFs dominate the therapy for RA and generally are the first biologics chosen to augment methotrexate when patients are not achieving a satisfactory response.

We market testing products under our AVISE ® brand that allow for the differential diagnosis, prognosis and monitoring of complex autoimmune and autoimmune-related diseases, including SLE and RA.

We are focused on leveraging our sales channel targeting the approximately 4,500 rheumatologists across the United States to promote use of our product portfolio.

In effect, rheumatologists are compelled to reach a definitive diagnosis quickly and administer effective treatment.

We address the unmet needs of those suffering from debilitating and chronic autoimmune disorders through aiding in differential diagnosis, prognosis and monitoring, to ultimately improve clinical outcomes for patients.

We aim to become the standard of care in autoimmune disease testing.

The key tenets of our business strategy include:

▪ Expand adoption of our flagship product, AVISE ® CTD .

We have demonstrated a solid track record of commercial growth of our AVISE ® CTD test.

Using our specialty laboratory focused on rheumatology, we plan to build upon industry-leading quality, service and technology to support strong AVISE ® CTD adoption while continuing to expand and improve our AVISE ® CTD offering, grow our ordering physician base, and enhance our average reimbursement rates.

▪ Continue to develop innovative testing products, using clear criteria for R&D projects and commercialization milestones .

We undertake research projects that have the potential for impactful results and address the top consumer needs in the rheumatology space.

Criteria for developing products that we ultimately commercialize include Medicare coverage (specific to patient population), proprietary value-based pricing, published clinical utility and a strategy for medical guideline inclusion.

▪ Deliver sustainable profitable growth .

We seek to establish a solid foundation for growth and path to sustained profitability through continued gross margin expansion and improved operating expense efficiencies through the implementation of certain internal initiatives, such as leveraging validation, utility and reimbursement-oriented clinical studies to facilitate payor coverage of our testing products.

We center our efforts on long-term reimbursement and average sales price (ASP) growth.

We also seek to improve our per-test costs by focusing on profitable, core test offerings, minimizing fixed costs and overhead, and focusing our laboratory resources on AVISE ® CTD optimization.

Additionally, we employ a streamlined salesforce covering territories which are designed to achieve the most efficient and effective reach and frequency for the promotion of AVISE ® CTD.

Our Proprietary Technologies

We believe the competitive advantage for our testing products is supported by core proprietary technology, namely our AVISE ® Lupus test.

AVISE ® Lupus Test

Our AVISE ® Lupus test, which we offer as a stand-alone test and as part of our AVISE ® CTD test panel, is a proprietary, clinically validated method to aid in the diagnosis of SLE that provides a significant improvement in sensitivity, relative to the current standard of care.

The AVISE ® Lupus test leverages CB-CAPs technology, which determines the blood levels of complement activation proteins permanently deposited on hematopoietic cells.

The determination of complement proteins in a patient’s blood is a mainstay in clinical laboratory science, and state-of-the-art methods traditionally rely on measurement of serum or plasma levels of soluble complements.

We believe the competitive advantage for our testing products is supported by two core proprietary technologies:

our AVISE ® Lupus platform, which incorporate Cell-Bound Complement Activation Products (CB-CAPs) for diagnosing SLE and a set of three biomarkers, the t-cell based CB-CAP TC4d, along with two t-cell antibodies, TIgG, and TIgM (the T-Cell Biomarkers), all of which are incorporated into our AVISE ® CTD product.

AVISE ® Lupus

Our AVISE ® Lupus platform, which we offer as a stand-alone test and as part of our AVISE ® CTD test platform, is a proprietary, patent-protected and clinically validated method to aid in the diagnosis of SLE that provides a significant improvement in sensitivity, relative to the current standard of care.

The AVISE ® Lupus platform leverages CB-CAPs

technology, which determines the blood levels of complement activated proteins permanently deposited on hematopoietic cells.

Rheumatologists measure components of the complement system, including serum levels of C3 and C4, to help diagnose SLE and monitor SLE disease activity.

C3 and C4 are the most commonly determined complement proteins in the blood and the precursors to activation of complement proteins into biologically active breakdown products.

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While the limitations and drawbacks of measuring standard components of the complement system, such as C3 and C4, are well recognized by the medical community, these laboratory biomarkers are part of international guidelines for the classification of SLE.

We believe the availability of novel complement biomarkers combined with algorithmic interpretations, as a support or replacement of standard C3 and C4 measures, is of great value for rheumatologists and their patients.

We believe the availability of complement biomarkers combined with our proprietary algorithmic interpretations, as a support or replacement of standard C3 and C4 measures, is of great value for rheumatologists and their patients.

CB-CAPs technology directly measures protein products of complement activation, such as C4d, the product of C4 activation.

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(the 2014 Study), EC4d and BC4d showed 22% higher sensitivity (66%) than C3 and C4 (44%) in diagnosing SLE, with specificity fixed at 91%.

Our proprietary AVISE ® Lupus test integrates EC4d and BC4d with 8 autoantibodies to yield a quantitative and qualitative assessment of SLE risk.

The AVISE ® Lupus test was designed to improve upon the diagnostic sensitivity of conventional biomarkers used to diagnose SLE while maintaining a high degree of specificity.

In the aforementioned 2014 Study, the AVISE ® Lupus test demonstrated 80% sensitivity for SLE (meaning 8 out of 10 diagnosed SLE patients tested positive) and 86% specificity for SLE (meaning 86% of non-SLE control subjects with other rheumatic conditions tested negative).

A later study published in 2022 by Tyler O’Malley, et al., compared the clinical utility of the AVISE ® Lupus test to the conventional biomarker strategy in the diagnosis of SLE, demonstrating 6-fold increased odds of SLE diagnosis and 3-fold increased odds of treatment initiation with a

positive AVISE ® Lupus result.

We believe this patent-protected test gives us a significant advantage over our competitors.

Testing Products

Since inception, we have been committed to developing and commercializing innovative testing products that address the challenges rheumatologists face in differentially diagnosing, prognosing and monitoring complex autoimmune and autoimmune-related diseases.

We estimate the total addressable market for our AVISE ® testing products to be approximately $9 billion, based on estimated patient populations, the current Medicare allowable reimbursement rate and testing frequencies.

Our lead testing product, AVISE ® CTD, is a comprehensive test that aids in the differential diagnosis of SLE versus other common CTDs.

AVISE ® CTD includes our proprietary AVISE ® Lupus test, which leverages CB-CAPs technology to specifically measure activation of the complement system.

In addition to testing for SLE, AVISE ® CTD tests for a series of biomarkers in one convenient blood draw to aid in the differential diagnosis of a wide variety of CTDs and other diseases which can be challenging to diagnose as a result of overlapping symptoms.

These diseases include SLE;

Sjögren’s syndrome;

other autoimmune-related diseases, such as autoimmune thyroid;

and other disorders that mimic these diseases, such as fibromyalgia.

Use of our test significantly enhances the rheumatologist's ability to exclude SLE and differentiate other CTDs, resulting in a clearer assessment and ultimately increasing the efficiency and accuracy of the broader diagnostic process.

The clinical performance of our proprietary AVISE ® Lupus test, combined with the convenience of a single blood draw, make AVISE ® CTD an attractive choice among rheumatologists.

AVISE ® Lupus

Our proprietary AVISE ® Lupus test is the cornerstone of the SLE assessment within our more comprehensive AVISE ® CTD testing product.

Our proprietary AVISE ® Lupus platform integrates EC4d and BC4d with eight autoantibodies to yield a quantitative and qualitative assessment of SLE risk.

The AVISE ® Lupus platform was designed to improve upon the diagnostic sensitivity of conventional biomarkers used to diagnose SLE while maintaining a high degree of specificity.

In the 2014 Study, the AVISE ® Lupus platform demonstrated 80% sensitivity for SLE (meaning eight out of ten diagnosed SLE patients tested positive) and 86% specificity for SLE (meaning 86% of non-SLE control subjects with other rheumatic conditions tested negative).

A later study published in 2022 by Tyler O’Malley, et al., compared the clinical utility of the AVISE ® Lupus platform to the conventional biomarker strategy in the diagnosis of SLE, demonstrating six-fold increased odds of SLE diagnosis and three-fold increased odds of treatment initiation with a positive AVISE ® Lupus result.

We believe this patent-protected platform gives us a significant advantage over our competitors.

Our CB-CAPs technology for diagnosing SLE has patent protection through March 2034.

T-Cell Biomarkers

Our collaborative efforts with the Allegheny Health Network Research Institute (AHN) have resulted in further development of the T-Cell Biomarkers, for which we obtained an exclusive, worldwide license from AHN in May 2021 and launched commercially in January 2025 as part of the AVISE ® CTD test.

These biomarkers have been clinically validated, exhibit a high degree of specificity for lupus, are more sensitive for lupus compared to conventional biomarkers and serve as an enhancement to the AVISE ® Lupus profile also included in the test.

The TC4d test is patent protected through 2035, representing a proprietary expansion of CB-CAPs, involving a biochemical process wherein complement activation products are measured on T-cells.

We offer 10 commercialized tests under our AVISE ® brand, offering next-generation insights to aid the diagnosis, prognosis and monitoring of autoimmune conditions.

Our flagship product, AVISE ® CTD, represents approximately 90% of our current annual revenue.

AVISE ® CTD (Including AVISE ® Lupus)

Our flagship testing product, AVISE ® CTD, is a comprehensive test that aids in distinguishing overlapping symptoms and the differential diagnosis of a wide variety of CTDs and other diseases in one convenient blood draw.

These diseases include SLE, RA, Sjögren’s syndrome, APS, other autoimmune-related diseases and other disorders that mimic these diseases, such as fibromyalgia.

These conditions are often challenging to diagnose as a result of overlapping symptoms.

Rheumatologists choose to order the comprehensive AVISE ® CTD test or the more focused AVISE ® Lupus test based on medical necessity, which is determined by each patient’s symptoms and medical history.

AVISE ® CTD includes our proprietary AVISE ® Lupus platform, the cornerstone of the SLE assessment.

AVISE ® Lupus begins by quantifying the level of CB-CAPs biomarkers (EC4d and BC4d) in the patient’s blood.

These biomarkers are elevated in patients with SLE compared to patients with other CTDs.

Next, the AVISE ® Lupus test integrates these cell-bound complement products with 8 autoantibodies to yield a quantitative and qualitative assessment of SLE risk.

AVISE ® APS consists of a specialized panel of autoantibody tests.

This test aids in both the diagnosis and management of APS, a hyper-coagulation state leading to thrombosis, pregnancy complications and even death.

Next, the AVISE ® Lupus

platform integrates these cell-bound complement products with 8 autoantibodies to yield a quantitative and qualitative assessment of SLE risk.

In January 2025, we added three new unique T-Cell Biomarkers which provide enhanced sensitivity for SLE as compared to conventional SLE biomarkers and serve as a complement to the AVISE ® Lupus profile.

In a recent scientific abstract presented at the 2024 American College of Rheumatology (ACR) annual meeting, the combined T-Cell Biomarker panel was shown to capture a unique subset of SLE subjects otherwise testing negative for all conventional SLE biomarkers and the CB-CAPs biomarkers (EC4d and BC4d) already included in the AVISE ® CTD test.

The data, which showed that up to 50% of SLE subjects testing negative by conventional SLE biomarkers are identified as positive by one or more T-Cell Biomarker, has subsequently been published Frontiers in Immunology (February 26, 2025).

In cases of early inflammatory arthritis, differential diagnosis is broad, including conditions like reactive arthritis, crystal arthropathy, spondyloarthropathy, and other systemic rheumatic diseases such as SLE and Sjogren’s syndrome, alongside RA.

Approximately 70% of RA patients show serological evidence of RA, identified by key biomarkers:

anti-CCP and RF.

The remaining 30% of patients, despite lacking these serological markers, are clinically diagnosed with RA (the Seronegative RA Subgroup);

this subgroup is referred to as “seronegative RA.” These seronegative RA patients often face delays in diagnosis due to the absence of serological evidence.

In January 2025, we added three unique biomarkers specific to seronegative RA—Anti-RA33 IgA, Anti-RA33 IgG and Anti-RA33 IgM (the RA Sub-Profile Biomarkers)—that help bridge this diagnostic gap and enable AVISE ® CTD to correctly identify a greater proportion of the traditional Seronegative RA Subgroup, allowing for more timely and targeted treatment plans for these patients.

Other AVISE ® Tests

We offer the following additional tests under our AVISE ® brand.

Test Description

AVISE ® APS aids in both the diagnosis and management of APS, a hyper-coagulation state leading to thrombosis, pregnancy complications and even death.

Rheumatologists would typically request the AVISE ® APS test in patients who initially tested positive for one or more APS biomarkers contained in AVISE ® CTD, or in the management of patients experiencing a high-risk pregnancy.

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Rapid and accurate testing is essential to prevent death and long-term disability.

AVISE ® Anti-Histone

AVISE ® Anti-Histone is a test for autoantibodies to histone proteins commonly found in drug induced lupus and SLE patients.

AVISE ® SLE Prognostic

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AVISE ® Anti-CarP

AVISE ® Anti-CarP, developed by the Leiden University Medical Center, measures anti-CarP.

We introduced it as a biomarker-driven RA prognostic test, through a distribution agreement with Werfen USA, LLC, with the goal of identifying patients prone to more severe disease.

With the introduction of AVISE ® Anti-CarP in 2018, we became the first commercial laboratory to make testing for anti-CarP available in the United States.

This test uniquely addresses two major challenges facing rheumatologists today – (1) patients presenting with RA symptoms but lacking the common confirmatory blood tests for anti-RF or anti-CCP, known as sero-negative patients, and (2) the lack of a serologic indicator, which indicates a poor prognosis and helps guide treatment decisions.

Anti-CarP can be positive in up to 26% of RA patients who are negative for anti-CCP.

Furthermore, RA patients positive for Anti-CarP have an increased risk for more severe RA disease, including permanent joint damage .

AVISE ® Anti-CarP, is a biomarker-driven RA prognostic test, offered through a distribution agreement with Werfen USA, LLC to help identify RA patients with an increased risk for joint damage.

AVISE ® SLE Monitor

AVISE ® SLE Monitor is a blood test that employs CB-CAPs technology and is intended to assess the condition of a patient that has been diagnosed with SLE.

It offers a unique combination of biomarkers that measure for EC4d, which has shown greater accuracy in tracking disease activity than C3 and C4, which is associated with thrombosis risk in SLE.

AVISE ® SLE Monitor offers additional insight into a patient’s disease activity as well as possible adverse events.

Rheumatologists have limited methods for evaluating the extent of disease activity taking place inside the body of an SLE patient.

They rely on imperfect biomarkers, overt symptoms or flares and patient reported history.

All of these leave the rheumatologists looking for greater insights, especially in cases where patients under report their symptoms, a bias which healthcare providers may not fully appreciate.

AVISE ® SLE Monitor demonstrates correlation to SLE disease activity and is therefore designed to enable rheumatologists to effectively assess and optimize therapeutic intervention in patients diagnosed with SLE.

Additionally, AVISE ® SLE Monitor measures EC4d, anti-C1q, C3, C4 and anti-dsDNA which can assist physicians with managing their lupus nephritis patients.

Depending on disease severity, our AVISE ® SLE Monitor testing product may be utilized by patients multiple times a year and throughout their lives.

We believe AVISE ® SLE Monitor will play an increasingly important role in the management of SLE patients and further solidify the role and relationship of AVISE ® testing products for these patients.

AVISE ® MTX is a patented and validated blood test that precisely measures blood levels of MTXPG, the active metabolite of methotrexate linked to disease control in RA patients.

There is large variability in the way patients absorb and metabolize methotrexate, leaving rheumatologists unsure of what steps to take when a patient has an inadequate response.

AVISE ® SLE Monitor may be utilized by patients multiple times a year and throughout their lives.

AVISE ® MTX is a patented and validated blood test that precisely measures blood levels of methotrexate polyglutamates (MTXPG), the active metabolite of methotrexate linked to disease control in RA patients.

Methotrexate is the most widely prescribed drug by rheumatologists in the treatment of RA.

When faced with a patient who is not responding to methotrexate therapy, the options include increasing the dose, switching to a parenteral delivery method and/or advancing to a more costly biologic therapy.

AVISE ® MTX provides crucial information as to whether a patient has achieved MTXPG blood levels consistent with an appropriate response to methotrexate, also known as the therapeutic level, or if the MTXPG blood levels are too low to produce adequate effects.

MTXPG blood levels are actionable clinical utility checkpoints and can help clinicians identify causes for a lack of response to methotrexate, such as poor activation to active metabolites, underexposure secondary to poor absorption or poor compliance, all of which are limiting factors to the achievement of a robust clinical response with this first-line treatment.

AVISE ® MTX can allow rheumatologists to make more informed therapeutic decisions in their efforts to optimize methotrexate therapy and give patients their best chance at achieving an optimal response.

AVISE ® HCQ is a blood test designed to help rheumatologists objectively monitor levels of hydroxychloroquine (HCQ), in whole blood as they treat patients with SLE and other CTDs, including RA.

HCQ is typically prescribed to patients to control SLE disease activity and prevent flares.

However, there is large variability in the response to HCQ therapy, the drug can sometimes take weeks or months to have a therapeutic effect and compliance has been documented to be an issue in CTD patients.

We believe measuring HCQ makes the patient accountable, and also helps to determine whether HCQ blood levels are adequate and consistent with clinical efficacy.

The addition of new and costly biologic therapies approved for the treatment of SLE may drive interest by all healthcare stakeholders, especially payors, to adopt an approach that optimizes a generic drug before advancing to a costlier alternative.

We provide the results of our AVISE ® testing products in a comprehensive and easy-to-understand test report, typically sent to rheumatologists within five business days following receipt of the blood specimen.

As shown below, the result of the AVISE ® Lupus portion of the AVISE ® CTD report displays a gradient illustrating the likelihood of the presence of lupus, which facilitates interpretation and discussion of the result with the patient versus only reporting a numerical value.

In addition, all biomarker results for AVISE ® CTD are reported and organized by disease state, providing clarity and convenience for the rheumatologists.

The AVISE ® portfolio of testing products deliver meaningful insights to healthcare providers around the diagnosis, prognosis, and monitoring of CTDs.

Our flagship product, AVISE ® CTD, delivers a comprehensive assessment of CTDs via some of the most specific and sensitive biomarkers in the industry.

This information is delivered within an easy-to-understand test report, typically provided to rheumatologists within five business days of specimen receipt.

As shown below, AVISE ® CTD displays a graphical representation of the AVISE ® Lupus index results, along with an accompanying interpretation describing the likelihood of the presence of lupus.

Subsequent pages contain results for other biomarkers spanning across a broad number of disease states, conveniently grouped to assist providers in making confident, accurate and timely treatment decisions.

The AVISE ® CTD test report facilitates discussion of results with patients due to its intuitive structure and content.

A sample of the full AVISE ® CTD report is shown below:

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Our Pipeline and Growth Opportunities

We regularly confer with national experts in the clinical management of rheumatic autoimmune diseases to help guide the organization’s leadership team on the design and execution of research projects, as well as weigh-in on known and anticipated advances in technologies affecting clinical management of autoimmune diseases.

We believe there is significant potential to capitalize on our proprietary technologies by integrating with commercially validated biomarkers to develop testing products with superior clinical utility.

The complement pathway is widely implicated in the pathogenesis of a variety of conditions, including autoimmune diseases and organ transplant rejection.

We believe the stability and reliability of CB-CAPs technology, in combination with increased specificity provided by our patent-protected AVISE ® Lupus test, will allow us to produce meaningful and differentiated proprietary solutions for rheumatologists.

TC4d, TIgG and TIgM Biomarkers

Our collaborative efforts with the Allegheny Health Network Research Institute (AHN) have resulted in further development of three innovative biomarkers (TC4d, TIgG, and TIgM), for which we obtained an exclusive, worldwide license from AHN in May 2021.

These markers exhibit a high degree of specificity for lupus and are more sensitive for lupus compared to conventional biomarkers.

The objective is to incorporate these three biomarkers into the AVISE ® Lupus test in order to enhance the diagnostic sensitivity for lupus beyond its current 80% level.

Additionally, TC4d represents a proprietary expansion of our existing CB-CAPs portfolio, involving a similar biochemical process wherein complement activation products are measured on T-cells.

We believe the inclusion of these markers in our AVISE ® Lupus test could further amplify its sensitivity, thus facilitating earlier detection of disease, and further differentiating our test in the market.

CTD RA Sub-Profile

Approximately 70-80% of RA patients show serological evidence of RA, identified by key biomarkers:

anti-CCP and Rheumatoid Factor.

The remaining 20-30% of patients, despite lacking these serological markers, are clinically diagnosed with RA;

this subgroup is referred to as “seronegative RA.” These patients often face delays in diagnosis due to the absence of serological evidence.

Accordingly, identifying unique biomarkers specific to seronegative RA may bridge this diagnostic gap, enabling more timely and targeted treatment plans for these patients.

We have prioritized the following pipeline opportunities:

PAD4 Biomarkers

Citrullination is a post-translation modification in which the amino acid arginine is converted to citrulline, altering protein structure and increasing the potential for autoimmunity.

This process is central to the pathogenesis of RA, where an aberrant immune response against citrullinated proteins contributes to chronic inflammation and joint damage.

Peptidyl arginine deiminase 4 (PAD4) is a key enzyme in this process, and autoantibodies targeting PAD4 (anti-PAD4 IgG and IgA) have been increasingly recognized for their potential clinical relevance in RA.

While anti-citrullinated protein antibodies (ACPA) and RF are the primary serologic markers for RA, a subset of patients classified as seronegative RA lack these conventional biomarkers, reflecting an unmet need for a test that captures the Seronegative RA Subgroup.

Emerging evidence suggests that anti-PAD4 antibodies may serve as novel diagnostic biomarkers for RA, particularly in these unique seronegative cases.

Beyond the potential diagnostic utility, anti-PAD4 autoantibodies have been associated with more severe disease phenotypes, including greater joint erosion and extra-articular involvement, further underscoring their relevance in RA pathogenesis.

Ongoing research aims to better define their role in early detection, disease activity stratification, and prognosis, particularly in distinguishing RA from other autoimmune and inflammatory arthritides.

SLE Disease Activity

We are leveraging clinical and laboratory data collected across multiple longitudinal SLE cohorts to identify a set of biomarkers that can inform an AI-developed algorithm aimed at guiding ongoing treatment decisions throughout the course of a lupus patient’s journey.

SLE is characterized by a chronic, systemic inflammatory burden, and disease progression is defined by the accumulation of irreversible organ damage typically resulting from chronic inflammation and/or chronic corticosteroid use.

Among the challenges for rheumatologists responsible for the care of lupus patients is the unpredictability of the disease course defined by periods of waxing and waning episodes of inflammation.

The unpredictable nature of SLE and the lack of reliable conventional biomarkers indicative of present and near-term disease activity results in a significant unmet need for a surrogate method to monitor disease activity.

Our goal is to leverage clinical and laboratory data collected across multiple longitudinal SLE cohorts to identify a set of biomarkers that can inform an AI-developed algorithm aimed at guiding ongoing treatment decisions throughout the course of a lupus patient’s journey.

RA Disease Activity

We are leveraging our extensive biorepository containing clinically annotated serum collected from RA patients to screen for a host of protein antibody markers in an effort to develop an algorithmic solution that accurately predicts RA disease activity in a manner that outperforms conventional RA biomarkers.

RA is a chronic inflammatory disorder typically affecting multiple peripheral joints in a symmetrical pattern leading to progressive changes in bone and cartilage that causes pain, swelling, and eventually loss of joint function.

RA is thought to affect 1% of the general population and is typically diagnosed in a person’s 40s and 50s.

The management of RA involves routine follow up visits where physical signs and symptoms are evaluated and typically inflammatory biomarkers (C-reactive protein or erythrocyte sedimentation rate) are performed as a general indicator of inflammatory load.

The conventional approach to inflammatory assessment is non-specific and therefore suffers from both a lack of sensitivity and specificity which limits their utility for gauging actively treatable inflammation or assessing treatment response.

Accordingly, there is an unmet need for an objective surrogate of on-target RA disease activity that can be used to inform clinical decision-making in the form of treatment escalation or escalation based on risk of disease activity assessed at regular intervals.

Lupus Nephritis Biomarkers

Lupus nephritis (LN) is an autoimmune disease and a frequent complication in people who have SLE.

We are leveraging our intellectual property licensed from Johns Hopkins University (JHU) to develop a test for detecting protein analytes in urine that can aid rheumatologists in the ongoing management and risk stratification of patients suffering from Lupus Nephritis (LN).

LN is an autoimmune disease and a frequent complication in people who have SLE.

It causes the immune system to produce proteins called autoantibodies that attack the body's own tissues and organs, including the kidneys.

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However, it is not necessarily indicative of kidney prognosis or treatment response.

We aim to leverage intellectual property licensed from Johns Hopkins University (JHU) to develop a test for detecting protein analytes in urine that can aid rheumatologists in the ongoing management and risk stratification of patients suffering from LN.

AVISE ® SLE Monitor (2.0)

Among the challenges for rheumatologists responsible for the care of lupus patients is the unpredictability of the disease course defined by periods of waxing and waning episodes of inflammation.

At the 2024 ACR annual meeting, data was presented by our academic collaborators at JHU demonstrating meaningful progress towards the development of a non-invasive urinary protein biomarker panel.

In advance of the 2024 ACR annual meeting a provisional patent application was filed to patent methods of using a multitude of urinary protein biomarkers to predict LN treatment response at 12 months post-treatment, inflammatory kidney activity, kidney damage, and long-term kidney function.

Kidney Damage Biomarkers

The kidneys are affected in up to 40% of SLE patients.

Nephritis is a major contributor to SLE morbidity and prevention and minimization of kidney damage is one of the most important goals of early anti-inflammatory therapy in these patients.

Current methods for assessment of kidney involvement/damage are limited to serum creatinine, its derivative, estimated GRF (eGFR), measurement of the protein to creatinine ratio in urine (UPCR) and histologic examination of kidney biopsies.

eGFR is insensitive for early-stage disease, UPCR lacks specificity and biopsies are regionally variable and highly invasive with attendant risks.

We have developed a four-protein blood-based panel, which sensitively detects kidney damage in early LN and diabetic nephropathy which significantly outperforms creatinine and eGFR.

A provisional patent application was filed in November 2024 for methods of detecting kidney damage using the blood-based panel.

We expect to make this panel available through Pharma collaborations in early 2025 prior to releasing commercially through our clinical lab.

Sales and Marketing

We employ a specialized sales force focused on targeting the approximately 6,000 rheumatologists across the United States.

Our sales representatives generally have extensive experience in healthcare sales with backgrounds

in rheumatology, diagnostics and/or pharmaceutical sales.

Our sales representatives generally have extensive experience in healthcare sales with backgrounds in rheumatology, diagnostics and/or pharmaceutical sales.

In addition, our sales representatives complete a comprehensive disease-level sales training program and are required to participate in regular, ongoing training activities and certifications.

Our goal is for our sales representative to be viewed as a collaborative resource to the rheumatologists and their practice.

Our field-based sales force is organized into 40 territories within the following four regions:

West, Central, Northeast and Southeast.

Our field-based sales force is organized into 40 territories within the following five regions:

West, Central, Northeast, Southeast and Mid-Atlantic.

We anticipate adding new territories during 2025, in a measured fashion.

We also maintain an inside sales force that helps further our access to rheumatologists located in rural and outlying areas of the United States and works to increase our brand awareness with healthcare providers in these areas.

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Finally, we execute a high-frequency promotional strategy for our top-targeted rheumatologists and their office personnel to build knowledge, understanding and retention of the benefits of our testing products.

We plan to leverage core channels for building awareness and adoption, including our participation with multiple patient advocacy organizations and medical societies, such as the American College of Rheumatology (ACR).

We plan to leverage core channels for building awareness and adoption, including our participation with multiple patient advocacy organizations and medical societies, such as the ACR.

We have also established strong relationships with multiple rheumatology care management organizations (Super Groups), which can be key in influencing favorable reimbursement.

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In order to change clinical guidelines, tests must carry a high level of published evidence demonstrating analytical validity, clinical validity, clinical utility and cost-effectiveness.

When studies with such evidence are published in peer-reviewed journals, the authors of clinical guidelines may assess the level of evidence and determine whether modifying existing guidelines to include new technology is warranted.

When studies with such evidence are published in peer-reviewed journals and demonstrate performance superior to standard of care testing, the authors of clinical guidelines may assess the level of evidence and determine whether modifying existing guidelines to include new technology is warranted.

▪ Execute an internal managed care policy and claims adjudication function as part of our core business operations .

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

While we have contracts for reimbursement with a limited number of commercial payors, we are actively pursuing additional commercial payor contracts.

While we have contracts for reimbursement with a limited number of commercial payors, we are actively pursuing favorable medical policies and additional commercial payor contracts.

When we contract to serve as a participating provider, reimbursements are made pursuant to a percentage of our charges or a negotiated fee schedule amount.

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The final results of this study showed that AVISE ® Lupus demonstrated 86% specificity and 80% sensitivity in distinguishing SLE from other CTDs and fibromyalgia.

Additionally, the results showed that AVISE ® Lupus was 33% more specific than ANA (53% specificity/89% sensitivity) and 48% more sensitive than anti-dsDNA (32% sensitivity/97% specificity).

Additionally, the results showed that AVISE ® Lupus was

33% more specific than ANA (53% specificity/89% sensitivity) and 48% more sensitive than anti-dsDNA (32% sensitivity/97% specificity).

We further demonstrated the clinical validity of AVISE ® Lupus for detection of probable SLE (pSLE) in a 246 subject, multi-center, prospective, cross-sectional study, first published in the Arthritis & Rheumatology Journal in September 2019.

The objective of this study was to evaluate the frequency of AVISE ® Lupus and CB-CAPs as a marker of complement activation in patients with pSLE and the usefulness of the AVISE ® Lupus test as a predictor of the evolution of pSLE into classified SLE by the ACR criteria.

The objective of this study was to evaluate the frequency of AVISE ® Lupus and CB-CAPs as a marker of complement activation in patients with pSLE and the usefulness of the AVISE ® Lupus platform as a predictor of the evolution of pSLE into classified SLE by the ACR criteria.

Of the 92 pSLE patients, more pSLE were positive for CB-CAPs (28%) or AVISE ® Lupus (40%) than for low complement (9%) at the enrollment visit (p=0.0001, for each) and an AVISE ® Lupus index score >0.08 prospectively associated with the development from pSLE to SLE by ACR classification criteria within 18 months (hazard ratio = 3.11, p<0.01).

With the addition of the novel T-Cell SLE biomarker panel to our AVISE ® CTD panel, we demonstrated the clinical validity of T Cell-bound autoantibodies (TIgG and TIgM) and C4d-bound CD3+ T Cells (TC4d) in a multi-center clinical validation study of 400 clinically characterized patients.

The study aimed to evaluate the panel’s performance in differentiating SLE from non-SLE autoimmune rheumatic diseases (ARDs) and healthy individuals.

At 94–95% clinical specificity for SLE vs.

healthy individuals, the sensitivity (95% CI) for SLE was 58.1% (48.1–67.7%) for TC4d, 31.4% (22.7–41.2%) for TIgG, and 29.5% (21.0–39.2%) for TIgM.

Notably, the T Cell biomarkers identified 19% of diagnosed SLE patients who were negative for all conventional SLE biomarkers and our CB-CAPs (EC4d and BC4d).

Compared to conventional SLE biomarkers (anti-dsDNA, anti-Smith, and serum complement proteins C3 & C4), the novel T Cell biomarkers demonstrated significantly greater sensitivity for SLE (64% vs.

p < 0.001, g = 0.6), with an associated odds ratio of 3.7 (95% CI:

These findings support the added clinical value of T Cell biomarkers in enhancing the sensitivity of the AVISE ® CTD panel for SLE.

The addition of anti-RA33 autoantibodies to the AVISE ® CTD panel was supported by clinical validation data demonstrating their added sensitivity in seronegative rheumatoid arthritis (RA)—patients clinically diagnosed with RA but testing negative for anti-CCP and Rheumatoid Factor (IgA/IgM).

A study involving 651 clinically characterized subjects (290 RA patients, 261 ARD controls, and 100 healthy subjects) with diagnostic cutoffs established at 98% specificity for RA vs.

healthy individuals and 95% specificity vs.

ARDs, resulted in sensitivities for anti-RA33 IgA, IgG, and IgM of 6.0%, 6.2%, and 17.7%, respectively.

Notably, 12% (13/109) of seronegative RA patients were positive for at least one anti-RA33 isotype, demonstrating their additive clinical value.

In an internal validation study of 377 clinically characterized subjects (101 seronegative RA, 60 seropositive RA, 143 ARDs, and 73 healthy controls), we established cutoffs at 95%, 96%, and 99% specificity for IgA, IgM, and IgG, respectively.

The combined sensitivity in seronegative RA was 16%, with specificity exceeding 90% for RA vs.

ARD controls, except for IgG in RA vs.

SLE (85%) and IgA/IgM in RA vs.

psoriatic arthritis (86%).

Collectively, these findings support the inclusion of anti-RA33 autoantibodies in the RA sub-panel of the AVISE ® CTD comprehensive report.

Clinical Utility

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In the group of patients randomized to the AVISE ® Lupus group, positive test results associated significantly with initiation of prednisone (p=0.03) and a similar trend was observed with HCQ therapy (p=0.11).

Finally, in the group of patients randomized to the AVISE ® Lupus group, a positive test result associated with an increase in patient-reported outcomes measuring health-related quality of life using five-level EQ-5D (EQ5D-5L index score) from enrollment to visit 2 (p=0.028), and greater improvements were detectable when compared to the group of patients positive for AVISE ® Lupus and randomized to the SDLT arm (p=0.049).

Finally, in the group of patients randomized to the AVISE ® Lupus group, a positive test result associated with an increase in patient-reported outcomes measuring health-related quality of life using five-level EQ-5D (EQ5D-5L index score) from enrollment to visit two (p=0.028), and greater improvements were detectable when compared to the group of patients positive for AVISE ® Lupus and randomized to the SDLT arm (p=0.049).

In July 2021, a real-world retrospective analysis of patients tested with the AVISE ® Lupus test was published in the journal Lupus Science & Medicine, titled "A multianalyte assay panel with cell-bound complement activation products demonstrates clinical utility in systemic lupus erythematosus clinical utility study summary." A cohort of 161 AVISE ® Lupus tested patients from 12 rheumatology centers across the United States provided clinical outcome data on diagnosis and treatment decisions following AVISE ® Lupus testing.

The study findings revealed a 7 to 15-fold increased risk of Lupus diagnosis in AVISE ® Lupus Positive and anti-dsDNA negative patients relative to patients negative for both tests.

In addition, AVISE ® Lupus positive and anti-dsDNA negative patients were at 3 to 4-fold increased odds, relative to patients testing negative for both tests, of starting a new hydroxychloroquine (cornerstone therapy for Lupus) prescription following AVISE ® Lupus testing.

The study findings revealed a seven to 15-fold increased risk of Lupus diagnosis in AVISE ® Lupus Positive and anti-dsDNA negative patients relative to patients negative for both tests.

In addition, AVISE ® Lupus positive and anti-dsDNA negative patients were at three to four-fold increased odds, relative to patients testing negative for both tests, of starting a new HCQ (cornerstone therapy for Lupus) prescription following AVISE ® Lupus testing.

Collectively, the study results affirm earlier study findings demonstrating the superior clinical utility and actionability of AVISE ® Lupus vs.

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Our laboratory is certified under the Clinical Laboratory Improvement Amendments of 1988 (CLIA) and accredited by the College of American Pathologists (CAP).

Our laboratory is certified for performance of high-complexity testing by the Centers for Medicare & Medicaid Services (CMS) in accordance with CLIA and is licensed by California and all states requiring out-of-state licensure, including the New York State Department of Health (NYSDOH).

Our clinical laboratory typically reports AVISE ® testing product results within five business days.

Our clinical laboratory typically reports AVISE ® testing results within five business days.

We believe that our existing laboratory facility is adequate to meet our business needs for at least the next 12 months and that additional laboratory space will be available on commercially reasonable terms, if required.

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We have established oversight for systems implementation and maintenance procedures, document control processes, supplier qualification,

preventive or corrective actions and employee training processes that we believe achieves excellence in operations.

preventive and/or corrective actions and employee training processes that we believe achieve excellence in operations.

We continuously monitor and improve our processes and procedures and believe this high-quality service leads to customer satisfaction and retention.

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Such traditional methods include testing for a broad range of diagnostic, immunology and chemistry biomarkers, such as ANA and anti-dsDNA, and serum complement biomarkers, such as C3 and C4.

We also face competition from commercial laboratories, such as Laboratory Corporation of America Holdings, Quest Diagnostics Incorporated, ARUP Laboratories, Inc.

and the Mayo Clinic, all of which have existing infrastructures to support the commercialization of diagnostic services.

We also face competition from commercial laboratories, such as ARUP Laboratories, Inc.;

Laboratory Corporation of America Holdings;

the Mayo Clinic;

and Quest Diagnostics Incorporated, all of which have existing infrastructures to support the commercialization of diagnostic services.

Large, multispecialty group medical clinics, health systems and academic medical university-based clinics may provide in-house clinical laboratories offering autoimmune and autoimmune-related disease testing services.

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

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

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

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

Other potential competitors include companies that might develop diagnostic, disease or drug monitoring products, such as AMPEL BioSolutions, LLC;

DxTerity Diagnostics, Inc.;

Genalyte Inc.;

Immunovia AB;

Oncimmune Holdings plc;

and Progentec Diagnostics Inc.

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

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Others may develop products with prices lower than ours or have preferred network status that could be viewed by rheumatologists and payors as functionally equivalent to our solution or offer solutions at prices designed to promote market penetration.

This 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.

Human Capital

As of December 31, 2024, we had a total of 209 employees:

203 full-time employees and 6 part-time employees.

This includes 57 in laboratory operations, 13 in research and development, 59 in sales and marketing and 74 in general and administrative functions.

All of our employees are located in the United States, none of which are represented by a labor union or covered by a collective bargaining agreement.

We consider relations with our employees to be good.

We recognize that attracting, motivating and retaining talent at all levels is vital to our continued success.

Our employees are a significant asset and we aim to create an equitable, inclusive and empowering environment in which our employees can grow and advance their careers, with the overall goal of developing, retaining and expanding our workforce, as needed, to support our current pipeline and future business goals.

By focusing on employee retention and engagement, we improve our ability to support our business operations and protect the long-term interests of our securityholders.

Our success also depends on our ability to attract, engage and retain a diverse group of employees.

Our efforts to recruit and retain a diverse and passionate workforce include providing competitive compensation and benefits packages and efforts to ensure our employees' voices are heard.

We value innovation, passion, data-driven decision making, persistence and honesty, and are building a diverse environment where our employees can thrive and be inspired to make exceptional contributions to bring novel testing products to patients.

Our human capital resources objectives include, as applicable, identifying, recruiting, retaining, motivating and integrating our existing and future employees.

The principal purposes of our equity incentive plans are to attract, retain and motivate selected employees and directors through grants of stock-based compensation awards and payments of cash-based performance bonus awards, in order to increase stockholder value and the success of our company by motivating our employees to perform to the best of their abilities and achieve our objectives.

We are committed to providing a competitive and comprehensive benefits package to our employees.

Our benefits package provides a balance of protection along with the flexibility to meet the individual health and wellness needs of our

We plan to continue to refine our efforts related to optimizing our use of human capital as we grow, including improvements in the way we hire, develop, motivate and retain employees.

Intellectual Property Overview

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We are the owner or licensee of a portfolio of patents and patent applications and possess substantial know-how and trade secrets which protect various aspects of our business.

The patent families comprising our patent portfolio are primarily focused on our AVISE ® testing products for the diagnosis, prognosis and monitoring of autoimmune and autoimmune-related diseases, and red blood cell MTXPG exposure assessments.

The patent families comprising our patent portfolio are primarily focused on our AVISE ® testing products for the diagnosis, prognosis and monitoring of autoimmune and autoimmune-related diseases.

We intend to leverage the intellectual property surrounding our AVISE ® testing products as an important component of our business strategy.

Patent Protection for our AVISE ® Testing Products

Our portfolio of patents and patent applications related to our AVISE ® testing products generally relates to two aspects:

the AVISE ® Lupus test and the AVISE ® MTX test.

Our portfolio of patents and patent applications related to our AVISE ® testing products generally relates to three aspects:

the AVISE ® Lupus platform, the AVISE ® CTD platform and the AVISE ® MTX test.

As of February 21, 2025, our portfolio primarily consisted of the following:

AVISE ® Lupus Test

We own five issued patents (US 10,132,813, US 11,360,099, US 11,531,033, US 11,761,965, and US 11,885,812), six U.S.

nonprovisional patent applications, one US provisional patent application, and ten foreign patents that relate to our AVISE® Lupus products.

The foreign patents have issued in Europe (EP 2,673,644 and EP2972365), China (CN105229470), Japan (JP6453299) and Hong Kong (HK1192316).

AVISE ® Lupus Platform

We own five issued U.S.

patents (US 10,132,813, US 11,360,099, US 11,531,033, US 11,761,965, and US 11,885,812), three U.S.

nonprovisional patent applications, and six foreign patents that relate to our AVISE ® Lupus platform.

The foreign patents have issued in Europe (EP2972365), China (CN105229470), and Japan (JP6453299).

These patents cover the AVISE ® Lupus algorithm.

The patent applications expire between 2032 and 2040.

Any patent claiming priority to the U.S.

provisional patent application will expire in 2044.

The patents expire between 2032 and 2034.

TC4d, TIgG and TIgM Biomarkers

We licensed one issued patent (US 9,709,564) that relates to our AVISE ® CTD product.

A foreign patent application has been filed in Brazil (BR112017002575 2).

These patents cover a method of specifically diagnosing SLE through the combined use of a CB-CAP bound to a t-cell along with t-cell autoantibodies.

patent expires in 2035.

MTX Exposure Assessment Products and Services

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These patents include U.S.

7,582,282 and 7,695,908, which are expected to expire between 2026 and 2027.

We previously held licenses to five patent families related to CB-CAPs technology from the University of Pittsburgh (UPitt).

We have terminated these license agreements (related to U.S.

7,361,517, 7,390,631, 7,585,640, 7,588,905, 8,080,382, 8,126,654, and foreign equivalents thereof), effective March 22, 2024.

Our royalty obligations continue on cash collected in future periods for testing services provided prior to the royalty expiration date of March 23, 2024.

7,582,282 and 7,695,908, which are expected to expire in 2026 and 2027, respectively.

Proprietary Rights and Processes

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Amended and Restated Exclusive License Agreement with the University of Pittsburgh

In August 2011, we entered into an amended and restated exclusive license agreement with UPitt, to amend and restate the exclusive license agreement we obtained by our purchase of the medical diagnostics division of Cypress Bioscience, Inc.

(Cypress) in 2010 (the Cypress Purchase) and to obtain an exclusive license to UPitt’s patent rights in certain inventions (the UPitt Patent Rights) related to the use of CB-CAPs technology in the diagnosis, prognosis and monitoring of diseases, including certain patents related to our AVISE ® testing products.

Under the agreement, we are permitted to make, use and sell products and services utilizing the UPitt Patent Rights in the field of SLE and the field of monitoring of organ transplantation and organ rejection and to sublicense such rights.

UPitt retained the right to practice under the UPitt Patent Rights and to use such rights for non-commercial education and research purposes.

In addition, this agreement is subject to the rights of the U.S.

government, if any, as set forth in 35 U.S.C.

§200, et seq.

Pursuant to this law, the U.S.

government may have acquired a nonexclusive, nontransferable, paid-up license to practice or have practiced for or on behalf of the U.S.

government the inventions described in the UPitt Patent Rights throughout the world.

In consideration for the rights granted to us under the agreement, we made certain upfront payments to UPitt on the first and second anniversaries of the agreement that increased on the third and subsequent anniversaries of the agreement until the first sale of products or services utilizing the UPitt Patent Rights.

We are required to pay UPitt a low single-digit royalty on net sales of products or services utilizing the UPitt Patent Rights sold by us or our affiliates, subject to minimum annual royalty payments and other adjustment in certain circumstances.

We also made a $0.2 million milestone payment to UPitt with the achievement of certain levels of net sales which we met in 2014.

Our royalty obligations continue for each licensed product or service on a country-by-country basis only until

March 23, 2024, which is the date of the expiration of the last licensed patent covering the applicable licensed product or service.

Exclusive License Agreement and Master Research Collaboration Agreement with Allegheny Health Network Research Institute

In May 2021, we entered into an exclusive license agreement with AHN, under which we obtained an exclusive, worldwide license to AHN's patent rights in certain inventions (the AHN Patent Rights) related to diagnostics for autoimmune rheumatic diseases.

In August 2011, we entered into an amended and restated exclusive license agreement (the UPitt License Agreement) with the University of Pittsburgh (UPitt), through which we obtained an exclusive license to UPitt’s patent rights in certain inventions (the UPitt Patent Rights) related to the use of CB-CAPs technology in the diagnosis, prognosis and monitoring of diseases, including certain patents related to our AVISE ® testing products.

Under the agreement, we were required to pay UPitt a low single-digit royalty on net sales of products or services that utilized the UPitt Patent Rights sold by us or our affiliates, subject to minimum annual royalty payments and other adjustment in certain circumstances.

The UPitt License Agreement terminated on March 23, 2024, which was the date of the expiration of the last licensed patent covering the applicable licensed product or service, and our royalty obligations for cash collections related to each licensed product or service ended on such date.

Amended and Restated Exclusive License Agreement with Allegheny Health Network Research Institute

In May 2021, we entered into an exclusive license agreement with AHN, as amended in January 2025, under which we obtained an exclusive, worldwide license to AHN's patent rights in certain inventions (the AHN Patent Rights) related to diagnostics for autoimmune rheumatic diseases.

Under the agreement, we are permitted to make, use and sell products and services utilizing the AHN Patent Rights and to sublicense such rights;

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government with respect to the AHN Patent Rights, including under a funding agreement between AHN and the U.S.

government and under the Bayh-Dole Act (35 U.S.C.

government and under the Bayh-Dole Act of 1980 (Bayh-Dole Act) (35 U.S.C.

§200, et seq.).

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In consideration for the rights granted to us under the agreement, we paid an initial license fee to AHN to cover past patent expenses and agreed to pay future direct patent costs related to AHN Patent Rights.

We are also required to pay AHN a low single-digit royalty on net sales of products utilizing the AHN Patent Rights through the first quarter of 2024 sold by us or our affiliates, subject to adjustment in certain circumstances.

We were also required to pay AHN a low single-digit royalty on net sales of products utilizing the AHN Patent Rights through the first quarter of 2024 sold by us or our affiliates, subject to adjustment in certain circumstances.

Beginning in the second quarter of 2024, we are required to pay AHN an increased low single-digit royalty or a flat annual minimum royalty amount, which royalty obligations continue for each licensed product on a country-by-country basis until the expiration of the last licensed patent covering the applicable licensed product in such country, pending approvals and commercialization, or the earlier termination of the agreement (excluding payment obligations accruing prior to such termination).

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Absent early termination, the agreement will continue until expiration date of the longest-lived patent right included in the AHN Patent Rights.

In addition, we entered into a master research collaboration agreement with AHN, focused on the development of novel patented biomarkers for diagnosis, prognosis and monitoring of autoimmune diseases, including SLE.

The agreement has a three-year initial term, expiring May 2024, with renewals thereafter for successive one-year terms upon mutual agreement with AHN.

Each party may terminate the agreement upon 60 days' notice to the other party.

We are required to pay AHN a collaboration fee of $0.4 million for each year of the agreement and AHN is required to make an in-kind contribution equivalent of $0.3 million for the initial term and each subsequent one-year term, if any.

Exclusive License Agreement and Collaboration Agreement with Queen Mary University of London

In November 2021, we entered into an exclusive license agreement with Queen Mary University of London (QMUL), under which we obtained an exclusive license to QMUL's patent-pending inventions (the QMUL Patent Rights), related to diagnosis and/or development of diagnostic or companion diagnostics for RA.

Under the agreement, we are permitted to make, use and sell products and services utilizing the QMUL Patent Rights and to sublicense such rights;

provided, however, that any such sublicenses may only be granted with QMUL's consent.

QMUL retained the right to practice under the QMUL Patent Rights and to use such rights for teaching, research, education, public service, clinical and other research-related purposes.

In consideration for the rights granted to us under the agreement, we paid an initial license fee to QMUL and payment of past patent expenses and ongoing patent expenses.

We are required to make a $0.1 million milestone payment upon the first commercial sale of products utilizing the QMUL Patent Rights.

In addition, after the first 18 months of commercial sales under the terms of the exclusive license agreement, we are required to pay royalties in the low to high single-digits on net sales of testing products using the assigned patents, pending approvals and commercialization.

In the event we sublicense any of the QMUL Patent Rights, we are obligated to pay QMUL a double-digit percentage of sublicensing income, whether in the form of royalties or sub-license fees.

The agreement requires that we diligently develop and commercialize products that are covered by the QMUL Patent Rights.

QMUL may terminate the agreement if we fail to develop the QMUL Patent Rights in the field of diagnosis and/or development of diagnostic or companion diagnostics for rheumatoid arthritis, QMUL may convert our license to non-exclusive.

In April 2023, we discontinued development of our AVISE ® RADR platform, which was being developed using the QMUL Patent Rights.

We also discontinued the associated clinical trials.

We are permitted to terminate the license agreement upon six month written notice to QMUL.

QMUL may terminate the agreement in the event of our nonperformance of any of our material obligations under the agreement if such nonperformance remains uncured for a certain period of time following our receipt of written notice of such nonperformance or in the event of insolvency.

Absent early termination, the agreement will continue for a period of 20 years after the first commercial sale of any licensed product utilizing the QMUL Patent Rights.

In addition, we entered into a collaboration agreement with QMUL for a three-year term, expiring November 2024.

We or QMUL may terminate the master research collaboration agreement upon 30-day written notice.

In January 2025, we amended the amended and restated exclusive license agreement with AHN to include additional terms regarding the sale by us of certain combination products under the AHN Patent Rights.

Under the amendment, we are required to pay AHN a nominal royalty on net sales of combination products utilizing the T-Cell Biomarkers under the AHN Patent Rights.

Exclusive License Agreement Johns Hopkins University

In November 2023, we entered into an exclusive license agreement with Johns Hopkins University, under which we obtained an exclusive, worldwide license to JHU’s patent rights in certain inventions (the JHU Patent Rights) related to methods of using urinary protein biomarkers as a means of risk stratifying lupus nephritis patients and predicting treatment response.

In November 2023, we entered into an exclusive license agreement with JHU, under which we obtained an exclusive, worldwide license to JHU’s patent rights in certain inventions (the JHU Patent Rights) related to methods

of using urinary protein biomarkers as a means of risk stratifying lupus nephritis patients and predicting treatment response.

Under the agreement, we are permitted to make, use, import, export, offer and sell products and services utilizing the JHU Patent Rights and to sublicense such rights, subject to certain limitations.

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Absent early termination, the agreement will continue for the longer of (i) expiration of the last to expire patent included in the license agreement, (ii) 10 years after the first commercial sale of any licensed product utilizing the JHU Patent Rights, or (iii) if no patents issue, 20 years from the effective date of the agreement (November 8, 2023).

We may terminate the agreement upon ninety days’ advance written notice to JHU.

We may terminate the agreement upon 90 days’ advance written notice to JHU.

Exclusive License Agreement and Collaboration Agreement with Queen Mary University of London

We terminated this agreement with QMUL in September 2024.

Clinical Laboratory Improvement Amendments of 1988

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The laws and regulations governing the marketing of diagnostic products are evolving, extremely complex, and in many instances, there are no significant regulatory or judicial interpretations of these laws and regulations.

We perform our tests like AVISE ® CTD, AVISE ® SLE Prognostic and AVISE ® MTX assays in our Vista, California clinical laboratory, and they are currently primarily regulated under CLIA, as administered by CMS, as well as by applicable state laws, as described above.

The FDA regulates any diagnostic tests that meet the definition of a medical device, except under specific, narrow circumstances.

We perform our tests like AVISE ® CTD, AVISE ® SLE Prognostic and AVISE ® MTX assays in our Vista, California clinical laboratory, and although the performance of such tests is primarily regulated under CLIA, as administered by CMS, as well as by applicable state laws, as described above, the FDA has in recently promulgated regulations asserted its authority over the safety and efficacy of such laboratory developed tests (LDTs), including through pre-market review, and the controls necessary to maintain assay quality.

Food and Drug Administration (FDA) regulates any diagnostic tests that meet the definition of a medical device, except under specific, narrow circumstances.

The Federal Food, Drug and Cosmetic Act (FDCA) defines a medical device as "an instrument, apparatus, implement, machine, contrivance, implant, in vitro reagent, or other similar or related article, including a component part, or accessory, which is, among other things:

intended for use in the

diagnosis of disease or other conditions, or in the cure, mitigation, treatment, or prevention of disease, in man or other animals and which does not achieve its primary intended purposes through chemical action within or on the body of man or other animals and which is not dependent upon being metabolized for the achievement of any of its primary intended purposes." By this definition, in vitro reagents and diagnostic tests are considered medical devices.

intended for use in the diagnosis of disease or other conditions, or in the cure, mitigation, treatment, or prevention of disease, in man or other animals and which does not achieve its primary intended purposes through chemical action within or on the body of man or other animals and which is not dependent upon being metabolized for the achievement of any of its primary intended purposes." By this definition, in vitro reagents and diagnostic tests are considered medical devices.

Specifically, the FDA defines an in vitro diagnostic test (IVD) as "reagents, instruments, and systems intended for use in the diagnosis of disease or other conditions, including a determination of the state of health, in order to cure, mitigate, treat, or prevent disease or its sequelae." Therefore, the FDA generally considers diagnostic testing products like ours to be IVDs subject to the agency's regulatory requirements.

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and 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 the malfunction were to recur.

The FDA has broad post-market and regulatory and enforcement powers.

The FDA has broad post-market and regulatory and enforcement powers, including facility inspections and market surveillance.

Failure to comply with the applicable U.S.

medical device regulatory requirements could result in, among other things, warning letters, fines, injunctions, consent decrees, civil penalties, repairs, replacements, refunds, recalls or seizures of products, total or partial suspension of production, the FDA’s refusal to grant future premarket clearances or approvals, withdrawals or suspensions of current product applications, and criminal prosecution.

Although the FDA has statutory authority to assure that medical devices, including IVDs, are safe and effective for their intended uses, the FDA has generally exercised its enforcement discretion and not enforced applicable device regulations with respect to IVDs that are designed, manufactured and used within a single high-complexity CLIA-certified laboratory for use only in that laboratory.

Such tests are referred to as LDTs.

Although the FDA had historically statutory authority to assure that medical devices, including IVDs, are safe and effective for their intended uses, the FDA has generally exercised its enforcement discretion and not enforced applicable device regulations with respect to LDTs, which are IVDs that are designed, manufactured and used within a single high-complexity CLIA-certified laboratory.

We believe that all of our AVISE ® test products are LDTs, as are our near-term pipeline candidate tests.

However, in October 2023, the FDA issued a proposed rule aimed at regulating LDTs under the current medical device framework and proposing to phase out its existing enforcement discretion policy for this category of diagnostic tests;

the public comment period ended in early December 2023.

The proposal envisions that the LDT enforcement policy phase-out process would occur in gradual stages over a total period of four years, with pre-market approval applications for high-risk tests to be submitted by the 3.5-year mark, although more details are expected to be provided with the upcoming final rule.

The likelihood of the FDA finalizing the proposed rule in April 2024 (as is currently projected), as well as potential litigation challenging the agency’s authority to take such action, is uncertain at this time.

Affected stakeholders continue to press for a comprehensive legislative solution to create a harmonized paradigm for oversight of LDTs by

both the FDA and CMS, instead of implementation of the proposed FDA administrative action, which may be disruptive to the industry and to patient access to certain diagnostic tests.

However, in May 2024, the FDA issued a final rule aimed at regulating LDTs under the current medical device framework and phasing out its existing enforcement discretion policy for this category of diagnostic tests;

the final rule became effective on July 5, 2024.

The LDT enforcement policy phase-out process will occur in gradual stages over a total period of four years, with pre-market approval applications for high-risk tests to be submitted by the 3.5-year mark.

Moderate-risk and low-risk tests are expected to be in compliance at the 4-year mark, although FDA has stated it will continue to exercise enforcement discretion with respect to tests that are the subject of pre-market submissions that are pending review.

The FDA’s final rule and proposed phase-out process is complex and, concurrently, the agency announced several exceptions from the requirement to comply with full medical device regulatory controls, depending upon the specific nature of the LDT and the clinical laboratory that is offering such LDT for use by healthcare providers.

We have begun the process of evaluating the final rule’s potential impact on our AVISE ® test products, our operations, and our business more generally.

Publication of the LDT final rule prompted the American Clinical Laboratory Association (ACLA) and one of its members, on May 29, 2024, as well as the Association for Molecular Pathology (AMP) and one of its members, on August 19, 2024, to file complaints against the FDA in the Eastern District of Texas and the Southern District of Texas, respectively.

Both complaints allege that the agency does not have authority to promulgate the LDT final rule and seek to vacate the FDA’s action;

the two cases were subsequently consolidated into a single action pending in the Eastern District of Texas.

Briefing is ongoing in the consolidated case and the outcome is uncertain.

The ongoing litigation could potentially affect the FDA’s plans to implement these new LDT requirements, making the implementation timeline somewhat uncertain although no preliminary injunction has been issued to date.

Accordingly, the agency has continued its implementation efforts by actively providing guidance and training to clinical laboratories on how to comply with medical device general controls.

Following the transition to the new Trump administration, it is unclear whether the Executive Branch of the U.S.

government will continue to defend the FDA’s rulemaking action in the consolidated litigation in Texas or if it will take steps to rescind or modify the LDT final rule.

Affected stakeholders also continue to press for a comprehensive legislative solution to create a harmonized paradigm for oversight of LDTs by both the FDA and CMS, instead of implementation of the FDA’s final rule, which may be disruptive to the industry and to patient access to certain diagnostic tests.

However, this FDA rulemaking was initiated after years of failed congressional attempts to harmonize the regulatory paradigms

applicable to LDTs and other IVDs, making it unclear whether any legislative efforts would be successful going forward.

The outcome of the November 2024 elections on the composition of the 2025-2026 Congress, with both the Senate and House transitions to Republican control, also creates uncertainties for the diagnostic industry.

Even though we presently commercialize our tests as LDTs, the FDA may disagree that our marketed tests are within the scope of its current enforcement discretion criteria for LDTs, our tests may in the future become subject to more onerous regulation by the FDA.

For several years, members of Congress have been working with stakeholders on a possible bill to regulate in vitro clinical tests including LDTs.

For example, as drafted and re-introduced for consideration by the current Congress, legislation called the Verifying Accurate, Leading-edge IVCT Development (VALID Act), has been garnering bipartisan and bicameral support.

The VALID Act would codify into law the term "in vitro clinical test" (IVCT) to create a new medical product category separate from medical devices that includes products currently regulated as IVDs as well as LDTs.

The VALID Act would also create a new system for labs and hospitals to use to submit their tests electronically to the FDA for approval, which is aimed at reducing the amount of time it takes for the agency to approve such tests, and establish a new program to expedite the development of diagnostic tests that can be used to address a current unmet need for patients.

It is unclear whether the VALID Act would be passed by Congress in its current form or signed into law by the President.

If the FDA finalizes its position on regulation of LDTs through the ongoing notice-and-comment rulemaking process, or the VALID Act or other federal legislation is passed reforming the government’s regulation of LDTs, or alternatively, if the FDA disagrees with our assessment that our tests fall within the definition of an LDT, we could, for the first time, be subject to enforcement of regulatory requirements such as registration and listing requirements, medical device reporting requirements and quality control requirements.

Any new legislation or FDA regulations affecting LDTs may result in increased regulatory burdens on our ability to continue marketing our tests and to develop and introduce new tests in the future.

Additionally, if and when the FDA begins to actively enforce its premarket submission regulations with respect to LDTs generally or our tests in particular, whether as a result of new legislative authority or culmination of the current notice-and-comment rulemaking process, we may be required to obtain premarket clearance for our tests under Section 510(k) of the FDCA or approval of a PMA.

If and when the FDA begins to actively enforce its premarket submission regulations with respect to LDTs generally or to our tests in particular, whether as a result of new legislative authority or under the May 2024 LDT final rule, depending upon the risk classification of each individual test, we may be required to obtain premarket clearance for our diagnostic assays under Section 510(k) of the FDCA or approval of a PMA.

The process for submitting a 510(k) premarket notification and receiving FDA clearance usually takes from three to 12 months, but it can take significantly longer, and clearance is never guaranteed.

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PMA approval typically requires extensive clinical data and can be significantly longer, more expensive and more uncertain than the 510(k) clearance process.

If premarket review is required for some or all of our tests, the FDA could require that we stop selling our products pending clearance or approval and conduct clinical testing prior to making submissions to the FDA to obtain premarket clearance or approval.

If premarket review is required for some or all of our tests, the FDA could require that we stop selling our tests and testing services pending clearance or approval and conduct clinical testing prior to making submissions to FDA to obtain premarket clearance or approval.

The FDA could also require that we label our tests as investigational or limit the labeling claims we are permitted to make.

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In addition, trials involving human subjects often require significant time and cash resources to complete and are subject to a high degree of risk, including risks of experiencing delays, failing to complete the trial or obtaining unexpected or negative results.

If the investigational device presents a “significant risk,” as defined by the FDA, the agency requires the device sponsor to submit an investigational device exemption application (IDE) to the FDA.

The exemption must become effective prior to commencing human clinical studies.

A significant risk device is one that presents a potential for serious risk to the health, safety or welfare of a patient and either is implanted, used in supporting or sustaining human life, substantially important in diagnosing, curing, mitigating or treating disease or otherwise preventing impairment of human health, or otherwise presents a potential for serious risk to a patient.

An IDE must be supported by appropriate non-clinical data, such as animal and laboratory test results, showing that the device has a safety profile appropriate for human testing and that the trial protocol is scientifically sound.

The IDE will automatically become effective 30 days after receipt by the FDA, unless the FDA expressly approves or denies the application in writing or notifies the sponsor that the investigation is on hold and may not begin until the sponsor provides supplemental information about the investigation that satisfies the agency’s concerns.

If the FDA determines that there are deficiencies or other concerns with an IDE that require modification of the trial, the FDA may permit a clinical trial to proceed under a conditional approval or the sponsor and the FDA must resolve any outstanding concerns before the clinical trial can begin.

If the device presents a non-significant risk to the patient according to criteria established by FDA as part of the IDE regulations, a sponsor may begin the clinical trial after obtaining approval for the trial by one or more IRBs without separate authorization from the FDA, but must still comply with abbreviated IDE requirements, such as monitoring the investigation, ensuring that the investigators obtain informed consent, and labeling and record-keeping requirements.

In the Consolidated Appropriations Act for 2023, Congress amended the FDCA to require the sponsor of any pivotal clinical trial that will be used to demonstrate the safety and effectiveness of a medical device marketing authorization submission to develop a diversity action plan for such trial, and if submission of an IDE application is required, to submit such diversity action plan to the FDA.

The action plan must include the sponsor’s diversity goals for enrollment, as well as a rationale for the goals and a description of how the sponsor will meet them.

The FDA may grant a waiver for some or all of the requirements for a diversity action plan.

It is unknown at this time how the diversity action plan may affect device pivotal clinical trial planning and timing, but if FDA objects to a sponsor’s diversity action plan and requires the sponsor to amend the plan or take other actions, it may delay trial initiation.

Advertising of Laboratory Services or LDTs

Advertising for laboratory services and diagnostic testing products is subject to federal truth-in-advertising laws enforced by the Federal Trade Commission (FTC), as well as comparable state consumer protection laws, whether or not such services are regulated by the FDA as Class I or Class II devices or not directly subject to enforcement

discretion with respect to the FDA’s device requirements as LDTs.

Under the Federal Trade Commission Act (FTC Act), the FTC is empowered, among other things, to (a) prevent unfair methods of competition and unfair or deceptive acts or practices in or affecting commerce;

Under the Federal Trade Commission Act (the FTC Act), the FTC is empowered, among other things, to (a) prevent unfair methods of competition and unfair or deceptive acts or practices in or affecting commerce;

(b) seek monetary redress and other relief for conduct injurious to consumers;

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In addition to statutory exceptions to the Anti-Kickback Statute, regulations provide for a number of safe harbors.

If an arrangement meets the provisions of a safe harbor or exception, it is deemed not to violate the Anti-Kickback Statute, and the parties are immune from prosecution.

If an arrangement meets the provisions of a safe harbor or exception, it is deemed to comply with the Anti-Kickback Statute, and the parties are immune from prosecution.

An arrangement must fully comply with each element of an applicable safe harbor in order to qualify for protection.

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In addition, providers and suppliers must report and return any overpayments received from the Medicare and Medicaid programs within 60 days of identification, and failure to identify and return such overpayments exposes the provider or supplier to federal False Claims Act liability.

Violation of the federal False Claims Act may result payment of up to three times the actual damages sustained by the government, plus significant per-claim civil penalties, as well as mandatory exclusion from government healthcare programs.

Violation of the federal False Claims Act may result payment of up to three times the actual damages sustained by the government, plus

significant per-claim civil penalties, as well as mandatory exclusion from government healthcare programs.

Several states, including California, have enacted comparable false claims laws that may apply regardless of payor.

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Like the Anti-Kickback Statute, this federal criminal statute requires a showing of intent, but a person or entity does not need to have actual knowledge of the statute or specific intent to violate it in order to have committed a violation.

The Physician Payments Sunshine Act imposes annual reporting requirements on manufacturers of certain devices, drugs and biologics for certain payments and transfers of value by them and in some cases their distributors to physicians (defined to include doctors, dentists, optometrists, podiatrists and chiropractors), certain other healthcare providers (such as nurse practitioners), and teaching hospitals, as well as ownership and investment interests held by physicians (as defined under the statute) and their immediate family members.

The Physician Payments Sunshine Act imposes annual reporting requirements on manufacturers of certain devices, drugs and biologics for certain payments and transfers of value by them and in some cases their distributors to physicians (defined to include doctors, dentists, optometrists, podiatrists and chiropractors), certain other advanced non-physician healthcare practitioners (such as nurse practitioners), and teaching hospitals, as well as ownership and investment interests held by physicians and their immediate family members.

Any failure to comply with these reporting requirements could result in significant fines and penalties.

Because we manufacture our own in vitro diagnostic tests solely for use by or within our own laboratory, we believe that we are exempt from these reporting requirements.

We may become subject to such reporting requirements under the terms of current CMS regulations, however, if enacted federal legislation renders our tests regulated by FDA, or if FDA finalizes its recently initiated notice-and-comment rulemaking to exercise authority over LDTs as medical devices or otherwise requires us to obtain premarket clearance or approval for one or more of our tests.

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.

We may become subject to such reporting requirements under the terms of current CMS regulations, however, if the FDA requires us to obtain marketing authorizations for our diagnostic tests as medical devices (whether because the agency determines that one or more of such tests do not fall within the scope of the agency’s existing LDT definition or because of its recently issued final rule to exercise authority over LDTs as medical devices) or Congress enacts legislative reforms to the federal oversight of LDTs to subject them to FDA regulation and/or the reporting requirements of the Sunshine Act.

It is presently unknown how CMS will respond to the recently finalized FDA policy change to effectively render all LDTs medical device products under federal law, and whether or when it will assert that the Sunshine Act’s reporting requirements will begin to apply to the manufacturers of such LDTs.

Given that litigation is ongoing between members of the clinical laboratory industry and FDA/HHS in relation to the May 2024 LDT final rule, it may be many months or even years before we have clarity on the applicability of state and federal Sunshine Act laws to our business.

Certain states also require medical device manufacturers to maintain compliance programs and/or be licensed as manufacturers or distributors by a state professional board or health department.

Because the FDA’s now-in-effect final rule renders a clinical laboratory like ours a “medical device manufacturer,” we have begun the process of evaluating whether and to what extent those kinds of medical device-specific state requirements may be applicable to our operations.

We are also subject to applicable state restrictions on laboratory billing.

These laws vary from state to state but generally are intended to prevent a provider who ordered but did not perform the service from billing for that service at a markup.

For example, California has an anti-markup statute with which we must comply, which prohibits a provider from charging for any laboratory test that it did not perform unless the provider (a) notifies the patient, client or customer of the name, address and charges of the laboratory performing the test, and (b) charges no more than what the provider was charged by the clinical laboratory that performed the test except for any other service actually rendered to the patient by the provider (for example, specimen collection, processing and handling).

or customer of the name, address and charges of the laboratory performing the test, and (b) charges no more than what the provider was charged by the clinical laboratory that performed the test except for any other service actually rendered to the patient by the provider (for example, specimen collection, processing and handling).

This provision applies, with certain limited exceptions, to licensed persons such as physicians and clinical laboratories regulated under California’s Business and Professions Code.

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Other states have similar anti-markup and other client billing restrictions with which we must comply.

Many states also have "direct-bill" laws, which require the party that performed the service to bill for the service, with certain exceptions.

Many states also have "direct-bill" laws, that require the party that performed the service to bill for the service, with certain exceptions.

If our operations are found to be in violation of any of the fraud and abuse laws described above or any other healthcare regulatory laws that apply to us, we may be subject to penalties, including potentially significant criminal and civil and/or administrative penalties, damages, fines, disgorgement, imprisonment, exclusion from participation in government healthcare programs, contractual damages, reputational harm, administrative burdens, diminished profits and future earnings, and the curtailment or restructuring of our operations, any of which could adversely affect our ability to operate our business and our results of operations.

International Regulations

Many countries in which we may offer any of our testing products in the future have anti-kickback regulations prohibiting providers from offering, paying, soliciting or receiving remuneration, directly or indirectly, in order to induce business that is reimbursable under any national healthcare program.

In situations involving physicians employed by state-funded institutions or national healthcare agencies, violation of the local anti-kickback law may

also constitute a violation of the U.S.

Foreign Corrupt Practices Act (FCPA), and/or other applicable anti-corruption laws.

The FCPA prohibits any U.S.

individual, business entity or employee of a U.S.

business entity from offering or providing, directly or through a third party, including any potential distributors we may rely on in certain markets, anything of value to a foreign official with corrupt intent to influence an award or continuation of business or to gain an unfair advantage, whether or not such conduct violates local laws.

In addition, it is illegal for a company that reports to the SEC to have false or inaccurate books or records or to fail to maintain a system of internal accounting controls.

We will also be required to maintain accurate information and control over sales and distributors’ activities that may fall within the purview of the FCPA, including its books and records provisions and its anti-bribery provisions.

The standard of intent and knowledge under the FCPA’s anti-bribery provisions is minimal intent and knowledge are usually inferred from the fact that bribery took place.

The FCPA’s accounting provisions do not require intent.

Violations of the FCPA’s anti-bribery provisions for corporations and other business entities are subject to a fine of up to $2.0 million and officers, directors, stockholders, employees and agents are subject to a fine of up to $100,000 and imprisonment for up to five years.

Other countries, including the United Kingdom and other Organisation for Economic Co-Operation and Development Anti-Bribery Convention members, have similar anti-corruption regulations, such as the U.K.

When marketing our testing products outside of the United States, we may be subject to foreign regulatory requirements governing human clinical testing, prohibitions on the import of tissue necessary for us to perform our testing products or restrictions on the export of tissue imposed by countries outside of the United States or the import of tissue into the United States, and marketing approval.

If we market our testing products outside of the United States, we may be subject to foreign regulatory requirements governing human clinical testing, prohibitions on the import of tissue necessary for us to perform our testing products or restrictions on the export of tissue imposed by countries outside of the United States or the import of tissue into the United States, and marketing approval.

These requirements vary by jurisdiction, differ from those in the United States and may in some cases require us to perform additional pre-clinical or clinical testing.

In many countries outside of the United States, coverage, pricing and reimbursement approvals are also required.

Additionally, many countries in which we may offer any of our testing products in the future have anti-kickback regulations prohibiting providers from offering, paying, soliciting or receiving remuneration, directly or indirectly, in order to induce business that is reimbursable under any national healthcare program.

Privacy and Security Laws

Data Privacy and Security Laws

HIPAA established comprehensive federal standards for the privacy and security of health information.

In 2009, Congress enacted Subtitle D of the Health Information Technology for Economic and Clinical Health Act (HITECH) provisions of the American Recovery and Reinvestment Act of 2009.

HITECH amended HIPAA and, among other things, expanded and strengthened HIPAA, created new targets for enforcement, imposed new penalties for noncompliance and established new breach notification requirements.

The Administrative Simplification provisions of the federal Health Insurance Portability and Accountability Act of 1996 (HIPAA), as amended by the federal Health Information Technology for Economic and Clinical Health Act (HITECH) the U.S.

Department of HHS has issued regulations that established comprehensive federal standards for the privacy and security of health information.

HITECH, among other things, expanded and strengthened HIPAA, created new targets for enforcement, imposed new penalties for noncompliance, and established new breach notification requirements.

HIPAA applies to health plans, healthcare clearing houses, and healthcare providers that conduct certain healthcare transactions electronically (collectively, Covered Entities), as well as individuals or entities that perform services for them involving the use, or disclosure of, individually identifiable health information or "protected health information" (PHI) under HIPAA (Business Associates).

Under HIPAA, as amended by the HITECH Act, HHS has issued regulations to protect the privacy and security of PHI used or disclosed by Covered Entities and Business Associates.

HIPAA also regulates and standardizes the codes, formats and identifiers used in certain healthcare transactions and standardization of identifiers for health plans and providers, for example insurance billing.

Any non-compliance with HIPAA and HITECH and related penalties, could adversely impact our business.

The HIPAA security standards require the adoption of administrative, physical and technical safeguards and the adoption of written security policies and procedures to maintain the security of protected health information.

The HIPAA security standards require the adoption of administrative, physical, and technical safeguards and the adoption of written security policies and procedures to maintain the security of PHI.

Also, federal agencies are increasing their focus on the importance of cybersecurity in protecting health information.

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The HIPAA privacy regulations address the privacy of PHI by limiting the use and release of such information.

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

They also set forth certain rights that an individual has with respect to an individual’s PHI maintained by a covered entity, including the right to access or amend certain records containing PHI, request an accounting of disclosures of PHI, and to request restrictions on the use or disclosure of PHI.

The HIPAA breach notification regulations impose certain reporting requirements on Covered Entities and their Business Associates in the event of a breach of PHI.

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Breaches must be reported as soon as reasonably practicable, but no later than sixty days following discovery of the breach.

Reports must be made to affected individuals, the Secretary, and depending on the size of the breach, the local and national media.

Covered Entities like us are also

subject to the HHS HIPAA audit program and may be investigated in connection with a privacy or data security complaint.

Reports must be made to affected individuals, the

Secretary, and depending on the size of the breach, the local and national media.

Covered Entities like us are also subject to the HHS HIPAA audit program and may be investigated in connection with a privacy or data security complaint.

Significant civil and criminal fines and other penalties may be imposed for violating HIPAA directly, and in connection with acts or omissions of any agents, including downstream business associates, as determined according to the federal common law of agency.

Civil penalties are adjusted for inflation on an annual basis and can exceed one million dollars per year for failure to comply with a HIPAA requirement.

A single breach incident can violate multiple requirements.

Additionally, a person who knowingly obtains or discloses PHI in violation of HIPAA may face criminal penalties (including fines and imprisonment), which increase if the wrongful conduct involves false pretenses or the intent to sell, transfer or use PHI for commercial advantage, personal gain or malicious harm.

Penalties for failure to comply with a requirement of HIPAA and HITECH vary significantly depending on the failure and include civil monetary penalties of up to approximately $2.1 million per violation of the same requirement per calendar year (as of August 8, 2024, subject to annual inflation adjustments).

A single breach incident can violate multiple requirements, resulting in potential penalties in excess of $2.1 million.

Additionally, a person who knowingly obtains or discloses individually identifiable health information in violation of HIPAA may face a criminal penalty of up to $50,000 and up to one year of imprisonment.

These criminal penalties increase if the wrongful conduct involves false pretenses or the intent to sell, transfer or use identifiable health information for commercial advantage, personal gain, or malicious harm.

Covered Entities are also subject to enforcement by state Attorneys General who were given authority to enforce HIPAA.

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

Even when HIPAA does not apply, according to the FTC, failing to take appropriate steps to keep consumers’ personal information secure constitutes unfair acts or practices in or affecting commerce in violation of Section 5(a) of the FTC Act.

Even when HIPAA does not apply, according to the FTC, failing to take appropriate steps to keep consumers’ personal information secure constitutes unfair or deceptive acts or practices in or affecting commerce in violation of Section 5(a) of the FTC Act.

The FTC expects a company’s data security measures to be reasonable and appropriate in light of the sensitivity and volume of consumer information it holds, the size and complexity of its business, and the cost of available tools to improve security and reduce vulnerabilities.

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The California Confidentiality of Medical Information Act (CMIA) imposes restrictive requirements regulating the use and disclosure of health information and other personally identifiable information.

California has also recently adopted the California Consumer Privacy Act of 2018 (CCPA), which went into effect January 1, 2020.

The CCPA, among other things, creates new data privacy obligations for covered companies and provides new privacy rights to California residents, including the right to opt out of certain disclosures of their information.

It also creates individual privacy rights for California consumers and increases the privacy and security obligations of entities handling certain personal information.

In addition to the CMIA, California adopted the California Consumer Privacy Act of 2018 (CCPA), which went into effect January 1, 2020.

The CCPA, among other things, created new data privacy obligations for covered companies and provides new privacy rights to California residents, including the right to opt out of certain disclosures of their information.

It also created individual privacy rights for California consumers and increased the privacy and security obligations of entities handling certain categories of personal information.

The CCPA provides for civil penalties for violations, as well as a private right of action for data breaches that is expected to increase data breach litigation.

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It also created a new California data protection agency authorized to issue substantive regulations and is expected to result in increased privacy and information security enforcement.

Various states such as Colorado, Connecticut, Delaware, Florida, Indiana, Iowa, Montana, Oregon, Tennessee, Texas, Utah and Virginia have enacted their own privacy laws similar to the CCPA, and other states are considering proposals for such laws, all of which increases the complexity of compliance and the risk of failures to comply.

Various states such as Colorado, Connecticut, Delaware, Florida, Indiana, Iowa, Kentucky, Maryland, Montana, Nebraska, New Hampshire, New Jersey, Oregon, Rhode Island, Tennessee, Texas, Utah, and Virginia have enacted their own omnibus consumer

privacy laws similar to the CCPA, and other states are considering proposals for such laws, all of which increases the complexity of compliance and the risk of failures to comply.

Numerous other federal and state laws, including consumer protection laws and regulations, govern the collection, dissemination, use, access to, confidentiality and security of patient health information.

For example, Washington state recently enacted the “My Health My Data” Act which regulates a broad category called “consumer health data,” defined as “personal information that is linked or reasonably linkable to a consumer and that identifies a consumer’s past, present, or future physical or mental health.” Notably, the “My Health My Data” Act contains a private right of action, which is expected to increase litigation.

In addition, Congress and some states are considering new laws and regulations that further protect the privacy and security of medical records or medical information.

With the recent increase in publicity regarding data breaches resulting in improper dissemination of consumer information, all 50 states have passed laws regulating the actions that a business must take if it experiences a data breach, as defined by state law, including prompt disclosure within a specified amount

of time to affected individuals.

In addition to data breach notification laws, some states have enacted statutes and rules requiring businesses to reasonably protect certain types of personal information they hold or to otherwise comply with certain specified data security requirements for personal information.

Congress has also been considering similar federal legislation relating to data privacy and data protection.

Many states, such as Massachusetts, have also implemented genetic testing and privacy laws imposing specific patient consent requirements and requirements for protecting test results.

Many states have also implemented genetic testing and privacy laws imposing specific patient consent requirements and requirements for protecting test results.

The interplay of federal and state laws regulating genetic information may be subject to varying interpretations by courts and government agencies, creating complex compliance issues for us and potentially exposing us to additional expense, adverse publicity and liability.

Further, as regulatory focus on genetic privacy issues continues to increase and laws and regulations concerning the protection of personal information expand and become more complex, these potential risks to our business could intensify.

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

For example, increasing concerns about health information privacy have recently prompted the federal government to issue guidance, taking a newly expansive view of the scope of the laws and regulations that they enforce.

The applicability and requirements of these laws and penalties for violations vary widely.

Failure to maintain compliance, or changes in state or federal laws regarding privacy or security, could result in civil and/or criminal penalties and damages and could have a material adverse effect on our business.

Also, more than thirty states regulate artificial intelligence (AI) or are considering proposed legislation that would regulate AI.

Generally, such regulations aim to protect individuals such as consumers, employees, and/or job applicants from bias, discrimination, and invasion of privacy and to promote transparency with respect to use of AI by companies.

Information Blocking Rules

The Office of the National Coordinator for Health Information Technology (ONC) coordinates the ongoing development of standards to enable interoperable health information technology infrastructure nationwide in the healthcare sector.

In May 2020, ONC released the final Information Blocking Rule to implement the interoperability and patient access provisions of the 21st Century Cures Act.

We will need to continually review our practices for conduct that could be considered as likely to interfere with access, exchange or use of electronic health information, as those practices are prohibited by the Information Blocking Rule, unless one of the exceptions outlined in the Information Blocking Rule applies.

In May 2020, ONC released the final Information Blocking Rule to implement the interoperability and patient access provisions of the 21st Century Cures Act, which took effect in 2021.

We need to continually review our practices for conduct that could be considered as likely to interfere with access, exchange or use of electronic health information, as those practices are prohibited by the Information Blocking Rule, unless one of the exceptions outlined in the Information Blocking Rule applies.

Among other things, the Information Blocking Rule requires us to provide patients with on-demand access to laboratory test results.

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It is currently unclear how the ONC will approach delays in providing patient access in these situations.

Healthcare providers including laboratories will be subject to civil monetary penalties for violations of the Information Blocking Rule once the penalty regulations are finalized.

The amount of such penalties for laboratories is unknown, but the regulations for health industry networks (HINs), health information exchanges (HIEs), and certified developers of health information technology allow for up to $1.0 million in penalties per violation.

Healthcare providers including laboratories will be subject "disincentives" for violations of the Information Blocking Rule.

HHS and ONC released a final rule establishing disincentives for health care providers that have committed information blocking on June 24, 2024, potentially affecting certain providers’ eligibility in the Medicare Promoting Interoperability Program and Medicare Shared Savings Program.

HHS indicated it may establish additional health care provider disincentives in future rulemaking.

GDPR and Foreign Laws

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In Europe, the General Data Protection Regulation (GDPR) went into full effect in May 2018.

The GDPR implements stringent operational requirements for processors and controllers of personal data, including, for example, expanded disclosures about how personal information is collected and used, limitations on retention of information, increased requirements pertaining to health data and pseudonymized (i.e., key-coded) data, mandatory data breach notification requirements, more robust rights for individuals in regard to their personal data and higher standards for controllers to demonstrate that they have obtained valid consent for certain data processing activities.

data and pseudonymized (i.e., key-coded) data, mandatory data breach notification requirements, more robust rights for individuals in regard to their personal data and higher standards for controllers to demonstrate that they have obtained valid consent for certain data processing activities.

It provides that European Union (EU), and European Economic Area (EEA), member states may make their own further laws and regulations, which may impose further limitations, including in relation to the processing of biometric or health data, which may result in differences between member state laws, limit our ability to use and share personal data, cause our costs to increase and/or harm our business and/or financial condition.

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For example, in 2016, the EU and the United States agreed to a transfer framework for data transferred from the EU to the United States, called the Privacy Shield, but the Court of Justice of the EU invalidated the Privacy Shield when it decided the case Maximilian Schrems vs.

Facebook (Case C-311-18), known as Schrems II .

However, on July 10, 2023, the European Commission adopted an adequacy decision for a new mechanism for transferring data from the EU to the United States – the EU-US Data Privacy Framework, which provides EU individuals with several new rights, including the right to obtain access to their data, or obtain correction or deletion of incorrect or unlawfully handled data.

Facebook (Case C-311-18), known as “Schrems II.” However, on July 10, 2023, the European Commission adopted an adequacy decision for a new mechanism for transferring data from the EU to the United States – the EU-U.S.

Data Privacy Framework, which provides EU individuals with several new rights, including the right to obtain access to their data, or obtain correction or deletion of incorrect or unlawfully handled data.

The adequacy decision followed the signing of an executive order introducing new binding safeguards to address the points raised in the Schrems II decision.

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The European Commission will continually review developments in the United States along with its adequacy decision.

Adequacy decisions can be adapted or even withdrawn in the event of developments affecting the level of protection in the

applicable jurisdiction.

Adequacy decisions can be adapted or even withdrawn in the event of developments affecting the level of protection in the applicable jurisdiction, and uncertainty surrounding the continuing independence of the redress mechanism in the United States could lead the EU to revisit or withdraw its adequacy decision.

Future actions of EU data protection authorities are difficult to predict.

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GDPR, companies not established in the United Kingdom but who process personal data in relation to the offering of goods or services to individuals in the United Kingdom, or to monitor their behavior will be subject to the U.K.

GDPR – the requirements of which are (at this time) largely aligned with those under the EU GDPR and as such, may lead to similar compliance and operational costs with potential fines of up to £17.5 million or 4% of global turnover In June of 2021, the European Commission issued a decision, which will sunset on June 27, 2025 without further action, that the United Kingdom ensures an adequate level of protection for personal data transferred under the EU GDPR from the EU to the United Kingdom.

The Parliament of the United Kingdom is currently considering the Data Protection and Digital Information Bill to harmonize the 2018 Data Protection Act, U.K.

GDPR, and the Privacy and Electronic Communications Regulations under one legislative framework.

GDPR—the requirements of which are (at this time) largely aligned with those under the EU GDPR and as such, may lead to similar compliance and operational costs with potential fines of up to £17.5 million or 4% of global turnover.

In June of 2021, the European Commission issued a decision, which will sunset on June 27, 2025 without further action, that the United Kingdom ensures an adequate level of protection for personal data transferred under the EU GDPR from the EU to the United Kingdom.

Billing and Government Reimbursement for Clinical Laboratory Services

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The MAC responsible for administering Medicare claims submitted by our laboratory, Noridian Healthcare Solutions (Noridian), has adopted Palmetto’s positive coverage policy, along with a related local coverage article that identifies a unique billing identifier for this test.

Under Medicare, payment for our laboratory tests are generally made under the Clinical Laboratory Fee Schedule (CLFS) with payment amounts assigned to specific procedure billing codes.

Under Medicare, payment for our laboratory tests is generally made under the Clinical Laboratory Fee Schedule (CLFS) with payment amounts assigned to specific procedure billing codes.

In April 2014, Congress passed the Protecting Access to Medicare Act (PAMA), which substantially changed the way in which Medicare sets the payment amounts for clinical laboratory services.

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PAMA did not impact Medicare reimbursement for AVISE ® CTD in 2024 compared to levels experienced in 2023.

Additionally, PAMA and changes to the PFS will not have a significant impact to Medicare reimbursement for AVISE ® CTD in 2024 compared to levels experienced in 2023.

Since December 2019, Congress has passed a series of laws to modify PAMA’s statutory requirements related to the data reporting period and phase-in of payment reductions under the CLFS or CDLTs that are not ADLTs Most recently, the Further Continuing Appropriations and Other Extensions Act of 2024 (Pub.L.

118-22, enacted on November 16, 2023) further delayed the reporting requirement as well as the application of the 15% phase-in reduction.

Under these statutory provisions, the next data reporting period for CDLTs that are not ADLTs will be January 1, 2025 through March 31, 2025, and will be based on the most recent data collection period of January 1, 2019 through June 30, 2019.

Additionally, we do not expect PAMA and changes to the PFS will not have a significant impact to Medicare reimbursement for AVISE ® CTD in 2025 compared to levels experienced in 2024.

Most recently, on September 26, 2024, Section 221 of the Continuing Appropriations and Extensions Act, 2025, was passed, and it delayed data reporting requirements for CDLTs that are not ADLTs as well as the phase-in of payment reductions.

The next data reporting period for CDLTs that are not ADLTs will be January 1, 2026 through March 31, 2026, and will be based on the original data collection period of January 1, 2019 through June 30, 2019.

After this data reporting period, the three-year data reporting cycle for these tests will resume (e.g., 2028, 2031, etc.).

The same series of laws modified the phase-in of payment reductions resulting from private payor rate implementation so that a 0.0% reduction limit was applied for calendar years (CYs) 2021 through 2024, as compared to the payment amounts for a test the preceding year.

The Further Continuing Appropriations and Other Extensions Act of 2024 further applied a 0.0% reduction limit for CY 2024.

The Further Continuing Appropriations and Other Extensions Act, 2025, further applied a 0.0% reduction limit for CY 2025.

Consequently, payment may not be reduced by more than 15% per year for CYs 2026 through 2028 as compared to the payment amounts established for a test the prior year.

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The AMA publishes approved codes on a quarterly basis.

We requested a PLA code and in the quarter ended March 31, 2022, CMS agreed, effective April 1, 2022, to recognize a new PLA code for our protein-based test, AVISE ® Lupus.

Billing for diagnostic testing can be complicated.

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Any of these penalties or sanctions could have a material adverse effect on our results of operations or cash flows.

Healthcare Reform

In March 2010, the Affordable Care Act (ACA) was enacted in the United States and made a number of substantial changes to the way healthcare is financed both by governmental and private payors.

Although the ACA included a medical device tax, the tax never went into effect and was fully repealed by Congress with enactment of the 2019 federal spending package signed into law on December 20, 2019.

Since the ACA’s enactment, there have been judicial and Congressional challenges to certain aspects of the ACA, and as a result, certain sections of the ACA have not been fully implemented or were effectively repealed.

However, following several years of litigation in the federal courts, in June 2021, the U.S.

Supreme Court (the Supreme Court) upheld the ACA when it dismissed a legal challenge to the ACA’s constitutionality.

Further legislative and regulatory changes under the ACA remain possible, although the current Democrat-led presidential administration has been taking steps to strengthen the ACA.

Future changes or additions to the ACA, the Medicare and Medicaid programs and changes stemming from other healthcare reform measures, especially with regard to healthcare access, financing or other legislation in individual states, could have a material adverse effect on the healthcare industry in the United States.

The uncertainty around the future of the ACA, and in particular the impact to reimbursement levels and the number of insured individuals, may lead to delay in the purchasing decisions of our customers.

In addition to the ACA, there will likely continue to be proposals by legislators at both the federal and state levels, regulators and private third-party payors to reduce costs while expanding individual healthcare benefits.

Environmental and Other Regulatory Requirements

Our laboratory is subject on an ongoing basis to federal, state and local laws and regulations governing the use, storage, handling and disposal of regulated medical waste, hazardous waste and biohazardous waste, including

chemicals, biological agents and compounds and blood and other tissue specimens.

Typically, we use licensed or otherwise qualified outside vendors to dispose of this waste.

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

However, many of these laws and regulations provide

for strict liability, holding a party potentially liable without regard to fault or negligence.

As a result, we could be held liable for damages and fines if our, or others', business operations or other actions result in contamination of the environment or personal injury due to exposure to hazardous materials.

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Occupational Safety and Health Administration relating to workplace safety for healthcare employees, including requirements to develop and implement programs to protect workers from exposure to blood-borne pathogens by preventing or minimizing any exposure through needle stick or similar penetrating injuries.

Human Capital

As of December 31, 2023, we had a total of 179 employees:

174 full-time employees and 5 part-time employees.

This includes 44 in laboratory operations, 9 in research and development, 49 in sales and marketing and 72 in general and administrative functions.

All of our employees are located in the United States, none of which are represented by a labor union or covered by a collective bargaining agreement.

We consider relations with our employees to be good.

We recognize that attracting, motivating and retaining talent at all levels is vital to our continued success.

By focusing on employee retention and engagement, we also improve our ability to support our business and operations, our pipeline, and also protect the long-term interests of our securityholders.

Our success also depends on our ability to attract, engage and retain a diverse group of employees.

Our efforts to recruit and retain a diverse and passionate workforce include providing competitive compensation and benefits packages and efforts to ensure our employees' voices are heard.

Our human capital resources objectives include, as applicable, identifying, recruiting, retaining, motivating and integrating our existing and future employees.

We are committed to providing a competitive and comprehensive benefits package to our employees.

Our benefits package provides a balance of protection along with the flexibility to meet the individual health and wellness needs of our employees.

We plan to continue to refine our efforts related to optimizing our use of human capital as we grow, including improvements in the way we hire, develop, motivate and retain employees.

We conduct periodic anonymous employee surveys aimed at measuring the overall satisfaction of our team and make efforts to address issues brought to our attention.

The results consistently show that our employees consider their work valuable and meaningful.

Information About Our Directors and Executive Officers

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John Aballi President, Chief Executive Officer and Director

Kamal Adawi Chief Financial Officer and Corporate Secretary

Black Chief Financial Officer and Corporate Secretary

Tina Nova, Ph.D.

Executive Chairman of the Board of Directors

Brian Birk Managing Partner, Co-Founder, Sun Mountain Capital

Ana Hooker Senior Vice President, Chief Laboratory Officer, Exact Sciences Corporation

Wendy Johnson Chief Business Officer, Reneo Pharmaceuticals, Inc.

Scott Kahn, Ph.D.

Director, Rady Children's Institute for Genomic Medicine

Paul Kim Chief Financial Officer, Fulgent Genetics, Inc.

Ebetual Pallares, Ph.D.

Managing Member, Proficio Capital Management, LLC

Bruce Robertson, Ph.D.

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Frank Stokes Chief Financial Officer, Castle Biosciences, Inc.

Diversity and Inclusion

Our organization recognizes the importance of diversity and inclusion in recruiting, developing and retaining the best available talent.

We are committed to further understanding and building upon our diversity and inclusion strengths and are continuing the process of identifying opportunities and developing initiatives.

As of December 31, 2023, 58.6% of our employees identified as female, 33.9% identified as male and 7.5% of our employees identified as other or declined to self-identify.

Additionally, 47.9% of our employees identified as White, 24.2% as Hispanic or Latino, 15.1% as Asian, 3.8% as Black or African-American, 3.2% as two or more races (not Hispanic or Latino), 0.6% as Native Hawaiian or other Pacific Islander, and 0.6% as American Indian or Alaska Native.

4.9% of our employees identified as other or declined to self-identify.

Environmental, Social and Governance Matters

In 2020, we undertook a review of our environmental, social and governance (ESG), matters.

In 2021, we released our initial Sustainability Report.

In 2022, we created an Environmental, Social and Governance Committee (ESG Committee) with the purpose, duties and responsibility of reviewing and recommending our programs, policies and practices relating to ESG issues.

In 2022, we created our Environmental, Social and Governance Committee (ESG Committee) with the purpose, duties and responsibility of reviewing and recommending our programs, policies and practices relating to ESG issues.

The ESG Committee meets formally at least annually and plans to make recommendations to our President and Chief Executive Officer to be presented to the audit committee of our board of directors (the Audit Committee) when warranted.

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Our website address is www.exagen.com.

The information

contained in, or accessible through, our website is not part of, and is not incorporated by reference into, this Annual Report.

The information contained in, or accessible through, our website is not part of, and is not incorporated by reference into, this Annual Report.

Investors should not rely on any such information in deciding whether to purchase our common stock.

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Our filings with the SEC are available free of charge on the SEC’s website and on the "Investors" section of our website as soon as reasonably practicable after we electronically file such material with, or furnish it to, the SEC.

The SEC maintains an internet site that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC at www.sec.gov.

The SEC maintains a website that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC at www.sec.gov.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 1. Business