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Item 1A. Risk Factors

2022-03-22 compared with 2021-03-16 · 326 added, 408 removed, 794 unchanged (48% of the section changed)

Risk Factors.

Investing in our common stock involves a high degree of risk.

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

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

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

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

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

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

• Our future growth depends, in part, on our ability to execute on our strategy of integrating the promotion of our existing and future proprietary testing products with the promotion of therapeutics through third party collaborations and strategic partnerships, and we may be unsuccessful in our efforts to establish such relationships or our promotion efforts after any such relationships are established, which could adversely affect our ability to implement this strategy;

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

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

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

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

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

• If our sole laboratory facility becomes damaged or inoperable, we are required to vacate our existing facility or we are unable to expand our existing facility as needed, we will be unable to perform our testing services and our business will be harmed and, in addition, we are in the process of converting warehouse space into additional laboratory facilities, but this may not be successful;

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

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Risks Related to Our Business and Strategy

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

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

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

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International and U.S.

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

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

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

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

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

While many jurisdictions have fully reopened or have begun a phased re-opening, the potential to return to prior restrictions remains if there are future increases (or, in some jurisdictions, continued increases) in new cases of COVID-19 or any of its viral variants, including the Delta and Omicron variants.

The duration of any restrictions may also vary depending on the ultimate success of ongoing vaccination efforts.

Even in areas where "stay-at-home" restrictions, masking and social distancing measures have been lifted and the number of COVID-19 cases have declined, some jurisdictions may re-impose these measures as and if variant strains emerge or cases rise.

Many individuals remain cautious about resuming activities such as preventative-care medical visits.

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

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

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

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

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

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

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

healthcare system, a reduction in patient flow occurred and our test volumes began to

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

In the fourth quarter of 2020, our volume of AVISE ® CTD tests delivered exceeded our pre-COVID-19 levels.

For the three months ended December 31, 2021 as compared to the same period in 2020, we experienced an AVISE ® CTD volume increase of approximately 19%.

For the year ended December 31, 2021 as compared to the same period in 2020, we experienced an AVISE ® CTD test volume increase of approximately 28%.

However, the continued spread of COVID-19 and patient hesitancy in seeking preventative medical care, the extent of which are dependent on circumstances that are highly uncertain, may adversely affect testing volumes in future periods.

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

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

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

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

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

In addition, we believe there are several other important factors that have impacted, and that we expect will impact our operating performance and results of operations, including shutdowns of our facilities and operations as well as those of our suppliers and courier services, disruptions to the supply chain of material needed for our tests, our sales and commercialization activities and our ability to receive specimens and perform or deliver the results from our tests, delays in reimbursement and coverage decisions from Medicare and third-party payors and in interactions with regulatory authorities, as well as our inability to achieve or re-negotiate volume-based discounts with our key suppliers and to absorb fixed laboratory expenses.

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

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

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

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

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

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

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

We have also experienced delays, beginning in the first quarter of 2021, in procurement of our testing supplies due in part to disruptions to the global supply chain resulting from the COVID-19 pandemic, which may continue into the future, and our partners, may also experience a disruption in their ability to readily obtain supply.

We are facing and may continue to face increased competition for laboratory and scientific employees due to the increased demand in the industry for such personnel.

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

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

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

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

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

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As of December 31, 2021, we had an accumulated deficit of $208.1 million.

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

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

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

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

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

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

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

Further, we cannot ensure the continued

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

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

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

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

We are in the process of integrating our historical testing products business with the promotion of therapeutics in an integrated testing and therapeutics strategy.

Our integrated testing and therapeutics strategy leverages our sales and marketing efforts, targeting rheumatologists for the commercialization of our testing products to promote therapeutics.

As a result, our future growth is dependent, in part, on our ability to leverage our unique commercial model of offering testing products combined with therapeutics, including with respect to the Janssen Agreement, which we entered into in December 2018 to exclusively promote SIMPONI ® in the United States.

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

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

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

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

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

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

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

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

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

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

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

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

Our future growth depends, in part, on our ability to execute on our strategy of integrating the promotion of our existing and future proprietary testing products with the promotion of therapeutics through third party collaborations and strategic partnerships, and we may be unsuccessful in our efforts to establish such relationships or our promotion efforts after any such relationships are established, which could adversely affect our ability to implement this strategy.

We intend to integrate our historical testing products business with the promotion of therapeutics in an integrated testing and therapeutics strategy.

Our integrated testing and therapeutics strategy would leverage our sales and marketing efforts, targeting rheumatologists for the commercialization of our testing products in co-promotion with therapeutics.

As a result, our future growth is dependent, in part, on the success of this strategy.

The Janssen Agreement was terminated effective as of August 31, 2021.

While we remain optimistic about the strategy of providing an integrated testing and therapeutics model, we may be unsuccessful in our efforts to establish relationships with collaborators in the future.

Even if we successfully establish these relationships, our ability to effectively implement this strategy will depend on our or our collaborator's ability to create demand for the applicable therapeutic through our or our collaborator's commercial and sales activities.

Moreover, we may encounter difficulties in maintaining an effective sales force in furtherance of these co-promotion efforts.

We have a limited history partnering with pharmaceutical companies for the promotion of therapeutics.

Consequently, any predictions made about our future success or viability with respect to our promotion activities may not be as accurate as they could be if we had a history of successfully co-promoting therapeutics.

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

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

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

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

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

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

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

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

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

If we are unable to manage our ongoing and future growth effectively, it may be difficult for us to execute our business strategy and our business could be harmed.

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

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

If we fail to successfully establish and maintain relationships with these collaborators and strategic partners, our ability to implement our integrated testing and therapeutics strategy and generate sufficient revenue to grow and sustain our business, and our business, financial condition and results of operations, will be adversely affected.

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

We intend to opportunistically evaluate, and may continue to enter into, agreements with pharmaceutical companies to integrate the promotion of our testing products with their therapeutics.

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

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

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

For example, we have limited control over, and rely on Janssen for, numerous activities that are critical to our ability to successfully promote SIMPONI ® , such as pricing decisions, manufacture and supply of SIMPONI ® , reimbursement support, marketing materials, the prosecution and enforcement of patents and other intellectual property rights related to SIMPONI ® and public communications and presentations regarding SIMPONI ® .

We likewise have limited control of how our other partners use the information provided by our testing products.

If any of our current or future partners breaches or terminates our agreements, or fails to conduct the activities contemplated by our agreements in a timely manner, our success promoting the applicable therapeutics, testing products or information provided thereby could be diminished or blocked completely.

It is possible that partners will change their strategic focus, pursue alternative technologies or develop alternative products, either on their own or in collaboration with others.

For example, under the Janssen Agreement, Janssen is not prohibited from developing or commercializing products that are competitive with SIMPONI ® .

If Janssen commercializes any competing products, it may provide lower levels of support to SIMPONI ® or may terminate our agreement entirely.

The effectiveness of our partners, if any, in marketing the applicable therapeutics will also affect our revenue and earnings.

In addition, if our other partners encounter problems with our testing products or information provided by our testing products that they rely on as part of their efforts, our reputation and that of our testing products could be damaged, and it could impair our ability to enter into future agreements to promote therapeutics.

We rely on Janssen to provide, on a timely basis, an adequate and reliable supply of SIMPONI ® .

Any delay or interruption of supply or Janssen’s failure to comply with regulatory or other requirements could limit its ability to make, or cause it to cease sales, of SIMPONI ® .

Any manufacturing defect or error discovered after SIMPONI ® has been produced and distributed could result in even more significant consequences, including costly recall procedures.

For example, we provide GSK our test result data to provide market insights for their commercial organization.

The amount and timing of resources applied by our potential future partners may be largely outside of our control.

For example, we had limited control over, and relied on Janssen for, numerous activities that were critical to our ability to successfully promote SIMPONI ® , such as pricing decisions, manufacture and supply of SIMPONI ® , reimbursement support, marketing materials, the prosecution and enforcement of patents and other intellectual property rights related to SIMPONI ® and public communications and presentations regarding SIMPONI ® .

We likewise had limited control of how our other partners use the information provided by our testing products.

The Janssen Agreement was terminated effective as of August 31, 2021.

If any of our future partners breaches or terminates our agreements, or fails to conduct the activities contemplated by our agreements in a timely manner, our success promoting the applicable therapeutics, testing products or information provided thereby could be diminished or blocked completely.

It is possible that our future partners will change their strategic focus, pursue alternative technologies or develop alternative products, either on their own or in collaboration with others.

The effectiveness of our future partners, if any, in marketing the applicable therapeutics

will also affect our revenue and earnings.

In addition, if our future partners encounter problems with our testing products or information provided by our testing products that they rely on as part of their efforts, our reputation and that of our testing products could be damaged, and it could impair our ability to enter into future agreements to promote therapeutics.

With respect to any of our partners with which we enter into co-promotion agreements, we rely on the partner to provide, on a timely basis, an adequate and reliable supply of the relevant therapeutic product.

Any delay or interruption of supply or the partner's failure to comply with regulatory or other requirements could limit our or our partners' ability to make, or cause it to cease sales, of the therapeutic product.

Any manufacturing defect or error discovered after the partner's therapeutic product has been produced and distributed could result in even more significant consequences, including costly recall procedures.

In addition, the importation of pharmaceutical products into the United States is subject to regulation by the FDA, and the FDA can refuse to allow an imported product into the United States if it appears that the product fails to comply with applicable laws or regulations.

Moreover, Janssen and its third-party manufacturers and suppliers may experience difficulties related to their overall business and financial stability.

For example, in December 2019, a novel strain of coronavirus, COVID-19, has resulted in business closures and a limit on travel, as well as creating uncertainty in the broader economy and financial markets.

Any disruption, including the extent to which COVID-19 has an effect on Janssen, may impact our ability to readily obtain supply and other requirements under our agreement with Janssen.

To the extent Janssen faces manufacturing difficulties or is unable to provide an adequate and reliable supply of SIMPONI ® on a timely basis, our reputation could be harmed and our business could suffer.

Moreover, the partner or its respective third-party manufacturers and suppliers may experience difficulties related to their overall business and financial stability.

To the extent the partner faces manufacturing difficulties or are unable to provide an adequate and reliable supply of the relevant therapeutic product on a timely basis, our reputation could be harmed and our business could have suffered.

We do not have the capability and do not intend to discover or develop therapeutics on our own.

Therefore, the success of our integrated testing and therapeutics strategy depends in part on our ability to acquire additional rights to promote therapeutics from new or existing partners.

Therefore, the success of our integrated testing and therapeutics strategy depends in part on our ability to acquire additional rights to promote therapeutics from new partners.

Other companies, many of which have substantially greater financial, marketing and sales resources than we do, also compete with us for the acquisition of rights to therapeutics.

In addition, under the Janssen Agreement, we are prohibited from selling or promoting certain types of products that are used to treat the same indications that SIMPONI ® is used to treat.

In addition, depending on our agreements with our future partners, we may be prohibited from selling or promoting certain types of products that are used to treat the same indications that such partner's therapeutic is used to treat.

We may not be able to successfully negotiate any additional agreements to promote therapeutics and, if established, these relationships may not be successful.

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

The inability to enter into agreements for additional therapeutics

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

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

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

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

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

In particular, we have 61 representatives as of December 31, 2021 compared to 53 representatives as of December 31, 2020, and expect to continue to evaluate the reach and frequency with rheumatologists, including as we launch our pipeline products.

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

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

If we are unable to manage our ongoing and future growth effectively, it may be difficult for us to execute our business strategy and our business could be harmed.

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

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

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

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

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

For example, in the fourth quarter of 2021, we were featured in eight scientific presentations at the 2021 American College of Rheumatology's (ACR) Virtual Annual Conference, ACR Convergence 2021.

We will also need to generate demand

for both our testing products and, to the extent we are successful in establishing partnerships granting us the necessary rights, promoted therapeutics, through one-on-one education by our sales force.

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

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

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

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

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

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

Market acceptance of our testing products and, to the extent we are successful in establishing partnerships granting us the necessary rights, promoted therapeutics, depends on a number of factors, including:

• the perceived accuracy of our test results by rheumatologists and patients;

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• the effectiveness of our sales and marketing efforts.

In addition, if we or our partners had to withdraw a product from the market, it could harm our business and could impact market acceptance of our other testing products or promoted therapeutics.

Further, our AVISE ® CTD consists of various biomarkers, any of which could independently encounter issues with manufacturing, supply or overall quality.

In addition, if we or our future partners have to withdraw a product from the market, it could harm our business and could impact market acceptance of our other testing products or promoted therapeutics.

Further, our AVISE ® testing products consist of various biomarkers, any of which could independently encounter issues with manufacturing, supply or overall quality.

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

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

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

Our estimates of the annual total addressable markets for our current and potential future testing products and promoted therapeutics are based on a number of internal and third-party estimates.

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.

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

Our estimates of the annual total addressable markets for our current and potential future testing products are based on a number of internal and third-party estimates.

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.

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.

As a result, our estimates of the annual total addressable market for our current and potential future testing products and promoted therapeutics may prove to be incorrect.

If the actual number of patients who would benefit from our testing products and promoted therapeutics, the price at which we and our partners can sell future testing products, or the annual total addressable market for our testing products and promoted therapeutics is smaller than we have estimated, it may impair our sales growth and have an adverse impact on our business.

As a result, our estimates of the annual total addressable market for our current and potential future testing products may prove to be incorrect.

If the actual number of patients who would benefit from our testing products and promoted therapeutics, the price at which we and our partners can sell future testing products, or the annual total addressable market for our testing products is smaller than we have estimated, it may impair our sales growth and have an adverse impact on our business.

We may expend our limited resources to pursue a particular testing product or promoted therapeutic and fail to capitalize on other testing products or promoted therapeutics that may be more profitable or for which there is a greater likelihood of success.

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

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

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

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These fluctuations may occur due to a variety of factors, many of which are outside of our control, including, but not limited to:

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

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

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

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• expenditures that we may incur to acquire, develop or commercialize additional testing products and technologies;

• the level of demand for our testing products and promoted therapeutics, which may vary significantly;

• the receipt, timing and mix of revenue for our testing products and promoted therapeutics;

• the level of demand for our testing products and any therapeutics we may promote in the future, which may vary significantly;

• the receipt, timing and mix of revenue for our testing products and any therapeutics we may promote in the future;

• future accounting pronouncements or changes in our accounting policies;

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

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

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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• medically necessary;

• demonstrated lead to improved patient outcomes;

• demonstrated to lead to improved patient outcomes;

• appropriate for the specific patient;

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

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

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

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

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

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

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

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

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

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

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

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

Other third-party payors make their own decisions as to whether to establish a policy to reimburse our testing products.

Because approvals must be sought on a payor by payor basis, establishing broad coverage is a time-consuming and costly process.

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

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We use standard industry billing codes, known as CPT codes, to bill for our testing products.

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

If these codes were to change, there is risk that errors could be made in the claim adjudication process.

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

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

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

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

Additionally, providers and suppliers must report and return overpayments received from the Medicare and Medicaid programs within 60 days of identification.

Failure to identify and return such overpayments exposes the provider or supplier to liability under the federal False Claims Act.

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

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

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

With respect to payments received from government 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.

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 2021, Noridian posted the calendar year 2022 Medicare Physician Fee Schedule, or MPFS, and Clinical Laboratory Fee Schedule, or CLFS, which establishes the reimbursement rates to be paid by Medicare for our jurisdiction for services performed on or after January 1, 2022.

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

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

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

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

years ended December 31, 2020 and 2019, respectively.

We do not expect that PAMA or changes to the Physician Fee Schedule will have a significant impact to Medicare reimbursement for AVISE ® CTD in 2022 compared to levels experienced in 2021.

Revenue from Medicare comprised 19% and 20% of our revenue for the years ended December 31, 2021 and 2020, respectively.

Revenue from the sale of our AVISE ® CTD testing products comprised 81% and 70% of our revenue for the years ended December 31, 2021 and 2020, respectively.

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Despite the contractual provisions employed when working with third parties, the need to share trade secrets and other confidential information increases the risk that such trade secrets become known by our competitors, are intentionally or inadvertently incorporated into the technology of others or are disclosed or used in violation of these agreements.

Given that our proprietary position is based, in part, on our know-how and trade secrets and despite our efforts to protect our trade secrets, a competitor’s discovery of our proprietary technology and confidential information or other unauthorized use or disclosure would impair our competitive position and may have a material adverse effect on our business, financial condition, results of operations and prospects.

Significant safety or efficacy issues could arise for our promoted therapeutics, which could have an adverse effect on our revenue and financial condition.

Given that our proprietary position is based, in part, on our know-how and trade secrets and despite our efforts to

protect our trade secrets, a competitor’s discovery of our proprietary technology and confidential information or other unauthorized use or disclosure would impair our competitive position and may have a material adverse effect on our business, financial condition, results of operations and prospects.

Significant safety or efficacy issues could arise for our promoted therapeutics, if any, which could have an adverse effect on our revenue and financial condition.

Pharmaceutical products receive regulatory approval based on data obtained in controlled clinical trials of limited duration.

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

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

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

If safety or efficacy issues with a partner’s therapeutic arise, sales of the therapeutic could be halted by the partner or by regulatory authorities.

Safety or efficacy issues affecting suppliers’ or competitors’ products also may reduce the market acceptance of one of our partner’s therapeutics.

Safety or efficacy issues affecting suppliers’ or competitors’ products also may reduce the market acceptance of a partner’s therapeutics.

New data about a partner’s therapeutics, or products similar to a partner’s therapeutics, could negatively impact demand for such therapeutics due to real or perceived safety issues or uncertainty regarding efficacy and, in some cases, could result in product withdrawal.

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Such guidelines or recommendations may lead to lower sales of the applicable therapeutics and reduce our revenue or otherwise adversely affect our business, prospects, results of operations or financial condition.

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

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

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

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

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

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

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

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

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

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

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

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

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

For example, we have a sales force of 61 representatives as of December 31, 2021, and expect to continue to evaluate the reach and frequency with rheumatologists, including as we launch our pipeline products.

Agreements for the promotion of therapeutics may require us to further expand our specialized sales force.

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

In addition, our sales representatives do not currently promote any therapeutics and, until recently, not all of our sales representatives had promoted therapeutics as part of our organization, and they will need to complete additional training in order to effectively promote any therapeutic that we promote through future agreements.

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

In addition, competition for highly specialized sales personnel is intense, and we may not be able to attract and retain personnel or be able to maintain an efficient and effective sales and marketing force.

Our future sales will depend in large part on our ability to maintain an effective salesforce.

Our future sales will depend in large part on our ability to maintain an effective sales force.

If we are unsuccessful in this regard, it could negatively impact our revenue growth and potential profitability.

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

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

Additionally, we

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

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

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

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

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

Direct competition for the promotion of SIMPONI ® includes all other companies with anti-TNF biologics and the marketing companies supporting their distribution and promotion.

These products include HUMIRA ® from Abbvie Inc., ENBREL ® from Amgen Inc., CIMZIA ® from UCB, INFLECTRA ® from Pfizer, (biosimilar REMICADE ® ) and RENFLEXIS ® from Merck & Co.

(biosimilar REMICADE ® ).

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

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

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

and OLUMIANT ® from Eli Lilly and Company.

There are also several late-stage RA drug and biosimilar development programs and several additional RA products that have minimal sales to date or that are indicated for other rheumatic indications competitive to SIMPONI ® such as psoriatic arthritis and ankylosing spondylitis.

We believe the principal competitive factors in our target market include:

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confidence in diagnostic results;

safety and efficacy with respect to promoted therapeutics;

sales and marketing capabilities;

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

There are certain products for which a

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

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

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

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• expend significant funds to conduct substantial research and development;

• conduct successful validation studies;

• conduct successful verification, validation and utility studies;

• develop and scale our laboratory processes to accommodate different tests;

• achieve and maintain required regulatory certifications;

• achieve and maintain required regulatory certifications, including the hiring of appropriately licensed laboratory personnel;

• develop and scale our infrastructure to be able to analyze increasingly large amounts of data;

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• failure or sub-optimal performance of the testing product at the research or development stage;

• difficulty in accessing archival patient blood specimens, especially specimens with known clinical results;

• failure of clinical validation studies to support the effectiveness of the test.

• obtaining patient consent inclusive of genetic analysis;

• difficulty in accessing archival patient specimens, especially specimens with known clinical results;

• failure of clinical validation, utility and outcome studies to support the effectiveness of the test.

Typically, few research and development projects result in commercial products, and success in early clinical studies often is not replicated in later studies.

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.

In the second half of 2021, we began the conversion of approximately 8,000 square feet of warehouse space into additional clinical laboratory space and approximately 6,000 square feet of warehouse space into additional research and development facility space in order to, among other things, develop molecular and multiomic capabilities.

We have not yet developed any molecular or multiomic testing products nor do we have experience developing and integrating molecular biomarkers into new or existing testing products, and we may never be successful doing so in the future.

As a result, there is considerable risk that the expansion of our clinical laboratory

and research and development facility may not lead to the development of additional testing products that generate meaningful revenue.

Further, as we begin to expand our clinical laboratory and research and development facility in order to develop molecular and multiomic capabilities, we expect to need to make significant investments in key personnel and highly trained scientists with relevant experience to handle the increased operations and development of molecular biomarkers.

In addition, as we develop testing products, we will have to make significant investments in product development, marketing and selling resources.

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

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

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

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

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Also, the anticipated benefit of any strategic alliance, joint venture or acquisition may not materialize or such strategic alliance, joint venture or acquisition may be prohibited.

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.

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.

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.

The diagnostics and therapeutics industries are subject to rapidly changing technology, which could make our testing products, promoted therapeutics and other testing products we develop obsolete.

The diagnostics and therapeutics industries are subject to rapidly changing technology, which could make our current and future testing products and any future promoted therapeutics obsolete.

Our industry is characterized by rapid technological changes, frequent new product introductions and enhancements and evolving industry standards.

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

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

For example, with respect to SIMPONI ® and the treatment of RA, active psoriatic arthritis, or active ankylosing spondylitis, there are many novel therapeutic approaches in development and we expect that the competition in this market will increase dramatically.

If new therapeutics make SIMPONI ® obsolete or diminish the degree to which rheumatologists prescribe it, our ability to generate revenue under the Janssen Agreement will be harmed.

In addition, if any therapeutics we promote in the future become obsolete and we are unable to expand the applicable agreements or find new partners, our sales at that time could decline and our competitive position could be harmed.

Our failure to maintain relationships or build new relationships with key opinion leaders could materially adversely impact our business and prospects.

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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.

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

insurance coverage in the future.

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

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

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In addition, our research and development programs and commercial laboratory operations depend on our ability to attract and retain highly skilled scientists, including licensed clinical laboratory scientists and biostatisticians.

We may not be able to attract or retain qualified scientists and technicians in the future due to the intense competition for qualified personnel among life science businesses, particularly in Southern California.

may not be able to attract or retain qualified scientists and technicians in the future due to the intense competition for qualified personnel among life science businesses, particularly in Southern California.

Because it is expected that there will be a shortage of clinical laboratory scientists in coming years, it may become more difficult to hire sufficient numbers of qualified personnel.

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

If our sole laboratory facility becomes damaged or inoperable, we are required to vacate our existing facility or we are unable to expand our existing facility as needed, we will be unable to perform our testing services and our business will be harmed and, in addition, we are in the process of converting warehouse space into additional laboratory facilities, but this may not be successful.

We currently derive all of our revenue from tests conducted at a single laboratory facility located in Vista, California.

Vista is situated on or near earthquake fault lines.

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

Our facility and equipment could be harmed or rendered inoperable by natural or man-made disasters which may be exacerbated due to climate change, including earthquake, fire, flood, power loss, communications failure or terrorism, or public health crises such as the COVID-19 pandemic.

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

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Even in the unlikely event we are able to find a third party with such qualifications to enable us to conduct the tests contained in our testing products, we may be unable to negotiate commercially reasonable terms.

In order to rely on a third party to perform the tests contained in our testing products, we would need to engage another facility with established state licensure and Clinical Laboratory Improvement Amendments of 1988, or CLIA, accreditation under the scope of which tests could be performed following validation and other required procedures.

In order to rely on a third party to perform the tests contained in our testing products (even assuming we are able to do so in compliance with applicable regulations), we would need to engage another facility with established state licensure and Clinical Laboratory Improvement Amendments of 1988, or CLIA, certification under the scope of which tests could be performed following validation and other required procedures.

We cannot assure you that we would be able to find another CLIA-certified facility willing to comply with the required procedures, that any such facility would be willing to perform the tests contained in our testing products for us on commercially reasonable terms, or that it would be able to meet our quality standards.

In order to establish an additional clinical reference laboratory facility, we would have to spend considerable time and money securing adequate space, constructing the facility, recruiting and training employees, and establishing the additional operational and administrative infrastructure necessary to support a second facility.

We may not be able, or it may take considerable time, to replicate our testing processes or results in a new facility.

Additionally, any new clinical reference laboratory facility opened by us would be subject to certification under CLIA and licensing by several states, including California and New York, which could take a significant amount of time and result in delays in our ability to begin operations.

In order to establish additional clinical reference laboratory facilities, we have to spend considerable time and money securing or converting adequate space which may include constructing additional facilities, recruiting and training employees, and establishing the additional operational and administrative infrastructure necessary to support a second facility.

We may not be able, or it may take considerable time, to replicate our testing processes or results in any new or converted facility.

Additionally, any new clinical reference laboratory facility opened by us, including the pending warehouse conversions, would be subject to certification under CLIA and licensing by several states, including, as applicable, California and New York, which could take a significant amount of time and result in delays in our ability to begin operations.

We believe we have the capacity to meet our projected needs for at least the next 12 months, although we may grow at a rate that is faster than we expect.

Beyond this time frame, we may need to further expand our laboratory space.

Any future expansion could disrupt laboratory operations, resulting in an inability to meet customer turnaround time expectations, and could be delayed, resulting in slower realization of laboratory efficiencies anticipated from the use of the expanded facilities.

Adverse consequences resulting from a delay in the laboratory expansion could harm our relationships with our customers and our reputation, and could affect our ability to generate revenue.

We may need to further expand our laboratory space at a faster rate than we expect.

Any future expansion and the warehouse conversions currently in process could disrupt laboratory operations, resulting in an inability to meet customer turnaround time expectations, and could be delayed, resulting in slower realization of laboratory efficiencies anticipated from the use of the expanded facilities.

consequences resulting from a delay in the laboratory expansion could harm our relationships with our customers and our reputation, and could affect our ability to generate revenue.

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

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

As part of our process of determining CB-CAPs, which is part of our AVISE ® Lupus product, we utilize a number of flow cytometers that require calibration and performance validation according to the requirements of the College of American Pathologists, or CAP, at specified time intervals.

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 College of American Pathologists, or CAP, at specified time intervals.

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.

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• third-party ancillary billing services require proper tracking and reporting;

• pricing and other information related to our services is needed by our salesforce and other personnel in a timely manner to conduct business;

• pricing and other information related to our services is needed by our sales force and other personnel in a timely manner to conduct business;

• patient-identifiable health information must be securely held and kept confidential;

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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.

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 legally protected health information, including de-identified test reports, personally identifiable information about our patients, credit card information, intellectual property, and our proprietary business and financial information.

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 protected health information (including test results), personally identifiable information and credit card information.

We also store business and financial information, intellectual property, research and development information, trade secrets, and other proprietary and business critical information, including that of our customers, payors and third-party partners.

We manage and maintain our applications and data utilizing a combination of on-site and vendor-owned systems.

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.

In addition, we have limited control over the storage of sensitive data by our third-party therapeutics 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.

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

Additionally, as a result of the COVID-19 pandemic, 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.

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

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

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

A security breach or privacy violation that leads to unauthorized access, disclosure or modification of, or prevents access to, patient information, including PHI, could implicate state and federal breach notification laws.

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

Unauthorized access, loss or dissemination could also disrupt our operations, including our ability to process tests, provide test results, bill 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.

Any breach could also result in the compromise of our trade secrets and other proprietary information, which could 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.

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

Additionally, in connection with the ongoing COVID-19 pandemic, 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.

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.

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.

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.

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

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

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

Should Federal Express, United Parcel Service, or any other

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

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

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

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

Inflation could adversely affect our business and financial results.

Inflation, which increased significantly during 2021, may adversely affect us by increasing the costs of products, materials (including reagents and laboratory supplies), and labor needed to operate our business in future periods.

Actions by the government to stimulate the economy may increase the risk of significant inflation, which may have an adverse impact on our business or financial results.

Moreover, we may not be able to pass those costs along in the products we sell.

As such, inflationary pressures could have a material adverse effect on our performance and financial statements.

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

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

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

Recently enacted U.S.

tax legislation, known as the Tax Cuts and Jobs Act of 2017, has significantly changed the U.S.

federal income taxation of U.S.

corporations, including by reducing the U.S.

corporate income tax rate and revising the rules governing NOLs.

Many of these changes are effective immediately, without any transition periods or grandfathering for existing transactions.

The legislation is unclear in many respects and could be subject to potential amendments and technical corrections, as well as interpretations and implementing regulations by the U.S.

Treasury and U.S.

Internal Revenue Service, any of which could lessen or increase certain adverse impacts of the legislation.

In addition, it is unclear how these U.S.

federal income tax changes will affect state and local taxation, which often uses federal taxable income as a starting point for computing state and local tax liabilities.

Based on our current evaluation of this legislation, the reduction of the U.S.

corporate income tax rate required a provisional write-down of our deferred income tax assets (including the value of our NOL carryforwards and our tax credit carryforwards).

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

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

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

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

We urge our investors to consult with their legal and tax advisors with respect to such legislation and the potential tax consequences of investing in our common stock.

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

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

In September 2017, we entered into the loan and security agreement with Innovatus Life Sciences Lending Fund I, LP, or Innovatus, which we subsequently amended in November 2019 and November 2021, or 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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We are also subject to certain covenants that require us to maintain a minimum liquidity of at least $2.0 million and achieve certain minimum amounts of annual revenue, as measured on a rolling twelve-month basis, and are required under certain conditions to make mandatory prepayments of outstanding principal.

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

our current debt obligations are paid in full or we obtain the consent of Innovatus, which we may not be able to obtain.

As of December 31, 2021, there was $25.0 million in principal outstanding under the term loan and an additional $2.3 million outstanding representing interest at 2.0% per annum payable in-kind by adding the amount to the outstanding principal balance of the term loans.

Under the Amended Loan Agreement, we are required to repay any outstanding principal and capitalized interest in monthly installments over a two-year period commencing on December 1, 2024.

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

At December 31, 2021, we were in compliance with all covenants of the Amended Loan Agreement.

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

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

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

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

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

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

Under the Amended Loan Agreement, we are required to make monthly interest payments at a rate equal to 8.0% (provided that 2.0% of the 8.0% is payable in-kind by adding the amount to the outstanding principal balance of the term loans).

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The incurrence of additional indebtedness or the issuance of certain equity securities could result in increased fixed payment obligations and could also result in restrictive covenants, such as limitations on our ability to incur additional debt or issue additional equity, limitations on our ability to acquire or license intellectual property rights, and other operating restrictions that could adversely affect our ability to conduct our business.

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

In addition, our

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

In the event that we enter into collaborations or licensing arrangements to raise capital, we may be required to accept unfavorable terms.

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If we are not able to secure additional funding when needed, we may have to delay, reduce the scope of or eliminate one or more research and development programs or selling and marketing initiatives.

In addition, we may have to work with a partner on one or more of our testing products, promoted therapeutics or market development programs, which could lower the economic value of those programs to our company.

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

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

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

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

Moreover, in August 2020, the U.S.

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

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

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

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

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

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

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

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

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

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

In March 2020, members of the U.S.

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

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

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

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

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

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

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

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

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

Many of the factors that may cause or lead to a delay in the commencement or completion of clinical trials may also ultimately lead to delay or denial of regulatory clearance or approval.

The commencement of clinical trials may be delayed due to insufficient patient enrollment, which is a function of many factors, including the size of the patient population, the nature of the protocol, the proximity of patients to clinical sites and the eligibility criteria for the clinical trial.

We may find it necessary to engage contract research organizations to perform data collection and analysis and other aspects of our clinical trials, which might increase the cost and complexity of our trials.

We may also depend on clinical investigators, medical institutions and contract research organizations to perform the trials, and would control only certain aspects of their activities.

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

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

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

If we or any third-party contractor fails to comply with applicable GCPs, the clinical data generated in clinical trials may be deemed unreliable and the FDA, Competent Authorities of the Member States of the EEA or comparable foreign regulatory authorities may require us to perform additional clinical trials before clearing or approving our marketing applications.

A failure to comply with these regulations may require us to repeat clinical trials, which would delay the regulatory clearance or approval process.

In addition, if these parties do not successfully carry out their contractual duties or obligations or meet expected deadlines, or if the quality, completeness or accuracy of the clinical data they obtain is compromised due to the failure to adhere to our clinical protocols or for other reasons, our clinical trials may have to be extended, delayed or terminated.

Many of these factors would be beyond our control.

We may not be able to enter into replacement arrangements without undue delays or considerable expenditures.

If there are delays in testing or clearances or approvals as a result of the failure to perform by third-parties, our research and development costs would increase, and we may not be able to obtain regulatory clearance or approval for our testing products.

In addition, we may not be able to establish or maintain relationships with these parties on favorable terms, if at all.

Each of these outcomes would harm our ability to market our testing products, or to achieve sustained profitability.

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

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

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

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

and the reports of corrections and removals regulation, which requires manufacturers to report to the FDA if a device correction or removal was initiated to reduce a risk to health posed by the device or to remedy a violation of the FDCA caused by the device which may present a risk to health.

Even if we were able to obtain FDA clearance or approval for one or more of our testing products, if required, a testing product may be subject to limitations on the indications for which it may be marketed or to other regulatory conditions.

In addition, such clearance or approval may contain requirements for costly post-market testing and surveillance to monitor the safety or efficacy of the product.

The FDA has broad post-market enforcement powers, and if unanticipated problems with our testing products arise, or if we or our suppliers fail to comply with regulatory requirements following FDA clearance or approval, we may become subject to enforcement actions such as:

• adverse publicity, warning letters, untitled letters, fines, injunctions, consent decrees and civil penalties;

• repair, replacement, refunds, recalls, termination of distribution, administrative detention or seizures of our testing products;

• operating restrictions, partial suspension or total shutdown of production;

• customer notifications or repair, replacement or refunds;

• refusing our requests for 510(k) clearance or PMA approvals or foreign regulatory approvals of new testing products, new intended uses or modifications to existing testing products;

• withdrawals of current 510(k) clearances or PMAs or foreign regulatory approvals, resulting in prohibitions on sales of our testing products;

• FDA refusal to issue certificates to foreign governments needed to export testing products for sale in other countries;

• criminal prosecution.

Any of these sanctions could also result in higher than anticipated costs or lower than anticipated sales and have a material adverse effect on our reputation, business, results of operations and financial condition.

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

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

Presidential Election may impact our business and industry.

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

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

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

If we are slow or unable to adapt to changes in existing requirements or the adoption of new requirements or policies, or if we are not able to maintain regulatory compliance, we may be subject to enforcement action and we may not achieve or sustain profitability.

In addition, we may have to work with a partner on one or more of our testing products, and would have to work with a partner on any promoted therapeutics or market development programs, which could lower the economic value of those products or programs to our company.

Risks Related to Regulatory and Compliance Matters

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

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

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

On April 1, 2014, the Protecting Access to Medicare Act of 2014, or PAMA, was signed into law, which, among other things, implemented a new payment system for clinical laboratory tests reimbursed under the CLFS.

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

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

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

substantial civil monetary penalties.

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

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

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

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

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

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

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

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

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

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

On December 14, 2018, a U.S.

District Court Judge in the Northern District of Texas, or Texas District Court Judge, ruled that the entire ACA is invalid based primarily on the fact that the Tax Cuts and Jobs Act of 2017 repealed the tax-based shared responsibility payment imposed by the ACA, on certain individuals who fail to maintain qualifying health coverage for all or part of a year, which is commonly referred to as the “individual mandate”.

On December 18, 2019, the U.S.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

for patient care and lower costs.

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

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

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

Such scrutiny has resulted in several recent congressional inquiries and proposed and enacted federal and state legislation designed to, among other things, bring more transparency to product pricing, review the relationship between pricing and patient programs, and reform government program reimbursement methodologies for products.

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

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

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

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

Healthcare policy changes, including recently enacted and proposed new legislation reforming the U.S.

healthcare system, 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 private payors.

The ACA also introduced mechanisms to reduce the per capita rate of growth in Medicare spending if expenditures exceed certain targets.

Any such reductions could affect reimbursement payments for our tests.

The ACA also contains a number of other provisions, including provisions governing enrollment in federal and state healthcare programs, reimbursement matters and fraud and abuse, which we expect will impact our industry and our operations in ways that we cannot currently predict.

In April 2014, Congress passed PAMA, which included substantial changes to the way in which clinical laboratory services are be paid under Medicare Clinical Laboratory Fee Schedule.

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.

Medicare reimbursement for clinical laboratory diagnostic tests 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.

As a result, future Medicare payments may fluctuate more often and become subject to the willingness of private payors to recognize the value of diagnostic tests generally and any given test individually.

The impact of this payment system on rates for our tests, including any current or future tests we may develop, is uncertain.

We cannot predict whether or when these or other recently enacted healthcare initiatives will be implemented at the federal or state level or how any such legislation or regulation may affect us.

For instance, the payment reductions imposed by the ACA and the changes to reimbursement amounts paid by Medicare for tests such as ours based on the procedure set forth in PAMA, could limit the prices we will be able to charge or the amount of available reimbursement for our tests, which would reduce our revenue.

Additionally, these healthcare policy changes could be amended or additional healthcare initiatives could be implemented in the future.

For instance, the new Democrat-led presidential administration has been taking steps to strengthen the ACA and, following several years of litigation in the federal courts, in June 2021, the U.S.

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

Legislation related to precision medicine is also being considered in Congress and, if passed and signed into law, such legislation may affect genetic or genomic testing and related clinical laboratory offerings.

Further, the impact on our business of the expansion of the federal and state governments’ role in the U.S.

healthcare industry generally, including the social, governmental and other pressures to reduce healthcare costs while expanding individual benefits, is uncertain.

Any future changes or initiatives could have a materially adverse effect on our business, financial condition, results of operations and cash flows.

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

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

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

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

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If we were to lose our license or fail to obtain or maintain NYDOH approval for our laboratory developed tests in New York or if we were to lose our license in other states where we are required to hold licenses, we would not be able to test specimens from those states which would limit our revenue.

If we fail to comply with healthcare laws and regulations, we could face substantial penalties and our business, operations and financial condition could be adversely affected.

We and our partners, including those with whom we may enter into co-promotion or co-marketing arrangements, are also subject to healthcare fraud and abuse regulation by both the federal government and the states in which we or our partners conduct our business.

These laws include, without limitation, state and federal anti-kickback, self-referral, fraud and abuse, false claims, and physician sunshine laws and regulations.

The Federal Anti-Kickback Statute prohibits, among other things, knowingly and willfully offering, paying, soliciting or receiving any remuneration (including any kickback, bribe or rebate), directly or indirectly, overtly or covertly, in cash or in kind, to induce or in return for purchasing, leasing, ordering or arranging for the purchase, lease or order of any good, facility, item or service, including laboratory services, reimbursable, in whole or in part, under Medicare, Medicaid or other federally financed healthcare programs.

The term “remuneration” has been broadly interpreted to include anything of value.

The Federal Anti-Kickback Statute has been interpreted to apply to arrangements between manufacturers on one hand and prescribers, purchasers and formulary managers on the other.

Although there are a number of statutory exceptions and regulatory safe harbors protecting certain common activities from prosecution, the exceptions and safe harbors are drawn narrowly.

Our practices may not in all cases meet all of the criteria for safe harbor protection from anti-kickback liability.

Failure to meet all of the requirements of a particular applicable statutory exception or regulatory safe harbor, however, does not make the conduct per se illegal under the Federal Anti-Kickback Statute.

Instead, the legality of the arrangement will be evaluated on a case-by-case basis based on a cumulative review of all of its facts and circumstances.

Several courts have interpreted the statute’s intent requirement to mean that if any one purpose of an arrangement involving remuneration is to induce referrals of federal healthcare covered business, the Federal Anti-Kickback Statute has been violated.

Further, a person or entity does not need to have actual knowledge of the statute or specific intent to violate it.

in order to have committed a violation In addition, the government may assert that a claim including items or services resulting from a violation of the Federal Anti-kickback Statute constitutes a false or fraudulent claim for purposes of the false claims laws.

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

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

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

We had entered into certain arrangements with physicians for services related to specimen collection, transporting and handling.

Effective August 2015, we terminated all such agreements.

To date, no regulatory authorities have contacted us regarding these arrangements.

To the extent our prior arrangements are found to be inconsistent with applicable laws, we may be subject to significant penalties, including criminal penalties, and exclusion from participation in U.S.

federal or state health care programs.

The Federal civil and criminal false claims law, including the False Claims Act, prohibit, among other things, any person from knowingly presenting or causing to be presented a false claim for payment to the federal government, or knowingly making or causing to be made a false statement to get a false or fraudulent claim paid by the federal government.

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

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

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

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

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

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

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

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

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

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

In addition, under the federal civil monetary penalties statute, a person is prohibited from offering or transferring to a Medicare or Medicaid beneficiary any remuneration, including waivers of co-payments and deductible amounts (or any part thereof), that the person knows or should know is likely to influence the beneficiary’s selection of a particular provider, practitioner or supplier of Medicare or Medicaid payable items or services.

Moreover, in certain cases, providers who routinely waive copayments and deductibles for Medicare and Medicaid beneficiaries can also be held liable under the Federal Anti-Kickback Statute and civil False Claims Act.

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

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

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

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

The ACA, among other things, also imposed new reporting requirements on manufacturers of certain devices, drugs and biologics for certain payments and transfers of value by them and in some cases their distributors to physicians (defined to include doctors, dentists, optometrists, podiatrists and chiropractors), certain other health care providers beginning in 2022, and teaching hospitals, as well as ownership and investment interests held by physicians (as defined by the statute) and their immediate family members.

Manufacturers must submit reports by the 90th day of each calendar year.

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

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

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

We conduct business in a heavily regulated industry.

Complying with the numerous statutes and regulations pertaining to our business is expensive and time-consuming, and any failure by us, our consultants or commercial partners to comply could result in substantial penalties.

Our industry and our operations are heavily regulated by various federal, state, local and foreign laws and regulations, and the regulatory environment in which we operate could change significantly and adversely in the future.

These laws and regulations currently include, among others:

• CLIA’s and CAP’s regulation of our laboratory activities;

• FDA laws and regulations, including but not limited to requirements for offering LDTs;

• federal and state laws and standards affecting reimbursement by government payors, including certain coding requirements to obtain reimbursement and certain changes to the payment mechanism for clinical laboratory services resulting from the Protecting Access to Medicare Act of 2014, or PAMA;

• HIPAA and HITECH, which establish comprehensive federal standards with respect to the privacy and security of PHI, and requirements for the use of certain standardized electronic transactions with respect to transmission of such information, as well as similar laws protecting other types of personal information;

• state laws governing the maintenance of personally identifiable information of state residents, including medical information, and which impose varying breach notification requirements, some of which allow private rights of action by individuals for violations and also impose penalties for such violations;

• the federal Anti-Kickback Statute, which generally prohibits knowingly and willfully offering, paying, soliciting or receiving remuneration, directly or indirectly, in return for or to induce a person to refer to an individual any good, facility, item or service that is reimbursable under a federal healthcare program;

• the federal Stark Law, which generally prohibits a physician from making a referral for certain designated health services covered by the Medicare program, 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;

• 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;

• 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;

• EKRA, which imposes criminal penalties for knowing or 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;

• the ACA, which, among other things, establishes a requirement for providers and suppliers to report and return any overpayments received from the Medicare and Medicaid programs;

• other federal and state fraud and abuse laws, such as anti-kickback laws, prohibitions on self-referral, fee-splitting restrictions, insurance fraud laws, anti-markup laws, prohibitions on the provision of tests at no or discounted cost to induce physician or patient adoption and false claims acts, some of which may extend to services reimbursable by any third-party payor, including private payors;

• the prohibition on reassignment of Medicare claims and other Medicare and Medicaid billing and coverage requirements;

• state laws that prohibit other specified healthcare practices, such as billing physicians for tests that they order, waiving coinsurance, copayments, deductibles and other amounts owed by patients, business corporations practicing medicine or employing or engaging physicians to practice medicine and billing a state Medicaid program at a price that is higher than what is charged to one or more other payors;

• the FCPA, and applicable foreign anti-bribery laws;

• 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;

• 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;

• similar foreign laws and regulations that apply to us in the countries in which we operate or may operate in the future.

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.

In some cases, our risk of violating these or other laws and regulations is further increased because of the lack of their complete interpretation by applicable regulatory authorities or courts, and their provisions are thus open to a variety of interpretations.

We have adopted policies and procedures designed to comply with these laws and regulations and, in the ordinary course of our business, we conduct internal reviews of our compliance with these laws.

Our compliance is also subject to review by applicable government agencies.

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.

Additionally, we are subject to the risk that a person or government could allege such fraud or other misconduct, even if none occurred.

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.

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.

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.

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

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If we or our operations, or any of the rheumatologists or entities with whom we do business are found to be in violation of any of the laws described above or any other governmental regulations that apply to us, we may be subject to significant penalties, including administrative, civil and/or criminal penalties, damages, fines, disgorgement, individual imprisonment, exclusion from participation in U.S.

federal or state health care programs, such as Medicare and Medicaid in the U.S.

federal or state healthcare programs, such as Medicare and Medicaid in the U.S.

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

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

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

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

We may be required to modify our business practices, pay fines, incur significant expenses or experience losses due to litigation or governmental investigations.

From time to time and in the ordinary course of our business, we may be subject to litigation or governmental investigation on a variety of matters in the United States or foreign jurisdictions, including, without limitation, regulatory, intellectual property, product liability, antitrust, consumer, false claims, whistleblower, Qui Tam, privacy, anti-kickback, anti-bribery, environmental, commercial, securities and employment litigation and claims and other legal proceedings that may arise from the conduct of our business.

Our activities relating to our products and services are subject to extensive regulation in the United States and foreign jurisdictions.

Like many companies in our industry, we have in the ordinary course of business received inquiries, subpoenas, civil investigative demands, and other types of information requests from government authorities.

For example, in February 2022, we received a subpoena issued by the U.S.

Department of Justice requesting documents related to its investigation of potential federal regulatory healthcare offenses.

We are fully cooperating with the U.S.

Department of Justice to promptly respond to the requests for information in this subpoena, but we cannot predict when the investigation will be resolved, the outcome of the investigation or its potential impact on our business which may ultimately be greater than we expect.

In addition, responding to this subpoena, and any litigation or government investigation generally, diverts the attention of our management team and diverts resources from our core business.

As such, the time and attention of our management team in responding to these matters may limit their time available to devote to our business, and we may also incur significant expenses or experience losses in relation to these matters.

As a result of these matters, we may also be required to alter the conduct of our operations or pay penalties.

Any of these circumstances may adversely affect our business, prospects, reputation and results of operations.

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.

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

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

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

Specifically, the FDA

defines an in vitro diagnostic test, or IVD, is defined 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 our testing products to be IVDs subject to the agency’s regulatory requirements.

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 for use only in that laboratory.

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

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 test or not launch any other tests we may develop.

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.

The premarket review process for diagnostic products can be lengthy, expensive, time-consuming, and unpredictable.

As part of the process to prepare regulatory submissions for FDA review, we may be required to conduct formal clinical trials before applying for commercial marketing authorization.

Performing additional, new clinical studies and trials in order to obtain product approval from the FDA, if any were to become necessary, would take a significant amount of time and would substantially delay our ability to commercialize our AVISE ® tests, all of which would adversely impact our business.

While we believe that we are currently in material compliance with applicable laws and regulations as historically enforced by the FDA with respect to LDTs, we cannot assure you that the FDA will agree with our determination.

A determination that we have violated these laws and regulations, or a public announcement that we are being investigated for possible violations, could adversely affect our business, prospects, results of operations, and financial condition.

The FDA may undertake rulemaking to regulate LDTs or Congress may reform the current legal requirements applicable to LDTs, in which 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.

We currently market our AVISE ® tests as LDTs and may in the future market other tests as LDTs.

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

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

If there are changes in FDA regulations and legislative authorities such that the agency begins to exercise oversight over LDTs, we may become subject to extensive regulatory requirements and may be required to stop selling our existing test 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.

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 are very limited, orders from healthcare providers or reimbursement for our tests may decline.

Since 2017, Congress has 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.

In March 2020, a bipartisan group of members from both chambers of Congress formally introduced the Verifying Accurate, Leading-edge IVCT Development, or VALID Act, which would codify the term “in vitro clinical test,” or IVCT, and create a new medical product category separate from medical devices that includes products currently regulated as IVDs as well as LDTs, among other provisions.

The VALID Act would also create a new system for laboratories to use to submit their tests electronically to the FDA for 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.

A substantively unchanged version of the VALID Act was reintroduced in both houses of Congress on June 24, 2021.

Moreover, HHS published a policy announcement in August 2020 stating that FDA must go through a notice-and- comment rulemaking process before requiring premarket review of LDTs as medical devices, rather than making such a change through guidance documents, compliance manuals, or other informal policy statements.

HHS’s policy statement did not affect proposed legislation for the regulation of LDTs, such as the VALID Act described above.

In November 2021, the Biden Administration withdrew that HHS policy announcement and ostensibly restored FDA’s regulatory oversight of LDTs.

If Congress were to pass the VALID Act or any other legislation applicable to the FDA’s regulation of LDTs, we will likely be subject to increased regulatory burdens such as registration and listing requirements, adverse event reporting requirements, and quality control requirements.

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.

Any such process would likely be costly and time-consuming.

The outcome and ultimate impact on our business of any changes to the federal government’s regulation of LDTs is difficult to predict.

Potential future increased regulation of our LDTs could result in increased costs and administrative and legal actions for noncompliance, including warning letters, fines, penalties, product suspensions, product recalls, injunctions and other civil and criminal sanctions, which could have a material and adverse effect upon our business, operating results, and financial condition.

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.

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.

The Federal Trade Commission 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.

The FTC and/or state enforcement or regulatory agencies (including but not limited to the offices of state attorneys general) may object to the materials and methods we use to promote our current tests or other LDTs we may develop in the future, including with respect to the product claims in our promotional materials, and may initiate enforcement actions against us.

Enforcement actions by the FTC may include, among others, injunctions, civil penalties, and equitable monetary relief.

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.

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.

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

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

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

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

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

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

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

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.

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

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

Further, the HITECH Act and the Final HIPAA Omnibus Rule that was promulgated in 2013, made additional parts of HIPAA directly applicable to business associates.

As a result, both covered entities and business associates are now subject to significant civil and criminal penalties for failure to comply with the Privacy Standards and/or the Security Standards.

HIPAA and the HITECH Act also include standards for common healthcare electronic transactions and code sets, such as claims information, plan eligibility, payment information and the use of electronic signatures, and privacy and electronic security of individually identifiable health information.

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

HIPAA also includes standards for common healthcare electronic transactions and code sets, such as claims information, plan eligibility, payment information and the use of electronic signatures, and privacy and electronic security of individually identifiable health information.

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

Submission of electronic healthcare claims and payment transactions that do not comply with the HIPAA electronic data transmission standards could result in delayed or denied payments.

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

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

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

Penalties for failure to comply with a requirement of HIPAA are substantial and could include corrective action plans and/or the imposition of civil or criminal penalties.

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

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

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

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

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

security incidents qualify as reportable breaches.

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

Additionally, certain states have adopted comparable privacy and security laws and regulations, some of which may be more stringent than HIPAA.

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

The CCPA may increase our compliance costs and potential liability.

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

Further, the CPRA recently passed in California and may increase our compliance costs and potential liability, imposes additional data protection obligations on covered businesses, including additional consumer rights processes, limitations on data uses, new audit requirements for higher risk data, and adds opt outs for certain uses of sensitive data.

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

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

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

In 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 that was enacted in February 2021), 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.

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

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.

It is possible that these laws may be interpreted and applied in a manner that is inconsistent with our existing practices.

Any failure or perceived failure by us, or any third parties with which we do business, to comply with our privacy policies, changing expectations, evolving laws, rules and regulations, industry standards, or

contractual obligations to which we or such third parties are or may become subject, may result in actions or other claims against us by governmental entities or private actors, the expenditure of substantial costs, time and other resources or the incurrence of significant fines, penalties or other liabilities.

In addition, any such action, particularly to the extent we were found to be guilty of violations or otherwise liable for damages, would damage our reputation and adversely affect our business, financial condition, and results of operations.

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

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

Our future growth may depend, in part, on our ability to develop and commercialize our testing products and promote therapeutics in foreign markets.

We are not permitted to market or promote any of our testing products or promote therapeutics before we or our partners receive regulatory approval from applicable regulatory authorities in foreign markets, and we or they may never receive such regulatory approvals for any of our testing products or promoted therapeutics.

Our future growth may depend, in part, on our ability to develop and commercialize our testing products and/or promote therapeutics in foreign markets.

We are not permitted to market or promote any of our testing products or promote therapeutics before we or our future partners receive regulatory approval from applicable regulatory authorities in foreign markets, and we or they may never receive such regulatory approvals for any of our testing products or promoted therapeutics.

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

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

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

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

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

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• production shortages resulting from any events affecting raw material supply or manufacturing capabilities abroad;

• business interruptions resulting from geopolitical actions, including war and terrorism, or natural disasters including earthquakes, typhoons, floods and fires.

• business interruptions resulting from geopolitical actions, including war and terrorism such as the current conflict in Ukraine, or natural disasters which may be exacerbated due to climate change, including earthquakes, typhoons, floods and fires.

Risks Related to our Intellectual Property

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

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.

maintenance of patents in potentially relevant jurisdictions.

Currently, we own or have an exclusive license to 11 issued U.S.

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

We also own one issued U.S.

patent, two pending U.S.

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

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

We own one issued U.S.

patent, three pending U.S.

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

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

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However, trade secrets can be difficult to protect.

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

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

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

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

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Obtaining and enforcing patents in the diagnostics industry involves both technological and legal complexity, and is therefore costly, time-consuming and inherently uncertain.

The United States has enacted and is currently implementing wide-ranging patent reform legislation.

The United States has enacted and is currently implementing wide-

ranging patent reform legislation.

Supreme Court rulings have narrowed the scope of patent protection available in certain circumstances and weakened the rights of patent owners in certain situations.

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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”).

government also has the right

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

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

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

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The legal systems of certain countries, particularly certain developing countries, do not favor the enforcement of patents, trade secrets and other intellectual property protection, particularly those relating to biotechnology products, which could make it difficult for us to stop the infringement of our patents or marketing of competing products in violation of our proprietary rights generally.

Proceedings to enforce our patent rights in foreign jurisdictions could result in substantial costs and divert our efforts and attention from other aspects of our business, could put our patents at risk of being invalidated or interpreted narrowly, and could provoke third parties to assert claims against us.

Proceedings to enforce our patent rights in

foreign jurisdictions could result in substantial costs and divert our efforts and attention from other aspects of our business, could put our patents at risk of being invalidated or interpreted narrowly, and could provoke third parties to assert claims against us.

We may not prevail in any lawsuits that we initiate and the damages or other remedies awarded, if any, may not be commercially meaningful.

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

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

intellectual property rights.

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

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

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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.

For example, certain patent rights related to AVISE ® Lupus are licensed from the University of Pittsburgh, certain patent rights related to AVISE ® MTX are licensed from Prometheus.

For example, certain patent rights related to AVISE ® Lupus are licensed from the University of Pittsburgh.

Our existing license agreements as related to our AVISE ® testing products impose various regulatory and/or commercial diligence obligations, payment of milestones and/or royalties and other obligations.

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

Periodic maintenance fees,

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

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

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

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

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

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

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

In that event, we may be required to expend significant time and resources to develop or license replacement technology.

The licensing and acquisition of third-party proprietary rights is a competitive area, and companies, which may be more established, or have greater resources than we do, may also be pursuing strategies to license or acquire third-party proprietary rights that we may consider necessary or attractive in order to further develop our AVISE ® testing products or our partners consider necessary or attractive in order to promote their therapeutic.

The licensing and acquisition of third-party proprietary rights is a competitive area, and companies, which may be more established, or have greater resources than we do, may also be pursuing strategies to license or acquire third-party proprietary rights that we may consider necessary or attractive in order to further develop our AVISE ® testing products or our future partners, if any, consider necessary or attractive in order to promote their therapeutics.

More established companies may have a competitive advantage over us due to their size, cash resources and greater clinical development and commercialization capabilities.

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

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

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

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.

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To counter infringement or unauthorized use, we may be required to file infringement claims, which can be expensive and time-consuming.

We may not be able to prevent, alone or with our licensors, misappropriation of our intellectual property rights, particularly in countries where the laws may not protect those rights as fully as in the United States.

We may not be able to

prevent, alone or with our licensors, misappropriation of our intellectual property rights, particularly in countries where the laws may not protect those rights as fully as in the United States.

In addition, if we or one of our licensors initiated legal proceedings against a third party to enforce a patent covering one of our AVISE ® testing products, the defendant could counterclaim that the patent covering such AVISE ® testing product is invalid and/or unenforceable.

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

We are not aware of any third-party

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

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

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

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

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

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

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.

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

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

In addition, 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.

In addition, the holders of 5,117,230 shares of common stock and holders of warrants to purchase 409,108 shares of common stock are entitled to rights with respect to registration of such shares under the Securities Act pursuant to an investors’ rights agreement between such holders and us.

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

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

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

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

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

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

Based on their most recent publicly filed beneficial ownership reports, our greater than 5% stockholders collectively own approximately 72% of our outstanding capital stock and our greater than 5% stockholders, directors and officers collectively own (without duplication) approximately 73% of our outstanding capital stock as of February 15, 2022.

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

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

This concentration of ownership may have

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

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

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

Since 2020, our average daily trading volume has been approximately 47,000 shares.

General Risk Factors

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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.

We are an emerging growth company, as defined in 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 initial public offering, or IPO.

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 $1.07 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.

We are an emerging growth company, as defined in the Jumpstart Our Business Startups Act of 2012, or 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 initial public offering, or IPO.

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 $1.07 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.

For so long as we remain an emerging growth company, 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.

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

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

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

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

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

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If we fail to maintain proper and effective internal control over financial reporting, our ability to produce accurate and timely financial statements could be impaired, investors may lose confidence in our financial reporting and the trading price of our common stock may decline.

Pursuant to Section 404 of Sarbanes-Oxley, our management will be required to report upon the effectiveness of our internal control over financial reporting beginning with the annual report for our fiscal year ending December 31, 2020.

Pursuant to Section 404 of Sarbanes-Oxley, our management has been required to report upon the effectiveness of our internal control over financial reporting beginning with the annual report for our fiscal year ending December 31, 2020.

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.

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

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

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 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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§ 201, the U.S.

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

Travel Act, the USA

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

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

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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.

What changed 10-K

Item 1A. Risk Factors