1 unchanged sentence
Investing in our common stock involves a high degree of risk.
−Removed: You should consider carefully the risks and uncertainties described below, together with all of the other information included in this Annual Report on Form 10-K, including our financial statements and related notes and "Management’s Discussion and Analysis of Financial Condition and Results of Operations," before making an investment decision to purchase or sell shares of our common stock.
+Added: You should consider carefully the risks and uncertainties described below, together with all of the other information included in this Annual Report, including our financial statements and related notes and "Management’s Discussion and Analysis of Financial Condition and Results of Operations," before making an investment decision to purchase or sell shares of our common stock.
If any of the following risks are realized, our business, financial condition, results of operations and prospects could be materially and adversely affected.
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You should carefully consider these risk factors, together with the risk factors set forth in this Item 1A:
−Removed: • We have a history of losses, we expect to incur net losses in the future and we may not be able to generate sufficient revenue to achieve and maintain profitability;
+Added: • Our operating results may fluctuate significantly, which makes our future operating results difficult to predict and could cause our operating results to fall below expectations or any guidance we may provide.
+Added: We have a history of losses and we may not be able to generate sufficient revenue to achieve and maintain profitability.
+Added: Our estimates regarding profitability and the time in which we may achieve profitability may ultimately be incorrect;
• If third-party payors do not provide coverage and adequate reimbursement for our testing products, or they breach, rescind or modify their contracts or reimbursement policies or delay payments for our testing products, or if we or our partners are unable to successfully negotiate payor contracts, our commercial success could be materially compromised;
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• Our commercial success depends on attaining and maintaining significant market acceptance of our testing products among rheumatologists, patients, third-party payors and others in the medical community;
−Removed: • We rely on sole suppliers for some of the reagents, equipment and other materials used in our testing products, and we may not be able to fund replacements or transition to alternative suppliers;
+Added: • We rely on sole suppliers for some of the reagents, equipment and other materials used in our testing products, and a sole third-party fulfillment center used to supply healthcare providers with our testing products, and we may not be able to fund replacements or transition to alternative suppliers or fulfillment centers;
• If we are unable to support demand for our current testing products or any of our future testing products or solutions, our business could suffer;
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• We have previously and may again in the future be required to modify our business practices, pay fines, incur significant expenses or experience losses due to litigation or governmental investigations;
−Removed: • The FDA may disagree with our assessment that our AVISE® test products and any other tests we may develop are LDTs and determine that such test products are medical devices subject to the FDCA and FDA regulations;
+Added: • The FDA may disagree with our assessment that our AVISE ® test products and any other tests we may develop are LDTs eligible for enforcement discretion and determine that such test products are fully subject to active compliance enforcement under the FDCA and FDA regulations;
• If we are unable to maintain intellectual property protection, our competitive position could be harmed;
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We have incurred net losses since our inception.
−Removed: For the years ended December 31, 2023 and 2022, we incurred net losses of $23.7 million and $47.4 million, respectively, and we expect to incur additional losses in 2024 and in future years.
+Added: For the years ended December 31, 2024 and 2023, we incurred net losses of $15.1 million and $23.7 million, respectively, and we expect to incur additional losses in 2025 and in future periods.
As of December 31, 2024, we had an accumulated deficit of $294.3 million.
+Added: We also expect to continue to devote substantial resources to increase adoption of, and reimbursement for, our testing products and to develop future testing products.
Over the next several years, we expect to continue to devote substantially all of our resources to increase adoption of, and reimbursement for, our testing products and to develop future testing products.
1 unchanged sentence
Our failure to achieve and maintain profitability in the future could cause the market price of our common stock to decline and materially and adversely affect our prospects and business.
−Removed: If third-party payors do not provide coverage and adequate reimbursement for our testing products, or they breach, rescind or modify their contracts or reimbursement policies or delay payments for our testing products, or if we or our partners are unable to successfully negotiate payor contracts, our commercial success could be compromised.
−Removed: Successful commercialization of our testing products depends, in large part, on the availability of coverage and adequate reimbursement from third-party payors, including government payors, such as Medicare and Medicaid and commercial payors.
+Added: If third-party payors do not provide coverage and adequate reimbursement for our testing products, or they breach, rescind or modify their contracts or reimbursement policies or delay payments for our testing products, or if we or our partners are unable to successfully negotiate payor contracts, our commercial success could be materially compromised.
+Added: Successful commercialization, or continued commercialization, of our testing products depends, in large part, on the availability of coverage and adequate reimbursement from third-party payors, including government payors, such as Medicare and Medicaid and commercial payors.
For the testing products that we develop and commercialize, each third-party payor decides whether to cover the product, the amount it will reimburse for a covered product and the specific conditions for reimbursement.
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• included in clinical guidelines.
−Removed: If we are unable to provide third-party payors with sufficient evidence of the clinical utility and validity of our test, they may not provide coverage, or may provide limited coverage, which will adversely affect our revenue and our
−Removed: ability to succeed.
+Added: If we are unable to provide third-party payors with sufficient evidence of the clinical utility and validity of our tests, they may not provide coverage, or may provide limited coverage, which may materially and adversely affect our revenue and our ability to succeed.
In addition, clinicians may be less likely to order a test unless third-party payors pay a substantial portion of the test price.
−Removed: Therefore, coverage determinations and reimbursement levels and conditions are critical to commercial success, and if we are not able to secure positive coverage determinations and reimbursement levels, our business will be materially adversely affected.
+Added: Therefore, coverage determinations and reimbursement levels and conditions are critical to commercial success, and if we are not able to secure positive coverage determinations and reimbursement levels, our business may be materially adversely affected.
Third-party payors and other entities also conduct technology assessments of new medical tests and devices and provide and/or sell the results of their assessments to other parties.
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So, in an effort to improve transparency regarding Medicare support of AVISE ® Lupus, we submitted a formal request to Noridian for coverage of our AVISE ® Lupus test under the new PLA Code.
−Removed: On September 27, 2022, we received notice that Noridian has deemed our application for an LCD to be valid.
+Added: On September 27, 2022, we received notice that Noridian has deemed our application for an LCD to be valid, but our application is still pending.
Ultimately receiving a favorable LCD is uncertain and may be time-consuming, resource intensive and require multiple quarterly or annual periods to complete.
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Even if many third-party payors currently reimburse for our testing products, such payors have in the past and may again withdraw coverage at any time, review and adjust the rate of reimbursement, require co-payments from patients or stop paying for our testing products altogether, any of which could materially reduce our revenue.
+Added: Our operating results may fluctuate significantly, which makes our future operating results difficult to predict and could cause our operating results to fall below expectations or any guidance we may provide.
+Added: Our estimates regarding profitability and the time in which we may achieve profitability may ultimately be incorrect.
+Added: Our quarterly and annual operating results may fluctuate significantly, which makes it difficult for us to predict our future operating results.
+Added: The estimated time in which we may achieve positive Adjusted EBITDA and profitability and
+Added: fluctuations in our operating results may vary from period to period due to a variety of factors, many of which are beyond our control.
+Added: These factors include, but are not limited to:
+Added: • our ability to successfully market and sell our AVISE ® testing products;
+Added: • our ability to increase the average selling price for our AVISE ® testing products;
+Added: • our ability to successfully commercialize new testing products and to do so in the timelines in which we expect, including the January 2025 launch of AVISE ® CTD incorporating our new T-Cell Biomarkers and RA Sub-Profile Biomarkers;
+Added: • the extent to which the T-Cell Biomarkers and RA Sub-Profile Biomarkers are reimbursed by third-party payors;
+Added: • the extent to which our current testing and future testing products, if any, are eligible for coverage and reimbursement from third-party payors;
+Added: • the timing and cost of, and level of investment in, research, development, regulatory approval and commercialization activities relating to our testing products, which may change from time to time
+Added: • the cost of supplies, equipment and materials used for our testing products and laboratory operations, which may vary depending on the quantity of production and the terms of our agreements with third-party suppliers and manufacturers;
+Added: • expenditures that we may incur to acquire, develop or commercialize additional testing products and technologies;
+Added: • the level of demand for our testing products, which may vary significantly;
+Added: • the receipt, timing and mix of revenue for our testing products;
+Added: • future accounting pronouncements or changes in our accounting policies;
+Added: • our ability to collect timely reimbursement for our tests;
+Added: • the rate and extent to which payors make an overpayment determination and require us to return all or some portion of payments which we received in a prior period;
+Added: • the timing and success or failure of competing products, or any other change in the competitive landscape of our industry, including consolidation among our competitors or partners.
+Added: The cumulative effects of these factors could result in large fluctuations and unpredictability in our quarterly and annual operating results and could cause our estimates regarding positive Adjusted EBITDA profitability to ultimately be incorrect.
+Added: For instance during 2024, our quarterly operating results varied due, in part, to our efforts regarding revenue cycle management.
+Added: As a result, comparing our operating results on a period-to-period basis may not be meaningful.
+Added: Investors should not rely on our past results as an indication of our future performance.
+Added: This variability and unpredictability could also result in our failing to meet the expectations of industry or financial analysts or investors for any period.
+Added: If our revenue, Adjusted EBITDA, profitability estimates or operating results fall below the expectations of analysts or investors or below any forecasts we may provide to the market, this could have a material adverse effect on our business, financial condition and results of operations and/or cause the market price of our common stock to decline.
In the near-term, we expect that our financial results will depend primarily on sales of our testing products, and we will need to generate sufficient revenue from these testing products to grow our business.
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In the near term, we expect to continue to derive a majority of our revenue from sales of AVISE ® CTD.
−Removed: We are in various stages of research and development with respect to other testing products that we may offer, but there can be no assurance that we will be able to commercialize these testing products.
+Added: We are in various stages of commercialization and research and development with respect to other testing products that we may offer, but there can be no assurance that we will be able to successfully develop or commercialize these testing products.
The demand for our testing products may decrease or may not continue to increase at historical rates for a number of reasons.
In addition, at any point in time we may decide to no longer commercialize any of our testing products for any number of reasons.
−Removed: While we have experienced revenue growth from the sale of our testing products, we may not be able to sustain this growth or maintain existing revenue levels.
+Added: While we have experienced revenue growth from the sale of our testing products, we
+Added: may not be able to sustain this growth or maintain existing revenue levels.
Further, we cannot ensure the continued availability of our testing products in commercial quantities at acceptable costs.
−Removed: If we are unable to increase sales of our testing products, expand reimbursement for our testing products, or successfully develop and commercialize
−Removed: additional testing products, our revenue and our ability to achieve and sustain profitability would be impaired, and the market price of our common stock could decline.
+Added: If we are unable to increase sales of our testing products, expand reimbursement for our testing products, or successfully develop and commercialize additional testing products, our revenue and our ability to achieve and sustain profitability would be impaired, and the market price of our common stock could decline.
Business disruptions could seriously harm our future revenue and financial condition and increase our costs and expenses.
−Removed: Our operations could be subject to earthquakes, power shortages, telecommunications failures, water shortages, floods, hurricanes, typhoons, fires, extreme weather conditions, medical epidemics, political instability, acts of war, including the current conflict in Ukraine and the Middle East, and other natural or manmade disasters (which may be exacerbated due to climate change) or business interruptions, for which we are predominantly self-insured.
+Added: Our operations could be subject to earthquakes, power shortages, telecommunications failures, water shortages, floods, hurricanes, typhoons, fires, extreme weather conditions, medical epidemics, political instability, acts of war, including the current conflicts in Ukraine and the Middle East, and other natural or manmade disasters (which may be exacerbated due to climate change) or business interruptions, for which we are predominantly self-insured.
We rely on third-party manufacturers to produce our testing products.
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Pursuant to Section 404 of Sarbanes-Oxley, our management is required to report upon the effectiveness of our internal control over financial reporting.
−Removed: When we lose our status as an “emerging growth company” and reach an accelerated filer threshold, our independent registered public accounting firm will be required to attest to the effectiveness of our internal control over financial reporting.
+Added: When we reach an accelerated filer threshold, our independent registered public accounting firm will be required to attest to the effectiveness of our internal control over financial reporting.
The rules governing the standards that must be met for management to assess our internal control over financial reporting are complex and require significant documentation, testing and possible remediation.
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If we or, if required, our auditors are unable to conclude that our internal control over financial reporting is effective, investors may lose confidence in our financial reporting and the trading price of our common stock may decline.
−Removed: On November 13, 2022, management and the Audit Committee determined that we made certain errors in revenue resulting from erroneous and duplicate billings related to changes in billing practices.
−Removed: The errors were due to the inadequate design, implementation and precision of internal controls and procedures to evaluate and monitor the accounting for revenue recognition.
−Removed: As a result, revenue and accounts receivable were overstated and other liabilities was understated for the quarter and year to date periods ended June 30, 2022.
−Removed: We concluded that these were material errors in the financial statements requiring a restatement of the Form 10-Q for the three and six months ended June 30, 2022.
−Removed: Accordingly, management determined that this control deficiency constituted a material weakness as of December 31, 2022.
−Removed: In response to the material weaknesses, and as previously disclosed in Item 9A of our annual report on Form 10-K for the year ended December 31, 2022, we implemented a remediation plan which included, but was not limited to, evaluating the staffing level, skills and qualification of accounting department personnel, enhancement of our existing control structure and processes for revenue recognition and improving the detailed review process of our revenue recognition models.
−Removed: The enhancements made to our control environment were in place as of December 31, 2023, and based on the evaluation of relevant internal controls, management has concluded that the material weaknesses previously identified have been remediated as of December 31, 2023.
−Removed: We cannot assure you that there will not be material weaknesses or significant deficiencies in our internal control over financial reporting in the future.
+Added: Our management has previously identified material weaknesses in our internal controls that we believe have been remediated, however we cannot assure you that there will not be material weaknesses or significant deficiencies in our internal control over financial reporting in the future.
Any failure to maintain internal control over financial reporting could severely inhibit our ability to accurately report our financial condition, results of operations or cash flows.
−Removed: If we are unable to conclude that our internal control over financial reporting is effective, or if our independent registered public accounting firm determines we have a material weakness or significant deficiency in our internal control over financial reporting once that firm begin its Section 404 reviews, investors may lose confidence in the accuracy and completeness of our financial reports, the market price of our common stock could decline, and we could be subject to sanctions or investigations by Nasdaq, the SEC or other regulatory authorities.
+Added: If we are unable to conclude that our internal control over financial reporting is effective, or if our independent registered public accounting firm determines we have a material weakness or significant deficiency in our internal control over financial reporting once that firm begin its Section 404 reviews, investors may lose confidence in the accuracy and completeness of our financial reports, the market price of our common stock could decline, and we could be subject to sanctions or investigations by the Nasdaq Stock Market LLC, the SEC or other regulatory authorities.
Failure to remedy any material weakness in our internal control over financial reporting, or to implement or maintain other effective control systems required of public companies, could also restrict our future access to the capital markets.
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Our efforts to educate the medical community and third-party payors regarding the benefits of our testing products may require significant resources and may never be successful.
−Removed: We may experience limits on our revenue if rheumatologists decide not to order our testing products or if we are otherwise unable to create or maintain demand for our testing products.
+Added: We may experience limits on our revenue if healthcare providers decide not to order our testing products or if we are otherwise unable to create or maintain demand for our testing products.
If we are unable to create or maintain demand for our testing products in sufficient volume, we may not generate sufficient revenue to become profitable.
−Removed: To generate increased demand, we will need to continue to educate rheumatologists about the benefits of our testing products through publications in peer-reviewed medical journals, presentations at medical conferences and other similar means.
−Removed: For example, in the fourth quarter of 2023, we were featured in five scientific presentations at the 2023 ACR Annual Conference, ACR Convergence 2023.
+Added: To generate increased demand, we will need to continue to educate healthcare providers about the benefits of our testing products through publications in peer-reviewed medical journals, presentations at medical conferences and other similar means.
+Added: For example, in the fourth quarter of 2024, we were featured in five scientific presentations at the 2024 ACR annual meeting.
We will also need to generate demand for our testing products through one-on-one education by our sales force.
We also plan to focus on educating patients about the benefits of these testing products, which we believe will be necessary to generate further demand.
−Removed: In addition, our inability to obtain and maintain coverage and adequate reimbursement
−Removed: from third-party payors may limit adoption by rheumatologists, as well as third-party payors exerting pressure on rheumatologists and healthcare providers to order in-network testing products which could adversely affect our revenue.
−Removed: Rheumatologists may rely on guidelines issued by industry groups regarding the diagnosis, prognosis, treatment and monitoring of autoimmune and autoimmune-related diseases, and the monitoring of the effectiveness of therapeutic drugs used to treat such diseases before utilizing any diagnostic test or monitoring solution.
+Added: In addition, our inability to obtain and maintain coverage and adequate reimbursement from third-party payors may limit adoption by healthcare providers, as well as third-party payors exerting pressure on healthcare providers to order in-network testing products which could adversely affect our revenue.
+Added: Healthcare providers may rely on guidelines issued by industry groups regarding the diagnosis, prognosis, treatment and monitoring of autoimmune and autoimmune-related diseases, and the monitoring of the effectiveness of therapeutic drugs used to treat such diseases before utilizing any diagnostic test or monitoring solution.
The sizes of the markets for our testing products have not been established with precision and may be smaller than we estimate.
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These include, without limitation, the number of patients with autoimmune and autoimmune-related diseases and the assumed prices at which we can sell testing products and our partners can sell therapeutics in markets that have not been established.
−Removed: While we believe our assumptions and the data underlying our estimates are reasonable, these assumptions and estimates may not be correct and the conditions supporting our assumptions or estimates may change at any time, thereby reducing the predictive accuracy of these underlying factors.
+Added: While we believe our assumptions and the data underlying our estimates are reasonable, these assumptions and estimates may not be correct and the conditions supporting our assumptions or estimates may change at any time, thereby reducing the predictive
+Added: accuracy of these underlying factors.
As a result, our estimates of the annual total addressable market for our current and potential future testing products may prove to be incorrect.
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If we do not accurately evaluate the commercial potential or target market for a potential testing product, we may forego other similar arrangements which would have been more advantageous for us to pursue.
−Removed: Our operating results may fluctuate significantly, which makes our future operating results difficult to predict and could cause our operating results to fall below expectations or any guidance we may provide.
−Removed: Our quarterly and annual operating results may fluctuate significantly, which makes it difficult for us to predict our future operating results.
−Removed: These fluctuations may occur due to a variety of factors, many of which are outside of our control, including, but not limited to:
−Removed: • our ability to successfully market and sell our AVISE ® testing products;
−Removed: • the extent to which our current testing and future testing products, if any, are eligible for coverage and reimbursement from third-party payors;
−Removed: • the timing and cost of, and level of investment in, research, development, regulatory approval and commercialization activities relating to our testing products, which may change from time to time, and our ability to successfully commercialize new testing products;
−Removed: • the cost of supplies, equipment and materials used for our testing products and laboratory operations, which may vary depending on the quantity of production and the terms of our agreements with third-party suppliers and manufacturers;
−Removed: • expenditures that we may incur to acquire, develop or commercialize additional testing products and technologies;
−Removed: • the level of demand for our testing products, which may vary significantly;
−Removed: • the receipt, timing and mix of revenue for our testing products;
−Removed: • future accounting pronouncements or changes in our accounting policies;
−Removed: • our ability to collect timely reimbursement for our tests;
−Removed: • the rate and extent to which payors make an overpayment determination and require us to return all or some portion of payments which we received in a prior period;
−Removed: • the timing and success or failure of competing products, or any other change in the competitive landscape of our industry, including consolidation among our competitors or partners.
−Removed: The cumulative effects of these factors could result in large fluctuations and unpredictability in our quarterly and annual operating results.
−Removed: For instance during 2023, our operating results varied due, in part, to our efforts regarding revenue cycle management.
−Removed: As a result, comparing our operating results on a period-to-period basis may not be meaningful.
−Removed: Investors should not rely on our past results as an indication of our future performance.
−Removed: This variability and unpredictability could also result in our failing to meet the expectations of industry or financial analysts or investors for any period.
−Removed: If our revenue or operating results fall below the expectations of analysts or investors or below any forecasts we may provide to the market, it could have a material adverse effect on our business, financial condition and results of operations.
We rely on sole suppliers for some of the reagents, equipment and other materials used in our testing products, and a sole third-party fulfillment center used to supply healthcare providers with our testing products, and we may not be able to find replacements or transition to alternative suppliers or fulfillment centers.
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In addition, in order to mitigate these risks, we may need to maintain inventories of these supplies at higher levels than would be the case if multiple sources of supply were available.
−Removed: We rely on a third party as our sole fulfillment center in Florida to supply healthcare providers with our testing products.
+Added: We rely on a third-party as our sole fulfillment center in Georgia to supply healthcare providers with our testing products.
Our sole fulfillment center could be harmed or rendered inoperable by natural or man-made disasters, including fire, earthquake, hurricane, flooding, pandemics or other disease outbreaks and power outages, which may render it difficult or impossible for us to supply healthcare providers with our testing products for some period of time.
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We may also need additional certified laboratory scientists and other scientific and technical personnel to process higher volumes of our testing products.
−Removed: We cannot assure you that any increases in scale, related improvements and quality assurance will be successfully implemented or that appropriate personnel will be available.
−Removed: We will also need to purchase additional equipment, some of which can
−Removed: take several months or more to procure, setup and validate, and increase our software and computing capacity to meet increased demand.
+Added: We cannot assure you that any increases in scale, related improvements and quality assurance will be successfully implemented or
+Added: that appropriate personnel will be available.
+Added: We will also need to purchase additional equipment, some of which can take several months or more to procure, setup and validate, and increase our software and computing capacity to meet increased demand.
Failure to implement necessary procedures, transition to new processes, hire the necessary personnel, obtain any necessary additional equipment and increase software and computing capacity could result in higher costs of processing tests or inability to meet demand.
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In addition, there can be no assurance that we will have adequate space in our laboratory facility to accommodate such required expansion.
−Removed: We are also currently collaborating with third parties in an effort to implement multiplex technology in our laboratory.
−Removed: We may experience difficulties securing a partner for this technology and integrating such technology into our existing laboratory operations, which could affect our ability to meet demand for our testing products.
If we encounter difficulty meeting market demand or quality standards, our reputation could be harmed and our future prospects and our business could suffer.
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These changes have in the past and may again result in uneven cash flow or impact the timing of revenue recognized with these payors.
−Removed: With respect to payments received from government healthcare programs, factors such as a prolonged government shutdown could cause significant regulatory delays or could result in attempts to reduce payments made to us by federal healthcare programs.
+Added: With respect to payments received from government healthcare programs, factors such as a prolonged
+Added: government shutdown could cause significant regulatory delays or could result in attempts to reduce payments made to us by federal healthcare programs.
In addition, third-party payors may refuse to ultimately make payment if their processes and requirements have not been met on a timely basis.
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In 2024, Noridian posted the calendar year 2025 Medicare Physician Fee Schedule (MPFS), and CLFS, which establishes the reimbursement rates to be paid by Medicare for our jurisdiction for services performed on or after January 1, 2025.
−Removed: PAMA and changes to the PFS did not have a significant impact to Medicare reimbursement for AVISE ® CTD in 2024 compared to levels experienced in 2023.
+Added: PAMA and changes to the MPFS and CLFS are not expected to have a significant impact to Medicare reimbursement for AVISE ® CTD in 2025 compared to levels experienced in 2024.
Revenue from Medicare comprised 25% and 34% of our revenue for the years ended December 31, 2024 and 2023, respectively.
−Removed: Revenue from the sale of our AVISE ® CTD testing products comprised 88% and 84% of our revenue for the years ended December 31, 2023 and 2022, respectively.
+Added: Revenue from the sale of our AVISE ® CTD test comprised 91% and 88% of our revenue for the years ended December 31, 2024 and 2023, respectively.
We also rely on a third-party provider to provide revenue cycle management software systems for certain processing and collection functions.
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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.
−Removed: also face competition from commercial laboratories, such as ARUP Laboratories, Inc.;
+Added: We also face competition from commercial laboratories, such as ARUP Laboratories, Inc.;
Laboratory Corporation of America Holdings;
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and Quest Diagnostics Incorporated, all of which have existing infrastructures to support the commercialization of diagnostic services.
−Removed: 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.
−Removed: Additionally, we compete against regional clinical laboratories providing testing in the autoimmune and autoimmune-related disease field, including Rheumatology Diagnostics Laboratories, Inc.
−Removed: (acquired by Laboratory Corporation of America in June 2020).
+Added: Large, multispecialty group medical clinics, health systems
+Added: and academic medical university-based clinics may provide in-house clinical laboratories offering autoimmune and autoimmune-related disease testing services.
+Added: 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 or disease or drug monitoring products, such as AMPEL BioSolutions, LLC;
2 unchanged sentences
Immunovia AB;
−Removed: Oncimmune plc;
−Removed: Progentec Diagnostics Inc.;
−Removed: and Scipher Medicine Corporation.
+Added: Oncimmune Holdings plc;
+Added: and Progentec Diagnostics Inc.
In the future, we may also face competition from companies developing new products or technologies.
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Typically, few research and development projects result in commercial products, and success in early clinical studies often is not replicated in later studies.
−Removed: At any point, we may abandon development of a testing product candidate or we may be required to expend considerable resources repeating clinical studies, which would adversely affect the timing for generating potential revenue from a new testing product and our ability to invest in other products in our pipeline.
+Added: At any point, we may abandon development of a testing product candidate or we may be required to expend considerable resources repeating clinical studies, which would
+Added: adversely affect the timing for generating potential revenue from a new testing product and our ability to invest in other products in our pipeline.
In addition, as we develop testing products, we may have to make significant investments in product development, marketing and selling resources.
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We may not identify or complete these transactions in a timely manner, on a cost-effective basis, or at all, and we may not realize the anticipated benefits of any acquisition, technology license, strategic alliance, joint venture or investment.
−Removed: To finance any acquisitions or investments, we may choose to issue shares of our stock as consideration, which would dilute the ownership of our stockholders.
+Added: To finance any acquisitions or investments, we may choose to issue shares of our stock, or stock equivalents, as consideration, which would dilute the ownership of our stockholders.
If the price of our common stock is low or volatile, we may not be able to acquire other companies for stock.
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In addition, our loan agreement restricts our ability to pursue certain mergers, acquisitions, amalgamations or consolidations that we may believe to be in our best interest.
−Removed: Additionally, future acquisitions or dispositions could result in potentially dilutive issuances of our equity
−Removed: securities, the incurrence of debt, contingent liabilities or amortization expenses or write-offs of goodwill, any of which could harm our financial condition.
+Added: Additionally, future acquisitions or dispositions could result in potentially dilutive issuances of our equity securities, the incurrence of debt, contingent liabilities or amortization expenses or write-offs of goodwill, any of which could harm our financial condition.
We cannot predict the number, timing or size of future joint ventures or acquisitions, or the effect that any such transactions might have on our operating results.
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Although we maintain professional liability insurance, we cannot assure you that our insurance would fully protect us from the financial impact of defending against these types of claims or any judgments, fines or settlement costs arising out of any such claims.
−Removed: Any errors or omissions or professional liability claim brought against us, with or without merit, could increase our insurance rates or prevent us from securing insurance coverage in the future.
−Removed: Additionally, any product liability lawsuit could cause injury to our reputation or cause us to suspend sales of our testing products.
+Added: Any errors or omissions or professional liability claim brought against us, with or without merit, could materially increase our insurance rates or prevent us from securing insurance coverage in the future.
+Added: Additionally, any product liability lawsuit could cause material injury to our reputation or cause us to suspend sales of our testing products.
Similarly, any product liability lawsuit affecting our partners could also cause injury to our reputation.
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Additionally, our success depends on our ability to attract and retain qualified and highly-specialized salespeople.
−Removed: We may have difficulties locating, recruiting or retaining qualified salespeople, which could cause a delay or decline in the rate of adoption of
−Removed: our testing products.
+Added: We may have difficulties locating, recruiting or retaining qualified salespeople, which could cause a delay or decline in the rate of adoption of our testing products.
If we are not able to attract and retain the necessary personnel to accomplish our business objectives, we may experience constraints that could adversely affect our ability to support our research and development, clinical laboratory and sales efforts.
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As part of our process of determining CB-CAPs, the key biomarker detection and measurement technology incorporated into our AVISE ® Lupus and AVISE ® CTD products, we utilize a number of flow cytometers that require calibration and performance validation according to the requirements of the CAP at specified time intervals.
−Removed: While we believe we have implemented appropriate controls and metrics in our laboratory to meet such requirements, we
−Removed: cannot provide any assurance that our instruments will not fall out of specification, in which case we would be required to re-calibrate them.
+Added: While we believe we have implemented appropriate controls and metrics in our laboratory to meet such requirements, we cannot provide any assurance that our instruments will not fall out of specification, in which case we would be required to re-calibrate them.
Failure to timely re-calibrate our instruments could negatively impact the test results, which could result in liability and harm our reputation.
Patient specimens degrade and become unusable generally within 48 hours of collection.
−Removed: Therefore, if we do not have other sufficient properly functioning flow cytometers due to failure to meet specifications or they otherwise become inoperable, our ability to process patient specimens in the required timeframe would be compromised and our business could be harmed.
+Added: Therefore, if we do not have other sufficient properly functioning flow cytometers due to
+Added: failure to meet specifications or they otherwise become inoperable, our ability to process patient specimens in the required timeframe would be compromised and our business could be harmed.
Failure in our information technology, telephone or other systems could significantly disrupt our operations and adversely affect our business and financial condition.
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• proper recordkeeping is required for operating our business, managing employee compensation and other personnel matters.
−Removed: Our business, results of operations and financial condition may be adversely affected if, among other things:
+Added: Our business, results of operations and financial condition may be materially and adversely affected if, among other things:
• our information technology, telephone or other systems fail or are interrupted for any extended length of time;
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Despite the precautionary measures we have taken to prevent breakdowns in our information technology, telephone and other systems, sustained or repeated system failures that interrupt our ability to process test orders, deliver test results or perform testing in a timely manner or that cause us to inadvertently disclose or lose patient information could adversely affect our business, results of operations and financial condition.
−Removed: Security breaches, loss of data and other disruptions to us, our third-party service providers or our partners could compromise sensitive information related to our business or prevent us from accessing critical information and expose us to liability, which could adversely affect our business and our reputation.
+Added: Security breaches, loss of data and other disruptions to us, our third-party service providers or our partners could compromise sensitive information related to our business or prevent us from accessing critical information and expose us to liability, which could materially and adversely affect our business and our reputation.
In the ordinary course of our business, we and our partners, and our respective third-party service providers collect and store sensitive data, such as PHI (including test results), personally identifiable information, and credit card information.
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We manage and maintain our applications and data utilizing a combination of on-site and vendor-owned systems.
−Removed: We face a number of risks related to our protection of, and our service providers’ protection of, this critical information, including loss of access, unauthorized disclosure and unauthorized access, as well as risks associated with our ability to identify and audit such events and risks associated with the need to
−Removed: reconstruct any lost or stolen data.
+Added: We face a number of risks related to our protection of, and our service providers’ protection of, this critical information, including loss of access, unauthorized disclosure and unauthorized access, as well as risks associated with our ability to identify and audit such events and risks associated with the need to reconstruct any lost or stolen data.
In addition, we have limited control over the storage of sensitive data by our third-party partners as well as risks related to the transfer and sale of de-identified data files to such partners.
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Attacks upon information technology systems are increasing in their frequency, levels of persistence, sophistication and intensity, and are being conducted by sophisticated and organized groups and individuals with a wide range of motives and expertise.
+Added: Additionally, the adoption of AI technologies may further heighten the risk of cyber-attacks.
+Added: Leveraging AI capabilities to potentially improve internal functions and operations presents further risks and challenges, including the possibility of creating new attack methods for adversaries.
+Added: The use of AI to support business operations carries inherent risks related to data privacy, IP, and security, such as intended, unintended, or inadvertent transmission of proprietary, confidential, or sensitive information, as well as challenges related to implementing and maintaining AI tools, such as developing and maintaining appropriate datasets for such support.
+Added: If we fail to implement adequate safeguards, the use of AI may introduce additional operational vulnerabilities by producing inaccurate outcomes based on flaws in the underlying data or methodologies, or unintended results.
Additionally, most of our employees have the ability to work remotely, which may increase the risk of security breaches, loss of data and other disruptions as a consequence of more employees accessing sensitive and critical information from remote locations.
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Any such access, disclosure or other loss of information could also result in legal claims or proceedings, and liability under laws that protect the privacy of personal information, such as HIPAA, as amended by the HITECH Act, and their implementing regulations and similar state data privacy and security laws and regulations including civil and criminal penalties.
−Removed: Unauthorized access, loss or dissemination could also disrupt our operations, including our ability to process tests, provide test results, bill payors or patients, process claims and appeals, provide customer assistance services, conduct research and development activities, collect, process and prepare company financial information, provide information about our products and other patient and rheumatologist education and outreach efforts through our website and manage the administrative aspects of our business and could damage our reputation, any of which could adversely affect our business.
−Removed: Any breach could also result in the compromise of our trade secrets and other proprietary information, which could adversely affect our competitive position.
+Added: Unauthorized access, loss or dissemination could also disrupt our operations, including our ability to process tests, provide test results, bill payors or patients, process claims and appeals, provide customer assistance services, conduct research and development activities, collect, process and prepare company financial information, provide information about our products and other patient and rheumatologist education and outreach efforts through our website and manage the administrative aspects of our business and could damage our reputation, any of which could materially and adversely affect our business.
+Added: Any breach could also result in the compromise of our trade secrets and other proprietary information, which could materially and adversely affect our competitive position.
In addition, the interpretation and application of federal and state consumer, health-related and data protection laws in the United States are often uncertain, contradictory and in flux.
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Complying with these various laws could cause us to incur substantial costs or require us to change our business practices, systems and compliance procedures in a manner adverse to our business.
−Removed: If we are unable to prevent such security breaches or privacy violations or implement satisfactory remedial measures in connection with security incidents, we may suffer loss of reputation, financial loss, and civil or criminal fines or other penalties.
+Added: If we are unable to prevent such security breaches or privacy violations or implement satisfactory remedial measures in connection with security incidents, we may suffer material loss of reputation, financial loss, civil or criminal fines or other penalties.
In addition, these breaches and other forms of inappropriate access can be difficult to detect, and any delay in identifying them may lead to increased harm of the type described above.
−Removed: Our financial condition, commercialization efforts and results of operations has been and may again in the future be adversely affected by outbreaks of contagious diseases.
+Added: Our financial condition, commercialization efforts and results of operations have been and may again in the future be adversely affected by outbreaks of contagious diseases.
Any outbreak of a contagious disease, or other adverse public health developments, could have a material and adverse effect on our business operations.
Such adverse effects could include disruptions or restrictions on the ability of our, our collaborators’, or our suppliers’ personnel to travel, and could result in temporary closures of our facilities or the facilities of our collaborators or suppliers, including our sole laboratory.
−Removed: While the impact of the COVID-19 pandemic on our business, financial condition, results of operations and cash flows has subsided, the extent to which COVID-19 will affect our operations in the future will depend on future developments, which are highly uncertain and cannot be predicted with confidence.
+Added: While the impact of the COVID-19 pandemic on our business, financial condition, results of operations and cash flows has subsided, the extent to which any potential pandemics or health epidemics will affect our operations in the future will depend on future developments, which are highly uncertain and cannot be predicted with confidence.
Performance issues, service interruptions or price increases by our shipping carrier could adversely affect our business, results of operations and financial condition, and harm our reputation and ability to provide testing services on a timely basis.
Expedited, reliable shipping is essential to our operations.
−Removed: We have been utilizing both United Parcel Service and Federal Express Corporation (Federal Express) for reliable and secure point-to-point transport of patient specimens
−Removed: to our laboratory and enhanced tracking of these patient specimens.
−Removed: Should Federal Express, United Parcel Service, or any other carrier we may use in the future, encounter delivery performance issues such as loss, damage or destruction of a specimen, it may be difficult to replace our patient specimens in a timely manner and such occurrences may damage our reputation and lead to decreased utilization from rheumatologists for our testing services and increased cost and expense to our business.
+Added: We have been utilizing both United Parcel Service (UPS) and Federal Express Corporation (Federal Express) for reliable and secure point-to-point transport of patient specimens to our laboratory and enhanced tracking of these patient specimens.
+Added: Should Federal Express, UPS, or any other carrier we may use in the future, encounter delivery performance issues such as loss, damage or destruction of a specimen, it may be difficult to replace our patient specimens in a timely manner and such occurrences may damage our reputation and lead to decreased utilization from rheumatologists for our testing services and increased cost and expense to our business.
In addition, any significant increase in shipping time or disruption to delivery service, whether due to bad weather, natural disaster (which may be exacerbated due to climate change), public health epidemics or pandemics, terrorist attacks or threats, labor strikes, work stoppages or boycotts, or for other reasons, could adversely affect our ability to receive and process patient specimens on a timely basis.
−Removed: If we, Federal Express, or United Parcel Service were to terminate our relationship, we would be required to find another party to provide expedited, reliable point-to-point transport of our patient specimens.
+Added: If we, Federal Express, or UPS were to terminate our relationship, we would be required to find another party to provide expedited, reliable point-to-point transport of our patient specimens.
There are only a few other providers of such nationwide transport services, and there can be no assurance that we will be able to enter into arrangements with such other providers on acceptable terms, if at all.
Finding a new provider of transport services would be time-consuming and costly and result in delays in our ability to provide our testing services.
−Removed: Even if we were to enter into an arrangement with any such provider, there can be no assurance that they will provide the same level of quality in transport services currently provided to us by Federal Express and United Parcel Service.
−Removed: If any new provider does not provide, or if Federal Express or United Parcel Service does not continue to provide, the required quality and reliability of transport services at the same or similar costs, it could materially and adversely affect our business, reputation, results of operations and financial condition.
+Added: Even if we were to enter into an arrangement with any such provider, there can be no assurance that they will provide the same level of quality in transport services currently provided to us by Federal Express and UPS.
+Added: If any new provider does not provide, or if Federal Express or UPS does not continue to provide, the required quality and reliability of transport services at the same or similar costs, it could materially and adversely affect our business, reputation, results of operations and financial condition.
Inflation could adversely affect our business and financial results.
−Removed: Inflation increased significantly during 2022 and continued to increase through 2023.
The current inflationary environment has resulted in higher prices, which have impacted our costs incurred to generate revenue from our laboratory testing services, costs to attract and retain personnel, and other operating costs.
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As such, inflationary pressures could have a material adverse effect on our performance and financial statements.
−Removed: The failure of financial institutions or transactional counterparties could adversely affect our current and projected business operations and our financial condition and results of operations.
−Removed: On March 10, 2023, Silicon Valley Bank (SVB) was closed by the California Department of Financial Protection and Innovation, which appointed the Federal Deposit Insurance Corporation (FDIC) as receiver.
−Removed: Similarly, on March 12, 2023, Signature Bank and Silvergate Capital Corp.
−Removed: were each swept into receivership.
−Removed: A statement by the Department of the Treasury, the Federal Reserve and the FDIC stated that all depositors of SVB would have access to all of their money after only one business day of closure, including funds held in uninsured deposit accounts.
−Removed: Although we do not have any funds deposited with SVB and Signature Bank, we regularly maintain cash balances with other financial institutions in excess of the FDIC insurance limit.
−Removed: A failure of a depository institution to return deposits could impact access to our invested cash or cash equivalents and could adversely impact our operating liquidity and financial performance.
+Added: We maintain cash deposits in excess of federally insured limits.
+Added: Adverse developments affecting financial institutions, including bank failures, could adversely affect our liquidity and financial performance.
+Added: We maintain our cash, cash equivalents, and marketable securities with high quality, accredited financial institutions.
+Added: However, some of these accounts exceed the Federal Deposit Insurance Corporation (FDIC) insurance limit of $250,000 and, while we believe we are not exposed to significant credit risk due to the financial strength of these depository institutions or investments, if any such depository institution fails to return our deposits, or if a depository institution is subject to other adverse conditions in the financial or credit markets, this could further impact access to our invested cash or cash equivalents and could adversely impact our operating liquidity and financial performance.
+Added: Further, the failure or collapse of one or more of these depository institutions or default on these investments could materially adversely affect our ability to recover these assets and/or materially harm our financial condition.
Our ability to utilize our net operating loss carryforwards and certain other tax attributes may be limited.
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Based upon this study, we determined that ownership changes had occurred in 2003, 2008, 2012, 2017 and 2019, and that our ability to use a significant portion of our NOL carryforwards is subject to limitation under Section 382 of the Code as a result of a prior ownership change.
−Removed: If we undergo an ownership change as a result of subsequent shifts in our stock ownership, our ability to utilize our NOL carryforwards and other pre-change tax attributes could be further limited by Sections 382 and 383 of the Code.
+Added: If we undergo an ownership change as a result of subsequent shifts in our stock ownership, our ability to utilize our NOL
+Added: carryforwards and other pre-change tax attributes could be further limited by Sections 382 and 383 of the Code.
Similar provisions of state tax law may also apply.
In addition, federal NOL carryforwards generated in periods after December 31, 2017, may be carried forward indefinitely but, in taxable years beginning after December 31, 2020, may only be used to offset 80% of our taxable income.
−Removed: As a result of the foregoing, if we earn net taxable income,
−Removed: our ability to use NOL carryforwards and other tax attributes to offset taxable income and taxes, as applicable, may be limited.
+Added: As a result of the foregoing, if we earn net taxable income, our ability to use NOL carryforwards and other tax attributes to offset taxable income and taxes, as applicable, may be limited.
Our term loan contains restrictions that limit our flexibility in operating our business, and if we fail to comply with the covenants and other obligations under our loan agreement, the lenders may be able to accelerate amounts owed under the facility and may foreclose upon the assets securing our obligations.
−Removed: In September 2017, we entered into the loan and security agreement (the 2017 Term Loan) with Innovatus Life Sciences Lending Fund I, LP (Innovatus), which we subsequently amended in November 2019, November 2021 and April 2023 (the Amended Loan Agreement).
+Added: In September 2017, we entered into the loan and security agreement (the 2017 Term Loan) with Innovatus Life Sciences Lending Fund I, LP (Innovatus), which we subsequently amended in November 2019, November 2021, April 2023 and April 2024 (the Amended Loan Agreement).
The Amended Loan Agreement is collateralized by substantially all of our personal property, including our intellectual property.
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1 to Form S-3 filed on November 27, 2023, that provides for aggregate offerings of up to $150.0 million of our securities subject to various limitations.
−Removed: We filed a prospectus on November 29, 2023 pursuant to this registration statement, registering sales of our common stock in an amount not to exceed $50.0 million, pursuant to a sales agreement by
−Removed: and between us and Cowen and Company, LLC (TD Cowen), as amended by Amendment No.
+Added: We filed a prospectus on November 29, 2023 pursuant to this registration statement, registering sales of our common stock in an amount not to exceed $50.0 million, pursuant to a sales agreement by and between us and TD Securities (USA) LLC (as successor in interest to Cowen and Company, LLC) (TD Cowen), as amended by Amendment No.
1 to Sales Agreement dated November 17, 2023 (the Amended Sales Agreement).
Using a shelf registration statement to raise capital generally takes less time and is less expensive than other means, such as conducting an offering under a registration statement on Form S-1 and companies may be able to receive more favorable terms by raising capital pursuant to a shelf registration statement on Form S-3.
−Removed: Our ability to raise capital under our current shelf registration statement (and any future registration statement on Form S-3) is, and may again in the future be, limited by, among other things, current and future SEC rules and regulations impacting the eligibility of smaller companies to use Form S-3 without restrictions.
−Removed: As of the date of this Annual Report, we are subject to the "baby shelf rule" because the market value of our outstanding shares of common stock held by non-affiliates, or public float, was less than $75.0 million as of the date of this Annual Report.
−Removed: As a result, for sales following the date of this Annual Report and until we again have a public float with a value in excess of $75.0 million, if ever, we will be unable to use our shelf registration statement on Form S-3 or the Amended Sales Agreement to raise additional funds to the extent the aggregate market value of securities sold by us or on our behalf pursuant to Instruction I.B.6.
−Removed: of Form S-3 during the 12 calendar months immediately prior to, and including, any intended sale does not exceed one-third of the aggregate market value of our public float, calculated in accordance with the instructions to Form S-3.
+Added: Our ability to raise capital under our current shelf registration statement (and any future registration statement on Form S-3) has in the past, and may again in the future be, limited by, among other things, current and future SEC rules and regulations impacting the eligibility of smaller companies to use Form S-3 without restrictions.
+Added: We have previously been subject to the "baby shelf rules" and if we were to become subject to the "baby shelf rules" again, we would be unable to use our shelf registration statement on Form S-3 or the Amended Sales Agreement to raise additional funds to the extent the aggregate market value of securities sold by us or on our behalf pursuant to Instruction I.B.6.
+Added: of Form S-3 during the 12 calendar months immediately prior to, and including, any intended sale would exceed one-third of the aggregate market value of our public float, calculated in accordance with the instructions to Form S-3.
+Added: As of the date of this Annual Report, we are not subject to the "baby shelf rules" because the market value of our outstanding shares of common stock held by non-affiliates calculated in accordance with Instruction I.B.6.
+Added: of Form S-3, or public float, was greater than $75.0 million as of the date of this Annual Report.
In the case of the incurrence of further indebtedness, the Amended Loan Agreement, subject to certain customary exceptions, restricts our ability to incur additional indebtedness or encumber any of our property without the prior consent of Innovatus.
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Additional funding may not be available to us on acceptable terms, or at all.
−Removed: If we raise funds by issuing equity securities, dilution to our stockholders could result, and the market price of our common stock could decline.
+Added: If we raise funds by issuing equity securities, including as a result of our existing sales agreement with TD Cowen, dilution to our stockholders could result, and the market price of our common stock could decline.
Any equity securities issued also may provide for rights, preferences or privileges senior to those of holders of our common stock.
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In addition, we may have to work with a partner on one or more of our testing products or market development programs, which could lower the economic value of those products or programs to our company.
−Removed: We are an emerging growth company and a smaller reporting company, and the reduced disclosure requirements applicable to emerging growth companies and smaller reporting companies may make our common stock less attractive to investors.
−Removed: We are an emerging growth company, as defined in the Jumpstart Our Business Startups Act of 2012 (the JOBS Act) and may remain an emerging growth company until the last day of the fiscal year following the fifth anniversary of the completion of our IPO, or December 31, 2024.
−Removed: However, if certain events occur prior to the end of such five-year period, including if we become a “large accelerated filer,” our annual gross revenue exceeds $1.235 billion or we issue more than $1.0 billion of non-convertible debt in any three-year period, we will cease to be an emerging growth company prior to the end of such five-year period.
−Removed: For so long as we remain an emerging growth company,
−Removed: we are permitted and intend to rely on exemptions from certain disclosure requirements that are applicable to other public companies that are not emerging growth companies.
−Removed: These exemptions include:
−Removed: • being permitted to provide only two years of audited financial statements, in addition to any required unaudited interim condensed financial statements, with correspondingly reduced “Management’s discussion and analysis of financial condition and results of operations” disclosure;
−Removed: • not being required to comply with the auditor attestation requirements in the assessment of our internal control over financial reporting;
−Removed: • not being required to comply with any requirement that may be adopted by the Public Company Accounting Oversight Board regarding mandatory audit firm rotation or a supplement to the auditor’s report providing additional information about the audit and the financial statements;
−Removed: • reduced disclosure obligations regarding executive compensation;
−Removed: • exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved.
−Removed: We cannot predict whether investors will find our common stock less attractive if we rely on these exemptions.
−Removed: If some investors find our common stock less attractive as a result, there may be a less active trading market for our common stock and our stock price may be reduced or more volatile.
−Removed: In addition, the JOBS Act provides that an emerging growth company can take advantage of an extended transition period for complying with new or revised accounting standards.
−Removed: This allows an emerging growth company to delay the adoption of these accounting standards until they would otherwise apply to private companies.
−Removed: We have elected to avail ourselves of this exemption and, therefore, we may not be subject to the same implementation timing for new or revised accounting standards as other public companies that are not emerging growth companies, which may make comparison of our financials to those of other public companies more difficult.
−Removed: We are also a “smaller reporting company” as defined in the Exchange Act.
−Removed: We may continue to be a smaller reporting company even after we are no longer an emerging growth company.
−Removed: We may take advantage of certain of the scaled disclosures available to smaller reporting companies and will be able to take advantage of these scaled disclosures for so long as our voting and non-voting common stock held by non-affiliates is less than $250.0 million measured on the last business day of our second fiscal quarter, or our annual revenue is less than $100.0 million during the most recently completed fiscal year and our voting and non-voting common stock held by non-affiliates is less than $700.0 million measured on the last business day of our second fiscal quarter.
+Added: We are a smaller reporting company and the reduced disclosure requirements applicable to smaller reporting companies may make our common stock less attractive to investors.
+Added: We are a “smaller reporting company” as defined in the Exchange Act.
+Added: We may take advantage of certain of the scaled disclosures available to smaller reporting companies and will be able to take advantage of these scaled
+Added: disclosures for so long as our voting and non-voting common stock held by non-affiliates is less than $250.0 million measured on the last business day of our second fiscal quarter, or our annual revenue is less than $100.0 million during the most recently completed fiscal year and our voting and non-voting common stock held by non-affiliates is less than $700.0 million measured on the last business day of our second fiscal quarter.
Risks Related to Regulatory and Compliance Matters
−Removed: Healthcare policy changes, including recently enacted and proposed new legislation reforming the U.S.
−Removed: healthcare system, could cause significant harm to our business, operations and financial condition.
+Added: Healthcare policy changes could cause significant harm to our business, operations and financial condition.
The ACA made a number of substantial changes to the way healthcare is financed both by governmental and commercial payors.
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Under PAMA, certain clinical laboratories are required to periodically report to CMS private payor payment rates and volumes for their tests, and laboratories that fail to report the required payment information may be subject to substantial civil monetary penalties.
+Added: Since December 2019, Congress has passed a series of laws to modify PAMA’s statutory requirements related to the data reporting period and phase-in of payment reductions under the CLFS for CDLTs that are not ADLTs.
+Added: 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 until 2026.
Medicare reimbursement for CDLTs is based on the weighted-median of the payments made by private payors for these tests, rendering private payor payment levels even more significant than in the past.
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The failure to comply with CLIA requirements can result in enforcement actions, including the revocation, suspension, or limitation of our CLIA certificate of accreditation, as well as a directed plan of correction, state on-site monitoring, civil money penalties, civil injunctive suit and/or criminal penalties.
−Removed: We must maintain CLIA compliance and certification to be eligible to bill for tests provided to Medicare beneficiaries.
+Added: We must maintain CLIA compliance and certification to be eligible to bill for tests provided to Medicare beneficiaries and to some patients covered by commercial payors.
If we were to be found out of compliance with CLIA program requirements and subjected to sanctions, our business and reputation could be harmed.
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These laws and regulations currently include, among others:
−Removed: • CLIA’s and CAP’s regulation of our laboratory activities;
−Removed: • FDA laws and regulations, including but not limited to requirements for offering LDTs;
+Added: • CLIA’s and CAP’s regulation of our laboratory activities, as well as state licensure laws and regulations;
+Added: • FDA laws and regulations that apply to medical devices such as our companion diagnostics and other IVDs as well as LDTs, following the July 2024 effective date of the agency’s LDT final rule;
• federal and state laws and standards affecting reimbursement by government payors, including certain coding requirements to obtain reimbursement and certain payment mechanisms for clinical laboratory services resulting from PAMA;
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• the federal Stark Law, which generally prohibits a physician from making a referral for certain designated health services covered by Medicare or Medicaid, including laboratory and pathology services, if the physician or an immediate family member has a financial relationship with the entity providing the designated health services;
−Removed: • the federal False Claims Act, which imposes civil penalties, and provides for civil whistleblower or qui tam actions, against individuals or entities for knowingly presenting, or causing to be presented, to the federal government, claims for payment that are false or fraudulent or making a false statement to avoid, decrease or conceal an obligation to pay money to the federal government;
−Removed: • the federal Civil Monetary Penalties Law, which generally prohibits, among other things, the offering or transfer of remuneration to a Medicare or Medicaid beneficiary if it is likely to influence the beneficiary’s selection of a particular provider, practitioner or supplier of services reimbursable by Medicare or Medicaid;
+Added: • the federal False Claims Act, which imposes up to treble damages and per-claim civil penalties, and provides for civil whistleblower or qui tam actions, against individuals or entities for knowingly presenting, or causing to be presented, to the federal government, claims for payment that are false or fraudulent or making a false statement to avoid, decrease or conceal an obligation to pay money to the federal government;
+Added: • the CMP Law, which generally prohibits, among other things, the offering or transfer of remuneration to a Medicare or Medicaid beneficiary if it is likely to influence the beneficiary’s selection of a particular provider, practitioner or supplier of services reimbursable by Medicare or Medicaid;
• EKRA, which imposes criminal penalties for knowing and willful payment or offer, or solicitation or receipt, of any remuneration, whether directly or indirectly, overtly or covertly, in cash or in kind, in exchange for the referral or inducement of laboratory testing (among other healthcare services) covered by healthcare benefit programs (including commercial insurers) unless a specific exception applies;
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• federal, state and local regulations relating to the handling and disposal of regulated medical waste, hazardous waste and biohazardous waste and workplace safety for healthcare employees;
−Removed: • laws and regulations relating to health and safety, labor and employment, public reporting, taxation and other areas applicable to businesses generally, all of which are subject to change, including, for example, the significant changes to the taxation of business entities were enacted in December 2017;
+Added: • laws and regulations relating to health and safety, labor and employment, public reporting, taxation and other areas applicable to businesses generally, all of which are subject to change;
• similar foreign laws and regulations that apply to us in the countries in which we operate or may operate in the future.
+Added: Various federal and state laws, such as the Sunshine Act and state gift bans, that apply to medical device manufacturers could extend to our clinical reference laboratory now that FDA will actively regulate LDTs as medical devices pursuant to the 2024 final rule, and clinical laboratories offering and furnishing LDTs are considered to be device manufacturers as a result.
+Added: We are in the process of evaluating whether and to what extent those kinds of medical device-specific state requirements may be applicable to our operations.
Any future growth of our business, including, in particular, continued reliance on consultants, commercial partners and other third parties, may increase the potential for violating these laws.
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However, these laws and regulations are subject to change and additional interpretation and guidance from regulatory authorities.
−Removed: For instance, in April 2022, the HHS OIG issued a new advisory opinion indicating that a particular clinical laboratory’s practice of contracting with hospitals for the collection of samples for testing could, based on the facts provided and assuming the requisite intent, be a violation of the federal Anti-Kickback Statute.
−Removed: If this Advisory Opinion ultimately limits our ability to collect samples in a hospital setting, we may be required to contract for sample collection with other collection sites or sources, such as mobile phlebotomists, that could be more expensive and less convenient for patients, which could adversely affect both demand for our tests and the margins and profitability of our tests.
−Removed: Given the complexity of these existing and changing rules and regulations, it is not always possible to identify and deter misconduct by employees, distributors, consultants and commercial partners and the precautions we take to detect and prevent this activity may not be effective in controlling unknown or unmanaged risks or losses or in protecting us from government investigations or other actions or lawsuits stemming from a failure to comply with applicable laws or regulations.
−Removed: Additionally, we are subject to the risk that a person or government could allege such fraud or other misconduct, even if none occurred.
−Removed: For additional information see the risk factor below entitled “We have previously and may again in the future be required to modify our business practices, pay fines, incur significant expenses or experience losses due to litigation or governmental investigations.” Any action brought against us for violation of these or other laws or regulations, even if we successfully defend against it, could cause us to incur significant legal expenses, divert our management’s attention from the operation of our business and harm our reputation.
−Removed: If our operations, including the conduct of our employees, consultants and commercial partners, are found to be in violation of any of these laws and regulations, we may be subject to applicable penalties associated with the violation, including administrative, civil and criminal penalties, damages, fines, individual imprisonment, exclusion from participation in federal healthcare programs, refunding of payments received by us and curtailment or cessation of our operations.
−Removed: Any of these consequences could seriously harm our business and our financial results.
It is possible that some of our business activities could be subject to challenge under one or more of such laws.
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Although an effective compliance program can mitigate the risk of investigation and prosecution for violations of these laws, the risks cannot be entirely eliminated.
−Removed: Any action against us for violation of these laws, even if we successfully defend against it, could cause us to incur significant legal expenses and divert our management’s attention from the operation of our business.
+Added: Given the complexity of these existing and changing rules and regulations, it is not always possible to identify and deter misconduct by employees, distributors, consultants and commercial partners and the precautions we take to detect and prevent this activity may not be effective in controlling unknown or unmanaged risks or losses
+Added: or in protecting us from government investigations or other actions or lawsuits stemming from a failure to comply with applicable laws or regulations.
+Added: Additionally, we are subject to the risk that a person or government could allege such fraud or other misconduct, even if none occurred.
+Added: For additional information see the risk factor below entitled “ We have previously and may again in the future be required to modify our business practices, pay fines, incur significant expenses or experience losses due to litigation or governmental investigations.” Any action against us for violation of these laws, even if we successfully defend against it, could cause us to incur significant legal expenses and divert our management’s attention from the operation of our business.
Moreover, achieving and sustaining compliance with these laws may prove costly.
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Attorney’s Office dismissed this “covered conduct” in the qui tam with prejudice, while non-covered conduct was dismissed without prejudice.
+Added: The Department of Justice excused itself from the case in connection with the settlement.
In November 2023, the complaint was unsealed and served on Exagen.
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Exagen opposed this motion, and all motions are still pending.
−Removed: The Company intends to vigorously defend against the claims being asserted in the complaint.
+Added: While we cannot predict when these matters will be resolved, the Company intends to vigorously defend against the claims being asserted in the complaint.
Any of these circumstances may adversely affect our business, prospects, reputation and results of operations.
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Any violations of the laws and regulations described above may result in substantial civil and criminal fines and penalties, imprisonment, the loss of export or import privileges, debarment, tax reassessments, breach of contract and fraud litigation, reputational harm and other consequences.
−Removed: The FDA may disagree with our assessment that our AVISE ® test products and any other tests we may develop are LDTs and determine that such test products are medical devices subject to the FDCA and FDA regulations.
+Added: The FDA may disagree with our assessment that our AVISE ® test products and any other tests we may develop are LDTs eligible for enforcement discretion and determine that such test products are fully subject to active compliance enforcement under the FDCA and FDA regulations.
The FDA regulates any diagnostic test that meets the definition of a medical device, except under specific, narrow circumstances.
The 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:
−Removed: intended for use in the diagnosis of disease or other conditions, or in the cure, mitigation,
−Removed: 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.
+Added: 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 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 to be IVDs subject to the agency’s regulatory requirements for IVDs.
−Removed: However, the FDA has generally exercised its enforcement discretion and not enforced applicable regulations with respect to LDTs, which are IVDs that are designed, manufactured, and used within a single high-complexity CLIA-certified laboratory.
+Added: Historically, the FDA had generally exercised its enforcement discretion and not enforced applicable 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.
−Removed: If the FDA were to disagree with our conclusion that our AVISE ® test products fall within the scope of the agency’s LDT definition and determines that the AVISE ® tests are thus subject to FDA’s medical device authorities and implementing regulations, we would become subject to extensive regulatory requirements and may be required to stop selling our existing tests or refrain from launching any other tests we may develop.
−Removed: In particular, the FDA may require us to obtain PMAs or another type of device marketing authorization in order for us to commercialize our AVISE ® tests.
+Added: If the FDA were to disagree with our conclusion that our AVISE ® test products fall within the scope of the agency’s LDT definition and determines that the AVISE ® tests are thus subject to FDA’s medical device authorities and implementing regulations, we would become immediately subject to extensive regulatory requirements and may be required to stop selling our existing tests or refrain from launching any other tests we may develop.
+Added: In particular, the FDA may require us to obtain marketing authorization for each of our AVISE ® tests in order for use to commercialize them.
The premarket review process for diagnostic testing products can be lengthy, expensive, time-consuming, and unpredictable.
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Any finding by the FDA or another regulatory authority 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.
−Removed: The FDA may finalize its rulemaking to regulate LDTs or Congress may take action to reform the current legal requirements applicable to LDTs, and in either case, we may become subject to extensive regulatory requirements and may be required to conduct additional clinical trials prior to continuing to sell our existing tests or launching any other tests we may develop, which may increase the cost of conducting, or otherwise harm, our business.
+Added: Planned changes in the way that the FDA regulates tests designed and performed by laboratories like ours could result in delay or additional expense in offering our current tests and tests that we may develop in the future.
We currently market our AVISE ® tests as LDTs and may, in the future, market other tests as LDTs.
−Removed: Although historically the FDA has applied a policy of enforcement discretion with respect to LDTs whereby the FDA does not generally actively enforce its regulatory requirements for such tests, in October 2023, the FDA issued a proposed rule to regulate LDTs under the current medical device framework.
−Removed: The agency’s proposal also includes a plan to phase out its current enforcement discretion policy over several years.
−Removed: This FDA rulemaking was initiated after years of failed congressional attempts to harmonize the regulatory paradigms applicable to LDTs and other in vitro diagnostic tests, as discussed further below.
−Removed: The likelihood of the FDA finalizing the proposed rule following a public comment period, as well as potential litigation challenging its authority to take such action, is uncertain at this time as stakeholders continue to press for a comprehensive legislative solution instead of administrative agency action.
−Removed: If there are changes in FDA regulations or legislative authorities such that the agency begins to exercise oversight over LDTs, or if the FDA disagrees that our marketed tests are within the scope of its criteria used for defining LDTs, we may become subject to extensive regulatory requirements and may be required to stop selling our existing tests or launching any other tests we may develop and to conduct additional clinical trials or take other actions prior to continuing to market our tests.
−Removed: If the FDA allows our tests to remain on the market but there is uncertainty about our tests, if they are labeled investigational by the FDA or if labeling claims the FDA allows us to make do not include the claims necessary or desirable for successful commercialization, orders from healthcare providers or reimbursement for our tests may decline.
−Removed: In addition, as noted above, Congress had been working on legislation to create an LDT and IVD, regulatory framework that would be separate and distinct from the existing medical device regulatory framework.
−Removed: Reform legislation called the VALID Act garnered bipartisan and bicameral support in recent years but failed to move out of committee during the last congressional session.
−Removed: As drafted and re-introduced for consideration by the current Congress, the VALID Act would codify the term IVCT to create a new medical product category separate from medical devices to include products currently regulated as IVDs as well as LDTs, among other provisions.
−Removed: The VALID Act would also create a new system for laboratories to use to submit their tests electronically to the FDA for
−Removed: approval, which is aimed at reducing the amount of time it would take 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.
−Removed: The FDA’s October 2023 publication of an LDT proposed rule that would apply the existing medical device framework to laboratory-developed products has renewed stakeholder calls for a more targeted approach to modernizing the federal government’s oversight of clinical diagnostic tests.
−Removed: It remains possible that congressional action in this area could displace the need for the FDA to complete its recently proposed rulemaking.
−Removed: If Congress were to pass the VALID Act or any other legislation applicable to the FDA’s regulation of LDTs, or if the FDA were to successfully promulgate new regulations for such products through the recently initiated notice-and-comment rulemaking or a future rulemaking proceeding, we will likely be subject to increased regulatory burdens such as registration and listing requirements, adverse event reporting requirements and quality control requirements.
−Removed: Any legislation or formal FDA regulatory framework affecting LDTs is also likely to have premarket application requirements prohibiting commercialization without FDA authorization and controls regarding modification to the tests that may require further FDA submissions.
−Removed: The premarket review process can be lengthy, expensive, time-consuming and unpredictable.
−Removed: Further, obtaining premarket clearance may involve, among other things, successfully completing clinical trials, which require significant time and cash resources 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.
−Removed: If we are required to obtain premarket clearance or approval and/or conduct premarket clinical trials, our development costs could significantly increase, marketing of any new tests we may develop may be delayed, and sales of our existing tests could be interrupted or stopped.
−Removed: Any of these outcomes could reduce our revenue or increase our costs and materially adversely affect our business, prospects, results of operations or financial condition.
−Removed: The outcome and ultimate impact on our business of any changes to the federal government’s regulation of LDTs is difficult to predict.
−Removed: Failure to comply with any applicable FDA requirements could trigger a range of enforcement actions, including warning letters, fines, penalties, suspension of operations, product recalls or seizures, denial of applications for clearance or approval, injunctions and other civil or criminal sanctions, which could have a material and adverse effect upon our business, operating results and financial condition.
−Removed: Furthermore, should it be required in the future, we cannot be sure that our AVISE ® tests, or any new tests that we may develop, will be reviewed and authorized for marketing by the FDA in a timely or cost-effective manner, if authorized at all.
−Removed: Even if such tests are authorized for marketing by the FDA, the agency could limit the test’s indications for use, which may significantly limit the market for that product and may adversely affect our business and financial condition.
+Added: Historically, the FDA had exercised enforcement discretion with respect to most LDTs and generally had not required laboratories that furnish LDTs to comply with the agency’s requirements for medical devices (e.g., establishment registration, device listing, quality system regulations, premarket clearance or approval, and post-market controls).
+Added: May 2024, the FDA issued a final rule to regulate LDTs under the current medical device framework and phasing out its existing enforcement discretion policy for this category of diagnostic tests over several years.
+Added: The effective date of the agency’s final rule was July 5, 2024.
+Added: The agency’s final rule provides that the LDT enforcement policy phase-out process will occur in gradual stages over a total period of four years, with premarket approval applications for high-risk tests to be submitted by the 3.5-year mark.
+Added: Moderate-risk and low-risks tests are expected to be in compliance at the four-year mark, although FDA has stated that if premarket submissions are pending review it will continue to exercise enforcement discretion with respect to those tests.
+Added: The FDA’s final rule is complex and, concurrently, the agency announced several exceptions from the requirement to comply with full medical device regulatory controls, depending upon the specific nature of the LDT and the clinical laboratory that is offering such LDT for use by health care providers.
+Added: Of potential relevance is the agency’s position on LDTs that were marketed prior to the official publication date of the final rule.
+Added: Such “currently marketed” tests are subject to many of the device regulatory controls but are exempted from the premarket review and FDA authorization requirements (unless or until significant modifications are made to such “currently marketed” tests).
+Added: Similarly, FDA has created a partial enforcement discretion policy for tests approved by the New York State Clinical Laboratory Evaluation Program whereby such tests also do not need to undergo FDA premarket review but must come into compliance with all other device general controls in a stagged fashion between 2025 and 2027.
+Added: We have begun the process of evaluating the final rule’s potential impact on our tests, as well as our operations and business more generally.
+Added: On May 29, 2024, the American Clinical Laboratory Association (ACLA) and one of its members filed a complaint against the FDA in the Eastern District of Texas, alleging that the agency does not have authority to promulgate the LDT final rule and seeking to vacate the FDA’s action.
+Added: A second lawsuit was also filed against FDA by the Association for Molecular Pathology (AMP) on August 19, 2024 in the Southern District of Texas, and subsequently the two cases were consolidated into a single action pending in the Eastern District of Texas.
+Added: Briefing is ongoing in the consolidated case, and the outcome of such litigation is uncertain.
+Added: The litigation could potentially affect FDA’s plans to implement these new LDT requirements, making the potential implementation timeline somewhat uncertain, although no preliminary injunction has been issued to date.
+Added: Accordingly, the agency has continued its implementation efforts by actively providing guidance and training to clinical laboratories on how to comply with medical device general controls.
+Added: Affected stakeholders also continue to press for a comprehensive legislative solution to create a harmonized paradigm for oversight of LDTs by both the FDA and CMS, instead of implementation of the FDA’s final rule, which may be disruptive to the industry and to patient access to certain diagnostic tests.
+Added: However, this FDA rulemaking was initiated after years of failed congressional attempts to harmonize the regulatory paradigms applicable to LDTs and other IVDs, making it unclear whether any legislative efforts would be successful going forward.
+Added: If the FDA prevails in the Texas litigation and is able to fully implement the multi-year phase-in plan for the LDT final rule or Congress enacts comprehensive legislation to regulate in vitro diagnostics that moots the need for the LDT final rule, it could have a materially adverse impact on our results of operations.
+Added: Failure to comply with any applicable FDA requirements could trigger a range of enforcement actions by the FDA, including warning letters, civil monetary penalties, injunctions, criminal prosecution, recall or seizure, operating restrictions, partial suspension or total shutdown of operations and denial of or challenges to applications for clearance or approval, as well as significant adverse publicity.
The FTC and/or state enforcement or regulatory agencies may object to the methods and materials we use to promote our tests and initiate enforcement against us, which could adversely affect our business and financial condition.
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Enforcement actions by the FTC may include, among others, injunctions, civil penalties and equitable monetary relief.
−Removed: Actual or perceived failures to comply with applicable data protection, privacy and security laws, regulations, standards and other requirements could adversely affect our business, results of operations and financial condition.
−Removed: Any failure or perceived failure by us to comply with federal or state laws or regulations, our internal policies and procedures or our contracts governing our use and disclosures of personal information could result in negative publicity, government investigations and enforcement actions including significant penalties, claims by third parties, and damage to our reputation, any of which could have a material adverse effect on our operations, financial performance and business.
−Removed: Failure to comply with HIPAA, the HITECH Act, their implementing regulations and similar comparable state laws and regulations affecting the transmission, security and privacy of health information could result in significant penalties.
−Removed: Numerous federal, state and foreign laws and regulations, including HIPAA and the HITECH Act, govern the collection, dissemination, disclosure, security, use and confidentiality of individually identifiable health information health-related and other personal information.
−Removed: HIPAA and the HITECH Act require us to comply with standards for the use and disclosure of PHI within our company and with third parties.
−Removed: The privacy, security and breach
−Removed: notification rules promulgated under HIPAA, as amended by the HITECH Act, Standards for Privacy of Individually Identifiable Health Information (Privacy Standards) and the Security Standards for the Protection of Electronic Protected Health Information (Security Standards) under HIPAA establish a set of basic national privacy and security standards for the protection of individually identifiable health information by Covered Entities and their Business Associates.
+Added: Actual or perceived failures to comply with applicable data protection, privacy and security laws, regulations, standards and other requirements could materially and adversely affect our business, results of operations and financial condition.
+Added: Any failure or perceived failure by us to comply with federal or state laws or regulations, our internal policies and procedures or our contracts governing our use and disclosures of personal information could result in negative publicity, government investigations and enforcement actions including significant penalties, claims by third parties,
+Added: and damage to our reputation, any of which could have a material adverse effect on our operations, financial performance and business.
+Added: Failure to comply with HIPAA, the HITECH Act, their implementing regulations and similar comparable state laws and regulations affecting the transmission, security and privacy of health information could result in significant penalties or private litigation.
+Added: Numerous federal, state and foreign laws and regulations, including HIPAA and the HITECH Act in the United States, govern the collection, dissemination, disclosure, security, use and confidentiality of individually identifiable health information and, in many cases, other personal information.
+Added: HIPAA and the HITECH Act require us to comply with standards for the use and disclosure of PHI within our company and with respect to third parties.
+Added: The privacy, security and breach notification rules promulgated under HIPAA, as amended by the HITECH Act, Standards for Privacy of Individually Identifiable Health Information (Privacy Standards) and the Security Standards for the Protection of Electronic Protected Health Information (Security Standards) under HIPAA establish a set of basic national privacy and security standards for the protection of individually identifiable health information by Covered Entities and their Business Associates.
HIPAA requires Covered Entities, such as us, to develop and maintain policies and procedures with respect to individually identifiable health information that is used or disclosed, including the adoption of administrative, physical and technical safeguards to protect the privacy and security of such information.
HIPAA also requires us to provide individuals with certain rights with respect to their PHI.
−Removed: If we engage a Business Associate to help us carry out healthcare activities and functions, we must have a written Business Associate contract or other arrangement with the Business Associate that establishes specifically what the Business Associate has been engaged to do and requires the Business Associate to comply with the requirements of HIPAA.
+Added: If we engage a Business Associate to help us carry out healthcare activities and functions, we must have a written Business Associate contract or other arrangement with the Business Associate that establishes specifically what the Business Associate has been engaged to do and obligates the Business Associate to comply with HIPAA requirements.
Further, in the event of a breach of unsecured PHI we must notify each individual whose PHI is breached as well as federal regulators and in some cases, must publicize the breach in local or national media.
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In the conduct of our business, we process, maintain, and transmit sensitive data, including PHI.
−Removed: There can be no assurance that a breach of privacy or security will not occur.
−Removed: If there is a breach, we could be subject to various lawsuits, penalties and damages and may be required to incur costs to mitigate the impact of the breach on affected individuals.
+Added: There can be no assurance that a material breach of privacy or security will not occur.
+Added: If there is a breach, we could be subject to various lawsuits, penalties and damages and may be required to incur costs to mitigate the impact of the breach on affected individuals such that our business may be materially and adversely affected.
Penalties for failure to comply with HIPAA requirements are substantial and could include corrective action plans and/or the imposition of civil or criminal penalties.
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It also created a new regulatory authority, the California Privacy Protection Agency (CPPA), which is authorized to issue substantive regulations and could result in increased privacy and information security enforcement.
−Removed: In the event that we are subject to or affected by HIPAA, the CCPA, the CPRA or other domestic privacy and data protection laws (for example Virginia's Consumer Data Protection Act and other similar laws that recently went into effect in in other states, such as Utah, Colorado, Connecticut, Delaware, Florida, Indiana, Iowa, Montana, Oregon, Tennessee, and Texas), any liability from failure to comply with the requirements of these laws could adversely affect our financial condition.
+Added: In the event that we are subject to or affected by HIPAA, the CCPA, the CPRA or other domestic privacy and data protection laws (for example Virginia's Consumer Data Protection Act and other similar laws that recently went into effect in in other states, such as Utah, Colorado, Connecticut, Delaware, Florida, Indiana, Iowa, Montana, Oregon, Tennessee, and Texas or Washington's "My Health My Data" Act), any liability from failure to comply with the requirements of these laws could adversely affect our financial condition.
In Europe, the GDPR went into effect in May 2018 and imposes strict requirements for processing the personal data of individuals within the EEA.
−Removed: Companies that must comply with the GDPR face increased compliance obligations and risk, including more robust regulatory enforcement of data protection requirements and potential fines for noncompliance of up to €20 million or 4% of the annual global revenues of the noncompliant company, whichever is greater.
−Removed: Among other requirements, the GDPR regulates transfers of personal data subject to the GDPR to third countries that have not been found to provide adequate protection to such personal data, including the United States, and the efficacy and longevity of current transfer mechanisms between the EU and the United States remains uncertain.
−Removed: For example, in 2016, the EU and United States agreed to a transfer framework for data transferred from the EU to the United States, called the Privacy Shield, but the Privacy Shield was invalidated in July 2020 by the Court of Justice of the EU.
+Added: Companies that must comply with the GDPR face increased compliance obligations
+Added: and risk, including more robust regulatory enforcement of data protection requirements and potential fines for noncompliance of up to €20 million or 4% of the annual global revenues of the noncompliant company, whichever is greater.
+Added: Among other requirements, the GDPR regulates transfers of personal data subject to the GDPR to countries outside of the EEA that have not been found to provide adequate protection to such personal data.
+Added: In 2016, the EU and United States agreed to a transfer framework for data transferred from the EU to the United States, called the Privacy Shield, but the Privacy Shield was invalidated in July 2020 by the Court of Justice of the EU.
In July 2023, however, 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.
−Removed: The adequacy decision followed
−Removed: the signing of an executive order introducing new binding safeguards addressing the reasons behind the Court of Justice of the EU’s invalidation of the original Privacy Shield.
−Removed: The European Commission will continually review developments in the United States along with its adequacy decision.
−Removed: However, future actions of EU data protection authorities are difficult to predict.
+Added: The adequacy decision followed the signing of an executive order introducing new binding safeguards addressing the reasons behind the Court of Justice of the EU’s invalidation of the original Privacy Shield.
+Added: The European Commission will continually review developments in the United States along with its adequacy decision, and the adequacy decision could be altered or withdrawn.
+Added: Future actions of EU data protection authorities and the potential impacts on data transfers are difficult to predict.
Relatedly, following the United Kingdom’s withdrawal from the EU, the GDPR was implemented in the United Kingdom as the U.K.
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Data Protection Act 2018, which implements certain derogations in the EU GDPR into U.K.
−Removed: GDPR mirrors the fines under the GDPR, i.e., fines up to the greater of €20 million (£17.5 million) or 4% of global turnover.
+Added: GDPR mirrors the fines under the GDPR, i.e., fines up to the greater of €20 million (£17.5 million) or 4% of annual 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.
−Removed: 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.
−Removed: GDPR, and the Privacy and Electronic Communications Regulations under one legislative framework.
The regulatory framework governing the collection, storage, use and sharing of certain information, particularly financial and other personal information, is rapidly evolving and is likely to continue to be subject to uncertainty and varying interpretations.
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• the existence of additional third-party patent rights of potential relevance to our business;
−Removed: • unexpected changes in tariffs, trade barriers and regulatory requirements;
+Added: • changes in tariffs, trade barriers and regulatory requirements;
• economic weakness, including inflation, or political instability in particular foreign economies and markets;
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If we are unable to maintain intellectual property protection, our competitive position could be harmed.
−Removed: Our ability to protect our technologies, such as the AVISE ® Lupus test, affects our ability to compete and to achieve sustained profitability.
+Added: Our ability to protect our technologies, such as the AVISE ® Lupus platform, affects our ability to compete and to achieve sustained profitability.
We rely on a combination of U.S.
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We apply for patents covering our testing products and technologies and uses thereof, as we deem appropriate, however we may fail to apply for patents on important testing products and technologies in a timely fashion or at all, or we may fail to apply for patents in potentially relevant jurisdictions, or we may cease our prosecution and maintenance of patents in potentially relevant jurisdictions.
−Removed: Currently, we have an exclusive license to 12 issued U.S.
−Removed: patents, one Patent Cooperation Treaty application, and certain corresponding foreign counterpart patents, relevant to our AVISE ® testing products.
+Added: Currently, we have an exclusive license to two issued U.S.
+Added: patents, one U.S.
+Added: patent application, and certain corresponding foreign counterpart patents, relevant to our AVISE ® testing products.
We own five issued U.S.
−Removed: patents, six pending U.S.
−Removed: patent applications, one pending U.S.
−Removed: provisional patent application and certain corresponding foreign counterpart patents relevant to our AVISE ® testing products.
+Added: patents, three pending U.S.
+Added: patent applications, and certain corresponding foreign counterpart patents relevant to our AVISE ® testing products.
While we intend to pursue additional patent applications, it is possible that our pending patent applications and any future applications may not result in issued patents.
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Furthermore, if third parties bring these proceedings against our patents, we could experience significant costs and management distraction.
−Removed: We previously held licenses to five patent families related to CB-CAPs technology from the University of Pittsburgh (UPitt).
+Added: We previously held licenses to five patent families related to CB-CAPs technology from UPitt.
We have terminated these license agreements (related to U.S.
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However, trade secrets can be difficult to protect.
−Removed: While we use commercially reasonable efforts to protect our trade secrets, our licensors,
−Removed: employees, consultants, contractors and other advisors may unintentionally or willfully disclose such trade secret information to third parties and competitors.
+Added: While we use commercially reasonable efforts to protect our trade secrets, our licensors, employees, consultants, contractors and other advisors may unintentionally or willfully disclose such trade secret information to third parties and competitors.
We attempt to protect our proprietary technology in large part by entering into confidentiality and non-disclosure agreements with our employees, consultants and other contractors.
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As a result, the U.S.
−Removed: government may have certain rights to intellectual property embodied in our testing products pursuant to the Bayh-Dole Act of 1980 (Bayh-Dole Act).
+Added: government may have certain rights to intellectual
+Added: property embodied in our testing products pursuant to the Bayh-Dole Act.
government rights include a non-exclusive, non-transferable, irrevocable worldwide license to use inventions for any governmental purpose.
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or (iii) government action is necessary to meet requirements for public use under federal regulations (also referred to as “march-in rights”).
−Removed: government also has the right to take title to these inventions if the grant recipient fails to disclose the invention to the government or fails to file an
−Removed: application to register the intellectual property within specified time limits.
+Added: government also has the right to take title to these inventions if the grant recipient fails to disclose the invention to the government or fails to file an application to register the intellectual property within specified time limits.
Intellectual property generated under a government funded program is also subject to certain reporting requirements, compliance with which may require us to expend substantial resources.
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If our licensors are not fully cooperative or disagree with us as to the prosecution, maintenance or enforcement of any patent rights, such patent rights could be compromised.
−Removed: If there are material defects in the form, preparation, prosecution or enforcement of our patents or patent applications, such patents may be invalid and/or unenforceable, and such applications may never result in valid, enforceable patents.
+Added: If there are material defects in the form, preparation, prosecution or enforcement of our patents or patent applications, such patents may
+Added: be invalid and/or unenforceable, and such applications may never result in valid, enforceable patents.
Any of these outcomes could impair our ability to prevent competition from third parties, which may have an adverse impact on our business.
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We have not had and do not have primary control over these activities for certain of our patents or patent applications and other intellectual property rights.
−Removed: We cannot be certain that such activities by third parties have been or will be conducted
−Removed: in compliance with applicable laws and regulations or will result in valid and enforceable patents or other intellectual property rights.
+Added: We cannot be certain that such activities by third parties have been or will be conducted in compliance with applicable laws and regulations or will result in valid and enforceable patents or other intellectual property rights.
Pursuant to the terms of the license agreements with some of our licensors, the licensors may have the right to control enforcement of our licensed patents or defense of any claims asserting the invalidity of these patents and even if we are permitted to pursue such enforcement or defense, we will require the cooperation of our licensors.
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We are a party to a number of license agreements under which we are granted intellectual property rights that are important to our business.
−Removed: For example, we license certain patent rights from AHN, QMUL and JHU.
+Added: For example, we license certain patent rights from AHN and JHU.
Our existing license agreements impose various regulatory and/or commercial diligence obligations, payment of milestones and/or royalties and other obligations.
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Periodic maintenance fees, renewal fees, annuity fees and various other governmental fees on any issued patents and/or applications are due to be paid to the USPTO and foreign patent agencies in several stages over the lifetime of the patents and/or applications.
−Removed: Our outside counsel has systems in place to monitor deadlines to pay these fees and to remind us of
−Removed: these fees, and our outside counsel employs an outside firm to pay these fees due to the USPTO and to foreign patent agencies based on our instructions.
+Added: Our outside counsel has systems in place to monitor deadlines to pay these fees and to remind us of these fees, and our outside counsel employs an outside firm to pay these fees due to the USPTO and to foreign patent agencies based on our instructions.
In the aggregate, these fees can be cost prohibitive for an early-stage company.
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Although we are not aware of any issued patents that will prevent us from marketing our AVISE ® testing products, there may be third-party patents of which we are currently unaware with claims to materials or methods of manufacture related to the use or manufacture of our AVISE ® testing products.
−Removed: If a third party that owns such a patent asserts it successfully against one of our current or future AVISE ® testing products, we may be unable to market our product, which could materially harm our business and because patent applications can take many years to issue and may be confidential for 18 months or more after filing, there may be currently pending third-party
−Removed: patent applications which may later result in issued patents that our AVISE ® testing products or our technologies may infringe, or which such third parties claim are infringed by the use of our technologies.
+Added: If a third party that owns such a patent asserts it successfully against one of our current or future AVISE ® testing products, we may be unable to market our product, which could materially harm our business and because patent applications can take many years to issue and may be confidential for 18 months or more after filing, there may be currently pending third-party patent applications which may later result in issued patents that our AVISE ® testing products or our technologies may infringe, or which such third parties claim are infringed by the use of our technologies.
Parties making claims against us for infringement or misappropriation of their intellectual property rights may seek and obtain injunctive or other equitable relief, which could effectively block our ability to further develop one or more of our AVISE ® testing products.
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• future sales of our common stock by our executive officers, directors and other stockholders;
−Removed: • general economic conditions and slow or negative growth of our markets, including as a result of the current conflict in the Ukraine and the Middle East.
+Added: • general economic conditions and slow or negative growth of our markets, including as a result of the current conflicts in the Ukraine and the Middle East.
In addition, the stock market in general, and the market for stock of life sciences companies in particular, has experienced extreme price and volume fluctuations that have often been unrelated or disproportionate to the operating performance of those companies.
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Sales of a substantial number of shares of our common stock in the public market or the perception that these sales might occur could significantly reduce the trading price of our common stock and impair our ability to raise adequate capital through the sale of additional equity securities.
+Added: At December 31, 2024, our employees and members of our board of directors collectively hold options to acquire up to 489,296 shares of our common stock and restricted stock units representing the contingent right to receive up to 1,710,373 shares of our common stock.
+Added: These shares are registered pursuant to our previously filed registration statements on Form S-8 and are generally freely-tradeable.
+Added: Future sales of substantial amounts of our common stock in the public market, including sales by our directors, employees, or other significant holders, shares issued upon exercise of then outstanding options or warrants, or the perception that such sales may occur, could adversely affect the market price of our common stock and cause significant dilution to our existing stockholders.
In addition, our directors and executive officers have and may continue to establish programmed selling plans under Rule 10b5-1 of the Exchange Act for the purpose of effecting sales of our common stock.
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Under Section 203, a corporation may not, in general, engage in a business combination with any holder of 15% or more of its capital stock unless the holder has held the stock for three years or, among other exceptions, the board of directors has approved the transaction.
−Removed: Our amended and restated certificate of incorporation provides that the Court of Chancery of the State of Delaware will be the exclusive forum for substantially all disputes between us and our stockholders, which
−Removed: could limit our stockholders’ ability to obtain a favorable judicial forum for disputes with us or our directors, officers or employees.
+Added: Our amended and restated certificate of incorporation provides that the Court of Chancery of the State of Delaware will be the exclusive forum for substantially all disputes between us and our stockholders, which could limit our stockholders’ ability to obtain a favorable judicial forum for disputes with us or our directors, officers or employees.
Our amended and restated certificate of incorporation provide that the Court of Chancery of the State of Delaware is the exclusive forum for any derivative action or proceeding brought on our behalf, any action asserting a breach of fiduciary duty, any action asserting a claim against us arising pursuant to the Delaware General Corporation Law, our amended and restated certificate of incorporation, or any action asserting a claim against us that is governed by the internal affairs doctrine;
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In addition, our Amended Loan Agreement restricts our ability to pay cash dividends on our common stock and we may also enter into credit agreements or other borrowing arrangements in the future that will restrict our ability to declare or pay cash dividends on our common stock.
−Removed: Any determination to pay dividends in the future will be at the discretion of our board of directors and will depend on our financial condition, operating results, capital requirements, general business conditions and other factors that our board of directors may deem relevant.
+Added: Any determination to pay dividends in the future will be at the discretion of our board of directors and will depend on our financial condition, operating results, capital
+Added: requirements, general business conditions and other factors that our board of directors may deem relevant.
As a result, capital appreciation, if any, of our common stock will be the sole source of gain for the foreseeable future.
An active, liquid trading market for our common stock may not be maintained.
−Removed: Prior to our initial public offering (IPO), there had been no public market for our common stock.
−Removed: Our common stock began trading on The Nasdaq Global Market (Nasdaq) relatively recently, but we can provide no assurance that we will be able to develop and sustain an active trading market for our common stock.
+Added: Prior to our initial public offering, there had been no public market for our common stock.
+Added: While our common stock now trades on The Nasdaq Global Market (Nasdaq), we can provide no assurance that we will be able to develop and sustain an active trading market for our common stock.
Even if an active trading market is developed, it may not be sustained.
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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.