Fulgent Genetics Inc
For the period ended Dec 31, 2024. Filed Feb 28, 2025.
View on SEC.govAbout this filing
A company's yearly report to the SEC, with audited financial statements. It is the fullest account a company gives of its business, its finances and the risks it sees.
FY2024 · Filed Feb 28, 2025
FLGT$23.74+27.2%Stored close · as of Nov 6, 2026
What changed in Risk Factors?
Read the current filingPrevious report: 10-K
Period ended 2023-12-31; filed 2024-02-28.
0000950170-24-022233
Item 1A. Risk FactorsCurrent report: 10-K
Period ended 2024-12-31; filed 2025-02-28.
0000950170-25-029512
Item 1A. Risk FactorsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 396 previous paragraphs and 435 current paragraphs.
275 unchanged; 109 reworded; 38 added; 8 removed; 4 previous and 13 current paragraphs rearranged.
Tables are not compared: 0 previous and 0 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (38)
Current report
Our consummation of future acquisitions may encounter scrutiny under federal and state antitrust laws. For example, our future acquisitions may be subject to notification under the Hart-Scott Rodino Antitrust Improvements Act of 1976 and to a waiting period and possible review by the DOJ and the FTC. Any delays, injunctions, conditions or modifications by any of these federal agencies could have a negative effect on us and result in the abandonment of all or part of otherwise attractive acquisition opportunities. There can be no assurance as to the cost, scope or impact on our business, results of operations, financial condition or prospects of the actions that may be required to obtain regulatory approvals. Further, even following completion of an acquisition, applicable government agencies may disagree with our interpretation of these complicated statutes and regulations. These disagreements, violations or alleged violations could result in significant civil or criminal penalties and/or equitable actions not in our favor. Any such circumstances, violations or alleged violations could have a material adverse effect on our business and substantially diminish the synergies and other advantages which we expect from such acquisition.
Current report
The development and use of AI presents risks and challenges that can impact our business, including by posing security risks to our confidential information, proprietary information, and personal data and could give rise to legal and/or regulatory actions, damage our reputation, or otherwise materially harm our business.
Current report
AI is increasingly being used in the biopharmaceutical, pharmaceutical, technology, and consumer health industries. We evaluate different AI technologies and identify areas where we can apply AI to improve our operations. We have developed and incorporated AI technology in certain of our products and services, including for digital pathology. Issues relating to the use of new and evolving technologies such as AI, machine learning, generative AI, and large language models, may cause us to experience perceived or actual brand or reputational harm, technical harm, competitive harm, legal liability, cybersecurity risks, privacy risks, compliance risks, security risks, ethical issues, and new or enhanced governmental or regulatory scrutiny, and we may incur additional costs to resolve such issues. Litigation or government regulation related to the use of AI may also adversely impact our ability to develop and offer products that use AI, as well as increase the cost and complexity of doing so. In addition, uncertainties regarding developing legal and regulatory requirements and standards may require significant resources to modify and maintain business practices to comply with U.S. and non-U.S. laws concerning the use of AI, the nature of which cannot be determined at this time. In addition, the European Union recently passed the Artificial Intelligence Act, whose regulations will be developed over the coming year and, in the United States, the recent Executive Order concerning AI may result in extensive new federal rule-making. Further, market demand and acceptance of AI technologies are uncertain, and we may be unsuccessful in our product development efforts.
Current report
As necessary, we plan to develop policies governing the use of AI to encourage appropriate use of AI by our employees, contractors, and authorized agents and that our assets, including intellectual property, competitive information, personal information we may collect or process, and customer information, are protected. Any failure by our personnel, contractors, or other agents to adhere to any policies that we may establish could violate confidentiality obligations or applicable laws and regulations, jeopardize our intellectual property rights, cause or contribute to unlawful discrimination, or result in the misuse of personally identifiable information or the injection of malware into our systems, any of which could have a material adverse effect on our business, results of operations, and financial condition.
Current report
Accounting principles generally accepted in the United States, or U.S. GAAP, is subject to interpretation by the Financial Accounting Standards Board, or FASB, the SEC, and various bodies formed to promulgate and interpret appropriate accounting principles. A change in accounting standards or practices can have a significant effect on our reported results and may even affect our reporting of transactions completed before the change is effective. New accounting pronouncements and varying interpretations of accounting pronouncements have occurred and may occur in the future. Changes to existing rules or the questioning of current practices may adversely affect our reported financial results or the way we conduct our business.
Current report
We incur costs and demands upon management as a result of complying with the laws and regulations affecting public companies in the United States, which may adversely affect our operating results.
Current report
As a public company listed in the United States, we incur significant additional legal, accounting and other expenses. In addition, changing laws, regulations and standards relating to corporate governance and public disclosure, including regulations implemented by the SEC and The Nasdaq Stock Market LLC, may increase legal and financial compliance costs and make some activities more time-consuming. These laws, regulations and standards are subject to varying interpretations, and as a result, their application in practice may evolve over time as new guidance is provided by regulatory and governing bodies. We invest resources to comply with evolving laws, regulations and standards, and this investment may result in increased general and administrative expenses and a diversion of management’s time and attention from revenue-generating activities to compliance activities. If, notwithstanding our efforts to comply with these laws, regulations and standards, we fail to comply, regulatory authorities may initiate legal proceedings against us, and our business may be harmed. As previously disclosed and as set forth in Note 8 “Debt, Commitments and Contingencies to the Consolidated Financial Statements,” we are under investigation by the SEC for certain alleged violations of securities laws. While we do not believe that any enforcement recommendation is warranted and deny all liability, we have recorded a $1.0 million potential liability with respect to this matter. The actual amount of liability, if any, may be materially higher than this estimate, as discussions are ongoing and there is no formal settlement or final resolution of this matter at this time.
Current report
Further, if we fail to comply with these laws, regulations and standards, it might also be more difficult for us to obtain certain types of insurance, including director and officer liability insurance, and we might be forced to accept reduced policy limits and coverage or incur substantially higher costs to obtain the same or similar coverage. The impact of these events could also make it more difficult for us to attract and retain qualified persons to serve on our board of directors, on committees of our board of directors or as members of senior management.
Current report
U.S. federal government contracts are generally subject to terms more favorable to the customer than commercial contracts. If the U.S. federal government significantly decreased or ceased doing business with us, our business, financial condition and results of operations would be materially and adversely affected.
Current report
In 2024, we were awarded a contract by the U.S. Department of Veterans Affairs, or VA, to provide hereditary cancer, pharmacogenetic and other genetic testing to veterans and to their family members. We are also party to a number of other government contracts.
Current report
U.S. federal government contracts, including our contract with the VA, generally contain provisions and are subject to laws and regulations that give the federal government rights and remedies not typically found in commercial contracts, including provisions permitting the federal government to:
Current report
suspend or permanently prohibit us from doing business with the federal government or with any specific government agency;
Current report
subject the award of some contracts to protest or challenge by competitors, which may require the contracting federal agency or department to suspend our performance pending the outcome of the protest or challenge and which may also require the government to solicit new proposals for the contract or result in the termination, reduction or modification of the awarded contract; and
Current report
decline to exercise an option to extend an existing multiple year contract.
Current report
The U.S. federal government may also terminate a contract either “for convenience” (for instance, due to a change in its perceived needs or its desire to consolidate work under another contract) or if a default occurs by failing to perform under the contract. If the federal government terminates a contract for convenience, we generally would be entitled to recover only our incurred or committed costs, settlement expenses and profit on the work completed prior to termination. If the federal government terminates a contract based upon a default, we generally would be denied any recovery for undelivered work, and instead may be liable for excess costs incurred by the federal government in procuring undelivered items from an alternative source and other damages as authorized by law. In addition, many government contracts are awarded through a rigorous competitive process, which may emphasize price over other qualitative factors. The U.S. federal government has increasingly relied upon multiple-year contracts with multiple contractors that generally require those contractors to engage in an additional competitive procurement process for each task order issued under a contract. This process may result in us facing significant additional pricing pressure and uncertainty and incurring additional costs. Further, to the extent our performance under a contract does not meet a government agency’s expectations, the customer might seek to terminate the contract prior to its scheduled expiration date, provide a negative assessment of our performance to government-maintained contractor past-performance data repositories, fail to award us additional business under existing contracts or otherwise, and direct future business to our competitors, suspend or debar from contracting with the federal government or any significant agency, including the VA. These various uncertainties, restrictions, and regulations by government authorities as well as profit and cost controls, could have a material adverse impact on our business, financial condition and results of operations.
Current report
The agency’s final rule provides that the LDT enforcement policy phase-out process would occur in gradual stages over a total period of four years, with pre-market approval applications for high-risk tests to be submitted by the three-and-a-half-year mark. Moderate-risk and low-risk tests are expected to be in compliance at the four-year mark, although FDA has stated that if premarket submissions are pending review it will continue to exercise enforcement discretion with respect to those tests. The FDA’s final rule is complex and, concurrently, the agency announced several exceptions from the requirement to comply with full medical device regulatory controls, depending upon the specific nature of the LDT and the clinical laboratory that is offering such LDT for use by health care providers. Of potential relevance is the agency’s position on LDTs that were marketed prior to the official publication date of the final rule. Such “currently marketed” tests are subject to many of the device regulatory controls but are exempt from the premarket review and FDA authorization requirements (unless or until significant modifications are made to such “currently marketed” tests). Similarly, FDA has created a partial enforcement discretion policy for tests approved by the New York’s Department of Health, Clinical Laboratory Evaluation Program, or CLEP, whereby such tests also do not need to undergo FDA premarket review but must come into compliance with all other device general controls in a stagged fashion between 2025 and 2027. We have begun the process of evaluating the final rule’s potential impact on our tests, our operations, and our business more generally.
Current report
On May 29, 2024, ACLA and one of its members filed a complaint against the FDA in the Eastern District of Texas, alleging that the agency does not have authority to promulgate the LDT final rule and seeking to vacate the FDA’s action. A second lawsuit was also filed against FDA by AMP on August 19, 2024 in the Southern District of Texas, and subsequently the two cases were consolidated into a single action pending in the Eastern District of Texas. Briefing is ongoing in the consolidated case, and the outcome of such litigation is uncertain. The litigation could potentially affect FDA’s plans to implement these new LDT requirements, making the potential implementation timeline somewhat uncertain, although no preliminary injunction has been issued to date. Accordingly, the agency has continued its implementation efforts by actively providing guidance and training to clinical laboratories on how to comply with medical device general controls.
Current report
Failure to obtain necessary foreign regulatory approvals or certifications may adversely affect our ability to expand our operations internationally.
Current report
An important part of our business strategy is to expand and offer our tests internationally, with patient specimens collected by laboratory and health care professional customers in foreign countries for processing by our California laboratory. As we continue to expand our diagnostic offerings into new markets, including in Australia, we will become increasingly subject to or impacted by the regulatory requirements of foreign jurisdictions, which are varied and complex. Our tests, and certain components of our tests, may be subject to the regulatory approval requirements in each foreign country in which they are sold by us or a laboratory partner, and our future performance may depend in part on obtaining any necessary regulatory approvals in a timely manner. For example, we are in the process of obtaining a CE Mark from the European Commission for certain IVDs being offered to customers in Europe. We are also in the process of obtaining NATA accreditation in Australia.
Current report
We are occasionally required to address inquiries from regulatory authorities in various countries, such as those in the European Union, regarding the regulatory status of our diagnostic test offerings. If we do not continue to satisfactorily address any such questions in the future, we may be required to cease offering our products in the relevant country. This may in turn result in similar concerns, and subsequent cessation of our sources of revenue, in other countries.
Current report
Regulatory approval can be a lengthy, expensive and uncertain process. In addition, regulatory processes are subject to change, and new or changed regulations can result in unanticipated delays and cost increases. For example, the European Commission’s modernized regulations for in vitro diagnostic products, the IVDR, became effective in May 2022. Among others, the new regulations introduce risk-based classification for IVDs and will require Notified Body involvement for various classes of devices, including certain of our tests, which will require us to submit clinical evidence and post-market performance data to regulators. We must also achieve and maintain International Standards Organization, or ISO, certification of our quality management system to come into compliance with the IVDR.
Current report
We may not be able to obtain foreign regulatory approvals or authorizations for our tests on a timely basis, if at all, which may cause us to incur additional costs or prevent us from marketing our tests in certain foreign countries.
Current report
Certain states also require medical device manufacturers to maintain compliance programs and/or be licensed as manufacturers or distributors by a state professional board or health department. Because the FDA’s now-in-effect final rule renders a clinical laboratory like ours a “medical device manufacturer,” we have begun the process of evaluating whether and to what extent those kinds of medical device-specific state requirements may be applicable to our operations.
Current report
We are fully cooperating with the DOJ in connection with the CIDs that we have received and in connection with the HRSA audit. We cannot currently predict when these CID and HRSA audit matters will be resolved, the reasonable or likely outcome of these matters, or their potential impact, which may materially and adversely affect our business, prospects, and financial condition. These matters are not formal claims, and discussions and investigations remain ongoing. As such, we cannot reasonably estimate the loss or range of loss, if any, that may result from any material government investigations, audits, and reviews in which we are currently involved, given the inherent difficulty in predicting regulatory action, fines and penalties, if any, and the various remedies and levels of judicial review available to us in the event of an adverse finding. As a result, we have not recorded any liability related to these CID or audit matters.
Current report
In addition, and as previously disclosed, the SEC is conducting a non-public formal investigation, which relates to (i) the matters raised in the requests for the CID regarding 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 and (ii) our Exchange Act reports filed for 2018 through 2020. On May 6, 2024, the SEC staff advised us that the SEC staff made a preliminary determination to recommend that the SEC file an enforcement action against us 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 has fully cooperated with the SEC and its requests, and the Company and the SEC staff are continuing to communicate regarding this matter. While we do not believe that any enforcement recommendation is warranted and deny all liability, we have recorded a $1.0 million potential liability with respect to this matter. While we believe this amount is a reasonable and probable estimate, the actual amount of liability, if any, may be materially higher than this estimate, as discussions are ongoing and there is no formal settlement or final resolution of this matter at this time.
Current report
Outside of the United States, the legal landscape governing promotional and other marketing activities for professional laboratory services and diagnostic tests can vary widely from jurisdiction to jurisdiction, and is often more complex, less clear, or less developed than in the United States. If our marketing activities are found to be in violation of local laws, regulations or practices, we may be subject to fines and other penalties and may be required to cease marketing or commercialization activities in such jurisdiction.
Current report
Even if we receive regulatory approval or certification of our IVD medical device products, we will continue to be subject to extensive regulatory oversight.
Current report
Medical devices, including IVDs, are subject to extensive regulation by the FDA in the United States, the European authorities under the CE Mark process, and comparable regulatory agencies in other territories where we do business such as Japan and Taiwan. If any of our IVD products are approved by the FDA or other comparable foreign regulatory agencies or certified by Notified Bodies, we will be required to timely file various reports. If these reports are not filed timely, regulators may impose sanctions and sales of our products may suffer, and we may be subject to product liability or regulatory enforcement actions, all of which could harm our business. In addition, the FDA and the FTC regulate the advertising and promotion of medical devices to ensure that their promotional claims made are consistent with the applicable marketing authorizations, that there are adequate and reasonable data to substantiate the claims, and that the promotional labeling and advertising is neither false nor misleading in any respect. If the FDA or FTC determines that any of our promotional claims for IVD products are false, misleading, not substantiated or not permissible, we may be subject to enforcement actions and we may be required to revise our promotional claims and make other corrections or restitutions. Similar requirements apply in foreign jurisdictions.
Current report
FDA, state and comparable foreign authorities have broad enforcement powers. Our failure to comply with applicable regulatory requirements could result in enforcement action by the FDA, state or comparable foreign regulatory agencies, which may include any of the following sanctions:
Current report
customer notifications or repair, replacement or refunds;
Current report
Any of these sanctions could also result in higher than anticipated costs or lower than anticipated sales of our IVD products and have a material adverse effect on our reputation, business, results of operations and financial condition.
Current report
The EU’s regulatory landscape for IVD medical devices has also evolved in recent years with adoption of the IVDR to establish a modernized and more robust EU legislative framework, with the aim of ensuring better protection of public health and patient safety. We are working towards compliance with the IVDR for certain of our tests and have made initial submissions to our Notified Body for purposes of the conformity assessment process. We expect to receive CE marking under the IVDR for certain of our tests in the future, subject to ongoing review and auditing by the regulatory agency. If we are not able to obtain and maintain regulatory compliance, we may not be permitted to market our laboratory services in the EU or may become subject to enforcement by EU Competent Authorities.
Current report
Our nano-drug delivery platform is being researched and developed and, if approved, will be used as a delivery mechanism for other pharmaceuticals or therapeutics. To the extent these delivered substances cause undesirable side effects, encounter competition or experience regulatory limitations either prior or following market approval or are otherwise unavailable to us due to our lack of rights or ability to utilize supplies of these candidates, the prospects for our drug candidates or, as applicable, approved therapeutics could be materially and negatively affected. In such circumstances, our business, results of operations and the value of our common stock may decline.
Current report
we may be unable to demonstrate that a drug candidate’s clinical and other benefits outweigh its safety risks;
Current report
the FDA, EMA or comparable foreign regulatory authorities may disagree with our interpretation of data from non-clinical studies or clinical trials;
Removed paragraphs (8)
Previous report
We have historically focused primarily on providing our tests to hospitals, medical institutions and other laboratories, our traditional genetic testing customer base. Our customer base for our COVID-19 tests is principally comprised of governmental bodies, municipalities, and large corporations who pay us directly or through third-party payors. In March 2020, the Coronavirus Aid, Relief, and Economic Security Act, or CARES Act, was enacted, providing for reimbursement to healthcare providers for COVID-19 tests provided to uninsured individuals through a program administered by HRSA. However, HRSA announced that the program ceased accepting COVID-19 testing claims as of March 22, 2022, due to a lack of sufficient funds.
Previous report
Even though we presently commercialize our tests as LDTs, our tests may in the future become subject to more onerous regulation by the FDA. For example, the FDA may disagree with our assessment that our tests fall within the definition of an LDT and seek to regulate our tests as medical devices or the proposed rule to regulate LDTs as medical devices may be implemented.
Previous report
Separately, members of Congress have been working with stakeholders for several years on a possible bill to reform the regulation of in vitro clinical tests including LDTs. For example, as drafted and re-introduced for consideration by the current Congress, the Verifying Accurate, Leading-edge IVCT Development Act, or the VALID Act, has been garnering bipartisan and bicameral support. The VALID Act would codify into law the term “in vitro clinical test” to create a new medical product category separate from medical devices that includes products currently regulated as IVDs, as well as LDTs. The VALID Act would also create a new system for labs and hospitals to use to submit their tests electronically to the FDA for approval, which is aimed at reducing the amount of time it takes for the agency to approve such tests, and establish a new program to expedite the development of diagnostic tests that can be used to address a current unmet need for patients.
Previous report
It is unclear whether the VALID Act would be passed by Congress in its current form or signed into law by President Biden. Until the FDA finalizes LDT regulations through the ongoing notice-and-comment rulemaking process or the VALID Act or other legislation is passed reforming the federal government’s regulation of LDTs, it is unknown how the FDA may regulate our tests in the future and what testing and data may be required to support any required clearance or approval.
Previous report
We expect to utilize the FDA’s Section 505(b)(2) pathway for most of our product candidates, which are being developed using its nano-drug delivery platform technology. If that pathway is not available, the development of such product candidates will likely take significantly longer, cost significantly more and entail significantly greater complexity and risk than currently anticipated, and, in any case, may not be successful.
Previous report
Obtaining and maintaining our patent protection depends on compliance with various procedural, document submission, fee payment, and other requirements imposed by government patent agencies, and its patent protection could be reduced or eliminated for non-compliance with these requirements.
Previous report
We may be subject to claims challenging the inventorship of its patents and other intellectual property.
Reworded paragraphs (109)
Previous wording
We have a history of losses, and we may not be able to sustain profitability. At this time, we do not expect future material revenues from the sale of our COVID-19 tests and testing services.
Current wording
We have a history of losses, and we may not be able to sustain profitability.
Previous wording
Failure to comply with government laws and regulations related to submission of claims for our services could result in significant monetary damages and penalties and exclusion from the Medicare and Medicaid programs and corresponding foreign reimbursement programs. We are also subject to governmental audits, such as the current HRSA Audit, that could result in material refunds or settlements. Our business, prospects and financial condition may be adversely affected as the result of the current HRSA Audit.
Current wording
Failure to comply with government laws and regulations related to submission of claims for our services could result in significant monetary damages and penalties and exclusion from the Medicare and Medicaid programs and corresponding foreign reimbursement programs. We are also subject to governmental audits and investigations, such as the current HRSA Audit and CIDs, that could result in material refunds or settlements. Our business, prospects and financial condition may be adversely affected as the result of the current HRSA Audit and CIDs.
Previous wording
If we are unable to obtain and maintain patent protection for any product candidate we develop, our competitors could develop and commercialize products or technology similar to ours, and our ability to successfully commercialize any product candidate we may develop, and our technology, may be adversely affected.
Current wording
If we are unable to obtain and maintain patent protection for any drug candidate we develop, our competitors could develop and commercialize products or technology similar to ours, and our ability to successfully commercialize any drug candidate we may develop, and our technology, may be adversely affected.
Previous wording
Our future issued patents covering product candidates we develop could be found invalid or unenforceable if challenged in court or before administrative bodies in the United States or abroad.
Current wording
Our future issued patents covering drug candidates we develop could be found invalid or unenforceable if challenged in court or before administrative bodies in the United States or abroad.
Previous wording
If we do not obtain patent term extension and/or data exclusivity for any product candidate that we may develop, our business may be materially harmed.
Current wording
If we do not obtain patent term extension and/or data exclusivity for any drug candidate that we may develop, our business may be materially harmed.
Previous wording
In the ordinary course of our business, we generate, collect and store sensitive data, including personal health information, or PHI; personally identifiable information; intellectual property; and proprietary and other business-critical information, such as research and development data, commercial data, and other business and financial information. We manage and maintain the data we generate and collect and store data utilizing a combination of on-site systems and managed data center systems. We also communicate sensitive patient data when we deliver reports summarizing test results to our customers, which we deliver via our online encrypted web portal, encrypted email, or fax, or overnight courier. The secure processing, storage, maintenance, and transmission of this information is vital to our operations and business strategy, and we devote significant resources to protecting the confidentiality and integrity of this information. Although we have implemented security measures and other controls designed to protect sensitive information from unauthorized access, use, or disclosure, as disclosed previously, in 2022, one of our subsidiaries experienced security incidents to its information systems that resulted in the unauthorized access, use, and disclosure of PHI and other confidential information. These incidents have not materially affected our business. A breach or interruption could result in material legal claims or proceedings and could result in material liability or penalties under federal, state, or foreign laws that protect the privacy of personal information, discussed below under “We are subject to broad legal requirements regarding the information we test and analyze, and any failure to comply with these requirements could result in materially significant, penalties, materially damage our reputation and materially harm our business.” Additionally, unauthorized access, manipulation, loss, or dissemination could significantly damage our reputation and disrupt our operations, including our ability to perform our tests, analyze and provide test results, bill customers or other payors, process claims for reimbursement, provide customer service, conduct research and development activities, collect, process, and prepare company financial information, conduct education and outreach activities and manage the administrative aspects of our operations, as described further below under “We depend on our information technology systems and any material failure of these systems, due to hardware or software malfunctions, delays in operation, and/or material failures to implement new or enhanced systems or cybersecurity breaches, could materially harm our business.”
Current wording
On occasion, we do encounter attempted security incidents. To date, these incidents have not materially affected our business. While we are not currently aware of any cyber breaches, attacks, malicious software, or hardware that would materially and adversely affect our business, such security incident could be present in any of our or our subsidiaries’ systems or in the systems of our suppliers, customers, vendors, or contractors. When discovered, these incidents could cause us to suffer a material data breach. A breach or interruption could result in material legal claims or proceedings and could result in material liability or penalties under federal, state, or foreign laws that protect the privacy of personal information, discussed below under “We are subject to broad legal requirements regarding the information we test and analyze, and any failure to comply with these requirements could result in materially significant penalties, materially damage our reputation and materially harm our business.” Additionally, unauthorized access, manipulation, loss, or dissemination could significantly damage our reputation and disrupt our operations, including our ability to perform our tests, analyze and provide test results, bill customers or other payors, process claims for reimbursement, provide customer service, conduct research and development activities, collect, process, and prepare company financial information, conduct education and outreach activities and manage the administrative aspects of our operations, as described further below under “We depend on our information technology systems and any material failure of these systems, due to hardware or software malfunctions, delays in operation, and/or material failures to implement new or enhanced systems or cybersecurity breaches could materially harm our business.”
Previous wording
Our results of operations have experienced fluctuations from period to period, which we expect may continue in the future. These fluctuations can occur because of a variety of factors, including, among others, the amount and timing of sales of our tests and testing services, the prices we charge for our tests and testing services, customer or payor mix, general price degradation for our tests and testing services or other competitive factors, the rate and timing of our billings and collections, our ability to obtain reimbursement for our tests from third-party payors, our ability to maintain a broad and flexible testing menu, the timing and amount of our commitments and other payments, and exchange rate fluctuations, as well as the other risk factors discussed in this report. Our results have been, and may in the future be, impacted by events that may not recur regularly, in the same amounts or at all in the future. For instance, in 2020, we developed and began offering a series of COVID-19 tests. We experienced substantial revenue growth in 2020 and 2021 due primarily to the sales of, and growing demand, for these COVID-19 tests, but we have seen a decrease in our COVID-19 revenue in recent years due to the decline in prevalence of COVID-19. The fluctuations in our operating results may render period-to-period comparisons less meaningful, and investors should not rely on the results of any one period as an indicator of future performance. These fluctuations in our operating results could cause our performance in any particular period to fall below the expectations of securities analysts or investors or guidance we have provided to the public, which could negatively affect the price of our common stock.
Current wording
Our results of operations have experienced fluctuations from period to period, which we expect may continue in the future. These fluctuations can occur because of a variety of factors, including, among others, the amount and timing of sales of our tests and testing services, the prices we charge for our tests and testing services, customer or payor mix, general price degradation for our tests and testing services or other competitive factors, the rate and timing of our billings and collections, our ability to obtain reimbursement for our tests from insurance payors, our ability to maintain a broad and flexible testing menu, the timing and amount of our commitments and other payments, and exchange rate fluctuations, as well as the other risk factors discussed in this report. Our results have been, and may in the future be, impacted by events that may not recur regularly, in the same amounts or at all in the future. For instance, in 2020, we developed and began offering a series of COVID-19 tests. We experienced substantial revenue growth in 2020 and 2021 due primarily to the sales of, and growing demand, for these COVID-19 tests, but we have seen a decrease in our COVID-19 revenue in recent years due to the decline in prevalence of COVID-19. The fluctuations in our operating results may render period-to-period comparisons less meaningful, and investors should not rely on the results of any one period as an indicator of future performance. These fluctuations in our operating results could cause our performance in any particular period to fall below the expectations of securities analysts or investors or guidance we have provided to the public, which could negatively affect the price of our common stock.
Previous wording
We have a history of losses. Although we achieved profitability for the years ended December 31, 2020, 2021, and 2022, we may not again be profitable in any future periods. Further, our revenue levels may not grow at historical rates or at all. We may incur additional losses in the future. While we experienced significant profitability in connection with the sale of our COVID-19 tests in previous years, the demand for these tests has declined and, currently, we do not expect future material revenue from the sale of our COVID-19 tests and testing services. Even if there is a reoccurrence of demand for our COVID-19 tests or other substantial revenue growth, we may be unable to again manage our resources to effectively respond to this demand such that our revenues would again materially increase. Any losses would have an adverse effect on our stockholders’ equity and working capital, which could negatively impact our operations and your investment in the Company. A failure to sustain or grow our revenue levels and to maintain profitability may negatively affect our business, financial condition, results of operations and cash flows, and the market price of our common stock may decline or continue to decline.
Current wording
We have a history of losses. Although we achieved profitability for the year ended December 31, 2022, we were not profitable for the years ended December 31, 2023 and 2024, and we may not again be profitable in any future periods. Further, our revenue levels may not grow at historical rates or at all. We may incur additional losses in the future. While we experienced significant profitability in connection with the sale of our COVID-19 tests in previous years, the demand for these tests has declined and, currently, we do not expect future material revenue from the sale of our COVID-19 tests and testing services. Even if there is a reoccurrence of demand for our COVID-19 tests or other substantial revenue growth, we may be unable to again manage our resources to effectively respond to this demand such that our revenues would again materially increase. Any losses would have an adverse effect on our stockholders’ equity and working capital, which could negatively impact our operations and your investment in the Company. A failure to sustain or grow our revenue levels and to maintain profitability may negatively affect our business, financial condition, results of operations and cash flows, and the market price of our common stock may decline or continue to decline.
Previous wording
We have previously and may again in the future acquire businesses or assets, form joint ventures, make investments in other companies or technologies, or establish other strategic relationships, any of which could harm our operating results or dilute our stockholders’ ownership.
Current wording
We have previously and may again in the future acquire businesses or assets, form joint ventures, make investments in other companies or technologies, or establish other strategic relationships, any of which could harm our operating results or dilute our stockholders’ ownership. These transactions may be subject to federal and state anti-trust laws and regulations, and any failure to comply, or alleged failure to comply, with these laws and regulations, may adversely affect our business, operating results and prospects.
Previous wording
The composition and concentration of our customer base often fluctuates from period to period, and in certain prior periods, a small number of customers accounted for a significant portion of our revenue. When customers who, to our knowledge, are under common control or otherwise affiliated with each other are aggregated, one of our customers contributed $35.7 million or 12% of our total revenue during the year ended December 31, 2023. We continue to see significant concentration in a single large customer. For these customers and for customers generally, tests are purchased on a test-by-test basis and not pursuant to any long-term purchasing arrangements. As a result, any or all of our customers, including affiliated customers or customers under common control who purchase large quantities of tests, could decide at any time to decrease, delay, or discontinue their orders from us, which could adversely affect our revenue. We believe some of these fluctuations in customer demand may be attributable, in part, to the nature of our business. Our traditional genetic testing customers can experience significant volatility in their testing demand from period to period in the ordinary course of their operations and certain of these customers are experiencing significant financial distress. Demand fluctuations, particularly for any large customers, often have a significant impact on our period-to-period performance regardless of their cause.
Current wording
The composition and concentration of our customer base often fluctuates from period to period, and in certain prior periods, a small number of customers accounted for a significant portion of our revenue. When customers who, to our knowledge, are under common control or otherwise affiliated with each other are aggregated, one of our customers contributed $62.6 million or 22% of our total revenue during the year ended December 31, 2024. We continue to see significant concentration in a single large customer. For this customer and for customers generally, tests are purchased on a test-by-test basis and not pursuant to any long-term purchasing arrangements. As a result, any or all of our customers, including affiliated customers or customers under common control who purchase large quantities of tests, could decide at any time to decrease, delay, or discontinue their orders from us, which could adversely affect our revenue. We believe some of these fluctuations in customer demand may be attributable, in part, to the nature of our business. Our traditional laboratory and testing services customers can experience significant volatility in their testing demand from period to period in the ordinary course of their operations and certain of these customers are experiencing significant financial distress. Demand fluctuations, particularly for any large customers, often have a significant impact on our period-to-period performance regardless of their cause.
Previous wording
For instance, during 2023, projects for certain of our BioPharma services clients were scaled back or terminated due to those customers experiencing significant financial distress. We have also experienced recent growth in demand from fertility clinics and other laboratory customers as a result of our Beacon Expanded Carrier screen. However, if demand for IVF or other assisted reproductive technologies declines, demand for our Beacon tests and services may also decline. In light of the recent overturn of Roe v. Wade and recent state court decisions, there is uncertainty regarding the potential regulatory treatment of embryos, which may cause demand for IVF, or other assisted reproductive technologies, to decline or to decline in certain jurisdictions. Further, if our laboratory customers decided to perform certain testing services internally, our business and results of operations could be materially and adversely harmed. Our ability to maintain or increase sales to our existing customers depends on a variety of factors, including the other risk factors discussed in this report, many of which are beyond our control. Because of these and other factors, sales to any of our customers, including any key, affiliated, or commonly controlled customers, may not continue in the amounts or at the rates as they have in the past, and such sales may never reach or exceed historical levels in any future period. The loss of any of our customers, or a reduction in orders or difficulties collecting payments for tests ordered by any of them, could significantly reduce our revenue and adversely affect our operating results.
Current wording
For instance, during 2023 and 2024, several projects for our BioPharma services clients were scaled back or terminated. This was primarily due to those clients experiencing significant financial distress, undergoing restructuring, shifting their focus, reacting to changing market dynamics, or concluding large clinical trials. We have also experienced recent growth in demand from fertility clinics and other laboratory customers as a result of our Beacon Expanded Carrier, or Beacon screen. However, if demand for IVF or other assisted reproductive technologies declines, demand for our Beacon tests and services may also decline. In light of the overturning of Roe v. Wade, the recent political climate and state court decisions, there is uncertainty regarding the potential regulatory treatment of embryos, which may cause demand for IVF, or other assisted reproductive technologies, to decline or to decline in certain jurisdictions. Further, if our laboratory customers decided to perform certain testing services internally, our business and results of operations could be materially and adversely harmed. Our ability to maintain or increase sales to our existing customers depends on a variety of factors, including the other risk factors discussed in this report, many of which are beyond our control. Because of these and other factors, sales to any of our customers, including any key, affiliated, or commonly controlled customers, may not continue in the amounts or at the rates as they have in the past, and such sales may never reach or exceed historical levels in any future period. The loss of any of our customers, or a reduction in orders or difficulties collecting payments for tests ordered by any of them, could significantly reduce our revenue and adversely affect our operating results.
Previous wording
We operate our businesses in very competitive and evolving fields. While we believe that we compare favorably to these competitors, some of our competitors may have technical, competitive, or other advantages over us for the development of technologies and processes or greater experience in particular diagnostics or therapeutic development areas, and consolidation among pharmaceutical, diagnostic, and biotechnology companies can enhance such advantages.
Current wording
We operate our businesses in very competitive and evolving fields. While we believe that we compare favorably to these competitors, some of our competitors may have technical, competitive, or other advantages over us for the development of technologies and processes or greater experience in particular diagnostics or therapeutic development areas, and consolidation among pharmaceutical, diagnostic, and biotechnology companies can enhance these advantages.
Previous wording
More specifically, many of our competitors have longer operating histories, larger customer bases, larger research and development staffs, more expansive brand recognition, established manufacturing capabilities and facilities, and deeper market penetration; substantially greater financial, technological and research and development resources and selling and marketing capabilities with established sales forces; and considerably more experience dealing with third-party payors. As a result, they may be able to respond more quickly to changes in customer requirements or preferences, develop faster and better advancements for their technologies, product candidates and tests, create and implement more successful strategies for the promotion and sale of their tests, obtain more favorable results from third-party payors regarding coverage and reimbursement for their offerings, adopt more aggressive pricing policies for their tests, secure supplies from vendors on more favorable terms or devote substantially more resources to infrastructure and systems development. In addition, competitors may be acquired by, receive investments from, or enter into other commercial relationships with larger, well-established and well-financed companies, which may result in even more resources being concentrated among our competitors. Smaller or early-stage companies may also prove to be significant competitors, particularly through collaborative arrangements with large and established companies.
Current wording
More specifically, many of our competitors have longer operating histories, larger customer bases, larger research and development staffs, more expansive brand recognition, established manufacturing capabilities and facilities, deeper market penetration, substantially greater financial, technological and research and development resources and selling and marketing capabilities with established sales forces; and considerably more experience dealing with insurance payors. As a result, they may be able to respond more quickly to changes in customer requirements or preferences, develop faster and better advancements for their technologies, product candidates and tests, create and implement more successful strategies for the promotion and sale of their tests, obtain more favorable results from insurance payors regarding coverage and reimbursement for their offerings, adopt more aggressive pricing policies for their tests, secure supplies from vendors on more favorable terms or devote substantially more resources to infrastructure and systems development. In addition, competitors may be acquired by, receive investments from, or enter into other commercial relationships with larger, well-established and well-financed companies, which may result in even more resources being concentrated among our competitors. Smaller or early-stage companies may also prove to be significant competitors, particularly through collaborative arrangements with large and established companies.
Previous wording
Our laboratory services competitors include dozens of companies focused on pathology, genetic, and diagnostic testing services, including specialty and reference laboratories that offer traditional single-gene and multi-gene tests. As such, we face intense competition from other life science, biotechnology, pharmaceutical, research and development, and diagnostic companies. This competition is subject to rapid change, could be significantly affected by new product or testing introductions, and may intensify further in the future. With respect to our research and development business, these competitors also compete with us in recruiting and retaining top qualified scientific and management personnel and establishing clinical trial sites and patient registration for clinical trials, as well as in acquiring technologies complementary to, or necessary for, our programs. Our commercial opportunities could be reduced or eliminated if our competitors develop and commercialize products that are safer, more effective, less expensive, more convenient or easier to administer, or have fewer or less severe effects than any products that we may develop. Our competitors also may obtain FDA, EMA, or other regulatory approval for their products more rapidly than we may obtain approval for our products, which could result in our competitors establishing a strong market position before we are able to enter the market. Even if our drug candidates achieve marketing approval, they may be priced at a significant premium over competitive products if any have been approved by then. The key competitive factors affecting the success of our product candidates are likely to be their efficacy, safety, and availability of reimbursement. We may not be able to compete effectively against competitive organizations. If we are unable to compete effectively, this could have a material adverse effect on our business and results of operations.
Current wording
Our laboratory services competitors include dozens of companies focused on pathology, genetic, and diagnostic testing services, including specialty and reference laboratories that offer traditional single-gene and multi-gene tests. As such, we face intense competition from other life science, biotechnology, pharmaceutical, research and development, and diagnostic companies. This competition is subject to rapid change, could be significantly affected by new product or testing introductions, and may intensify further in the future. With respect to our research and development business, these competitors also compete with us in recruiting and retaining top qualified scientific and management personnel and establishing clinical trial sites and patient registration for clinical trials, as well as in acquiring technologies complementary to, or necessary for, our programs. Our commercial opportunities could be reduced or eliminated if our competitors develop and commercialize products that are safer, more effective, less expensive, more convenient or easier to administer, or have fewer or less severe effects than any products that we may develop. Our competitors also may obtain FDA, European Medicines Agency, or EMA, or other regulatory approval for their products more rapidly than we may obtain approval for our products, which could result in our competitors establishing a strong market position before we are able to enter the market. Even if our drug candidates achieve marketing approval, they may be priced at a significant premium over competitive products if any have been approved by then. The key competitive factors affecting the success of our drug candidates are likely to be their efficacy, safety, and availability of reimbursement, and drugs or drug candidates may compare more favorably than our drug candidates. We may not be able to compete effectively against competitive organizations. If we are unable to compete effectively, this could have a material adverse effect on our business and results of operations.
Previous wording
We perform our tests at our CLIA-certified laboratories in El Monte, California; Irving, Texas; Needham, Massachusetts; Phoenix, Arizona; Alpharetta, Georgia; and New York, New York. Our laboratories and the equipment we use to perform our tests would be costly to replace and could require substantial lead time to replace and qualify for use. Additionally, any other laboratory facilities or equipment we may use could be damaged or rendered inoperable by severe weather events, natural disasters, which may be exacerbated by the effects of climate change, or man-made disasters which could render it difficult or impossible for us to perform our tests for some period of time. The inability to perform our tests or the backlog that could develop if a laboratory becomes inoperable for even a short time could result in adversely affected turnaround times, the loss of customers or harm to our reputation. Although we maintain insurance for damage to our property and disruption of our business, this insurance may not be sufficient to cover all of our potential losses and may not continue to be available to us on acceptable terms, if at all.
Current wording
We perform our tests at our CLIA-certified laboratories in El Monte, California; Coppell, Texas; Needham, Massachusetts; Phoenix, Arizona; and Alpharetta, Georgia. Our laboratories and the equipment we use to perform our tests would be costly to replace and could require substantial lead time to replace and qualify for use. Additionally, any other laboratory facilities or equipment we may use could be damaged or rendered inoperable by severe weather events, natural disasters (which may be exacerbated by the effects of climate change), or man-made disasters which could render it difficult or impossible for us to perform our tests for some period of time. The inability to perform our tests or the backlog that could develop if a laboratory becomes inoperable for even a short time could result in adversely affected turnaround times, the loss of customers or harm to our reputation. Although we maintain insurance for damage to our property and disruption of our business, this insurance may not be sufficient to cover all of our potential losses and may not continue to be available to us on acceptable terms, if at all.
Previous wording
Further, if we need to relocate from one laboratory facility to another laboratory facility or obtain additional laboratory space, we may have difficulty locating suitable space in a timely manner, on reasonable terms or at all. Even if acceptable space was available, it would be challenging, time-consuming, and expensive to obtain or transfer the licensure and accreditation required for a commercial laboratory like ours and the equipment used to perform our tests. These challenges could be amplified if we or our joint ventures or other commercial partners seek to procure and maintain laboratory space outside the United States as we pursue international expansion. If we are unable to obtain or are delayed in obtaining new laboratory space as needed, we may not be able to provide our existing tests, provide test results within acceptable turnaround times, or develop and launch new tests, which could result in harm to our business, reputation, financial condition and results of operations.
Current wording
Further, if we need to relocate from one laboratory facility to another laboratory facility or obtain additional laboratory space, we may have difficulty locating suitable space in a timely manner, on reasonable terms or at all. Even if acceptable space was available, it would be challenging, time-consuming, and expensive to obtain or transfer the licensure and accreditation required for a commercial laboratory like ours and the equipment used to perform our tests. These challenges are amplified as we maintain laboratory space outside the United States. If we are unable to obtain or are delayed in obtaining new laboratory space as needed, we may not be able to provide our existing tests, provide test results within acceptable turnaround times, or develop and launch new tests, which could result in harm to our business, reputation, financial condition and results of operations.
Previous wording
Our business depends on our ability to quickly and reliably deliver test results to our customers. We typically receive specimens from customers within days of shipment, or in some cases overnight, for analysis at our laboratory facilities. Disruptions in delivery service, whether due to labor disruptions, bad weather or natural disasters (including severe weather, fires or other natural events which may be exacerbated by climate change), labor strikes, work stoppages, or boycotts, pandemics or epidemics, terrorist acts or threats, force majeure events, or for other reasons, could adversely affect specimen integrity and our ability to process specimens in a timely manner, provide test results within acceptable turnaround times and otherwise service our customers. These circumstances could ultimately materially and adversely affect our reputation and our business. In addition, if we are unable to continue to obtain expedited delivery services on commercially reasonable terms, our operating results may be materially and adversely affected.
Current wording
Our business depends on our ability to quickly and reliably deliver test results to our customers. We typically receive specimens from customers within days of shipment from the United States and outside the United States, or in some cases overnight, for analysis at our laboratory facilities. Disruptions in delivery service, whether due to labor disruptions, bad weather or natural disasters (including severe weather, fires or other natural events which may be exacerbated by climate change), labor strikes, work stoppages, or boycotts, pandemics or epidemics, terrorist acts or threats, force majeure events, or for other reasons, could adversely affect specimen integrity and our ability to process specimens in a timely manner, provide test results within acceptable turnaround times and otherwise service our customers. These circumstances could ultimately materially and adversely affect our reputation and our business. In addition, if we are unable to continue to obtain expedited delivery services on commercially reasonable terms, our operating results may be materially and adversely affected.
Previous wording
Information technology and telecommunications systems are vulnerable to disruption and damage from a variety of sources, including power outages and other telecommunications or network failures, natural disasters, and the outbreak of war or acts of terrorism. Breaches resulting in the compromise, disruption, degradation, manipulation, loss, theft, destruction, or unauthorized disclosure of sensitive information can occur in a variety of ways, including but not limited to, negligent or wrongful conduct by employees or former employees or others with permitted access to our information technology systems and information, or wrongful conduct by hackers, competitors, or certain governments. Our third-party vendors and business partners face similar risks. Moreover, despite network security and back-up measures, our servers and other electronic systems are vulnerable to cybersecurity breaches, such as physical or electronic break-ins, computer viruses, ransomware attacks, phishing schemes, and similar disruptive events. Despite the precautionary measures we have taken to detect and prevent or solve problems that could affect our information technology and telecommunications systems, one of our subsidiaries has experienced security incidents to its information systems that resulted in the unauthorized access, use, and disclosure of PHI and other confidential information. To date, these incidents have not materially affected our business, however such incidents could cause significant downtime or failures of our systems or those used by our third-party service providers. Cyber-attacks come in many forms, including the deployment of harmful malware or ransomware, exploitation of vulnerabilities, phishing, and other use of social engineering, and other means to compromise the confidentiality, integrity, and availability of our information technology systems and confidential information. The techniques used by criminal elements to attack computer systems are sophisticated, change frequently and may originate from less regulated or remote areas of the world. Although we carry property, business interruption, and cyber liability insurance, the coverage may not be adequate to compensate for all losses that may occur in the event of system downtime or failure. Any such disruption or loss of information technology or telecommunications systems on which critical aspects of our operations depend could have a material adverse effect on our business and our reputation.
Current wording
Information technology and telecommunications systems are vulnerable to disruption and damage from a variety of sources, including power outages and other telecommunications or network failures, natural disasters, and the outbreak of war or acts of terrorism. Breaches resulting in the compromise, disruption, degradation, manipulation, loss, theft, destruction, or unauthorized disclosure of sensitive information can occur in a variety of ways, including but not limited to, negligent or wrongful conduct by employees or former employees or others with permitted access to our information technology systems and information, or wrongful conduct by hackers, competitors, or certain governments. Our third-party vendors and business partners face similar risks. Moreover, despite network security and back-up measures, our servers and other electronic systems are vulnerable to cybersecurity breaches, such as physical or electronic break-ins, computer viruses, ransomware attacks, phishing schemes, and similar disruptive events. Such incidents could cause significant downtime or failures of our systems or those used by our third-party service providers. Cyber-attacks come in many forms, including the deployment of harmful malware or ransomware, exploitation of vulnerabilities, phishing, social engineering, and other means to compromise the confidentiality, integrity, and availability of our information technology systems and confidential information. The techniques used by criminal elements to attack computer systems are sophisticated, change frequently and may originate from less regulated or remote areas of the world. Although we carry property, business interruption, and cyber liability insurance, the coverage may not be adequate to compensate for all losses that may occur in the event of system downtime or failure. Any such disruption or loss of information technology or telecommunications systems on which critical aspects of our operations depend could have a material adverse effect on our business and our reputation.
Previous wording
If our computer systems are compromised, we could be subject to significant fines, damages, reputational harm, litigation, and enforcement actions, and we could lose trade secrets, the occurrence of which could materially harm our business, in addition to possibly requiring substantial and material expenditures of resources to remedy.
Current wording
If our computer systems are compromised, we could be subject to significant fines, damages, reputational harm, litigation, and enforcement actions, and we could lose trade secrets, the occurrence of any of which could materially harm our business, in addition to possibly requiring substantial and material expenditures of resources to remedy.
Previous wording
We rely on a limited number of suppliers for certain laboratory substances used in the chemical reactions incorporated into our tests and testing services, which we refer to as reagents, as well as for the sequencers, collection kits, and various other equipment and materials we use in our laboratory operations. In particular, we rely on Illumina as the sole supplier of the next generation sequencers and associated reagents we use to perform our genetic tests and as the sole provider of maintenance and repair services for these sequencers; on Roche Holdings AG for certain laboratory equipment, supplies and services for our immunohistochemistry services; on Beckman Coulter Diagnostics for certain laboratory equipment, supplies and services for our flow cytometry tests and testing services; on Leica Biosystems for an automated digital scanning solution to scale up the digital pathology operations; and on Abbott laboratories for certain laboratory equipment, supplies and services for our FISH tests and testing services. Additionally, our therapeutic development business relies on ANP Technologies, Inc. for certain laboratory services, equipment, tools, and drug intermediates in connection with our research and development efforts. We do not have long-term agreements with most of our suppliers and, as a result, they could cease supplying these materials and equipment generally to us at any time due to an inability to reach agreement with us on supply terms, disruptions in their operations, a determination to pursue other activities or lines of business, or they could fail to provide us with sufficient quantities of materials that meet our specifications, among other reasons. These suppliers may also be affected by natural disasters such as extreme weather events, fires or flooding (which may be exacerbated as a result of climate change), pandemics and health events, and disruptions of the global supply chain. While there are several sequencer suppliers that we believe could replace Illumina, and while we believe that we have sufficient alternative suppliers for our other needs, transitioning to a new supplier or locating a temporary substitute, if any are available, would be time-consuming and expensive, could result in interruptions in or otherwise affect the performance specifications of our laboratory operations or could require that we revalidate our tests. In addition, the use of equipment or materials provided by a replacement supplier could require us to alter our laboratory operations and procedures. Moreover, we believe there are currently only a few manufacturers that are capable of supplying and servicing certain equipment and other materials necessary for our laboratory operations, including sequencers and various associated reagents. As a result, replacement equipment and materials that meet our quality control and performance requirements may not be available on reasonable terms, in a timely manner or at all. If we encounter delays or d…
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Current wording
We rely on a limited number of suppliers for certain laboratory substances used in the chemical reactions incorporated into our tests and testing services, which we refer to as reagents, as well as for the sequencers and various other equipment and materials we use in our laboratory operations. In particular, we rely on Illumina as the sole supplier of the next generation sequencers and associated reagents we use to perform our genetic tests and as the sole provider of maintenance and repair services for these sequencers; on Roche Holdings AG for certain laboratory equipment, supplies and services for our immunohistochemistry services; on Beckman Coulter Diagnostics for certain laboratory equipment, supplies and services for our flow cytometry tests and testing services; on Leica Biosystems for an automated digital scanning solution to scale up the digital pathology operations; and on Abbott Laboratories for certain laboratory equipment, supplies and services for our FISH tests and testing services. Additionally, our therapeutic development business relies on ANP Technologies, Inc. for certain laboratory services, equipment, tools, and drug intermediates in connection with our research and development efforts. We do not have long-term agreements with most of our suppliers and, as a result, they could cease supplying these materials and equipment generally to us at any time due to an inability to reach agreement with us on supply terms, disruptions in their operations, a determination to pursue other activities or lines of business, or they could fail to provide us with sufficient quantities of materials that meet our specifications, among other reasons. These suppliers may also be affected by natural disasters such as extreme weather events, fires or flooding (which may be exacerbated as a result of climate change), pandemics and health events, and disruptions of the global supply chain. While there are several sequencer suppliers that we believe could replace Illumina, and while we believe that we have sufficient alternative suppliers for our other needs, transitioning to a new supplier or locating a temporary substitute, if any are available, would be time-consuming and expensive, could result in interruptions in or otherwise affect the performance specifications of our laboratory operations or could require that we revalidate our tests. In addition, the use of equipment or materials provided by a replacement supplier could require us to alter our laboratory operations and procedures. Moreover, we believe there are currently only a few manufacturers that are capable of supplying and servicing certain equipment and other materials necessary for our laboratory operations, including sequencers and various associated reagents. As a result, replacement equipment and materials that meet our quality control and performance requirements may not be available on reasonable terms, in a timely manner or at all. If we encounter delays or difficulties securi…
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Previous wording
Our success depends in large part on the skill, experience, and performance of our executive management team and others in key leadership positions, especially Ming Hsieh, our founder, Chief Executive Officer and Chairman of our board of directors; Paul Kim, our Chief Financial Officer; Dr. Han Lin Gao, our Chief Scientific Officer and Laboratory Director; and Jian Xie, our President and Chief Operating Officer. Additionally, the success of our Fulgent Pharma business depends in large part on the skill, experience, and performance of our executive management team and others in key leadership positions, especially Ray Yin, its President and Chief Scientific Officer. The continued efforts of these persons will be critical to us as we continue to develop our technologies and focus on growing our business. If we lose one or more of these key executives, we could experience difficulties maintaining our operations, including our ability to compete effectively, advance our technologies, develop new tests, and implement our business strategies. All of our executives and employees, including Messrs. Hsieh, Kim, and Xie; Dr. Yin; and Dr. Gao, are at-will, meaning either we or the executive may terminate his employment at any time. We do not carry key person insurance for any of our executives or other employees. In addition, we do not have long-term retention agreements in place with any of our executives or key employees.
Current wording
Our success depends in large part on the skill, experience, and performance of our executive management team and others in key leadership positions, especially Ming Hsieh, our founder, Chief Executive Officer and Chairman of our board of directors; Paul Kim, our Chief Financial Officer; Dr. Hanlin Gao, our Chief Scientific Officer and Laboratory Director; and Jian Xie, our President and Chief Operating Officer. Additionally, the success of our Fulgent Pharma business depends in large part on the skill, experience, and performance of Dr. Ray Yin, its President and Chief Scientific Officer. The continued efforts of these persons will be critical to us as we continue to develop our technologies and focus on growing our business. If we lose one or more of these key executives, we could experience difficulties maintaining our operations, including our ability to compete effectively, advance our technologies, develop new tests, and implement our business strategies. All of our executives and employees, including Messrs. Hsieh, Kim, and Xie; Dr. Yin; and Dr. Gao, are at-will, meaning either we or the executive may terminate his employment at any time. We do not carry key person insurance for any of our executives or other employees. In addition, we do not have long-term retention agreements in place with any of our executives or key employees.
Previous wording
We may not be successful in developing and marketing new tests, which could negatively impact our performance and prospects.
Current wording
We may not be successful in developing and marketing new tests or testing services, which could negatively impact our performance and prospects.
Previous wording
We believe our future success will depend in part on our ability to continue to expand our test and testing service offerings and develop and sell new tests and testing services and on our ability to expand our presence in new and existing markets, including our presence in the molecular diagnostic and cancer testing markets. We may not be successful in launching or marketing any new tests we may develop; in expanding into any new or existing markets; and, even if we are successful, the demand for our tests could decrease or may not continue to increase at historical rates due to resulting sales of any new tests. Development of new tests is time-consuming and costly, as development and marketing of new tests requires us to conduct research and development activities regarding the new tests and to further scale our laboratory processes and infrastructure to be able to analyze increasing amounts of more diverse data. Further, we may be unable to discover or develop and launch new tests for a variety of reasons, including failure of any proposed test to perform as expected, lack of validation or reference data for the test, or failure to demonstrate the utility of the test. Any new test we are able to discover and develop may not be launched in a timely manner, meet applicable regulatory standards, successfully compete with other technologies and available tests, avoid infringing the proprietary rights of others, achieve coverage and adequate reimbursement from third-party payors, be capable of performance at commercial levels and at reasonable costs, be successfully marketed, or achieve sufficient market acceptance for us to recoup our time and capital investment in the development of the test. Any failure to successfully develop, market, and sell new tests could negatively impact our ability to attract and retain customers, our revenue, and prospects.
Current wording
We believe our future success will depend in part on our ability to continue to expand our test and testing service offerings and develop and sell new tests and testing services and on our ability to expand our presence in new and existing markets, including our presence in the molecular diagnostic and cancer testing markets. We may not be successful in launching or marketing any new tests we may develop; in expanding into any new or existing markets; and, even if we are successful, the demand for our tests or testing services could decrease or may not continue to increase at historical rates. Development of new tests and testing services is time-consuming and costly, as development and marketing of new tests and testing services often requires us to conduct research and development activities regarding the new tests and to further scale our laboratory processes and infrastructure to be able to analyze increasing amounts of more diverse data. Further, we may be unable to discover or develop and launch new tests or testing services for a variety of reasons, including failure of any proposed test to perform as expected, lack of validation or reference data for the test, or failure to demonstrate the utility of the test. Any new test we are able to discover and develop may not be launched in a timely manner, meet applicable regulatory standards, successfully compete with other technologies and available tests, avoid infringing the proprietary rights of others, achieve coverage and adequate reimbursement from insurance payors, be capable of performance at commercial levels and at reasonable costs, be successfully marketed, or achieve sufficient market acceptance for us to recoup our time and capital investment in the development of the test. Any failure to successfully develop, market, and sell new tests or testing services could negatively impact our ability to attract and retain customers, our revenue, and prospects.
Previous wording
Our existing customer base includes international customers from a variety of geographic markets. As part of our strategy, we aim to increase our volume of direct sales to international customers in a variety of markets by conducting targeted marketing outreach activities and, if opportunities arise, engaging distributors or establishing other types of arrangements, such as additional joint ventures or other relationships. However, we may never be successful in achieving these objectives, and even if we are successful, these strategies may not result in meaningful or any increases in our customer base, test volumes, or revenue.
Current wording
Our existing customer base includes international customers from a variety of geographic markets. As we expand our direct test sales in other countries, we are increasingly subject to varied and complex foreign and international laws and regulations, and as part of our expansion strategy, we aim to conduct targeted marketing outreach activities and, if opportunities arise, engage distributors or establish other types of arrangements, such as additional joint ventures or other relationships. However, we may never be successful in achieving these objectives, and even if we are successful, these strategies may not result in meaningful or any increases in our customer base, test volumes, or revenue.
Previous wording
compliance with the laws and regulations of multiple jurisdictions, which may be conflicting or subject to increasing stringency or other changes, including privacy and data protection regulations, tax laws, employment laws, healthcare regulatory requirements, and other related approvals, including permitting and licensing requirements;
Current wording
compliance with the laws and regulations of multiple jurisdictions, which may be conflicting or subject to increasing stringency or other changes, including privacy and data protection regulations, tax laws, tariffs, employment laws, healthcare regulatory requirements, and other related approvals, including permitting and licensing requirements;
Previous wording
logistics associated with the shipment of blood or other tissue specimens, including infrastructure conditions, transportation delays, and the impact of U.S. and local laws and regulations, such as export and import restrictions, tariffs, or other charges and other trade barriers, all of which involve increased risk related to the trade policies of the current administration, which may threaten existing and proposed trade agreements and impose more restrictive U.S. export-import regulations that impact our business;
Current wording
logistics associated with the shipment of blood or other tissue specimens, including infrastructure conditions, transportation delays, and the impact of United States and local laws and regulations, such as export and import permit requirements or restrictions, tariffs, or other charges and other trade barriers, all of which involve increased risk related to the trade policies of the current administration, which may threaten existing and proposed trade agreements and impose more restrictive U.S. export-import regulations that impact our business;
Previous wording
natural disasters; political and economic instability, including wars , terrorism and political unrest, such as conflicts in the Ukraine and the Middle East; outbreak of disease; boycotts; and other business restrictions; and
Current wording
natural disasters; political and economic instability, including wars, terrorism and political unrest, such as conflicts in the Ukraine and the Middle East and tensions between China and Taiwan; outbreak of disease; boycotts; and other business restrictions; and
Previous wording
Any of these factors could significantly harm our existing relationships with international customers or derail our international expansion plans, which would cause our revenue and results of operations to suffer.
Current wording
Any of these factors could significantly harm our existing relationships with international customers or derail our international expansion plans, which would cause our revenue and results of operations to suffer. Our international business activities are subject to U.S. economic and trade sanctions, which restrict or otherwise limit our ability to do business in certain designated countries.
Previous wording
In addition, we are exposed to a number of additional risks and challenges related to our joint venture in China. These risks include, among others, difficulties predicting the market for genetic testing in Asia; competitive factors in this market, including challenges securing market share; local differences in customer demands and preferences and the regulatory environment and regulatory requirements; the interpretation or enforcement of laws, regulations, and rules in China and many of the other risks of doing business internationally that are discussed above. Although we believe this joint venture could result in expanded long-term opportunities to address the genetic testing market in Asia, this belief could turn out to be wrong, and we may never realize these or any other benefits we anticipate from our joint venture. Moreover, any joint venture we may seek to establish may never produce sufficient revenue for us to recover our capital and other investments in the joint venture, and we could become subject to liabilities based on our involvement in the joint venture’s operations. The materialization of any of these risks could materially harm our performance and prospects.
Current wording
In addition, we are exposed to a number of additional risks and challenges related to our joint venture in China. These risks include, among others, difficulties predicting the market for genetic testing in Asia; competitive factors in this market, including challenges securing market share; trade wars and tariffs; local differences in customer demands and preferences and the regulatory environment and regulatory requirements; the interpretation or enforcement of laws, regulations, and rules in China and many of the other risks of doing business internationally that are discussed above. Although we believe this joint venture could result in expanded long-term opportunities to address the genetic testing market in Asia, this belief could turn out to be wrong, and we may never realize these or any other benefits we anticipate from our joint venture. Moreover, any joint venture we may seek to establish may never produce sufficient revenue for us to recover our capital and other investments in the joint venture, and we could become subject to liabilities based on our involvement in the joint venture’s operations. The materialization of any of these risks could materially harm our performance and prospects.
Previous wording
Our business depends on our ability to provide reliable and accurate test results, including tests that incorporate rapidly evolving information about the role of genes and gene variants in disease and clinically relevant outcomes associated with these variants. Hundreds of genes can be implicated in some disorders. Overlapping networks of genes and symptoms can be implicated in multiple conditions. As a result, and particularly with respect to pathology tests, substantial judgment is required in order to interpret the results of each test we perform and produce a report summarizing these results. Errors, such as failures to detect genomic variants with high accuracy, or mistakes, such as failures to completely and correctly identify the significance of gene variants or to detect disease, could subject us to product liability or professional liability claims. Any such claim against us could result in substantial damages and be costly and time-consuming to defend. Although we maintain liability insurance, including for errors and omissions, our insurance may not 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. Additionally, any liability claim brought against us, with or without merit, could increase our insurance rates or prevent us from securing adequate insurance coverage in the future. Moreover, any liability lawsuit could damage our reputation or force us to suspend sales of our tests. The occurrence of any of these events could have a material adverse effect on our business, reputation and results of operations.
Current wording
Our business depends on our ability to provide reliable and accurate test results, including tests that incorporate rapidly evolving information about the role of genes and gene variants in disease and clinically relevant outcomes associated with these variants or pathology services and testing that often rely on human interpretation. Substantial judgment is often required in order to interpret the results of each test we perform and to produce a report summarizing these results. This is particularly true for our pathology testing services. Errors, such as failures to detect genomic variants with high accuracy, or mistakes, such as failures to completely and correctly identify the significance of gene variants, abnormal cells or to detect disease, could subject us to product liability or professional liability claims. Any such claim against us could result in substantial damages and be costly and time-consuming to defend. Although we maintain liability insurance, including for errors and omissions, our insurance may not 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. Additionally, any liability claim brought against us, with or without merit, could increase our insurance rates or prevent us from securing adequate insurance coverage in the future. Moreover, any liability lawsuit could damage our reputation or force us to suspend sales of our tests. The occurrence of any of these events could have a material adverse effect on our business, reputation and results of operations.
Previous wording
In addition, insurance coverage is increasingly expensive and difficult to obtain. Inability to obtain or maintain sufficient insurance coverage at an acceptable cost or to otherwise protect against potential product or other legal or administrative liability claims could prevent or inhibit customer relationships, the clinical development, commercial production, and sale of any of our products and product candidates, which could adversely affect our business.
Current wording
In addition, insurance coverage is increasingly expensive and difficult to obtain. Inability to obtain or maintain sufficient insurance coverage at an acceptable cost or to otherwise protect against potential product or other legal or administrative liability claims could prevent or inhibit customer relationships, the clinical development, commercial production, and sale of any of our products and drug candidates, which could adversely affect our business.
Previous wording
We expect our capital expenditures and operating expenses to increase over the next several years as we seek to expand our infrastructure, other commercial operations, and research and development activities. As of December 31, 2023, we had cash, cash equivalents, and marketable securities of approximately $847.7 million. We may seek to fund future cash needs through securities offerings, credit facilities, or other debt financings, asset sales, collaborations or licensing arrangements. Additional funding may not be available to us when needed, on acceptable terms or at all. For example, the COVID-19 pandemic initially caused extreme disruption and volatility in the global capital markets followed by a period of high market demand for life science and diagnostic company equities and then a period of less demand for these equities in 2022 and 2023. These circumstances and high volatility in capital markets generally may reduce our ability to access capital and/or adversely affect the stability of the depository institutions maintaining our assets.
Current wording
We expect our capital expenditures and operating expenses to increase over the next several years as we seek to expand our infrastructure, other commercial operations, and research and development activities. As of December 31, 2024, we had cash, cash equivalents, and marketable securities of approximately $828.6 million. We may seek to fund future cash needs through securities offerings, credit facilities, or other debt financings, asset sales, collaborations or licensing arrangements. Additional funding may not be available to us when needed, on acceptable terms or at all. For example, the COVID-19 pandemic initially caused extreme disruption and volatility in the global capital markets followed by a period of high market demand for life science and diagnostic company equities and then a period of less demand for these equities in 2022, 2023, and 2024. These circumstances and high volatility in capital markets generally may reduce our ability to access capital and/or adversely affect the stability of the depository institutions maintaining our assets.
Previous wording
Inflation may adversely affect us by materially increasing our costs.
Current wording
Inflation has and may again materially and adversely affect us by materially increasing our costs.
Previous wording
Recently, inflation has increased throughout the U.S. economy. Inflation can adversely affect us by materially increasing the costs of clinical trials and research, the development of our tests and product candidates, administration, and other costs of doing business. We may experience material increases in the prices of labor and other costs of doing business. In an inflationary environment, cost increases may materially outpace our expectations, causing us to use our cash and other liquid assets faster than forecasted. If this happens, we may need to raise additional capital to fund our operations, which may not be available in sufficient amounts or on reasonable terms, if at all, sooner than expected.
Current wording
In recent years, inflation has increased throughout the United States economy. Inflation has adversely affected us and may again adversely affect us by materially increasing the costs of clinical trials and research, the development of our tests and drug candidates, administration, and other costs of doing business. We have and may again experience material increases in the prices of labor and other costs of doing business. In an inflationary environment, cost increases may materially outpace our expectations, causing us to use our cash and other liquid assets faster than forecasted.
Previous wording
We are required to maintain internal control over financial reporting and report any material weaknesses in these internal controls. Section 404 of the Sarbanes-Oxley Act requires that we evaluate and determine the effectiveness of our internal control over financial reporting and annually provide a management report on these internal controls. We have incurred and expect to continue to incur significant expenses and devote substantial management effort toward compliance with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act. Although we have implemented systems, processes and controls and performed this evaluation as of the end of 2023, we will need to maintain and enhance these controls if and as we grow. Moreover, we may need to hire additional personnel and devote more resources to our financial reporting function in order to do so, which will increase our operating expenses.
Current wording
We are required to maintain internal control over financial reporting and report any material weaknesses in these internal controls. Section 404 of the Sarbanes-Oxley Act requires that we evaluate and determine the effectiveness of our internal control over financial reporting and annually provide a management report on these internal controls. We have incurred and expect to continue to incur significant expenses and devote substantial management effort toward compliance with the auditor attestation requirements of
Previous wording
If one or more material weaknesses is identified during the process of evaluating our internal controls or if we do not detect errors on a timely basis, our financial statements may be materially misstated. In addition, in that event, our management would be unable to conclude that our internal control over financial reporting is effective. In addition, now that we are no longer an emerging growth company, we are required to include an attestation report on internal control over financial reporting issued by our independent registered public accounting firm. Any failure to develop or maintain effective controls, or any difficulties encountered in their implementation or improvement, could materially harm our results of operations, cause us to fail to meet our reporting obligations, result in a restatement of our financial statements for prior periods, or adversely affect the results of management evaluations and independent registered public accounting firm audits of our internal control over financial reporting that we are required to include in our periodic reports that will be filed with the SEC. If we or our auditors were to conclude that our internal control over financial reporting was not effective because one or more material weaknesses had been identified or if internal control deficiencies result in the restatement of our financial results, investors could lose confidence in the accuracy and completeness of our financial disclosures and the price of our common stock could decline.
Current wording
If one or more material weaknesses is identified during the process of evaluating our internal controls or if we do not detect errors on a timely basis, our financial statements may be materially misstated. In addition, in that event, our management would be unable to conclude that our internal control over financial reporting is effective. In addition, we are required to include an attestation report on internal control over financial reporting issued by our independent registered public accounting firm. Any failure to develop or maintain effective controls, or any difficulties encountered in their implementation or improvement, could materially harm our results of operations, cause us to fail to meet our reporting obligations, result in a restatement of our financial statements for prior periods, or adversely affect the results of management evaluations and independent registered public accounting firm audits of our internal control over financial reporting that we are required to include in our periodic reports that will be filed with the SEC. If we or our auditors were to conclude that our internal control over financial reporting was not effective because one or more material weaknesses had been identified or if internal control deficiencies result in the restatement of our financial results, investors could lose confidence in the accuracy and completeness of our financial disclosures and the price of our common stock could decline.
Previous wording
We have been the subject of a shareholder class action, which was dismissed without prejudice; and may be subject to further shareholder litigation in the future; our costs of defending such litigation, arbitration and other proceedings and any adverse outcome of such litigation, arbitration, or other proceeding may have a material adverse effect on our business and the results of our operations.
Current wording
We have been the subject of a shareholder class action, which was dismissed without prejudice; and we may be subject to further shareholder litigation in the future; our costs of defending such litigation, arbitration, and other proceedings and any adverse outcome of such litigation, arbitration, or other proceeding may have a material adverse effect on our business and the results of our operations.
Previous wording
General political uncertainty may have an adverse impact on our operating performance and results of operations. In particular, the United States continues to experience significant political events that cast uncertainty on global financial and economic markets, especially in light of the upcoming presidential election. It is presently unclear exactly what actions the new administration in the United States will implement, and if implemented, how these actions may impact the pharmaceutical and diagnostics industries in the United States. Any actions taken by a new U.S. administration may have a negative impact on the United States economies and on our business, financial conditions, and results of operations.
Current wording
General political uncertainty may have an adverse impact on our operating performance and results of operations. In particular, the United States continues to experience significant political events that cast uncertainty on global financial and economic markets, especially in light of the new administration. It is presently unclear exactly what actions the new administration in the United States will implement, and if implemented, how these actions may impact the pharmaceutical and diagnostics industries in the United States. Any actions taken by the new administration may have a negative impact on the United States economies and on our business, financial conditions, and results of operations.
Previous wording
If third-party payors do not provide coverage and adequate reimbursement for our tests and testing services, our potential for growth and our ability to collect revenue for these tests and testing services could be limited and our results of operations may be materially and adversely affected.
Current wording
If insurance payors do not provide coverage and adequate reimbursement for our tests and testing services, our potential for growth and our ability to collect revenue for these tests and testing services could be limited and our results of operations may be materially and adversely affected.
Previous wording
Coverage and reimbursement by third-party payors, including managed care organizations, other private health insurers and government healthcare programs, such as Medicare and Medicaid, for the types of tests we perform can be limited and uncertain. Our customers may not order our tests or testing services unless third-party payors cover and provide adequate reimbursement for a substantial portion of the price of the tests. If we are not able to obtain coverage and an acceptable level of reimbursement for our tests from third-party payors, the patient for whom the test is ordered typically will owe a greater co-insurance, deductible or co-payment amount or may be expected to pay the entire cost of the test out-of-pocket, which could dissuade practitioners from ordering our tests and, if ordered, could result in a delay in or decreased likelihood of collecting payment, whether from patients or from third-party payors. We believe our ability to increase the amount of tests and testing services we sell to our healthcare provider customers and any corresponding revenue depends in part on our ability to achieve and maintain broad coverage and reimbursement for our tests from third-party payors.
Current wording
Coverage and reimbursement by insurance payors, including managed care organizations, other private health insurers and government healthcare programs, such as Medicare and Medicaid, for the types of tests we perform can be limited and uncertain. Our customers may not order our tests or testing services unless insurance payors cover and provide adequate reimbursement for a substantial portion of the price of the tests. If we are not able to obtain coverage and an acceptable level of reimbursement for our tests from insurance payors, the patient for whom the test is ordered typically will owe a greater co-insurance, deductible or co-payment amount or may be expected to pay the entire cost of the test out-of-pocket, which could dissuade practitioners from ordering our tests and, if ordered, could result in a delay in or decreased likelihood of collecting payment, whether from patients or from insurance payors. We believe our ability to increase the amount of tests and testing services we sell to our healthcare provider customers and any corresponding revenue depends in part on our ability to achieve and maintain broad coverage and reimbursement for our tests from insurance payors.
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Rearranged current paragraphs (13)
Current report — wording carried from elsewhere
In the ordinary course of our business, we generate, collect and store sensitive data, including personal health information, or PHI; personally identifiable information; intellectual property; and proprietary and other business-critical information, such as research and development data, commercial data, and other business and financial information. We manage and maintain the data we generate and collect and store data utilizing a combination of on-site systems and managed data center systems. We also communicate sensitive patient data when we deliver reports summarizing test results to our customers, which we deliver via our online encrypted web portal, encrypted email, or fax, or overnight courier. The secure processing, storage, maintenance, and transmission of this information is vital to our operations and business strategy, and we devote significant resources to protecting the confidentiality and integrity of this information. While we perform regular audits of our information systems security, we cannot audit our vendors, suppliers, and customers’ systems in the same way and cannot monitor containment or the spread of malware on those systems, with a potential resulting impact on our systems.
Current report — wording carried from elsewhere
We have a history of losses, and we may not be able to sustain profitability.
Current report — wording carried from elsewhere
Section 404 of the Sarbanes-Oxley Act. Although we have implemented systems, processes and controls and performed this evaluation as of the end of 2024, we will need to maintain and enhance these controls if and as we grow. Moreover, we may need to hire additional personnel and devote more resources to our financial reporting function in order to do so, which will increase our operating expenses.
Current report — wording carried from elsewhere
Affected stakeholders also continue to press for a comprehensive legislative solution to create a harmonized paradigm for oversight of LDTs by both the FDA and CMS, instead of implementation of the proposed FDA administrative action, which may be disruptive to the industry and to patient access to certain diagnostic tests. However, this FDA rulemaking was initiated after years of failed congressional attempts to harmonize the regulatory paradigms applicable to LDTs and other IVDs, making it unclear whether any legislative efforts would be successful going forward.
Current report — wording carried from elsewhere
We are subject to on-site routine and complaint-driven inspections under California state laboratory laws and regulations. If we are found to be out of compliance with California requirements, the CA Department of Public Health may suspend, restrict or revoke our license or laboratory permit, and may exclude persons or entities from owning, operating or directing a laboratory for two years following such license revocation, assess civil monetary penalties, or impose specific corrective action plans, among other sanctions. Any such actions could materially and adversely affect our business by prohibiting or limiting our ability to offer testing.
Current report — wording carried from elsewhere
Similar to other laboratories in the industry, we are currently being audited by HRSA with respect to our reimbursement for COVID-19 tests furnished to patients believed to be uninsured. We recorded approximately $548.9 million of reimbursements from HRSA under the Uninsured Program during the years ended December 31, 2022, 2021, and 2020. There is uncertainty with respect to the methodology HRSA will use in its audit and whether and how HRSA will extrapolate audit results. We are working with HRSA’s auditors to resolve any issues related to its audit, including any reimbursed amounts that may need to be returned to HRSA. We have also received a CID issued by the DOJ pursuant to the False Claims Act related to the DOJ’s investigation as to whether we submitted or caused to be submitted false claims to the Uninsured Program.
Current report — wording carried from elsewhere
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. Adverse developments in existing litigation claims or legal proceedings involving us or new claims could require us to establish or increase litigation reserves or enter into unfavorable settlements or satisfy judgments for monetary damages for amounts in excess of current reserves, which could adversely affect our financial results. 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.
Current report — wording carried from elsewhere
We intend to develop and seek approval for our drug candidates developed using our nano-drug delivery platform technology, including FID-007, FID-022, and other candidates it may develop, pursuant to the FDA’s 505(b)(2) pathway. If the FDA determines that we may not use this regulatory pathway, then we would need to seek regulatory approval via a “full” or “stand-alone” NDA under
Current report — wording carried from elsewhere
Our future issued patents covering drug candidates we develop could be found invalid or unenforceable if challenged in court or before administrative bodies in the United States or abroad.
Current report — wording carried from elsewhere
Patent terms may be inadequate to protect our competitive position on our products and services for an adequate amount of time.
Current report — wording carried from elsewhere
If we do not obtain patent term extension and/or data exclusivity for any drug candidate that we may develop, our business may be materially harmed.
Current report — wording carried from elsewhere
We may not be able to enforce our intellectual property rights outside the United States.
Current report — wording carried from elsewhere
the other risk factors discussed in this report.
Rearranged previous paragraphs (4)
Previous report — wording carried elsewhere
We have a history of losses, and we may not be able to sustain profitability. At this time, we do not expect future material revenues from the sale of our COVID-19 tests and testing services.
Previous report — wording carried elsewhere
Any adverse development or delay in our clinical trials could have a material and adverse effect on our business, financial condition, results of operations and prospects.
Previous report — wording carried elsewhere
We may be subject to claims that former employees, collaborators, or other third parties have an interest in its owned patent rights, trade secrets, or other intellectual property as an inventor or co-inventor. For example, we may have inventorship disputes arise from conflicting obligations of employees, consultants, or others who are involved in developing its product candidate or other technologies. Litigation may be necessary to defend against these and other claims challenging inventorship or its ownership of its owned patent rights, trade secrets, or other intellectual property. If we fail in defending any such claims, in addition to paying monetary damages, we may lose valuable intellectual property rights, such as exclusive ownership of, or right to use, intellectual property that is important to its product candidate, and other technologies. Even if we are successful in defending against such claims, litigation could result in substantial costs and be a distraction to management and other employees. Any of the foregoing could have a material adverse effect on our business, financial condition, results of operations and prospects.
Previous report — wording carried elsewhere
and the other risk factors discussed in this report.