Fulgent Genetics Inc

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

Previous report

From time to time and in the ordinary course of our business, we have been and again 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. As noted above, we are currently subject to the HRSA audit and have initiated a voluntary disclosure process with the appropriate government contacts. 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, or CIDs, and other types of information requests from government authorities. As previously disclosed, we have received a CID issued by the DOJ pursuant to the False Claims Act related to its investigation of allegations of medically unnecessary laboratory testing, improper billing for laboratory testing, and remuneration received or provided in violation of the Anti-Kickback Statute and the Stark Law. This CID requests information and records relating to certain of our customers named in the CID. As we also disclosed in prior filings, the SEC is conducting a non-public formal investigation, which appears to relate to the subject matters raised in the CID requests and our related disclosures and revenues reported in our Exchange Act reports filed for 2018 through 2020. We are fully cooperating with both the SEC and the U.S. Department of Justice in connection with their requests and investigations. On May 6, 2024, the SEC staff, or the Staff, advised the Company that it has made a preliminary determination to recommend that the SEC file an enforcement action against the Company based on a corporate negligence theory, which, if authorized, would allege violations of Sections 17(a)(2) and 17(a)(3) of the Securities Act of 1933, as amended, Sections 13(a), 13(b)(2)(A) and 13(b)(2)(B) of the Exchange Act, and Rules 13a-1, 13a-13, and 12b-20 thereunder. The Company does not believe that any enforcement recommendation is warranted and, on June 7, 2024, responded to the Staff’s preliminary recommendation. The Company is engaged in ongoing discussions with the SEC staff and the DOJ regarding these matters.

Previous report

We cannot predict when these investigations and matters will be resolved, the outcome of the investigations and matters, or the potential impact on our business, which may ultimately be greater than we expect. In addition, government investigations and litigation generally may divert the attention of our management team and 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 be subject to other penalties. Any of these circumstances may adversely affect our business, prospects, reputation and results of operations.