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CareDx, Inc.

CareDx, Inc.CDNAEarnings & Financial Report

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What changed in CareDx, Inc.'s 10-K — 2022 vs 2023

Top changes in CareDx, Inc.'s 2023 10-K

615 paragraphs added · 612 removed · 455 edited across 6 sections

Item 1. Business

Business — how the company describes what it does

162 edited+43 added−68 removed102 unchanged
State Privacy Laws New U.S. state privacy laws, such as the California Consumer Privacy Act, or the CCPA, which took effect in January 2020, and was amended by the California Privacy Rights Act effective January 2023, secure new privacy rights for consumers and impose new obligations on us.
State Privacy Laws U.S. state privacy laws, such as the California Consumer Privacy Act, or the CCPA, which took effect in January 2020, and was amended by the California Privacy Rights Act effective January 2023, secure new privacy rights for consumers and impose new obligations on us.
The proposal does not change any requirements of the IVDR or change the implementation date but changes the transitional provisions to allow a progressive rollout based on the risk level of the device. In accordance with these timelines, our current CE marked products will remain available to customers throughout the transition period.
The proposal does not change any requirements of the IVDR or the implementation date but changes the transitional provisions to allow a progressive rollout based on the risk level of the device. In accordance with these timelines, our current CE marked products will remain available to customers throughout the transition period.
Persistently elevated dd-cfDNA (more than one result above the 0.5% threshold) predicted over a 25% decline in the estimated glomerular filtration rate over three years (hazard ratio 1.97). Therefore, routine monitoring of dd-cfDNA allowed early identification of clinically important graft injury. Biomarker monitoring complemented histology and traditional laboratory surveillance strategies as a prognostic marker and risk-stratification tool post-transplant.
Persistently elevated dd-cfDNA (more than one result above 0.5%) predicted over a 25% decline in the estimated glomerular filtration rate over three years (hazard ratio 1.97). Therefore, routine monitoring of dd-cfDNA allowed early identification of clinically important graft injury. Biomarker monitoring complemented histology and traditional laboratory surveillance strategies as a prognostic marker and risk-stratification tool post-transplant.
These products include: AlloSeq Tx, a high-resolution HLA typing solution, AlloSeq cfDNA, our surveillance solution designed to measure dd-cfDNA in blood to detect active rejection in transplant recipients, and AlloSeq HCT, a NGS solution for chimerism testing for stem cell transplant recipients. Our AlloSeq products are designed to run on Illumina’s NGS instrumentation.
These products include: AlloSeq Tx, a high-resolution HLA typing solution; AlloSeq cfDNA, our surveillance solution designed to measure dd-cfDNA in blood to detect active rejection in transplant recipients; and AlloSeq HCT, an NGS solution for chimerism testing for stem cell transplant recipients. Our AlloSeq products are designed to run on Illumina’s NGS instrumentation.
Competition With our comprehensive portfolio of surveillance testing services, diagnostic products and patient and digital solutions business offerings, we face many different types of competition. Testing Services Our competition principally includes clinical reference labs and hospital labs using existing and routine clinical chemistry tests.
Competition With our comprehensive portfolio of surveillance testing services, diagnostic products and patient and digital solutions business offerings, we face many different types of competition. Testing Services Our competition principally includes clinical reference labs and hospital labs using existing and routine clinical chemistry tests and biopsies.
These practices have been the standard of care in the United States for many years, and we will need to continue to educate clinicians, transplant recipients and payers about the various benefits of our tests in order to change clinical practice.
These practices have been the standard of care in the United States for many years, and we will need to continue to educate clinicians, transplant recipients and payers about the various benefits of our tests to change clinical practice.
Information Blocking Prohibition On May 1, 2020, the Office of the National Coordinator for Health Information Technology promulgated final regulations under the authority of the 21st Century Cures Act to impose new conditions to obtain and maintain certification of certified health information technology and prohibit certain covered actors—developers of certified health information technology, health information networks / health information exchanges, and health care providers (including laboratories)—from engaging in activities that are likely to interfere with the access, exchange or use of electronic health information (information blocking).
Information Blocking Prohibition On May 1, 2020, the Office of the National Coordinator for Health Information Technology promulgated final regulations under the authority of the 21st Century Cures Act to impose new conditions to obtain and maintain certification of certified health information technology and prohibit certain covered actors—developers of certified health information technology, health information networks / health information exchanges, and healthcare providers (including laboratories)—from engaging in activities that are likely to interfere with the access, exchange or use of electronic health information (information blocking).
Our senior leadership team includes leaders with diverse skills, experience, racial background and genders. Our employees come from numerous countries and various backgrounds and we strive to provide a diverse and inclusive environment.
Our senior leadership team includes leaders with diverse skills, experience, racial backgrounds and genders. Our employees come from numerous countries and various backgrounds and we strive to provide a diverse and inclusive environment.
The high-level summary of the manuscript shows: • Use in both subclinical and clinical rejection: Elevated AlloSure (≥ 0.5%) strongly correlated with clinical and subclinical allograft rejection (p • Predictor of de novo donor-specific antibody (dnDSA): AlloSure associated with a 271% increased risk of development of dnDSA (p=0.001); • Associated with development of dnDSA: Elevated AlloSure levels ≥ 0.5% was associated with 3 times increase in the risk of development of dnDSA; • AlloSure as a leading indicator: AlloSure was elevated 91 days (median) ahead of DSA identification; • AlloSure is superior to serum creatinine (AUC of 80% v 49% respectively); • Identifies eGFR decline: Persistently elevated AlloSure (>1 result above 0.5%) predicted a > 25% decline in eGFR over 3 years (HR 1.97, p = 0.041), while persistently low levels identify allograft quiescence; and • AlloSure d ifferentiates rejections which are going to cause long term damage vs short term rejection, which has treatment implications: oral outpatient treatment vs inpatient, expensive and potentially harmful therapies.
The high-level summary of the manuscript shows: • Use in both subclinical and clinical rejection: Elevated AlloSure (≥ 0.5%) strongly correlated with clinical and subclinical allograft rejection (p • Predictor of de novo donor-specific antibody (dnDSA): AlloSure associated with a 271% increased risk of development of dnDSA (p=0.001); • AlloSure as a leading indicator: AlloSure was elevated 91 days (median) ahead of donor-specific antibody identification; • AlloSure is superior to serum creatinine (AUC of 80% v 49%, respectively); • Identifies eGFR decline: Persistently elevated AlloSure (>1 result above 0.5%) predicted a > 25% decline in eGFR over 3 years (HR 1.97, p=0.041), while persistently low levels identify allograft quiescence; and • AlloSure d ifferentiates rejections that are going to cause long-term damage vs short-term rejection, which has treatment implications: oral outpatient treatment vs inpatient, expensive and potentially harmful therapies.
Our ability to increase the clinical uptake for AlloSeq cfDNA will be a result of multiple factors, including local clinical education, customer lab technical proficiency and levels of country-specific reimbursement. Also in September 2019, we commercially launched AlloSeq Tx, the first of its kind NGS high-resolution HLA typing solution utilizing hybrid capture technology.
Our ability to increase the clinical uptake for AlloSeq cfDNA will be a result of multiple factors, including local clinical education, customer lab technical proficiency and levels of country-specific reimbursement. In September 2019, we launched AlloSeq Tx, the first of its kind NGS high-resolution HLA typing solution utilizing hybrid capture technology.
We are also actively working with our Notified Body to bring the Quality management system at the sites to be compliant to IVDR requirements by May 2026. Certain of our products also comply with the CMDCAS, which is a system designed to implement Canadian regulations requiring some medical devices be designed and manufactured under a registered QMS.
We are also actively working with our Notified Body to bring the quality management system at the sites to be compliant with IVDR requirements by May 2025. Certain of our products also comply with the CMDCAS, which is a system designed to implement Canadian regulations requiring some medical devices be designed and manufactured under a registered QMS.
Other States’ Laboratory Testing 20 Table of Contents Other states require out-of-state laboratories that accept specimens for testing from those states to be licensed. We have obtained licenses in California, Florida, New York, Maryland, Pennsylvania and Rhode Island, and believe we are in compliance with applicable licensing laws.
Other States’ Laboratory Testing 19 Table of Contents Other states require out-of-state laboratories that accept specimens for testing from those states to be licensed. We have obtained licenses in California, Florida, New York, Maryland, Pennsylvania and Rhode Island, and believe we are in compliance with applicable licensing laws.
Patient and Digital Solutions Business Development We develop, deploy and promote a rational set of software tools and data-driven services that provide clinical utility with respect to medication adherence and overall patient health. Our vision is to add smart analytics and machine learning to artificial intelligence in transplant.
Patient and Digital Solutions Business Development We develop, deploy and promote a rational set of software tools and data-driven services that provide clinical utility with respect to medication adherence and overall patient health. Our vision is to add smart analytics and machine learning to artificial intelligence in transplantation.
We have initiated clinical studies to generate data on our existing and planned future testing services. We have signed multiple biopharma research partnerships for AlloCell, a surveillance solution that monitors the level of engraftment and persistence of allogeneic cells for patients who have received cell therapy transplants.
We have initiated several clinical studies to generate data on our existing and planned future testing services. We have signed multiple biopharma research partnerships for AlloCell, a surveillance solution that monitors the level of engraftment and persistence of allogeneic cells for patients who have received cell therapy.
In 2021, we established a Diversity, Equity, and Inclusion committee to engage, retain and develop talent from diverse backgrounds by facilitating diversity, equity and inclusion advocacy through event sponsorship, leaning and client engagement. We have increased the diversity of our Board and leadership teams and continue to focus on maintaining a diverse organization.
In 2021, we established a Diversity, Equity, and Inclusion committee to engage, retain and develop talent from diverse backgrounds by facilitating diversity, equity and inclusion advocacy through event sponsorship, learning and client engagement. We have increased the diversity of our Board and leadership teams and continue to focus on maintaining a diverse organization.
We offer testing services, products, and patient and digital solutions along the pre- and post-transplant patient journey, and we are a leading provider of genomics-based information for transplant patients. Our headquarters are in Brisbane, California. Our primary operations are in Brisbane, California; Omaha, Nebraska; Fremantle, Australia and Stockholm, Sweden.
We offer testing services, products, and patient and digital solutions along the pre- and post-transplant patient journey, and we are a leading provider of genomics-based information for transplant patients. Our headquarters is located in Brisbane, California. Our primary operations are in Brisbane, California; Omaha, Nebraska; Fremantle, Australia and Stockholm, Sweden.
Federal and State Fraud and Abuse and Privacy Laws Because of the significant federal funding involved in Medicare and Medicaid, Congress and the states have enacted, and actively enforce, a number of laws to eliminate fraud and abuse in federal health care programs and across the healthcare system. Our business is subject to compliance with these laws.
Federal and State Fraud and Abuse and Privacy Laws Because of the significant federal funding involved in Medicare and Medicaid, Congress and the states have enacted, and actively enforce, a number of laws to eliminate fraud and abuse in federal healthcare programs and across the healthcare system. Our business is subject to compliance with these laws.
We believe the principal competitive factors in our target markets include: • quality and strength of clinical and analytical validation data; • confidence in diagnostic results; • technical performance and innovation to deliver new products that provide clinically actionable results; • reputation among customers as a provider of high value transplant diagnostic tests and diagnostic test services; • the extent of reimbursement; • inclusion in practice guidelines; • cost-effectiveness; and • ease of use.
We believe the principal competitive factors in our target markets include: • quality and strength of clinical and analytical validation data; • confidence in diagnostic results; 17 Table of Contents • technical performance and innovation to deliver new products that provide clinically actionable results; • reputation among customers as a provider of high value transplant diagnostic tests and diagnostic test services; • the extent of reimbursement; • inclusion in practice guidelines; • cost-effectiveness; and • ease of use.
Under the 21st Century Cures Act, health care providers that violate the information blocking prohibition will be subject to appropriate disincentives, which the U.S. Department of Health and Human services has yet to establish through required rulemaking.
Under the 21st Century Cures Act, healthcare providers that violate the information blocking prohibition will be subject to appropriate disincentives, which the U.S. Department of Health and Human Services has yet to establish through required rulemaking.
Intellectual Property Patents and Proprietary Technology In order to remain competitive, we seek to develop and maintain protection on the proprietary aspects of our technologies. We rely on a combination of patents, copyrights, trademarks, material data transfer agreements and licenses to protect our intellectual property rights.
Intellectual Property Patents and Proprietary Technology To remain competitive, we seek to develop and maintain protection on the proprietary aspects of our technologies. We rely on a combination of patents, copyrights, trademarks, material and data transfer agreements and licenses to protect our intellectual property rights.
Instead, we aim to leverage current and future innovations in biomarker identification and measurement, study design and data integration in developing future solutions. dd-cfDNA for Kidney Transplants Our published DART and Assessing AlloSure Dd-cfDNA Monitoring Insights of Renal Allografts With Longitudinal Surveillance (ADMIRAL) clinical studies have established the clinical validity of a dd-cfDNA-based solution for kidney transplant patients, AlloSure Kidney.
Instead, we aim to leverage current and future innovations in biomarker identification and measurement, study design and data integration in developing future solutions. dd-cfDNA for Kidney Transplants Our published DART and Assessing AlloSure Dd-cfDNA Monitoring Insights of Renal Allografts With Longitudinal Surveillance (ADMIRAL) clinical studies have established the clinical validity of AlloSure Kidney for kidney transplant patients.
We believe that core elements of effective surveillance solutions include: • highly accurate and quantitative results differentiating rejection from non-rejection status; • non-invasive procedures that do not create risks to the recipient; • ease of implementation; 10 Table of Contents • earlier detection of rejection; and • the ability to provide results with timing and at a frequency that allows for informed and effective treatment decisions.
We believe that core elements of effective surveillance solutions include: • highly accurate and quantitative results differentiating rejection from non-rejection status; • non-invasive procedures that do not create risks to the recipient; • ease of implementation; • earlier detection of rejection; and • the ability to provide results with timing and at a frequency that allows for informed and effective treatment decisions.
However, the failure to fit an arrangement within an exception or a safe harbor does not necessarily mean that the statute has been violated or that the arrangement will be prosecuted. Penalties for violations include criminal penalties and civil sanctions such as fines, imprisonment and possible exclusion from Medicare, Medicaid and other federal health care programs.
However, the failure to fit an arrangement within an exception or a safe harbor does not necessarily mean that the statute has been violated or that the arrangement will be prosecuted. Penalties for violations include criminal penalties and civil sanctions such as fines, imprisonment and possible exclusion from Medicare, Medicaid and other federal healthcare programs.
We believe the use of AlloMap Heart, in conjunction with other clinical indicators, can help healthcare providers and their patients better manage long-term care following a heart transplant, can improve patient care by helping healthcare providers avoid the use of unnecessary, invasive surveillance biopsies and may help to determine the appropriate dosage levels of immunosuppressants.
We believe the use of AlloMap Heart, in conjunction with other clinical indicators, can help healthcare providers and their patients better manage long-term care following a heart transplant, can improve patient care by helping healthcare providers 6 Table of Contents avoid the use of unnecessary, invasive surveillance biopsies and may help to determine the appropriate dosage levels of immunosuppressants.
These sole source suppliers include Thermo Fisher Scientific, Inc., or Thermo Fisher, which supplies us with instruments, laboratory reagents, a master mix formula and consumables; Roche Molecular Systems, which supplies us with laboratory reagents and consumables; Hamilton Robotics, which supplies equipment and consumables; Illumina, which supplies us with instruments, laboratory reagents and consumables; Becton, Dickinson and Company, and Streck, which supply us with cell preparation tubes; Beckman Coulter, which provides laboratory equipment, reagents and consumables; and Qiagen N.V., which supplies us with a proprietary buffer reagent.
These sole source suppliers include Thermo Fisher Scientific, Inc., or Thermo Fisher, which supplies us with instruments, laboratory reagents and consumables; Roche Molecular Systems, which supplies us with laboratory reagents and consumables; Hamilton Robotics, which supplies equipment and consumables; Illumina, which supplies us with instruments, laboratory reagents and consumables; Becton, Dickinson and Company, and Streck, which supply us with cell preparation tubes; Beckman Coulter, which provides laboratory equipment, reagents and consumables; and Qiagen N.V., which supplies us with a proprietary buffer reagent.
We currently produce products, which are CE labeled and subject to the In Vitro Diagnostic Medical Devices Directive (98/79/EC), or IVDD, a European Union, or EU, Directive. Some of our products are currently labeled by self-declaration based on 23 Table of Contents their intended use or certified by a Notified Body for Compliance to the IVDD requirements.
We currently produce products, which are CE labeled and subject to the In Vitro Diagnostic Medical Devices Directive (98/79/EC), or IVDD, a European Union, or EU, directive. Some of our products are currently labeled by self-declaration based on their intended use or certified by a Notified Body for Compliance to the IVDD requirements.
As part of our acquisition of TransChart in January 2021, we acquired 8 Table of Contents Tx Access, a cloud-based service that allows nephrologists and dialysis centers to electronically submit referrals to transplant programs, closely follow and assist patients through the transplant waitlist process, and ultimately, through transplantation. In June 2021, we acquired the Transplant Hero patient application.
As part of our acquisition of TransChart in January 2021, we acquired Tx Access, a cloud-based service that allows nephrologists and dialysis centers to electronically submit referrals to transplant programs and closely follow and assist patients through the transplant waitlist process, and ultimately, through transplantation. In June 2021, we acquired the Transplant Hero patient application.
Our ot her HLA typing products include: Olerup SSP, based on the “SSP” technology; and QTYPE, which uses real-time “PCR” methodology, to perform HLA typing. QTYPE was commercially launched at the end of September 2016. QTYPE enables HLA typing at a low to intermediate resolution for samples that require a fast turn-around-time and uses real-time PCR methodology.
Our ot her HLA typing products include: Olerup SSP, based on the “SSP” technology; and QTYPE, which uses real-time “PCR” methodology to perform HLA typing. QTYPE was commercially launched at the end of September 2016. QTYPE enables HLA typing at a low to intermediate resolution for samples that require a fast turnaround time and uses real-time PCR methodology.
For all tests performed outside the scope of the payer’s policy, and for tests performed where the payer has not adopted a coverage policy, we pursue reimbursement on a case-by-case basis. If a reimbursement claim is denied, we generally pursue payment through the particular payer’s appeal process. 16 Table of Contents International Our lab products have a broad international presence.
For all tests performed outside the scope of the payer’s policy, and for tests performed where the payer has not adopted a coverage policy, we pursue reimbursement on a case-by-case basis. If a reimbursement claim is denied, we generally pursue payment through the particular payer’s appeal process. International Our lab products have a broad international presence.
We believe we compete favorably on the factors described above. 18 Table of Contents Existing diagnostic methods for kidney transplant rejection include general, non-specific clinical chemistry tests, although biopsies are also a surveillance diagnostic tool. Existing diagnostic methods for heart transplant rejection generally involve evaluating biopsy samples to determine the presence or absence of rejection.
We believe we compete favorably on the factors described above. Existing diagnostic methods for kidney transplant rejection include general, non-specific clinical chemistry tests, although biopsies are also a surveillance diagnostic tool. Existing diagnostic methods for heart transplant rejection generally involve evaluating biopsy samples to determine the presence or absence of rejection.
QTYPE enables Human Leukocyte Antigen, or HLA, typing at a low to intermediate resolution for samples that require a fast turn-around-time and uses real-time polymerase chain reaction, or PCR, methodology. Olerup SSP is used to type HLA alleles based on the sequence specific primer, or SSP, technology.
QTYPE enables Human Leukocyte Antigen, or HLA, typing at a low to intermediate resolution for samples that require a fast turnaround time and uses real-time polymerase chain reaction, or PCR, methodology. Olerup SSP is used to type HLA alleles based on the sequence specific primer, or SSP, technology.
D-OAR was an observational, prospective, multicenter study to characterize the AlloSure Heart dd-cfDNA in a routine, clinical surveillance setting with heart transplant recipients. The D-OAR study was designed to validate that plasma levels of AlloSure Heart dd-cfDNA can discriminate acute rejection from no rejection, as determined by endomyocardial biopsy criteria.
D-OAR was an observational, prospective, multicenter study to characterize the AlloSure Heart dd-cfDNA in a routine, clinical surveillance setting with heart transplant recipients. The D-OAR study validated that plasma levels of AlloSure Heart dd-cfDNA can discriminate acute rejection from no rejection, as determined by endomyocardial biopsy criteria.
The Eliminating Kickbacks in Recovery Act of 2018 The Eliminating Kickbacks in Recovery Act of 2018, or EKRA, prohibits payments for referrals to recovery homes, clinical treatment facilities, and laboratories. EKRA’s reach extends beyond federal health care programs to include private insurance (i.e., it is an “all payer” statute).
The Eliminating Kickbacks in Recovery Act of 2018 The Eliminating Kickbacks in Recovery Act of 2018, or EKRA, prohibits payments for referrals to recovery homes, clinical treatment facilities, and laboratories. EKRA’s reach extends beyond federal healthcare programs to include private insurance (i.e., it is an “all payer” statute).
KidneyCare KidneyCare combines the dd-cfDNA analysis of AlloSure Kidney with the gene expression profiling technology of AlloMap Kidney and the predictive artificial intelligence technology of iBox in one surveillance solution. We have not yet made any applications to private payers for reimbursement coverage of AlloMap Kidney or iBox.
KidneyCare KidneyCare combines the dd-cfDNA analysis of AlloSure Kidney with the gene expression profiling technology of AlloMap Kidney and the predictive artificial intelligence technology of iBox in one surveillance solution. We have yet to submit any applications to private payers for reimbursement coverage of AlloMap Kidney or iBox.
Several courts have interpreted the statute to mean that if any one purpose of remuneration is to induce or reward referrals of federal health care program payable business, the statute has been violated. The statute contains a number of statutory exceptions and the U.S.
Several courts have interpreted the statute to mean that if any one purpose of remuneration is to induce or reward referrals of federal healthcare program payable business, the statute has been violated. The statute contains a number of statutory exceptions and the U.S.
Congress regarding their plans to repeal and replace the Affordable Care Act, and the Biden administration has announced plans to expand the federal health care programs, such as Medicare and Medicaid.
Congress regarding their plans to repeal and replace the Affordable Care Act, and the Biden administration has announced plans to expand federal healthcare programs, such as Medicare and Medicaid.
We also rely upon unpatented trade secrets and improvements, unpatented know-how and continuing technological innovation to develop and maintain our competitive position. We generally protect this information with confidentiality agreements and reasonable security measures. As of December 31, 2022, we had 20 issued U.S. patents related to transplant rejection and autoimmunity.
We also rely upon unpatented trade secrets and improvements, unpatented know-how and continuing technological innovation to develop and maintain our competitive position. We generally protect this information with confidentiality agreements and reasonable security measures. As of December 31, 2023, we had 10 issued U.S. patents related to transplant rejection and autoimmunity.
The ACROBAT study is a prospective, multicenter, observational cohort study to evaluate the use of AlloHeme, a microchimerism NGS tool to predict post-transplant relapse in patients with allogeneic hematopoietic cell transplants, or HCT.
The ACROBAT study is a prospective, multicenter, observational cohort study to evaluate the use of AlloHeme, a microchimerism NGS tool to predict post-transplant relapse in patients with allogeneic hematopoietic cell transplants, or HCT. This study is currently enrolling patients.
Our competitors also include companies that are focused on the development and commercialization of molecular diagnostic tests. In the field of post-transplant surveillance, Natera Inc., or Natera, and Eurofins Viracor, Inc., or Eurofins, have commercially available molecular diagnostics tests .
Our competitors also include companies that are focused on the development and commercialization of molecular diagnostic tests. In the field of post-transplant surveillance, Natera Inc., or Natera, and Eurofins Transplant Genomics, Inc., or Eurofins, and Oncocyte Inc., or Oncocyte, have commercially available molecular diagnostics tests .
We believe employee career development is an investment in our employees’ skills and our future. We offer our employees various training opportunities free of charge and during working hours. For example, in 2022, we launched LinkedIn Learning platform, a learning library and repository for self-guided personal and professional learning opportunities.
We believe employee career development is an investment in our employees’ skills and our future. We offer our employees various training opportunities free of charge and during working hours. For example, in 2022, we launched the LinkedIn 23 Table of Contents Learning platform, a learning library and repository for self-guided personal and professional learning opportunities for our employees.
ISO is an internationally recognized standard for QMS. Recertification is required every three years and we have been successfully recertified since obtaining our original ISO certification. The facility maintains a valid EC certificate for compliance to Directive 98/79/EC Annex IV, excluding Sections 4 and 6, Full Quality Assurance System In Vitro Diagnostic Medical Devices.
Recertification is required every three years and we have been successfully recertified since obtaining our original ISO certification. The facility maintains a valid EC certificate for compliance to Directive 98/79/EC Annex IV, excluding Sections 4 and 6, Full Quality Assurance System In Vitro Diagnostic Medical Devices.
Publications based on the analyses of the accumulated DART database results were used as a guide to design K-OAR. K-OAR is a multicenter, non-blinded, prospective observational cohort study which has enrolled more than 1,700 renal transplant recipients who will receive AlloSure Kidney as part of long-term surveillance.
Publications based on the analyses of the accumulated DART database results were used as a guide to design K-OAR. K-OAR is a multicenter, non-blinded, prospective observational cohort study which has enrolled more than 1,900 renal transplant recipients who received AlloSure Kidney as part of long-term surveillance.
There is currently no anticipated supply risk based on the implementation of the IVDR in May 2022. The date of certification for our products under the IVDR is currently under review in consultation with our notified body and certification of these products to the IVDR shall be achieved within the transition timeframes.
There is currently no anticipated supply risk based on the implementation of the IVDR in May 2022. The certification for our products under the IVDR is in progress with our notified body and certification of these products to the IVDR shall be achieved within the transition timeframes.
HeartCare provides complementary information about distinct biological processes, such as immune quiescence, active injury, ACR and AMR in heart transplant recipients. We have established our proprietary strategy for quantification of donor specific dd-cfDNA and published a validation study of AlloSure Heart in 2019.
HeartCare provides complementary information about distinct biological processes, such as immune quiescence, active injury, ACR and AMR in heart transplant recipients. We have established our proprietary strategy for quantification of donor specific dd-cfDNA and published a validation study of AlloSure Heart in 2019. We offer AlloSure Heart as a laboratory-developed test for management of heart transplant recipients.
In June 2021, we entered into a strategic agreement, which was amended in April 2022, with OrganX to develop clinical decision support tools across the transplant patient journey. Together, we and OrganX will develop advanced analytics that integrate AlloSure, the first transplant specific dd-cfDNA assay, with large transplant databases to provide clinical data solutions.
In June 2021, we entered into a strategic agreement, which was amended in April 2022, with OrganX to develop clinical decision support tools across the transplant patient journey. Together, we and OrganX will develop advanced analytics that integrate AlloSure with large transplant databases to provide clinical data solutions.
Product Advancement and Development Our ongoing research and development for our lab products business is focused on kitted products for pre-transplant and post-transplant patient testing. In the last decade of next generation, the ubiquity of sequencing has unveiled significant additional sequence diversity in the HLA region on chromosome 6 of the human genome.
Product Advancement and Development 14 Table of Contents Our ongoing research and development for our lab products business is focused on kitted products for pre-transplant and post-transplant patient testing. In the last decade, the ubiquity of sequencing has unveiled significant additional sequence diversity in the HLA region on chromosome 6 of the human genome.
We could be held liable for damages and fines as a result of our, or others, business operations should contamination of the environment or individual exposure to hazardous substances occur. In addition, we could be subject to significant fines for failure to comply with applicable environmental, health and safety 25 Table of Contents requirements.
We could be held liable for damages and fines as a result of our, or others', business operations should contamination of the environment or individual exposure to hazardous substances occur. In addition, we could be subject to significant fines for failure to comply with applicable environmental, health and safety requirements.
We also offer high-quality products that increase the chance of successful transplants by facilitating a better match between a donor and a recipient of stem cells and organs. In 2019, we began providing digital solutions to transplant centers following the acquisitions of Ottr Complete Transplant Management, or Ottr, and XynManagement, Inc., or XynManagement.
We also offer high-quality products that increase the chance of successful transplants by facilitating a better match between a donor and a recipient of stem cells and organs. We provide digital solutions to transplant centers following the acquisitions of Ottr Complete Transplant Management, or Ottr, and XynManagement, Inc., or XynManagement.
These guidelines advocate for lifelong surveillance of the transplanted heart for rejection and acknowledge the utility and evidence underlying the use of dd-cfDNA in surveillance for rejection in a framework of clinical surveillance. The guidelines also speak to the use of multimodality testing using GEP and dd-cfDNA in the surveilling the transplanted heart for rejection.
These guidelines advocate for lifelong surveillance of the transplanted heart for rejection and acknowledge the utility and evidence underlying the use of dd-cfDNA in surveillance for rejection in a framework of clinical surveillance. The guidelines also speak to the use of multimodality testing using gene expression profiling and dd-cfDNA in the surveilling the transplanted heart for rejection.
AlloSeq Tx 17 received CE mark authorization on May 15, 2020. In June 2020, we commercially launched AlloSeq HCT, a NGS solution for chimerism testing for stem cell transplant recipients. This technology has the potential to provide better sensitivity and data analysis compared to current solutions on the market. AlloSeq HCT received CE mark authorization in May 2022.
In June 2020, we launched AlloSeq HCT, an NGS solution for chimerism testing for stem cell transplant recipients. This technology has the potential to provide better sensitivity and data analysis compared to current solutions on the market. AlloSeq HCT received CE mark authorization in May 2022.
In September 2019, we announced the enrollment of the first patient in the Outcomes of KidneyCare on Renal Allografts, or OKRA, study, which is an extension of the K-OAR study. OKRA is a prospective, multi-center, observational registry of patients receiving KidneyCare for surveillance. Combined with K-OAR, more than 3,000 patients have been enrolled into the study.
In September 2019, we announced the enrollment of the first patient in the OKRA study, which is an extension of the K-OAR study. OKRA is a prospective, multi-center, observational registry of patients receiving KidneyCare for surveillance. Combined with the K-OAR study, more than 3,000 patients have been enrolled.
A dd-cfDNA solution such as AlloSure for the heart could help clinicians identify recipients with a higher probability of rejection and help determine which patients warrant a subsequent biopsy, because the likelihood of detecting rejection in the biopsy specimen would be enhanced. 14 Table of Contents Accordingly, we offer HeartCare.
A dd-cfDNA solution such as AlloSure for the heart helps clinicians identify recipients with a higher probability of rejection and determine which patients warrant a subsequent biopsy, because the likelihood of detecting rejection in the biopsy specimen would be enhanced. Accordingly, we offer HeartCare.
The market leader in HLA typing and third party distributors is Thermo Fisher through its acquisition of transplant-focused companies One Lambda and Linkage Biosciences. In certain HLA tissue typing markets that incorporate a wide variety of technology test platforms, such as SSP, SSO and NGS, competitors include Thermo Fisher, Omixon, GenDx, BAG, Qiagen, and Immucor.
The market leader in HLA typing and third-party distributors is Thermo Fisher through its One Lambda business. In certain HLA tissue typing markets that incorporate a wide variety of technology test platforms, such as SSP, SSO and NGS, competitors include: Thermo Fisher, Omixon, GenDx, BAG, Qiagen, and Immucor.
The number and scope of these requirements continues to grow, and there can be no assurance that we will be able to maintain any approvals that may be required to market our pre-transplant line of products outside the United States.
Foreign Jurisdictions Laws and regulations outside of the United States also apply to our products. The number and scope of these requirements continues to grow, and there can be no assurance that we will be able to maintain any approvals that may be required to market our pre-transplant line of products outside the United States.
Elevation of dd-cfDNA (0.5% or more) was significantly correlated with clinical and subclinical allograft rejection. dd-cfDNA values of 0.5% or more were associated with a nearly three-fold increase in risk of development of de novo donor-specific antibodies (hazard ratio 2.71) and were determined to be elevated a median of 91 days (interquartile range of 30-125 days) ahead of donor specific antibody identification.
Elevation of dd-cfDNA was significantly correlated with clinical and subclinical allograft rejection. dd-cfDNA values of 0.5% or more were associated with a nearly three-fold increase in risk of development of de novo donor-specific antibodies and were determined to be elevated a median of 91 days ahead of donor specific antibody identification.
Results are typically reported to the ordering clinician by fax or electronically via EMR or WebPortal within two business days of receipt of the sample. Test samples that fail to meet quality control criteria are immediately re-tested and the ordering clinician is notified of the need to re-test if turnaround time will be affected.
The test results are typically reported to the ordering clinician within two business days of receipt of the sample. Test samples that fail to meet quality control criteria are immediately re-tested and the ordering clinician is notified of the need to re-test if turnaround time will be affected.
Studies have reported that a higher percentage of dd-cfDNA in the bloodstream of patients is found with moderate or severe heart rejection compared to patients without rejection.
The use of both together constitutes HeartCare. Studies have reported that a higher percentage of dd-cfDNA in the bloodstream of patients is found with moderate or severe heart rejection compared to patients without rejection.
The IVDR requirements are applied starting May 26, 2022. The European Commission recently confirmed adoption of a proposal for a progressive roll-out of the IVDR to prevent disruption in the supply of In-Vitro Diagnostic products to the market.
The IVDR requirements are applied starting May 26, 2022. The European Commission recently confirmed adoption of a proposal 22 Table of Contents for a progressive rollout of the IVDR to prevent disruption in the supply of in vitro diagnostic products to the market.
The estimated U.S. average 2020 charges for a heart transplant were $1.66 million and for a kidney transplant were $0.44 million for the period 30 days before the transplant and 180 days after the transplant. The lifetime cost for transplant recipients varies significantly depending on each individual patient's circumstances. Unsuccessful treatment of rejection can result in an additional transplant.
In 2020, the estimated average charges in the U.S. for a heart transplant were $1.66 million and for a kidney transplant were $0.44 million for the period 30 days before the transplant and 180 days after the transplant. The lifetime cost for transplant recipients varies significantly depending on each individual patient's circumstances.
The Olerup SSP product line comprises products for low to high-resolution HLA typing. The product line includes close to 115 different typing products. We offer one of the most up-to-date and comprehensive libraries of HLA typing kits based on SSP technology. TruSight HLA was discontinued in December 2021 and we have progressively converted existing customers to AlloSeq.
The product line includes close to 150 different typing products. We offer one of the most up-to-date and comprehensive libraries of HLA typing kits based on SSP technology. TruSight HLA was discontinued in December 2021 and we have progressively converted existing customers to AlloSeq.
Private Payers and Medicaid Payers Due to End Stage Renal Disease, or ESRD, regulations by Medicare, most ESRD patients are covered by Medicare and Medicare Advantage plans and have access to AlloSure Kidney. Private payers that have adopted a positive coverage policy include BCBS payers as well as other national payers.
The Medicare reimbursement rate for HeartCare is $5,993. Private Payers and Medicaid Payers Due to End Stage Renal Disease, or ESRD, regulations by Medicare, most ESRD patients are covered by Medicare and Medicare Advantage plans and have access to AlloSure Kidney. Private payers that have adopted a positive coverage policy include BCBS payers as well as other national payers.
AlloCell is being commercialized through research agreements with biopharma companies developing cell therapies. We have executed multiple additional agreements with biopharma therapeutics companies to use AlloCell in research and clinical studies. In July 2021, we launched the Assessing Chimerism and Relapse of Bone marrow/ HCT transplant using AlloHeme Testing, or ACROBAT, study.
In 2021, we executed multiple additional agreements with biopharma therapeutics companies to use AlloCell in research and clinical studies. In July 2021, we launched the Assessing Chimerism and Relapse of Bone marrow/HCT transplant using AlloHeme Testing study, or the ACROBAT study.
The clinical outcomes of these patients will be entered into a registry database as the patients will be surveilled for three years. The study cohort will include a minimum of 300 patients from centers that use renal surveillance biopsies showing the value of AlloSure Kidney in subclinical rejection.
The clinical outcomes of these patients were entered into a registry database as the patients were surveilled for three years. The study cohort was designed to include a minimum of 300 patients from centers that use renal surveillance biopsies to show the value of AlloSure Kidney in subclinical rejection.
TransChart provides EMR software to hospitals throughout the United States to care for patients who have or may need an organ transplant.
In January 2021, we acquired TransChart. TransChart provides EMR software to hospitals throughout the United States to care for patients who have or may need an organ transplant.
On August 26, 2019, we acquired 100% of the outstanding common stock of XynManagement. XynManagement provides two unique solutions, XynQAPI software, or XynQAPI and XynCare. XynQAPI simplifies transplant quality tracking and Scientific Registry of Transplant Recipients, or SRTR, reporting.
In August 2019, we acquired 100% of the outstanding common stock of XynManagement. XynManagement provides two unique solutions, XynQAPI software, or XynQAPI, and XynCare. XynQAPI simplifies transplant quality tracking and 8 Table of Contents Scientific Registry of Transplant Recipients reporting.
Our business or financial results may be adversely impacted by adhering to these regulatory requirements and the related costs of ensuring and maintaining compliance . 24 Table of Contents Employees and Human Capital Resources On December 31, 2022, we had 738 employees, of which 727 were full-time employees.
Our business or financial results may be adversely impacted by adhering to these regulatory requirements and the related costs of ensuring and maintaining compliance . Employees and Human Capital Resources On December 31, 2023, we had 643 employees, of which 635 were full-time employees.
Our ongoing efforts include: • increasing understanding of biological processes of transplant rejection through analysis of genes/metagenes and dd-cfDNA in ongoing clinical trials such as K-OAR and OKRA, and commercial laboratory testing to further improve clinical utility of AlloSure Kidney and KidneyCare; • validation and clinical utility studies of AlloSure for other organs such as lung, pancreas and liver; • increasing understanding of biological processes of transplant rejection through analysis of genes/metagenes in archived and ongoing clinical trials, OAR registry, SHORE registry and commercial laboratory testing to further improve clinical utility of AlloMap Heart and AlloSure Heart; • technology platform and procedure optimization as well as further advances of laboratory information management to increase efficiency and lower costs in our testing and laboratory operations; • validation and clinical utility studies of dd-cfDNA reagents and software distributed outside the United States; • developing solutions for monitoring the success of hematopoietic stem cell transplantation; • developing solutions to identify allograft rejection in transplant biopsy tissue; • further development of QTYPE to expand its addressable market by including additional genetic content; • further development of NGS product lines such as AlloSeq Tx, AlloSeq cfDNA and AlloSeq HCT; • merging and analyzing internal and public clinical data sets to better understand factors that impact short and long term outcomes; • designing a multi-stakeholder transplant innovation ecosystem to accelerate improved patient management; • integrating real world data to confirm and extend results from other clinical data sets; • developing and deploying smart analytics and machine learning artificial intelligence that provide clinical utility with respect to patient health such as AiTraC; and • developing solutions for assessment of infection in transplant recipients. 13 Table of Contents Testing Services Advancement and Development Our research and development efforts are not limited to specific technology platforms, biomarkers or methodologies.
Research and development expenses of $81.9 million, $90.4 million and $76.5 million were incurred during the years ended December 31, 2023, 2022 and 2021, respectively. 12 Table of Contents Our ongoing efforts include: • increasing understanding of biological processes of transplant rejection through analysis of immune system gene expression and dd-cfDNA in ongoing clinical trials such as K-OAR and OKRA, and commercial laboratory testing to further improve clinical utility of AlloSure Kidney and KidneyCare; • validation and clinical utility studies of AlloSure for other organs such as pancreas and liver; • increasing understanding of biological processes of transplant rejection through analysis of genes/metagenes in archived and ongoing clinical trials, OAR registry, SHORE registry and commercial laboratory testing to further improve clinical utility of AlloMap Heart, AlloSure Heart and HeartCare; • technology platform and procedure optimization as well as further advances of laboratory information management to increase efficiency and lower costs in our testing and laboratory operations; • validation and clinical utility studies of dd-cfDNA reagents and software distributed outside the United States; • developing solutions for monitoring the success of hematopoietic stem cell transplantation; • developing solutions to identify allograft rejection in transplant biopsy tissue; • further development of QTYPE to expand its addressable market by including additional genetic content; • further development of NGS product lines such as AlloSeq Tx, AlloSeq cfDNA and AlloSeq HCT; • merging and analyzing internal and public clinical data sets to better understand factors that impact short- and long-term outcomes; • designing a multi-stakeholder transplant innovation ecosystem to accelerate improved patient management; • integrating real world data to confirm and extend results from other clinical data sets; • developing and deploying smart analytics and machine learning artificial intelligence that provide clinical utility with respect to patient health; and • developing solutions for assessment of infection in transplant recipients.
In the case of a kidney transplant, the median annual Medicare cost of care for a recipient whose kidney fails and is on dialysis is 500% more than the median annual cost of care for a recipient with a functioning transplant.
Unsuccessful treatment of rejection can result in an additional transplant. In the case of a kidney transplant, the median annual Medicare cost of care for a recipient whose kidney fails and is on dialysis is 500% more than the median annual cost of care for a recipient with a functioning transplant.
These NGS products include: AlloSeq Tx, a high-resolution HLA typing solution, AlloSeq cfDNA, our surveillance solution designed to measure dd-cfDNA in blood to detect active rejection in transplant recipients, and AlloSeq HCT, a NGS solution for chimerism testing for stem cell transplant recipients.
Our NGS products include: AlloSeq Tx, a high-resolution HLA typing solution; AlloSeq cfDNA, our surveillance solution designed to measure dd-cfDNA in blood to detect active rejection in transplant recipients; and AlloSeq HCT, an NGS solution for chimerism testing for stem cell transplant recipients. We received CE mark authorization for AlloSeq cfDNA in January 2020.
In November 2021, we acquired MedActionPlan, a New Jersey-based provider of medication safety, medication adherence and patient education. MedActionPlan is a leader in patient medication management for transplant patients and beyond. In December 2021, we acquired TTP, a transplant focused pharmacy located in Mississippi. TTP provides individualized transplant pharmacy services for patients at multiple transplant centers located throughout the U.S.
MedActionPlan is a leader in patient medication management for transplant patients and beyond. In December 2021, we acquired TTP, a transplant focused pharmacy located in Mississippi. TTP provides individualized transplant pharmacy services for patients at multiple transplant centers located throughout the U.S.
For AlloSure Kidney and other similar testing solutions, if required by the FDA or if new laws are enacted we may be required to conduct additional clinical trials to demonstrate clinical validity and utility of our test, and submit to the FDA a premarket approval application, or PMA, or 510(k) premarket notification application and obtain approval or clearance for the test subsequent to commercialization.
For AlloSure Kidney and other similar testing solutions, if required by the FDA or if new laws are enacted we may be required to conduct additional analytical studies and clinical trials to demonstrate clinical validity and safety and effectiveness of our tests, and submit to the FDA a premarket approval application, or PMA, or 510(k) premarket notification application.
An LDT is a test developed by a single laboratory for use only in that laboratory, such as AlloMap Heart or AlloSure Kidney.
An LDT is a test developed by a single laboratory for use only in that laboratory, such as our testing services, AlloMap Heart, AlloSure Kidney, AlloSure Lung and AlloSure Heart.
Typing with QTYPE requires approximately one hour compared to the up to 2-3 hours that it takes to do traditional SSP typing and the 5-7 hours that it takes with sequence-specific oligonucleotides, or SSO. 12 Table of Contents Olerup SSP is used to type HLA alleles based on the SSP technology.
Typing with QTYPE requires approximately one hour compared to the up to 2-3 hours that it takes to do traditional SSP typing and the 5-7 hours that it takes with sequence-specific oligonucleotides, or SSO. Olerup SSP is used to type HLA alleles based on the SSP technology. The Olerup SSP product line comprises products for low to high-resolution HLA typing.
This study is currently enrolling patients. 7 Table of Contents Products We develop, manufacture, market and sell products that increase the chance of successful transplants by facilitating a better match between a solid organ or stem cell donor and a recipient, and help to provide post-transplant surveillance of these recipients. Our historical product portfolio includes QTYPE and Olerup SSP.
Products We develop, manufacture, market and sell products that increase the chance of successful transplants by facilitating a better match between a solid organ or stem cell donor and a recipient, and help to provide post-transplant surveillance of these recipients. Our product portfolio includes AlloSeq Tx, QTYPE, Olerup SSP, AlloSeq HCT, and AlloSeq cfDNA.
Currently, our SSP production group in Sweden is represented by an IF Metall collective bargaining agreement. None of our other employees are represented by a union or are subject to collective bargaining agreements. We have never experienced a work stoppage and believe that our relations with our employees are good. We have zero-tolerance policy for discrimination.
None of our other employees are represented by a union or are subject to collective bargaining agreements. We have never experienced a work stoppage and believe that our relations with our employees are good. We have a zero-tolerance policy for discrimination.
We may in the future rely, at least in part, upon licensing agreements with third parties to obtain patent rights and transfers of technology, information and know-how that enable us to further our development of additional solutions for post-transplant surveillance. Of the 20 existing U.S. patents related to transplant rejection and autoimmunity, nine are the product of exclusive licensing agreements.
License Agreements We may in the future rely, at least in part, upon licensing agreements with third parties to obtain patent rights and transfers of technology, information and know-how that enable us to further our development of additional solutions for post-transplant surveillance.
Clinical validation using samples from prospective, multi-center studies demonstrated a sensitivity of 70% and specificity of 66% for allograft rejection, while the negative predictive value to AlloSure Kidney was 95% to discriminate rejection from quiescence at 10% prevalence of rejection. dd-cfDNA for Heart Transplants We believe that the AlloSure Heart dd-cfDNA-based solution provides additional value to AlloMap Heart.
Clinical validation using samples from prospective, multi-center studies demonstrated a sensitivity of 70% and specificity of 66% for allograft rejection, while the negative predictive value to AlloSure Kidney was 95% to discriminate rejection from quiescence at 10% prevalence of rejection.
In the DART study, to investigate the use of AlloSure Kidney as a surveillance tool, the investigators prospectively collected blood specimens from renal transplant patients at scheduled intervals and at the time of clinically indicated biopsies.
As part of a surveillance strategy, AlloSure Kidney can help identify patients with new or ongoing organ injury. In the DART study, to investigate the use of AlloSure Kidney as a surveillance tool, the investigators prospectively collected blood specimens from renal transplant patients at scheduled intervals and at the time of clinically indicated biopsies.
Tx9 received CE mark authorization in August 2022. Patient and Digital Solutions In 2019, we began providing digital solutions to transplant centers following the acquisitions of Ottr and XynManagement. On May 7, 2019, we acquired 100% of the outstanding common stock of Ottr.
Patient and Digital Solutions In 2019, we began providing digital solutions to transplant centers following the acquisitions of Ottr and XynManagement. In May 2019, we acquired 100% of the outstanding common stock of Ottr.
Our software solutions are currently used in over 160 transplant centers in the U.S. As of December 31, 2022, substantially all of our revenues came from the United States and Europe, and substantially all of our assets and operations were located in the United States, Sweden and Australia. We are organized and operate as a single reportable segment.
As of December 31, 2023, substantially all of our revenues came from the United States and Europe, and substantially all of our assets and operations were located in the United States, Sweden and Australia. We are organized and operate as a single reportable segment.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Our financial results currently are largely dependent on sales of AlloSure Kidney, AlloMap Heart and AlloSure Lung tests and products, and we will need to generate sufficient revenues from these and other solutions and tests we develop to grow our business.
Our financial results currently are largely dependent on sales of AlloSure Kidney, AlloMap Heart, AlloSure Heart and AlloSure Lung tests and products, and we will need to generate sufficient revenues from these and other solutions and tests we develop to grow our business.
For new diagnostic testing services, each private and government payer decides whether to cover the test, the amount it will reimburse for a covered test and the specific conditions for reimbursement. Clinicians and recipients may be likely not to order a diagnostic test unless third-party payers pay a substantial portion of the test price.
For new diagnostic testing services, each private and government payer decides whether to cover the test, the amount it will reimburse for a covered test and the specific conditions for reimbursement. Clinicians and recipients may not be likely to order a diagnostic test unless third-party payers pay a substantial portion of the test price.
District Court for the Northern District of California against us, Reginald Seeto, our President, Chief Executive Officer and member of our Board of Directors, Ankur Dhingra, our former Chief Financial Officer; Marcel Konrad, our former interim Chief Financial Officer and former Senior Vice President of Finance & Accounting; and Peter Maag, our former President, former Chief Executive Officer, former Chairman of the Board and current member of our Board of Directors.
District Court for the Northern District of California against us; Reginald Seeto, our former President, Chief Executive Officer and member of our Board of Directors; Ankur Dhingra, our former Chief Financial Officer; Marcel Konrad, our former interim Chief Financial Officer and former Senior Vice President of Finance & Accounting; and Peter Maag, our former President, former Chief Executive Officer, former Chairman of our Board of Directors and current member of our Board of Directors.
District Court for the Northern District of California, or the Edelman Derivative Action, against us as nominal defendant and Reginald Seeto, our President, Chief Executive Officer and member of our Board of Directors, Ankur Dhingra, our former Chief Financial Officer, Peter Maag, our former President, former Chief Executive Officer, former Chairman of the Board and current member of our Board of Directors, and the other members of our Board of Directors.
District Court for the Northern District of California, or the Edelman Derivative Action, against us as nominal defendant and Reginald Seeto, our former President, Chief Executive Officer and member of our Board of Directors; Ankur Dhingra, our former Chief Financial Officer; Peter Maag, our former President, former Chief Executive Officer, former Chairman of our Board of Directors and current member of our Board of Directors; and the other members of our Board of Directors.
The Repurchase Program may be carried out at the discretion of a committee of our board of directors through open market purchases, one or more Rule 10b5-1 trading plans, block trades and in privately negotiated transactions.
The Repurchase Program may be carried out at the discretion of a committee of our board of directors through open market purchases, one or more Rule 10b5-1 trading plans and block trades and in privately negotiated transactions.
These provisions include: • our board of directors is authorized, without prior stockholder approval, to create and issue preferred stock which could be used to implement anti-takeover devices; • advance notice is required for director nominations or for proposals that can be acted upon at stockholder meetings; • our board of directors is classified such that not all members of our board are elected at one time, which may make it more difficult for a person who acquires control of a majority of our outstanding voting stock to replace all or a majority of our directors; • stockholder action by written consent is prohibited; • special meetings of the stockholders may be called only by the chairman of our board of directors, a majority of our board of directors or by our chief executive officer or president (if at such time we have no chief executive officer); and • stockholders are not permitted to cumulate their votes for the election of directors.
These provisions include: • our board of directors is authorized, without prior stockholder approval, to create and issue preferred stock which could be used to implement anti-takeover devices; • advance notice is required for director nominations or for proposals that can be acted upon at stockholder meetings; • our board of directors is currently classified such that not all members of our board are elected at one time, which may make it more difficult for a person who acquires control of a majority of our outstanding voting stock to replace all or a majority of our directors; • stockholder action by written consent is prohibited; • special meetings of the stockholders may be called only by the chairman of our board of directors, a majority of our board of directors or by our chief executive officer or president (if at such time we have no chief executive officer); and • stockholders are not permitted to cumulate their votes for the election of directors.
If we are unable to complete the required Section 404 assessment as to the adequacy of our internal control over financial reporting or otherwise fail to maintain or implement effective controls and procedures for financial reporting, we could be unable to accurately and timely report our financial position, results of operations, and cash flows or key operating metrics, which could result in late filings of our annual and quarterly reports under the Securities Exchange Act of 1934, as amended, restatements of our consolidated financial statements or other corrective disclosures, a decline in our stock price, suspension or delisting of our common stock from the Nasdaq Global Market, SEC investigations, civil or criminal sanctions, an inability to 62 Table of Contents access the capital and commercial lending markets, defaults under our debt and other agreements or other material adverse effects on our business, reputation, results of operations, financial condition or liquidity.
If we are unable to complete the required Section 404 assessment as to the adequacy of our internal control over financial reporting or otherwise fail to maintain or implement effective controls and procedures for financial reporting, we could be unable to accurately and timely report our financial position, results of operations, and cash flows or key operating metrics, which could result in late filings of our annual and quarterly reports under the Securities Exchange Act of 1934, as amended, 61 Table of Contents restatements of our consolidated financial statements or other corrective disclosures, a decline in our stock price, suspension or delisting of our common stock from the Nasdaq Global Market, SEC investigations, civil or criminal sanctions, an inability to access the capital and commercial lending markets, defaults under our debt and other agreements or other material adverse effects on our business, reputation, results of operations, financial condition or liquidity.
In addition to the CLIA regulation, other federal and state healthcare laws and regulations that may affect our ability to conduct business, include, without limitation: • federal and state laws and regulations regarding billing and claims payment applicable to clinical laboratories and/or regulatory agencies enforcing those laws and regulations; • federal civil and criminal false claims laws and civil monetary penalty laws, which prohibit, among other things, individuals or entities from knowingly presenting, or causing to be presented to the government, claims for payment from Medicare, Medicaid or other third-party payers that are false or fraudulent, or making a false statement material to a false or fraudulent claim; • the federal Anti-Kickback Statute, which constrains our marketing practices, educational programs, pricing policies, and relationships with healthcare providers or other entities, by prohibiting, among other things, knowingly and willfully soliciting, receiving, offering or paying remuneration, directly or indirectly, to induce or reward, or in return for, either the referral of an individual or the purchase or recommendation of an item or service reimbursable under a federal health care program, such as the Medicare and Medicaid programs; • the federal physician self-referral law, commonly known as the Stark Law, which prohibits a physician from making a referral to an entity for certain designated health services, including clinical laboratory services, reimbursed by Medicare if the physician (or a member of the physician’s family); 50 Table of Contents • has a financial relationship with the entity, and which also prohibits the submission of any claims for reimbursement for designated health services furnished pursuant to a prohibited referral; • HIPAA, as amended by the Health Information Technology for Economic and Clinical Health Act of 2009, or HITECH, and its implementing regulations, which imposes certain requirements relating to the privacy, security and transmission of individually identifiable health information; HIPAA also created criminal liability for knowingly and willfully falsifying or concealing a material fact or making a materially false statement in connection with the delivery of or payment for healthcare benefits, items or services; • state laws regarding prohibitions on fee-splitting; • the federal health care program exclusion statute; and • state and foreign law equivalents of each of the above federal laws and regulations, such as anti-kickback, false claims, and self-referral laws, which may apply to items or services reimbursed by any third-party payer, including commercial insurers, and state and foreign laws governing the privacy and security of health information in certain circumstances, many of which differ from each other in significant ways and often are not preempted by HIPAA, thus complicating compliance efforts.
In addition to the CLIA regulation, other federal and state healthcare laws and regulations that may affect our ability to conduct business, include, without limitation: • federal and state laws and regulations regarding billing and claims payment applicable to clinical laboratories and/or regulatory agencies enforcing those laws and regulations; • federal civil and criminal false claims laws and civil monetary penalty laws, which prohibit, among other things, individuals or entities from knowingly presenting, or causing to be presented to the government, claims for payment from Medicare, Medicaid or other third-party payers that are false or fraudulent, or making a false statement material to a false or fraudulent claim; • the federal Anti-Kickback Statute, which constrains our marketing practices, educational programs, pricing policies, and relationships with healthcare providers or other entities, by prohibiting, among other things, knowingly and willfully soliciting, receiving, offering or paying remuneration, directly or indirectly, to induce or reward, or in return for, either the referral of an individual or the purchase or recommendation of an item or service reimbursable under a federal healthcare program, such as the Medicare and Medicaid programs; • the federal physician self-referral law, commonly known as the Stark Law, which prohibits a physician from making a referral to an entity for certain designated health services, including clinical laboratory services, reimbursed by Medicare if the physician (or a member of the physician’s family); • has a financial relationship with the entity, and which also prohibits the submission of any claims for reimbursement for designated health services furnished pursuant to a prohibited referral; • HIPAA, as amended by the Health Information Technology for Economic and Clinical Health Act of 2009, or HITECH, and its implementing regulations, which imposes certain requirements relating to the privacy, security and transmission of individually identifiable health information; HIPAA also created criminal liability for knowingly and willfully falsifying or concealing a material fact or making a materially false statement in connection with the delivery of or payment for healthcare benefits, items or services; • state laws regarding prohibitions on fee-splitting; • the federal healthcare program exclusion statute; and • state and foreign law equivalents of each of the above federal laws and regulations, such as anti-kickback, false claims, and self-referral laws, which may apply to items or services reimbursed by any third-party payer, including commercial insurers, and state and foreign laws governing the privacy and security of health information in certain circumstances, many of which differ from each other in significant ways and often are not preempted by HIPAA, thus complicating compliance efforts.
If we are unable to develop solutions to keep pace with rapid medical and scientific change, our operating results could be harmed. • If clinicians, hospital administrators, medical centers and laboratories do not adopt our diagnostic solutions, we will not achieve future sales growth. • Our quarterly operating results may fluctuate significantly or may fall below the expectations of investors or securities analysts, each of which may cause our stock price to fluctuate or decline. • Transplant centers may not adopt AlloSure Kidney, AlloSure Lung, AlloMap Heart, AlloSure Heart, or our other solutions due to historical practices or due to more favorable reimbursement policies associated with other means of monitoring transplants. 26 Table of Contents • If we are unable to successfully compete with larger and more established players in the clinical surveillance of the transplantation field, we may be unable to increase or sustain our revenues or achieve profitability. • If we are unable to successfully manage our growth and support demand for our tests, our business may suffer. • Our past revenue growth rates may not be indicative of future growth, and we may not grow at all, and revenue may decline. • If our laboratory facility in the U.S. becomes inoperable, we will be unable to perform AlloSure Kidney, AlloSure Lung, AlloMap Heart, AlloSure Heart, and future testing solutions, if any, and our business will be harmed. • Investors’ expectations of our performance relating to environmental, social and governance factors may impose additional costs and expose us to new risks. • Performance issues, service interruptions or price increases by our shipping carriers could adversely affect our business and harm our reputation and ability to provide our services on a timely basis. • If we are unable to raise additional capital on acceptable terms in the future, it may limit our ability to develop and commercialize new diagnostic solutions and technologies, and we may have to curtail or cease operations. • The loss of key members of our senior management team or our inability to attract and retain highly skilled scientists, clinicians and laboratory and field personnel could adversely affect our business. • Recent and future acquisitions and investments could disrupt our business, harm our financial condition and operating results, dilute your ownership of us and increase our debt or cause us to incur significant expense. • We rely extensively on third party service providers.
If we are unable to develop solutions to keep pace with rapid medical and scientific change, our operating results could be harmed. • If clinicians, hospital administrators, medical centers and laboratories do not adopt our diagnostic solutions, we will not achieve future sales growth. • Our quarterly operating results may fluctuate significantly or may fall below the expectations of investors or securities analysts, each of which may cause our stock price to fluctuate or decline. • Transplant centers may not adopt AlloSure Kidney, AlloSure Lung, AlloMap Heart, AlloSure Heart, or our other solutions due to historical practices or due to more favorable reimbursement policies associated with other means of monitoring transplants. • If we are unable to successfully compete with established players in the clinical surveillance of the transplantation field, we may be unable to increase or sustain our revenues or achieve profitability. • If we are unable to successfully manage our growth and support demand for our tests, our business may suffer. • Our past revenue growth rates may not be indicative of future growth, and we may not grow at all, and revenue may decline. • If our laboratory facility in the U.S. becomes inoperable, we will be unable to perform AlloSure Kidney, AlloSure Lung, AlloMap Heart, AlloSure Heart, and future testing solutions, if any, and our business will be harmed. • Investors’ expectations of our performance relating to environmental, social and governance factors may impose additional costs and expose us to new risks. • Performance issues, service interruptions or price increases by our shipping carriers could adversely affect our business and harm our reputation and ability to provide our services on a timely basis. • If we seek to and are unable to raise additional capital on acceptable terms in the future, it may limit our ability to develop and commercialize new diagnostic solutions and technologies, and we may have to curtail or cease operations. • The loss of key members of our senior management team or our inability to attract and retain highly skilled scientists, clinicians and laboratory and field personnel could adversely affect our business. • Recent and future acquisitions and investments could disrupt our business, harm our financial condition and operating results, dilute your ownership of us and increase our debt or cause us to incur significant expense. 25 Table of Contents • We rely extensively on third-party service providers.
Under PAMA, laboratories that receive the majority of their Medicare revenues from payments made under the CLFS report initially and then on a subsequent three-year basis thereafter (or annually for advanced diagnostic laboratory tests, or ADLTs), private payer payment rates and volumes for their tests.
Under PAMA, laboratories that receive the majority of their Medicare revenues from payments made under the CLFS report initially and then on a subsequent three-year basis thereafter (or annually for advanced diagnostic laboratory tests), private payer payment rates and volumes for their tests.
In addition, conducting international operations subjects us to risks that, generally, we have not faced in the U.S., including: • uncertain or changing regulatory registration and approval processes; • failure by us to obtain regulatory approvals or adequate reimbursement for the use of our current and future solutions in various countries; • competition from companies located in the countries in which we offer our products that may put us at a competitive disadvantage; • financial risks, such as longer accounts receivable payment cycles and difficulties in collecting accounts receivable; • logistics and regulations associated with shipping recipient samples, including infrastructure conditions and transportation delays; • limits in our ability to penetrate international markets if we are not able to process solutions locally; • difficulties in managing and staffing international operations and assuring compliance with foreign corrupt practices laws; • potentially adverse tax consequences, including the complexities of foreign value added tax systems, tax inefficiencies related to our corporate structure and restrictions on the repatriation of earnings; • increased financial accounting and reporting burdens and complexities; 43 Table of Contents • multiple, conflicting and changing laws and regulations such as healthcare regulatory requirements and other governmental approvals, permits and licenses; • the imposition of trade barriers such as tariffs, quotas, trade wars, preferential bidding or import or export licensing requirements; • political and economic instability, including interruptions in international relations, wars, terrorism and political unrest, general security concerns, outbreak of disease, boycotts, curtailment of trade and other business restrictions, including the ongoing conflict between Ukraine and Russia and the global impact of restrictions and sanctions imposed on Russia; • fluctuations in currency exchange rates; • regulatory and compliance risks that relate to maintaining accurate information and control over activities that may fall within the purview of the Foreign Corrupt Practices Act of 1977, its books and records provisions or its anti-bribery provisions, as well as risks associated with other anti-bribery and anti-corruption laws; and • reduced or varied protection for intellectual property rights in some countries.
In addition, conducting international operations subjects us to risks that, generally, we have not faced in the U.S., including: • uncertain or changing regulatory registration and approval processes; • failure by us to obtain regulatory approvals or adequate reimbursement for the use of our current and future solutions in various countries; • competition from companies located in the countries in which we offer our products that may put us at a competitive disadvantage; • financial risks, such as longer accounts receivable payment cycles and difficulties in collecting accounts receivable; • logistics and regulations associated with shipping recipient samples, including infrastructure conditions and transportation delays; • limits in our ability to penetrate international markets if we are not able to process solutions locally; • difficulties in managing and staffing international operations and assuring compliance with foreign corrupt practices laws; • potentially adverse tax consequences, including the complexities of foreign value added tax systems, tax inefficiencies related to our corporate structure and restrictions on the repatriation of earnings; • increased financial accounting and reporting burdens and complexities; • multiple, conflicting and changing laws and regulations such as healthcare regulatory requirements and other governmental approvals, permits and licenses; 42 Table of Contents • the imposition of trade barriers such as tariffs, quotas, trade wars, preferential bidding or import or export licensing requirements; • political and economic instability, including interruptions in international relations, wars, terrorism and political unrest, general security concerns, outbreak of disease, boycotts, curtailment of trade and other business restrictions, including the ongoing conflict between Ukraine and Russia, the global impact of restrictions and sanctions imposed on Russia and the Israel-Hamas war; • fluctuations in currency exchange rates; • regulatory and compliance risks that relate to maintaining accurate information and control over activities that may fall within the purview of the Foreign Corrupt Practices Act of 1977, its books and records provisions or its anti-bribery provisions, as well as risks associated with other anti-bribery and anti-corruption laws; and • reduced or varied protection for intellectual property rights in some countries.
In addition, an application, data security or network incident may allow unauthorized access to our systems or data or our customers’ data, disable access to our service, harm our reputation, create additional liability and adversely impact our financial results. • International expansion of our business exposes us to business, regulatory, political, operational, financial and economic risks associated with doing business outside of the United States. • Our operating results may be adversely affected by unfavorable economic and market conditions. • Billing complexities associated with obtaining payment or reimbursement for our current and future solutions may negatively affect our revenue, cash flows and profitability. • Healthcare reform measures could hinder or prevent the commercial success of AlloSure Kidney, AlloSure Lung, AlloMap Heart and AlloSure Heart. • In order to operate our laboratory, we have to comply with the CLIA and federal and state laws and regulations governing clinical laboratories and laboratory developed tests, including FDA regulations. • We are subject to numerous fraud and abuse and other laws and regulations pertaining to our business, the violation of any one of which could harm our business. • Our competitive position depends on maintaining intellectual property protection. • Our business is dependent on licenses from third parties. • Our operating results may fluctuate, which could cause our stock price to decrease. 27 Table of Contents • The market price of our common stock has been and will likely continue to be volatile, and you could lose all or part of your investment.
In addition, an application, data security or network incident may allow unauthorized access to our systems or data or our customers’ data, disable access to our service, harm our reputation, create additional liability and adversely impact our financial results. • International expansion of our business exposes us to business, regulatory, political, operational, financial and economic risks associated with doing business outside of the United States. • Our operating results may be adversely affected by unfavorable economic and market conditions. • Billing complexities associated with obtaining payment or reimbursement for our current and future solutions may negatively affect our revenue, cash flows and profitability. • Healthcare reform measures could hinder or prevent the commercial success of AlloSure Kidney, AlloSure Lung, AlloMap Heart and AlloSure Heart. • To operate our laboratory, we have to comply with the CLIA and federal and state laws and regulations governing clinical laboratories and laboratory-developed tests, including FDA regulations. • We are subject to numerous fraud and abuse and other laws and regulations pertaining to our business, the violation of any one of which could harm our business. • Our competitive position depends on maintaining intellectual property protection. • Our business is dependent on licenses from third parties. • Our operating results may fluctuate, which could cause our stock price to decrease. • The market price of our common stock has been and will likely continue to be volatile, and you could lose all or part of your investment.
Such risks include, but are not limited to, adverse effects on macroeconomic conditions, including inflation, rising interest rates and a potential economic recession; disruptions to our global technology infrastructure, including through cyberattack, ransom attack, or cyber-intrusion; adverse changes in international trade policies and relations; our ability to maintain or increase our product prices; disruptions in global supply chains; our exposure to foreign currency fluctuations; and constraints, volatility, or disruption in the capital markets, any of which could negatively affect our business and financial condition. 63 Table of Contents ITEM 1B.
Such risks include, but are not limited to, adverse effects on macroeconomic conditions, including inflation, rising interest rates and a potential economic recession; disruptions to our global technology infrastructure, including through cyberattack, ransom attack, or cyber-intrusion; adverse changes in international trade policies and relations; our ability to maintain or increase our product prices; disruptions in global supply chains; our exposure to foreign currency fluctuations; and constraints, volatility, or disruption in the capital markets, any of which could negatively affect our business and financial condition. 62 Table of Contents ITEM 1B.
We expect to continue to incur significant operating expenses and anticipate that our expenses will increase due to costs relating to, among other things: • researching, developing, validating and commercializing potential new testing services, products and patient and digital solutions, including additional expenses in connection with our continuing development and commercialization of KidneyCare, HeartCare, AlloSeq, AiTraC and other future solutions; • developing, presenting and publishing additional clinical and economic utility data intended to increase payer coverage and clinician adoption of our current and future solutions; • expansion of our operating capabilities; 28 Table of Contents • maintenance, expansion and protection of our intellectual property portfolio and trade secrets; • the process of fully integrating acquired companies and operations and the associated potential disruptions to our business; • future clinical trials; • expansion of the size and geographic reach of our sales force and our marketing capabilities to commercialize our existing and future solutions; • employment of additional clinical, quality control, scientific, customer service, laboratory, billing and reimbursement and management personnel; • compliance with existing and changing laws, regulations and standards, including those relating to corporate governance and public disclosure and regulations implemented by the Securities and Exchange Commission, or the SEC, and The Nasdaq Stock Market LLC; • employment of operational, financial, accounting and information systems personnel, consistent with expanding our operations and our status as a public company; and • failure to achieve expected operating results may cause a future impairment of goodwill or other assets.
We expect to continue to incur significant operating expenses and anticipate that our expenses will increase due to costs relating to, among other things: • researching, developing, validating and commercializing potential new testing services, products and patient and digital solutions, including additional expenses in connection with our continuing development and commercialization of KidneyCare, HeartCare, AlloSeq, AiTraC and other future solutions; • developing, presenting and publishing additional clinical and economic utility data intended to increase payer coverage and clinician adoption of our current and future solutions; • expansion of our operating capabilities; 26 Table of Contents • maintenance, expansion and protection of our intellectual property portfolio and trade secrets; • the process of fully integrating acquired companies and operations and the associated potential disruptions to our business; • future clinical trials; • expansion of the size and geographic reach of our sales force and our marketing capabilities to commercialize our existing and future solutions; • employment of additional clinical, quality control, scientific, customer service, laboratory, billing and reimbursement and management personnel; • compliance with existing and changing laws, regulations and standards, including those relating to corporate governance and public disclosure and regulations implemented by the Securities and Exchange Commission, or the SEC, and The Nasdaq Stock Market LLC; • ongoing litigation; • employment of operational, financial, accounting and information systems personnel, consistent with expanding our operations and our status as a public company; and • failure to achieve expected operating results may cause a future impairment of goodwill or other assets.
These NGS products include: AlloSeq Tx, a high-resolution HLA typing solution, AlloSeq cfDNA, our surveillance solution designed to measure dd-cfDNA in blood to detect active rejection in transplant recipients, and AlloSeq HCT, a NGS solution for chimerism testing for stem cell transplant recipients.
These NGS products include: AlloSeq Tx, a high-resolution HLA typing solution, AlloSeq cfDNA, our surveillance solution designed to measure dd-cfDNA in blood to detect active rejection in transplant recipients, and AlloSeq HCT, an NGS solution for chimerism testing for stem cell transplant recipients.
The decision to commence litigation over infringement of a patent is complex and may lead to several risks to us, including the following, among others: • the time, significant expense and distraction to management of managing such litigation; • the uncertainty of litigation and its potential outcomes; • the possibility that in the course of such litigation, the defendant may challenge the validity of our patents, which could result in a re-examination or post grant review of our patents and the possibility that the claims in our patents may be limited in scope or invalidated altogether; • the potential that the defendant may successfully persuade a court that their technology or products do not infringe our intellectual property rights; • the impact of such litigation on other licensing relationships we have or seek to establish, including the timing of renewing or entering into such relationships, as applicable, as well as the terms of such relationships; • the potential that a defendant may assert counterclaims against us; and 53 Table of Contents • adverse publicity to us or harm to relationships we have with customers or others.
The decision to commence litigation over infringement of a patent is complex and may lead to several risks to us, including the following, among others: • the time, significant expense and distraction to management of managing such litigation; • the uncertainty of litigation and its potential outcomes; • the possibility that in the course of such litigation, the defendant may challenge the validity of our patents, which could result in a re-examination or post grant review of our patents and the possibility that the claims in our patents may be limited in scope or invalidated altogether; • the potential that the defendant may successfully persuade a court that their technology or products do not infringe our intellectual property rights; • the impact of such litigation on other licensing relationships we have or seek to establish, including the timing of renewing or entering into such relationships, as applicable, as well as the terms of such relationships; • the potential that a defendant may assert counterclaims against us; and • adverse publicity to us or harm to relationships we have with customers or others.
We cannot predict whether Noridian or any future MAC will continue to provide reimbursement for AlloMap Heart, AlloSure Kidney or AlloSure Heart at the same payment amount or with the same breadth of coverage in the future, if at all.
We cannot predict whether Noridian or any future MAC will continue to provide reimbursement for AlloMap Heart, AlloSure Kidney, AlloSure Heart or AlloSure Lung at the same payment amount or with the same breadth of coverage in the future, if at all.
Additional changes in the MAC processing Medicare claims for AlloSure Kidney, AlloMap Heart or AlloSure Heart could impact the coverage or payment amount for our tests and our ability to obtain Medicare coverage for any products we may launch in the future.
Additional changes in the MAC processing Medicare claims for AlloSure Kidney, AlloMap Heart, AlloSure Heart or AlloSure Lung could impact the coverage or payment amount for our tests and our ability to obtain Medicare coverage for any products we may launch in the future.
Specifically, we did not design and maintain: (i) sufficient user access controls to ensure appropriate segregation of duties, logical access controls to prevent unauthorized user access and adequately restrict user and privileged access to financial applications, programs and data to appropriate Company personnel; (ii) program change management controls to ensure that information technology (“IT”), program and data changes affecting financial IT applications and underlying accounting records are identified, tested, authorized and implemented appropriately with appropriate segregation of duties; and (iii) Computer and Network operations controls to ensure that batch and interface jobs are monitored and privileges are appropriately granted, authorized and monitored.
Specifically, we did not design and maintain: (i) sufficient user access controls to ensure appropriate segregation of duties, logical access controls to prevent unauthorized user access and adequately restrict user and privileged access to financial applications, programs and data to appropriate Company personnel; (ii) program change management controls to ensure that information technology, or IT, program and data changes affecting financial IT applications and underlying accounting records are identified, tested, authorized and implemented appropriately with appropriate segregation of duties; and (iii) computer and network operations controls to ensure that batch and interface jobs are monitored and privileges are appropriately granted, authorized and monitored.
We cannot be certain that we will meet our projected targets and if we do not meet these targets as publicly announced, the commercialization of our diagnostic solutions may be delayed or may not occur at all and, as a result, our business will suffer and our stock price may decline. 33 Table of Contents The field of diagnostic testing in transplantation is evolving and is subject to rapid technological change.
We cannot be certain that we will meet our projected targets and if we do not meet these targets as publicly announced, the commercialization of our diagnostic solutions may be delayed or may not occur at all and, as a result, our business will suffer and our stock price may decline. 32 Table of Contents The field of diagnostic testing in transplantation is evolving and is subject to rapid technological change.
Our operating results and our share price may fluctuate from period to period due to a variety of factors, including: • demand by clinicians and recipients for our current and future solutions, if any; • coverage and reimbursement decisions by third-party payers and announcements of those decisions; • clinical trial results and publication of results in peer-reviewed journals or the presentation at medical conferences; • the inclusion or exclusion of our current and future solutions in large clinical trials conducted by others; • new or less expensive tests and services or new technology introduced or offered by our competitors or us; • the level of our development activity conducted for new solutions, and our success in commercializing these developments; • our ability to efficiently integrate the business of new acquisitions; • the level of our spending on test commercialization efforts, licensing and acquisition initiatives, clinical trials, and internal research and development; • changes in the regulatory environment, including any announcement from the FDA regarding its decisions in regulating our activities; • changes in recommendations of securities analysts or lack of analyst coverage; • failure to meet analyst expectations regarding our operating results; • additions or departures of key personnel; • public health emergencies such as the COVID-19 pandemic; • share repurchases completed by us; and • general market conditions.
Our operating results and our share price may fluctuate from period to period due to a variety of factors, including: • demand by clinicians and recipients for our current and future solutions, if any; • coverage and reimbursement decisions by third-party payers and announcements of those decisions; • clinical trial results and publication of results in peer-reviewed journals or the presentation at medical conferences; • the inclusion or exclusion of our current and future solutions in large clinical trials conducted by others; • new or less expensive tests and services or new technology introduced or offered by our competitors or us; • the level of our development activity conducted for new solutions, and our success in commercializing these developments; • our ability to efficiently integrate the business of new acquisitions; • the level of our spending on test commercialization efforts, licensing and acquisition initiatives, clinical trials, and internal research and development; • changes in the regulatory environment, including any announcement from the FDA regarding its decisions in regulating our activities; • changes in recommendations of securities analysts or lack of analyst coverage; • failure to meet analyst expectations regarding our operating results; • additions or departures of key personnel; • public health emergencies; • share repurchases completed by us; and • general market conditions.
It is possible that an adverse result in one or more of these possible future events could have a material adverse effect on us including increased expenses to defend, settle or resolve such litigation. 32 Table of Contents The development and commercialization of additional diagnostic solutions are key to our growth strategy.
It is possible that an adverse result in one or more of these possible future events could have a material adverse effect on us, including increased expenses to defend, settle or resolve such litigation. 31 Table of Contents The development and commercialization of additional diagnostic solutions are key to our growth strategy.
Risks Related to Cybersecurity and Data Privacy Security breaches, loss of data and other disruptions could compromise sensitive information related to our business or prevent us from accessing critical information and expose us to liability, which could adversely affect our business and our reputation. 55 Table of Contents We store sensitive intellectual property and other proprietary business information, including that of our customers, payers and collaboration partners.
Risks Related to Cybersecurity and Data Privacy Security breaches, loss of data and other disruptions could compromise sensitive information related to our business or prevent us from accessing critical information and expose us to liability, which could adversely affect our business and our reputation. 54 Table of Contents We store sensitive intellectual property and other proprietary business information, including that of our customers, payers and collaboration partners.
Our business or financial results may be adversely impacted by these uncertain economic conditions, including: adverse changes in interest rates, foreign currency exchange rates, tax laws or tax rates; increased inflation globally and in the U.S. in particular; a potential economic recession; contraction in the availability of credit in the marketplace due to legislation or other economic conditions, which may potentially impair our ability to access the capital markets on terms acceptable to us or at all; and the effects of government initiatives to manage economic conditions.
Our business or financial results may be adversely impacted by these uncertain economic conditions, including: adverse changes in interest rates, foreign currency exchange rates, tax laws or tax rates; increased inflation globally and in the U.S. in particular; liquidity concerns at financial institutions; a potential economic recession; contraction in the availability of credit in the marketplace due to legislation or other economic conditions, which may potentially impair our ability to access the capital markets on terms acceptable to us or at all; and the effects of government initiatives to manage economic conditions.
Patent applications in the United States and many foreign jurisdictions are not published until at least eighteen months after filing, and it is possible for a patent application filed in the United States to be maintained in secrecy until a patent is issued on the application. In addition, publications in the scientific literature often lag behind actual discoveries.
Patent applications in the United States and many foreign jurisdictions are not published until at least 18 months after filing, and it is possible for a patent application filed in the United States to be maintained in secrecy until a patent is issued on the application. In addition, publications in the scientific literature often lag behind actual discoveries.
If we are required to conduct premarket clinical trials, whether using prospectively acquired samples or archival samples, delays in the commencement or completion of clinical testing could significantly increase our development costs and delay test commercialization and also ultimately lead to delay or denial of regulatory clearance or approval.
If we are required to conduct premarket analytical studies and clinical trials, whether using prospectively acquired samples or archival samples, delays in the commencement or completion of analytical or clinical testing could significantly increase our development costs and delay test commercialization and also ultimately lead to delay or denial of regulatory clearance or approval.
Our failure to increase the frequency of use of our test by new and existing customers would adversely affect our growth and revenues. If we are unable to successfully compete with larger and more established players in the clinical surveillance of the transplantation field, we may be unable to increase or sustain our revenues or achieve profitability.
Our failure to increase the frequency of use of our test by new and existing customers would adversely affect our growth and revenues. If we are unable to successfully compete with established players in the clinical surveillance of the transplantation field, we may be unable to increase or sustain our revenues or achieve profitability.
We continue to monitor any adverse impact that the outbreak of war in Ukraine and the subsequent institution of sanctions against Russia by the United States and several European and Asian countries may have on the global economy in general, on our business and operations and on the businesses and operations of our suppliers and customers.
We continue to monitor any adverse impact that the outbreak of war in Ukraine, the subsequent institution of sanctions against Russia by the United States and several European and Asian countries, and the Israel-Hamas war may have on the global economy in general, on our business and operations and on the businesses and operations of our suppliers and customers.
We do not currently maintain “key person” insurance on any of our employees. 40 Table of Contents Our research and development programs and commercial laboratory operations depend on our ability to attract and retain highly skilled scientists and technicians, including geneticists, biostatisticians, engineers, licensed laboratory technicians and chemists.
We do not currently maintain “key person” insurance on any of our employees. 39 Table of Contents Our research and development programs and commercial laboratory operations depend on our ability to attract and retain highly skilled scientists and technicians, including geneticists, biostatisticians, engineers, licensed laboratory technicians and chemists.
Our rights to use this and other licensed technologies, data and materials and to employ the inventions claimed in licensed patents are subject to the continuation of and our compliance with the terms of the applicable licenses. Termination of the license could prevent us from producing or selling some or all of our products.
Our rights to use these and other licensed technologies, data and materials and to employ the inventions claimed in licensed patents are subject to the continuation of and our compliance with the terms of the applicable licenses. Termination of the license could prevent us from producing or selling some or all of our products.
On August 25, 2022, the court appointed an investor group led by the Oklahoma Police Pension and Retirement System as lead plaintiffs and appointed Saxena White P.A. and Robbins Geller Rudman & Dowd LLP as lead counsels. Plaintiffs filed an amended complaint on November 28, 2022.
On August 25, 2022, the court appointed an investor group led by the Oklahoma Police Pension and Retirement System as lead plaintiffs and appointed Saxena White P.A. and Robbins Geller Rudman & Dowd LLP as lead counsels. Plaintiffs filed an a mended complaint on November 28, 2022.
AlloMap, AlloSure, Olerup SSP, Olerup XM-ONE, QTYPE, Ottr and CareDx are registered trademarks of our company in the United States. Our registered or unregistered trademarks or trade names may be challenged, infringed, circumvented, declared generic or determined to be infringing on other marks.
AlloMap, AlloSure, Olerup SSP, QTYPE, Ottr and CareDx are registered trademarks of our company in the United States. Our registered or unregistered trademarks or trade names may be challenged, infringed, circumvented, declared generic or determined to be infringing on other marks.
For a detailed discussion of our financial condition and results of operations, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” We receive a substantial portion of our revenues from Medicare, and the loss of, or a significant reduction in, reimbursement from Medicare would severely and adversely affect our financial performance.
For a detailed discussion of our financial condition and results of operations, see “ Management’s Discussion and Analysis of Financial Condition and Results of Operations. ” We receive a substantial portion of our revenues from Medicare, and the loss of, or a significant reduction in, reimbursement from Medicare would severely and adversely affect our financial performance.
We do not believe that the CID, the SEC subpoena or the state regulatory agency information request raise any issues regarding the safety or clinical utility of any of our products or services and are cooperating fully with the investigations and the request for information.
We do not believe that the CID, the prior SEC subpoena, or the state regulatory agency information request raise or raised any issues regarding the safety or clinical utility of any of our products or services and are cooperating fully with the investigations and the request for information.
While we do not market AlloSure Kidney, AlloSure Lung, AlloMap Heart or AlloSure Heart as biopsy alternatives, per se, if treatment center administrators view our test as an alternative to a biopsy but believe they would derive more revenue from the performance of biopsies, such administrators may be motivated to reduce or avoid the use of our test.
While we do not market AlloSure Kidney, AlloSure Lung, AlloMap Heart or AlloSure Heart as biopsy alternatives, 34 Table of Contents per se, if treatment center administrators view our test as an alternative to a biopsy but believe they would derive more revenue from the performance of biopsies, such administrators may be motivated to reduce or avoid the use of our test.
The efforts of each of these persons will be critical to us as we continue to develop our technologies and testing processes. If we were to lose one or more of these key employees, including due to disease (such as COVID-19), disability or death, we may experience difficulties in competing effectively, developing our technologies and implementing our business strategies.
The efforts of each of these persons will be critical to us as we continue to develop our technologies and testing processes. If we were to lose one or more of these key employees, including due to disease, disability or death, we may experience difficulties in competing effectively, developing our technologies and implementing our business strategies.
We may expend significant financial and managerial resources in connection with responding to the CID, the SEC subpoena and other information requests. Any of the foregoing consequences could seriously harm our business and our financial results.
We may expend significant financial and managerial resources in connection with responding to the CID and other information requests. Any of the foregoing consequences could seriously harm our business and our financial results.
We would also be required to secure and maintain state licenses required by several states, including California, Florida, Maryland, New York, Rhode Island and Pennsylvania, which can take a significant amount of time and result in delays in our ability to begin operations at that facility.
We would also be required to secure and maintain state licenses required 37 Table of Contents by several states, including California, Florida, Maryland, New York, Rhode Island and Pennsylvania, which can take a significant amount of time and result in delays in our ability to begin operations at that facility.
Risks Related to the Healthcare Regulatory Environment In order to operate our laboratory, we have to comply with the CLIA and federal and state laws and regulations governing clinical laboratories and laboratory developed tests, including FDA regulations.
Risks Related to the Healthcare Regulatory Environment To operate our laboratory, we have to comply with the CLIA and federal and state laws and regulations governing clinical laboratories and laboratory-developed tests, including FDA regulations.
To compete successfully, we must continually update our product range and produce continually updated test kits and software. The failure to maintain the quality of our products or inability to keep pace with this innovation could render our existing or future solutions obsolete or less attractive to lab directors and clinicians.
To compete successfully, we must continually update our product range and produce continually updated test kits and software. The failure to maintain the quality of our products or inability to keep pace with this 35 Table of Contents innovation could render our existing or future solutions obsolete or less attractive to lab directors and clinicians.
For example, see the risk factor above titled “ We could become subject to legal proceedings that could be time consuming, result in costly litigation and settlements/judgments, require significant amounts of management attention and result in the diversion of significant operational resources, which could adversely affect our business, financial condition and results of operations ” for a discussion of our recently completed and ongoing litigation with Natera.
For example, see the risk factor above titled “ We are and could become subject to legal proceedings that could be time-consuming, result in costly litigation and settlements/judgments, require significant amounts of management attention and result in the diversion of significant operational resources, which could adversely affect our 52 Table of Contents business, financial condition and results of operations ” for a discussion of our recently completed and ongoing litigation with Natera.
If any of our trade secrets were to be disclosed to, or independently developed by, a competitor, our competitive position would be harmed. If our trademarks and trade names are not adequately protected, we may not be able to build name recognition in our markets of interest, and our business may be adversely affected.
If any of our trade secrets were to be disclosed to, or independently developed by, a competitor, our competitive position would be harmed. 53 Table of Contents If our trademarks and trade names are not adequately protected, we may not be able to build name recognition in our markets of interest, and our business may be adversely affected.
Additionally, such allegations against us could negatively impact our business operations and stockholders' equity, and the value of any investment in our stock could be reduced. The impact of the Russian invasion of Ukraine on the global economy, energy supplies and raw materials is uncertain, but may prove to negatively impact our business and operations.
Additionally, such allegations against us could negatively impact our business operations and stockholders' equity, and the value of any investment in our stock could be reduced. The impact of the Russian invasion of Ukraine and the Israel-Hamas war on the global economy, energy supplies and raw materials is uncertain, but may prove to negatively impact our business and operations.
While biopsies are less common for monitoring kidney transplant patients, there are transplant centers that manage patients with protocol biopsies, which could impact AlloSure Kidney revenue. We cannot provide assurance that our efforts 35 Table of Contents will increase the use of our test by new or existing customers.
While biopsies are less common for monitoring kidney transplant patients, there are transplant centers that manage patients with protocol biopsies, which could impact AlloSure Kidney revenue. We cannot provide assurance that our efforts will increase the use of our test by new or existing customers.
Such failures may subject us to administrative, civil, and criminal actions, penalties, damages, fines, exclusion from participation in federal health care programs, refunding of payments received by us and curtailment of our operations. Foreign governments may impose reimbursement standards, which may adversely affect our future profitability.
Such failures may subject us to administrative, civil, and criminal actions, penalties, damages, fines, exclusion from participation in federal healthcare programs, refunding of payments received by us and curtailment of our operations. Foreign governments may impose reimbursement standards, which may adversely affect our future profitability.
Moreover, we may be subject to additional 57 Table of Contents securities class action litigation as a result of volatility in the price of our common stock, which could result in substantial costs and diversion of management’s attention and resources and could harm our stock price, business, prospects, results of operations and financial condition.
Moreover, we may be subject to additional securities class action litigation as a result of volatility in the price of our common stock, which could result in substantial costs and diversion of management’s attention and resources and could harm our stock price, business, prospects, results of operations and financial condition.
Additionally, if transplant facilities have relationships with large reference laboratories that will not process and send out our specimens, the clinicians at these facilities may deem ordering our tests outside of these relationships too inconvenient for their patients.
Additionally, if transplant 38 Table of Contents facilities have relationships with large reference laboratories that will not process and send out our specimens, the clinicians at these facilities may deem ordering our tests outside of these relationships too inconvenient for their patients.
For the year ended December 31, 2022, revenue from Medicare for AlloMap Heart, AlloSure Kidney and AlloSure Heart represented 64% of testing services revenue. However, we may not be able to maintain or increase our tests reimbursed by Medicare for a variety of reasons, including changes in reimbursement practices, general policy shifts, or reductions in reimbursement amounts.
For the year ended December 31, 2023, revenue from Medicare for AlloMap Heart, AlloSure Kidney and AlloSure Heart represented 53% of testing services revenue. However, we may not be able to maintain or increase our tests reimbursed by Medicare for a variety of reasons, including changes in reimbursement practices, general policy shifts, or reductions in reimbursement amounts.
A lack of acceptance of our current and future solutions by these service providers could result in lower test volume. 39 Table of Contents If we are unable to raise additional capital on acceptable terms in the future, it may limit our ability to develop and commercialize new diagnostic solutions and technologies, and we may have to curtail or cease operations.
A lack of acceptance of our current and future solutions by these service providers could result in lower test volume. If we seek to and are unable to raise additional capital on acceptable terms in the future, it may limit our ability to develop and commercialize new diagnostic solutions and technologies, and we may have to curtail or cease operations.
In addition, on August 16, 2022, the U.S. enacted the Inflation Reduction Act of 2022, which, among other things, imposes an excise tax of 1% tax on the fair market value of net stock repurchases made after December 31, 2022. Therefore, there is no assurance with respect to the amount, price or timing of any such repurchases.
In addition, on August 16, 2022, the United States enacted the Inflation Reduction Act of 2022, which, among other things, imposes an excise tax of 1% tax on the fair market value of net stock repurchases made after December 31, 2022. Therefore, there is no assurance with respect to the amount, price or timing of any such repurchases.
Our patent position for AlloMap Heart is based on issued patents and patent applications disclosing identification of genes differentially expressed between activated and quiescent leukocytes and demonstration of correlation between gene expression patterns and specific clinical states and outcomes. As of December 31, 2022, we had 20 issued U.S. patents related to transplant rejection and autoimmunity.
Our patent position for AlloMap Heart is based on issued patents and patent applications disclosing identification of genes differentially expressed between activated and quiescent leukocytes and demonstration of correlation between gene expression patterns and specific clinical states and outcomes. As of December 31, 2023, we had 10 issued U.S. patents related to transplant rejection and autoimmunity.
We have insurance coverage in place for certain potential liabilities and costs relating to service interruptions, data corruption, cybersecurity risks, data security incidents and/or network security breaches, but this insurance is limited in amount, subject to a deductible, and may not be adequate to cover us for all costs arising from these incidents.
We have insurance coverage 55 Table of Contents in place for certain potential liabilities and costs relating to service interruptions, data corruption, cybersecurity risks, data security incidents and/or network security breaches, but this insurance is limited in amount, subject to a deductible, and may not be adequate to cover us for all costs arising from these incidents.
From time to time, we expect to estimate and publicly announce the anticipated timing of the accomplishment of various clinical and other product development goals. In addition, we have included a discussion of a number of anticipated targets in this Form 10-K.
From time to time, we expect to estimate and publicly announce the anticipated timing of the accomplishment of various clinical and other product development goals. In addition, we have included a discussion of a number of anticipated targets in this Annual Report on Form 10-K.
Changes to, or interpretations of, accounting methods or policies may require us to reclassify, restate or otherwise change or revise our consolidated financial statements, including those contained in this Annual Report on Form 10-K.
Changes to, or interpretations of, accounting methods or 44 Table of Contents policies may require us to reclassify, restate or otherwise change or revise our consolidated financial statements, including those contained in this Annual Report on Form 10-K.
While in general it is difficult to predict specifically what effects the Affordable Care Act or any future healthcare reform legislation or policies will have on our business, current and future healthcare reform legislation and policies could have a material adverse effect on our business and financial condition. In December 2020, the U.S.
While in general it is difficult to predict specifically what effects the Affordable Care Act or any future healthcare reform legislation or policies will have on our business, current and future healthcare reform legislation and policies could have a material adverse effect on our business and financial condition. 47 Table of Contents In December 2020, the U.S.
When we market our products and our solutions under development in foreign jurisdictions, we are subject to rules and regulations in those jurisdictions. In some foreign countries, including countries in the EU, the reimbursement of our current 51 Table of Contents and future solutions is subject to governmental control.
When we market our products and our solutions under development in foreign jurisdictions, we are subject to rules and regulations in those jurisdictions. In some foreign countries, including countries in the EU, the reimbursement of our current and future solutions is subject to governmental control.
In addition, national stock exchanges, and in particular the market for life science companies, have experienced significant price and volume fluctuations that have often been unrelated or disproportionate to the operating performance of those companies.
In addition, national stock exchanges, and in particular the market for life science companies, have experienced significant price and volume fluctuations that have often 56 Table of Contents been unrelated or disproportionate to the operating performance of those companies.
A severe or prolonged economic downturn, such as the global financial crisis, could result in a variety of risks to our business, including a decrease in the demand for our tests and in our ability to raise additional capital when needed on acceptable terms, if at all.
Continued adverse political conditions or a severe or prolonged economic downturn, such as the global financial crisis, could result in a variety of risks to our business, including a decrease in the demand for our tests and in our ability to raise additional capital when needed on acceptable terms, if at all.
In addition to the factors discussed in this "Risk Factors" section and elsewhere in this Annual Report on Form 10-K, factors that could cause fluctuations in the market price of our common stock include the following: • price and volume fluctuations in the overall stock market from time to time; • volatility in the market prices and trading volumes of life sciences stocks; • changes in operating performance and stock market valuations of other life sciences companies generally, or those in our industry in particular; • sales of shares of our common stock by us or our stockholders; • entering into financing or other arrangements with rights or terms senior to the interests of common stockholders; • failure of securities analysts to maintain coverage of us, changes in financial estimates by securities analysts who follow our company, or our failure to meet these estimates or the expectations of investors; • the financial projections we may provide to the public, any changes in those projections or failure to meet those projections; • announcements by us or our competitors of new products or services; • the public’s reaction to our press releases, other public announcements and filings with the SEC; • rumors and market speculation involving us or other companies in our industry; • actual or anticipated changes in our operating results or fluctuations in our operating results; • actual or anticipated developments in our business, our competitors’ businesses or the competitive landscape generally; • litigation involving us, our industry or both, or investigations by regulators into our operations or those of our competitors; • developments or disputes concerning our intellectual property or other proprietary rights; • announced or completed acquisitions of businesses or technologies by us or our competitors; • new laws or regulations or new interpretations of existing laws or regulations applicable to our business; • changes in accounting standards, policies, guidelines, interpretations or principles; • any significant change in our management; • public health emergencies, including the COVID-19 pandemic; and • general economic conditions and slow or negative growth of our markets.
In addition to the factors discussed in this "Risk Factors" section and elsewhere in this Annual Report on Form 10-K, factors that could cause fluctuations in the market price of our common stock include the following: • price and volume fluctuations in the overall stock market from time to time; • volatility in the market prices and trading volumes of life sciences stocks; • changes in operating performance and stock market valuations of other life sciences companies generally, or those in our industry in particular; • sales of shares of our common stock by us or our stockholders; • entering into financing or other arrangements with rights or terms senior to the interests of common stockholders; • failure of securities analysts to maintain coverage of us, changes in financial estimates by securities analysts who follow our company, or our failure to meet these estimates or the expectations of investors; • the financial projections we may provide to the public, any changes in those projections or failure to meet those projections; • announcements by us or our competitors of new products or services; • the public’s reaction to our press releases, other public announcements and filings with the SEC; • rumors and market speculation involving us or other companies in our industry; • actual or anticipated changes in our operating results or fluctuations in our operating results; • actual or anticipated developments in our business, our competitors’ businesses or the competitive landscape generally; • litigation involving us, our industry or both, or investigations by regulators into our operations or those of our competitors; • developments or disputes concerning our intellectual property or other proprietary rights; • announced or completed acquisitions of businesses or technologies by us or our competitors; • new laws or regulations or new interpretations of existing laws or regulations applicable to our business; • changes in accounting standards, policies, guidelines, interpretations or principles; • any significant change in our management; • public health emergencies; • our prior decision to withdraw our revenue guidance for fiscal 2023; • our decision to issue future financial guidance and the terms of such guidance; and • general economic conditions and slow or negative growth of our markets.
Additional discussion of the risks summarized in this risk factor summary, and other risks that we face, can be found below under the heading “Risk Factors” and should be carefully considered, together with other information in this Annual Report on Form 10-K, or this Form 10-K, and our other filings with the SEC before making an investment decision regarding our common stock. • Our business may be adversely affected by the effects of health epidemics, including the continuing COVID-19 pandemic. • We have a history of losses, and we expect to incur net losses for the next several years. • We receive a substantial portion of our revenues from Medicare, and the loss of, or a significant reduction in, reimbursement from Medicare would severely and adversely affect our financial performance. • Our financial results currently are largely dependent on sales of AlloSure Kidney, AlloMap Heart and AlloSure Lung tests and products, and we will need to generate sufficient revenues from these and other solutions and tests we develop to grow our business. • We are and could become subject to legal proceedings that could be time consuming, result in costly litigation and settlements/judgments, require significant amounts of management attention and result in the diversion of significant operational resources, which could adversely affect our business, financial condition and results of operations. • The development and commercialization of additional diagnostic solutions are key to our growth strategy.
Additional discussion of the risks summarized in this risk factor summary, and other risks that we face, can be found below under the heading “Risk Factors” and should be carefully considered, together 24 Table of Contents with other information in this Annual Report on Form 10-K, or this Form 10-K, and our other filings with the SEC before making an investment decision regarding our common stock. • We have a history of losses, and we expect to incur net losses for the next several years. • We receive a substantial portion of our revenues from Medicare, and the loss of, or a significant reduction in, reimbursement from Medicare would severely and adversely affect our financial performance. • Our financial results currently are largely dependent on sales of AlloSure Kidney, AlloMap Heart, AlloSure Heart and AlloSure Lung tests and products, and we will need to generate sufficient revenues from these and other solutions and tests we develop to grow our business. • We are and could become subject to legal proceedings that could be time-consuming, result in costly litigation and settlements/judgments, require significant amounts of management attention and result in the diversion of significant operational resources, which could adversely affect our business, financial condition and results of operations. • The development and commercialization of additional diagnostic solutions are key to our growth strategy.
We may also not be able to maintain or increase the portion 29 Table of Contents of our tests reimbursed by Medicare for a variety of other reasons, including changes in reimbursement practices and general policy shifts. On a five-year rotational basis, Medicare requests bids for its regional Medicare Administrative Contractors, or MAC, services.
We may also not be able to maintain or increase the portion of our tests reimbursed by Medicare for a variety of other reasons, including changes in reimbursement practices and general policy shifts, including the Billing Articles. On a five-year rotational basis, Medicare requests bids for its regional Medicare Administrative Contractors, or MAC, services.
If we should encounter delays or difficulties in securing from 42 Table of Contents Thermo Fisher, Becton, Dickinson and Company or Avantor, or Avantor encounters delays or difficulties in securing from Qiagen N.V., including as a result of impacts on their respective businesses due to the COVID-19 pandemic or the ongoing conflict between Ukraine and Russia and the global impact of restrictions and sanctions imposed on Russia, the quality and quantity of reagents, supplies or instruments that we require for our current products and services or other solutions we develop, we may need to reconfigure our test processes, which would result in delays in commercialization or an interruption in sales.
If we should encounter delays or difficulties in securing from Thermo Fisher, Becton, Dickinson and Company or Avantor, or Avantor encounters delays or difficulties in securing from Qiagen N.V., including as a result of impacts on their respective businesses due to the ongoing conflict between Ukraine and Russia, the global impact of 41 Table of Contents restrictions and sanctions imposed on Russia, and the Israel-Hamas war, the quality and quantity of reagents, supplies or instruments that we require for our current products and services or other solutions we develop, we may need to reconfigure our test processes, which would result in delays in commercialization or an interruption in sales.
Congress decide to regulate AlloSure Kidney and other future solutions under development as medical devices, we could be required to conduct additional premarket clinical testing subsequent to commercialization in the case of AlloSure Kidney and/or conduct premarket clinical testing prior to submitting a regulatory application for commercial sales for future products not yet developed.
Congress decide to regulate LDTs and other future solutions under development as medical devices, we could be required to conduct additional premarket analytical studies and clinical testing subsequent to continued commercialization in the case of AlloSure LDTs and/or conduct premarket clinical and analytical testing prior to submitting a regulatory application for commercial sales for future products not yet developed.
In June 2021, we entered into a strategic agreement, which was amended in April 2022, with OrganX to develop clinical decision support tools across the transplant patient journey. Together, we and OrganX will develop advanced analytics that integrate AlloSure, the first transplant specific dd-cfDNA assay, with large transplant databases to provide clinical data solutions.
In June 2021, we entered into a strategic agreement, which was amended in April 2022, with OrganX to develop clinical decision support tools across the transplant patient journey. Together, we and OrganX will develop advanced analytics that integrate AlloSure with large transplant databases to provide clinical data solutions.
We believe that our future revenue will depend on, among other factors: • the continued usage and acceptance of our current and future solutions; • demand for our testing services, products and patient and digital solutions; • the introduction and acceptance of new or enhanced products or services by us or by competitors; • our ability to maintain reimbursement for AlloSure Kidney, AlloSure Lung, AlloMap Heart and AlloSure Heart and secure reimbursement for our future solutions; • our ability to anticipate and effectively adapt to developing markets and to rapidly changing technologies; • our ability to attract, retain and motivate qualified personnel; • the initiation, renewal or expiration of significant contracts with our commercial partners; • pricing changes by us, our suppliers or our competitors; and • general economic conditions and other factors.
We believe that our future revenue will depend on, among other factors: • the continued usage and acceptance of our current and future solutions; • demand for our testing services, products and patient and digital solutions; • the introduction and acceptance of new or enhanced products or services by us or by competitors; • our ability to maintain reimbursement for AlloSure Kidney, AlloSure Lung, AlloMap Heart and AlloSure Heart and secure reimbursement for our future solutions; • our decision to continue our Medicare reimbursement submissions for AlloSure Kidney; • our decision to issue future financial guidance and the terms of such guidance; • our ability to anticipate and effectively adapt to developing markets and to rapidly changing technologies; • our ability to attract, retain and motivate qualified personnel; • the initiation, renewal or expiration of significant contracts with our commercial partners; • pricing changes by us, our suppliers or our competitors; and • general economic conditions and other factors.
In addition, we may not be able to fully realize the anticipated strategic benefits of any such combination or integration and any other businesses or assets we have or may acquire, which includes, with respect to Ottr, the complementary Ottr software, with respect to XynManagement, XynQAPI, TransChart and MedActionPlan, as well as TTP's services and technologies, and in each case the benefits of any significant cross-selling opportunities.
In addition, we may not be able to fully realize the anticipated strategic benefits of any such combination or integration and any other businesses or assets we have or may acquire, which includes, with respect to Ottr, the complementary Ottr software, with respect to XynManagement, XynQAPI, TransChart and MedActionPlan, as well as TTP, HLA Data Systems, and MediGO's services and technologies, and in each case the benefits of any significant cross-selling opportunities.
Also, the failure to comply with applicable legal and regulatory obligations could result in the disruption of our distribution and sales activities. We are also unable to predict how changing global economic conditions or potential global health concerns such as the COVID-19 pandemic will affect our partners, suppliers and distributors.
Also, the failure to comply with applicable legal and regulatory obligations could result in the disruption of our distribution and sales activities. We are also unable to predict how changing global economic conditions or potential global health concerns will affect our partners, suppliers and distributors.
We 38 Table of Contents could only use another facility with the established state licensures and CLIA certification necessary to perform AlloSure Kidney, AlloSure Lung, AlloMap Heart, AlloSure Heart, or future solutions following validation and other required procedures.
We could only use another facility with the established state licensures and CLIA certification necessary to perform AlloSure Kidney, AlloSure Lung, AlloMap Heart, AlloSure Heart, or future solutions following validation and other required procedures.
Any such breach could also result in the compromise of our trade 56 Table of Contents secrets and other proprietary information, which could adversely affect our competitive position.
Any such breach could also result in the compromise of our trade secrets and other proprietary information, which could adversely affect our competitive position.
We intend to defend ourselves vigorously, and we believe that we have good and substantial defenses to the claims alleged in the Edelman Derivative Action and the Stevenson Derivative Action, but there is no guarantee that we will prevail. Litigation is inherently unpredictable.
We intend to defend ourselves vigorously, and we believe that we have good and substantial defenses to the claims alleged in the consolidated derivative action and the Jacobsen Derivative Action, but there is no guarantee that we will prevail. Litigation is inherently unpredictable.
Over the long-term, if we are unable to establish name 54 Table of Contents recognition based on our trademarks and trade names, then we may not be able to compete effectively and our business may be adversely affected.
Over the long-term, if we are unable to establish name recognition based on our trademarks and trade names, then we may not be able to compete effectively and our business may be adversely affected.
Our management concluded that we had the following material weaknesses as of December 31, 2022: • General Information Technology Controls . We did not design and maintain effective general information technology controls (“GITCs”), for information systems and applications that are relevant to the preparation of the consolidated financial statements.
Our management concluded that we had the following material weaknesses as of December 31, 2023: • General Information Technology Controls . We did not design and maintain effective general information technology controls, or GITCs, for information systems and applications that are relevant to the preparation of the consolidated financial statements.
We cannot assure you that the measures we 60 Table of Contents have taken to date, or any measures we may take in the future, will be sufficient to remediate our existing material weaknesses or avoid potential future material weaknesses.
We cannot assure you that the measures we have taken to date, or any measures we may take in the future, will be sufficient to remediate our existing material weaknesses or avoid potential future material weaknesses.
This partnership delivers the next level of innovation beyond multi-modality by incorporating a variety of clinical inputs to create a universal composite scoring system.
This partnership delivers the next level of innovation by incorporating a variety of clinical inputs to create a universal composite scoring system.
Our net income (loss) and other operating results will be affected by numerous factors, including: • our ability to successfully market and sell our testing services and products; • our ability to successfully commercialize new diagnostic solutions; • the amount of our research and development expenditures; • the timing of cash collections from third-party payers; • the extent to which our current and future solutions, if any, are eligible for coverage and reimbursement from third-party payers; • the process of integrating new acquisitions, and the associated potential disruption to our business; • changes in coverage and reimbursement or in reimbursement-related laws directly affecting our business; • any intellectual property infringement lawsuit or opposition, interference or cancellation proceeding in which we may become involved or that otherwise may affect our intellectual property position; • announcements by our competitors of new or competitive products; • regulatory or legal developments affecting our test or competing products; • total operating expenses; and 34 Table of Contents • changes in expectation as to our future financial performance, including financial estimates, publications or research reports by securities analysts.
Our net income (loss) and other operating results will be affected by numerous factors, including: • our ability to successfully market and sell our testing services and products; • our ability to successfully commercialize new diagnostic solutions; • the amount of our research and development expenditures; • the timing of cash collections from third-party payers; • the extent to which our current and future solutions, if any, are eligible for coverage and reimbursement from third-party payers; • the process of integrating new acquisitions, and the associated potential disruption to our business; • changes in coverage and reimbursement or in reimbursement-related laws directly affecting our business, including as a result of the Billing Articles; • our decision to continue our Medicare reimbursement submissions for AlloSure Kidney; • our decision to issue future financial guidance and the terms of such guidance; • any intellectual property infringement lawsuit or opposition, interference or cancellation proceeding in which we may become involved or that otherwise may affect our intellectual property position; • announcements by our competitors of new or competitive products; • regulatory or legal developments affecting our test or competing products; 33 Table of Contents • total operating expenses; and • changes in expectation as to our future financial performance, including financial estimates, publications or research reports by securities analysts.
To the extent the war in Ukraine may adversely affect our business as discussed above, it may also have the effect of heightening many of the other risks described herein.
To the extent the wars in Ukraine or Israel may adversely affect our business as discussed above, it may also have the effect of heightening many of the other risks described herein.
For example, a prolonged conflict may result in increased inflation, escalating energy prices and constrained availability, and thus increasing costs of raw materials. We will continue to monitor this fluid situation and develop contingency plans as necessary to address any disruptions to our business operations as they develop.
For example, a prolonged conflict in Ukraine or Israel may result in increased inflation, escalating energy prices and constrained availability, and thus increasing costs of raw materials. We will continue to monitor these fluid situations and develop contingency plans as necessary to address any disruptions to our business operations as they develop.
The short and long-term implications of Russia’s invasion of Ukraine are difficult to predict at this time.
The short and long-term implications of Russia’s invasion of Ukraine and the Israel-Hamas war are difficult to predict at this time.
Our current Medicare Part B reimbursement was not set pursuant to a national coverage determination by CMS. Although we believe that coverage is available under Medicare Part B even without such a determination, we currently lack the national coverage certainty afforded by a formal coverage determination by CMS.
Medicare reimbursements currently comprise a significant portion of our revenue. Our current Medicare Part B reimbursement was not set pursuant to a national coverage determination by CMS. Although we believe that coverage is available under Medicare Part B even without such a determination, we currently lack the national coverage certainty afforded by a formal coverage determination by CMS.
See the risk factor above titled “We receive a substantial portion of our revenues from Medicare, and the loss of, or a significant reduction in, reimbursement from Medicare would severely and adversely affect our financial performance” .
See the risk factor above titled “ We receive a substantial portion of our revenues from Medicare, and the loss of, or a significant reduction in, reimbursement from Medicare would severely and adversely affect our financial performance ”.

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Item 2. Properties

Properties — owned and leased real estate

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The following is a summary of the locations, functions and approximate square footage of those facilities as of December 31, 2022: Location Function Square Footage United States Brisbane, California Corporate headquarters 26,506 Brisbane, California Research & development and clinical laboratories 68,318 West Chester, Pennsylvania Sales office and distribution 6,336 Omaha, Nebraska Digital solutions office 101,004 Columbus, Ohio Digital solutions office 3,806 Flowood, Mississippi Transplant pharmacy 4,800 Gaithersburg, Maryland General office use 2,118 Europe Stockholm, Sweden Research & development and product manufacturing 24,940 Australia Fremantle Research & development and product manufacturing 11,593 We do not own any real property.
The following is a summary of the locations, functions and approximate square footage of those facilities as of December 31, 2023: Location Function Square Footage United States Brisbane, California Corporate headquarters 26,506 Brisbane, California Research & development and clinical laboratories 68,318 West Chester, Pennsylvania Sales office and distribution 6,336 Omaha, Nebraska Digital solutions office 24,984 Columbus, Ohio Digital solutions office 3,806 Flowood, Mississippi Transplant pharmacy 4,800 Gaithersburg, Maryland General office use 2,118 Europe Stockholm, Sweden Research & development and product manufacturing 24,940 Australia Fremantle Research & development and product manufacturing 11,593 We do not own any real property.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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(3) On December 3, 2022, our Board of Directors approved our stock repurchase program, authorizing us to purchase up to $50 million in shares of our common stock over a period of up to two years, commencing on December 8, 2022.
(4) On December 3, 2022, our board of directors approved our stock repurchase program, authorizing us to purchase up to $50 million in shares of our common stock over a period of up to two years, commencing on December 8, 2022.
Securities Authorized for Issuance Under Equity Compensation Plans See Item 12 of Part III of this Annual Report on Form 10-K regarding information about securities authorized for issuance under our equity compensation plans. Issuer Repurchases of Equity Securities and Withholding of Equity Securities During the quarter ended December 31, 2022, we effected stock repurchases pursuant to our stock repurchase program.
Securities Authorized for Issuance Under Equity Compensation Plans See Item 12 of Part III of this Annual Report on Form 10-K regarding information about securities authorized for issuance under our equity compensation plans. Issuer Repurchases of Equity Securities and Withholding of Equity Securities During the quarter ended December 31, 2023, we effected stock repurchases pursuant to our stock repurchase program.
The stock performance shown on the graph below is not necessarily indicative of future price performance. 65 Table of Contents Sales of Unregistered Securities There were no sales of unregistered securities by us during the fourth quarter of 2022.
The stock performance shown on the graph below is not necessarily indicative of future price performance. 65 Table of Contents Sales of Unregistered Securities There were no sales of unregistered securities by us during the fourth quarter of 2023.
Holders of Record As of February 23, 2023, there were approximately 63 holders of record of our common stock. Because many of our shares of common stock are held by brokers and other institutions on behalf of stockholders, we are unable to estimate the total number of stockholders represented by these record holders.
Holders of Record As of February 26, 2024, there were approximately 63 holders of record of our common stock. Because many of our shares of common stock are held by brokers and other institutions on behalf of stockholders, we are unable to estimate the total number of stockholders represented by these record holders.
The following stock performance graph compares total stockholder returns for CareDx, Inc. from December 29, 2017 through December 30, 2022 against the Nasdaq Market Composite Index and Nasdaq Biotech Index, assuming a $100 investment made on December 29, 2017. Each of the two comparative measures of cumulative total return assumes reinvestment of dividends.
The following stock performance graph compares total stockholder returns for CareDx, Inc. from December 31, 2018 through December 29, 2023 against the Nasdaq Market Composite Index and Nasdaq Biotech Index, assuming a $100 investment made on December 31, 2018. Each of the two comparative measures of cumulative total return assumes reinvestment of dividends.
The Repurchase Program may be carried out at the discretion of a committee of our Board of Directors through open market purchases, one or more Rule 10b5-1 trading plans, block trades and in privately negotiated transactions. ITEM 6. [RESERVED] 66 Table of Contents
The Repurchase Program may be carried out at the discretion of a committee of our board of directors through open market purchases, one or more Rule 10b5-1 trading plans and block trades and in privately negotiated transactions.
(2) Comprised of: (a) 20,847 shares of our common stock withheld from employees for the payment of taxes, for which the average price paid per share with respect to withheld shares was $6.17, which represents fair market value of our common stock on the date of withholding, and (b) 50,051 shares of our common stock repurchased pursuant to our stock repurchase program at an average price per repurchased share of $12.82.
(2) Comprised of: (a) 19,443 shares of our common stock withheld from employees for the payment of taxes, for which the average price paid per share with respect to withheld shares was $7.18, which represents the average fair market value of our common stock on the date of withholding, and (b) 1,931,190 shares of our common stock repurchased pursuant to our stock repurchase program at an average price per repurchased share of $9.31.
Shares repurchased by us or withheld to satisfy tax withholding obligations during each month of the quarter ended December 31, 2022 were as follows: Total Number of Shares Purchased or Withheld Average Price Paid per Share Total Number of Shares Purchased as Part of Publicly Announced Plans or Program Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs (in millions) October 1, 2022 - October 31, 2022 5,858 (1) $ 6.22 — $ — November 1, 2022 - November 30, 2022 19,143 (1) 5.89 — — December 1, 2022 - December 31, 2022 70,898 (2) 12.58 50,051 (3) 49.4 (3) Total 95,899 50,051 (3) (1) Represents shares of our common stock withheld from employees for the payment of taxes.
Shares repurchased by us or withheld to satisfy tax withholding obligations during each month of the quarter ended December 31, 2023 were as follows: Total Number of Shares Purchased or Withheld Average Price Paid per Share Total Number of Shares Purchased as Part of Publicly Announced Plans or Program (4) Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs (in millions) October 1, 2023 - October 31, 2023 103,711 (1) $ 5.86 92,000 $ 47.2 (4) November 1, 2023 - November 30, 2023 1,950,633 (2) 9.29 1,931,190 29.2 (4) December 1, 2023 - December 31, 2023 780,625 (3) 9.77 755,569 21.9 (4) Total 2,834,969 2,778,759 (1) Comprised of: (a) 11,711 shares of our common stock withheld from employees for the payment of taxes, for which the average price paid per share with respect to withheld shares was $6.51, which represents the average fair market value of our common stock on the date of withholding, and (b) 92,000 shares of our common stock repurchased pursuant to our stock repurchase program at an average price per repurchased share of $5.78.
Average price paid per share with respect to withheld shares represents fair market value of our common stock on the date of withholding.
(3) Comprised of: (a) 25,056 shares of our common stock withheld from employees for the payment of taxes, for which the average price paid per share with respect to withheld shares was $11.43, which represents the average fair market value of our common stock on the date of withholding, and (b) 755,569 shares of our common stock repurchased pursuant to our stock repurchase program at an average price per repurchased share of $9.71.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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In 2021, we executed multiple additional agreements with biopharma therapeutics companies to use AlloCell in research and clinical studies. In July 2021, we launched the Assessing Chimerism and Relapse of Bone marrow/ HCT transplant using AlloHeme Testing, or ACROBAT, study.
In 2021, we executed multiple additional agreements with biopharma therapeutics companies to use AlloCell in research and clinical studies. In July 2021, we launched the Assessing Chimerism and Relapse of Bone marrow/ HCT transplant using AlloHeme Testing study, or the ACROBAT study.
As part of our acquisition of TransChart in January 2021, we acquired Tx Access, a cloud-based service that allows nephrologists and dialysis centers to electronically submit referrals to transplant programs, closely follow and assist patients through the transplant waitlist process, and ultimately, through transplantation. In June 2021, we acquired the Transplant Hero patient application.
As part of our acquisition of TransChart in January 2021, we acquired Tx Access, a cloud-based service that allows nephrologists and dialysis centers to electronically submit referrals to transplant programs and closely follow and assist patients through the transplant waitlist process, and ultimately, through transplantation. In June 2021, we acquired the Transplant Hero patient application.
Our estimates are based on our historical experience and on 71 Table of Contents various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources.
Our estimates are based on our historical experience and on various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that 71 Table of Contents are not readily apparent from other sources.
Revenue is recorded considering a five-step revenue recognition model that includes identifying the contract with a customer, identifying the performance obligations in the contract, determining the transaction price, allocating the transaction price to the performance obligations, and recognizing revenue when, or as, an entity satisfies a performance obligation.
Revenue is recorded considering a five-step revenue recognition model that includes identifying the contract with a customer, identifying the performance obligations in the contract, determining the transaction price, allocating the transaction price to the performance obligations and recognizing revenue when, or as, an entity satisfies a performance obligation.
The Repurchase Program may be carried out at the discretion of a committee of our Board of Directors through open market purchases, one or more Rule 10b5-1 trading plans, block trades and in privately negotiated transactions.
The Repurchase Program may be carried out at the discretion of a committee of our Board of Directors through open market purchases, one or more Rule 10b5-1 trading plans and block trades and in privately negotiated transactions.
TruSight HLA was discontinued in December 2021 and we have progressively converted existing customers to AlloSeq. In addition, we were granted the exclusive right to develop and commercialize other NGS product lines in the field of bone marrow and solid organ transplantation on diagnostic testing.
TruSight HLA was discontinued in December 2021 and we have progressively converted existing customers to AlloSeq Tx. In addition, we were granted the exclusive right to develop and commercialize other NGS product lines in the field of bone marrow and solid organ transplantation on diagnostic testing.
Reimbursement for AlloMap Heart AlloMap Heart test volume and the corresponding reimbursement revenue has generally increased over time since the launch of AlloMap Heart, as the ISHLT included AlloMap in guidelines, payers adopted coverage policies and no longer consider AlloMap Heart to be experimental and investigational.
Reimbursement for AlloMap Heart AlloMap Heart test volume and the corresponding reimbursement revenue has generally increased over time since the launch of AlloMap Heart, as the ISHLT included AlloMap in its guidelines and payers adopted coverage policies and no longer consider AlloMap Heart to be experimental and investigational.
These NGS products include: AlloSeq Tx, a high-resolution HLA typing solution, AlloSeq cfDNA, our surveillance solution designed to measure dd-cfDNA in blood to detect active rejection in transplant recipients, and AlloSeq HCT, a NGS solution for chimerism testing for stem cell transplant recipients.
These NGS products include: AlloSeq Tx, a high-resolution HLA typing solution, AlloSeq cfDNA, our surveillance solution designed to measure dd-cfDNA in blood to detect active rejection in transplant recipients, and AlloSeq HCT, an NGS solution for chimerism testing for stem cell transplant recipients.
GAAP. The preparation of these consolidated financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the consolidated financial statements, as well as the reported revenue generated and expenses incurred during the reporting periods.
The preparation of these consolidated financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the consolidated financial statements, as well as the reported revenue generated and expenses incurred during the reporting periods.
In September 2019, we commercially launched AlloSeq cfDNA, our surveillance solution designed to measure dd-cfDNA in blood to detect active rejection in transplant recipients, which received CE mark authorization on January 20, 2020.
In September 2019, we launched AlloSeq cfDNA, our surveillance solution designed to measure dd-cfDNA in blood to detect active rejection in transplant recipients, which received CE mark authorization on January 20, 2020.
Our ability to increase the clinical uptake for AlloSeq cfDNA will be a result of multiple factors, including local clinical education, customer lab technical proficiency and levels of country-specific reimbursement. Also in September 2019, we commercially launched AlloSeq Tx, the first of its kind NGS high-resolution HLA typing solution utilizing hybrid capture technology.
Our ability to increase the clinical uptake for AlloSeq cfDNA will be a result of multiple factors, including local clinical education, customer lab technical proficiency and levels of country-specific reimbursement. In September 2019, we launched AlloSeq Tx, the first of its kind NGS high-resolution HLA typing solution utilizing hybrid capture technology.
Income Tax (Expense) Benefit For the year ended December 31, 2022, we recorded an income tax expense of $0.4 million on a loss before income taxes of $76.2 million.
For the year ended December 31, 2022, we recorded an income tax expense of $0.4 million on a loss before income taxes of $76.2 million.
Contractual Obligations For a discussion regarding our significant contractual obligations as of December 31, 2022 and the effect those obligations are expected to have on our liquidity and cash flows in future periods, please refer to Note 9 of the consolidated financial statements, and “Results of Operations—Liquidity and Capital Resources”, respectively, included elsewhere in this Annual Report on Form 10-K.
Contractual Obligations For a discussion regarding our significant contractual obligations as of December 31, 2023 and the effect those obligations are expected to have on our liquidity and cash flows in future periods, please refer to Note 9 of the consolidated financial statements, and “Results of Operations—Liquidity and Capital Resources”, respectively, included elsewhere in this Annual Report on Form 10-K.
As of December 31, 2022, no impairment of acquired in-process technology assets has been identified. Intangible assets and long-lived assets subject to amortization We evaluate our finite-lived intangible assets and our long-lived assets for indicators of possible impairment when events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable.
As of December 31, 2023, no impairment of acquired in-process technology assets has been identified. Intangible assets and long-lived assets subject to amortization We evaluate our finite-lived intangible assets and our long-lived assets for indicators of possible impairment when events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable.
Cash Flows from Investing Activities For the year ended December 31, 2022, net cash used in investing activities was $228.5 million and primarily related to the purchase of short-term marketable securities of $315.1 million, additions of capital expenditures, net of $21.2 million, payments for acquired intangibles of $3.1 million, and acquisition of business, net of cash acquired of $0.6 million.
For the year ended December 31, 2022, net cash used in investing activities was $228.5 million and primarily related to the purchase of short-term marketable securities of $315.1 million, additions of capital expenditures, net of $21.2 million, payments for acquired intangibles of $3.1 million, and acquisition of business, net of cash acquired of $0.6 million.
We also consider our market capitalization on the date of the analysis to ensure the reasonableness of the reporting unit’s fair value. In connection with our annual goodwill assessment on December 1, 2022, we performed a qualitative assessment taking into consideration past, current and projected future earnings, recent trends and market conditions; and our market capitalization.
We also consider our market capitalization on the date of the analysis to ensure the reasonableness of the reporting unit’s fair value. In connection with our annual goodwill assessment on December 1, 2023, we performed a qualitative assessment taking into consideration past, current and projected future earnings, recent trends and market conditions; and our market capitalization.
Based on this analysis, we concluded that it was more likely than not that the fair value of the reporting unit exceeded its carrying amount. As such, it was not necessary to perform the quantitative goodwill impairment assessment at that time. As of December 31, 2022, no impairment of goodwill has been identified.
Based on this analysis, we concluded that it was more likely than not that the fair value of the reporting unit exceeded its carrying amount. As such, it was not necessary to perform the quantitative goodwill impairment assessment at that time. As of December 31, 2023, no impairment of goodwill has been identified.
Cash Flows from Financing Activities Net cash used in financing activities for the year ended December 31, 2022 was $4.5 million and primarily related to taxes paid related to net share settlements of restricted stock units of $5.9 million, payments of contingent consideration of $2.6 million, and repurchase and retirement of common stock of $0.6 million.
Net cash used in financing activities for the year ended December 31, 2022 was $4.5 million and primarily related to taxes paid related to net share settlements of restricted stock units of $5.9 million, payments of contingent consideration of $2.6 million, and repurchase and retirement of common stock of $0.6 million.
Although these countries are considered economically stable and we have experienced no notable burden from foreign exchange transactions, export duties or government regulations, unanticipated events in foreign countries could have a material adverse effect on our operations. 81 Table of Contents
Although these countries are considered economically stable and we have experienced no notable burden from foreign exchange transactions, export duties or government regulations, unanticipated events in foreign countries could have a material adverse effect on our operations. 83 Table of Contents
Our historical product portfolio includes QTYPE and Olerup SSP.QTYPE enables speed and precision in HLA typing at a low to intermediate resolution for samples that require a fast turn-around-time and uses real-time PCR methodology. QTYPE received CE mark certification on April 10, 2018. Olerup SSP is used to type HLA alleles based on the SSP technology.
Our historical product portfolio includes QTYPE and Olerup SSP. QTYPE enables speed and precision in HLA typing at a low to intermediate resolution for samples that require a fast turnaround time and uses real-time PCR methodology. QTYPE received CE mark certification on April 10, 2018. Olerup SSP is used to type HLA alleles based on the SSP technology.
Impairment of Goodwill, Intangible Assets and Long-lived Assets Goodwill 73 Table of Contents Goodwill recorded in a business combination is not subject to amortization. Instead, it is tested for impairment on an annual basis and whenever events or changes in circumstances indicate its carrying amount may not be recoverable. Our annual impairment test date is December 1 st .
Impairment of Goodwill, Intangible Assets and Long-lived Assets Goodwill Goodwill recorded in a business combination is not subject to amortization. Instead, it is tested for impairment on an annual basis and whenever events or changes in circumstances indicate its carrying amount may not be recoverable. Our annual impairment test date is December 1 st .
Our net loss also included the following noncash items: $46.6 million in stock-based compensation expense, $11.6 million of depreciation and amortization expense, amortization of right-of-use assets of $4.4 million, asset impairments and write-downs of $0.8 million, unrealized loss on long-term marketable equity securities of $1.2 million and amortization of premium on short-term marketable securities, net of $0.4 million.
Our net loss also included the following noncash items: $46.6 million in 82 Table of Contents stock-based compensation expense, $11.6 million of depreciation and amortization expense, amortization of right-of-use assets of $4.4 million, asset impairments and write-downs of $0.8 million, unrealized loss on long-term marketable equity securities of $1.2 million and amortization of premium on short-term marketable securities, net of $0.4 million.
The application helps patients manage their medications through alarms and interactive logging of medication events. In June 2021, we entered into a strategic agreement, which was amended in April 2022, with OrganX to develop clinical decision support tools across the transplant patient journey.
The application helps patients manage their medications through alarms and interactive logging of medication events. 70 Table of Contents In June 2021, we entered into a strategic agreement, which was amended in April 2022, with OrganX to develop clinical decision support tools across the transplant patient journey.
D-OAR was an observational, prospective, multicenter study to characterize the AlloSure Heart dd-cfDNA in a routine, clinical surveillance setting with heart transplant recipients. The D-OAR study was designed to validate that plasma levels of AlloSure Heart dd-cfDNA can discriminate acute rejection from no rejection, as determined by endomyocardial biopsy criteria.
D-OAR was an observational, prospective, multicenter study to characterize the AlloSure Heart dd-cfDNA in a routine, clinical surveillance setting with heart transplant recipients. The D-OAR study validated that plasma levels of AlloSure Heart dd-cfDNA can discriminate acute rejection from no rejection, as determined by endomyocardial biopsy criteria.
The effective tax rate for the year ended December 31, 2022 differs from the federal statutory tax rate mainly due to the state income tax expense per the new research and development regulations, whereas in prior years we only recognized the deferred tax assets from foreign losses with the full valuation allowance.
The difference in the effective tax rate for the year ended December 31, 2022 from the federal statutory tax rate is mainly due to the state income tax expense per the new research and development regulations, whereas in prior years we only recognized the deferred tax assets from foreign losses with the full valuation allowance.
In June 2020, we commercially launched AlloSeq HCT, a NGS solution for chimerism testing for stem cell transplant recipients. This technology has the potential to provide better sensitivity and data analysis compared to current solutions on the market. AlloSeq HCT received CE mark authorization in May 2022.
In June 2020, we launched AlloSeq HCT, an NGS solution for chimerism testing for stem cell transplant recipients. This technology has the potential to provide better sensitivity and data analysis compared to current solutions on the market. AlloSeq HCT received CE mark authorization in May 2022.
Compensation expense for stock options issued to nonemployees is calculated using the Black-Scholes Model and is recorded over the service performance period using the straight-line attribution method. Options subject to vesting are required to be periodically remeasured over their service performance period, which is generally the same as the vesting period.
Compensation expense for stock options issued to nonemployees is calculated using the Black-Scholes Model and is recorded over the service performance period using the straight-line attribution method. Options subject to vesting are required to be periodically re-measured over their service performance period, which is generally the same as the vesting period.
Business Combinations We determine and allocate the purchase price of an acquired business to the assets acquired and liabilities assumed based on their estimated fair values as of the business combination date, including separately identifiable intangible assets, which are separable from goodwill.
Business Combinations We determine and allocate the purchase price of an acquired business to the assets acquired and liabilities assumed based on their estimated fair values as of the business combination date, including separately identifiable intangible assets, which are 73 Table of Contents separable from goodwill.
Under PAMA, laboratories that receive the majority of their Medicare revenues from payments made under the CLFS would report initially and then on a subsequent three-year basis thereafter (or annually for advanced diagnostic laboratory tests, or ADLTs), private payer payment rates and volumes for their tests.
Under PAMA, laboratories that receive the majority of their 76 Table of Contents Medicare revenues from payments made under the CLFS would report initially and then on a subsequent three-year basis thereafter (or annually for advanced diagnostic laboratory tests), private payer payment rates and volumes for their tests.
While histologic analysis of the allograft biopsy specimen remains the standard method used to assess injury and differentiate rejection from other injury in kidney transplants, as an invasive test with complications, repetitive biopsies are not well tolerated. AlloSure Kidney provides a non-invasive test, assessing allograft injury that enables more frequent, quantitative and safer assessment of allograft rejection and injury status.
While histologic analysis of the allograft biopsy specimen remains the standard method used to assess injury and differentiate rejection from other injury in kidney transplants, as an invasive test with complications, repetitive biopsies are not well tolerated. AlloSure Kidney enables more frequent, quantitative and safer assessment of allograft rejection and injury status.
Products We develop, manufacture, market and sell products that increase the chance of successful transplants by facilitating a better match between a solid organ or stem cell donor and a recipient, and help to provide post-transplant surveillance of these recipients. Our historical product portfolio includes QTYPE and Olerup SSP.
Products We develop, manufacture, market and sell products that increase the chance of successful transplants by facilitating a better match between a solid organ or stem cell donor and a recipient, and help to provide post-transplant surveillance of these recipients. Our product portfolio includes AlloSeq Tx, QTYPE, Olerup SSP, AlloSeq HCT, and AlloSeq cfDNA.
The Number of AlloMap Heart, AlloSure Lung, AlloSure Kidney and AlloSure Heart Tests We Receive and Report The growth of our testing services business is tied to the number of AlloSure Kidney, AlloSure Lung, AlloMap Heart and AlloSure Heart patient samples we receive and patient results we report.
Factors Affecting Our Performance The Number of AlloMap Heart, AlloSure Lung, AlloSure Kidney and AlloSure Heart Tests We Receive and Report The growth of our testing services business is tied to the number of AlloSure Kidney, AlloSure Lung, AlloMap Heart and AlloSure Heart patient samples we receive and patient results we report.
Testing Services Revenue Our testing services revenue is derived from AlloSure Kidney, AlloMap Heart, AlloSure Heart and AlloSure Lung tests, which represented 82%, 87% and 85% of our total revenues for the years ended December 31, 2022, 2021 and 2020, respectively.
Testing Services Revenue Our testing services revenue is derived from AlloSure Kidney, AlloMap Heart, AlloSure Heart and AlloSure Lung tests, which represented 75%, 82% and 87% of our total revenues for the years ended December 31, 2023, 2022 and 2021, respectively.
We generally bill software subscription fees in advance. Revenue from software subscriptions is deferred and recognized ratably over the subscription term. The medication sales revenue is recognized based on the negotiated contract price with the governmental, commercial and non-commercial payers with any applicable patient co-pay. We recognize revenue from medication sales when prescriptions are delivered.
Revenue from software subscriptions is deferred and recognized ratably over the subscription term. The medication sales revenue is recognized based on the negotiated contract price with the governmental, commercial and non-commercial payers with any applicable patient co-pay. We recognize revenue from medication sales when prescriptions are delivered.
Product Revenue Our product revenue is derived primarily from sales of AlloSeq Tx, Olerup SSP and QTYPE products. Product revenue represented 9%, 9% and 10% of total revenue for the years ended December 31, 2022, 2021 and 2020, respectively.
Product Revenue Our product revenue is derived primarily from sales of AlloSeq Tx, Olerup SSP and QTYPE products. Product revenue represented 12%, 9% and 9% of total revenue for the years ended December 31, 2023, 2022 and 2021, respectively.
We record deferred revenue in relation to these agreements when cash payments are received, or invoices are issued 72 Table of Contents in advance of our performance, and generally recognize revenue over the contractual term, as performance obligations are fulfilled. In addition, we derive patient and digital solutions revenue from software subscriptions and medication sales.
We record deferred revenue in relation to these agreements when cash payments are received, or invoices are issued in advance of our performance, and generally recognize revenue over the contractual term, as performance obligations are fulfilled. In addition, we derive patient and digital solutions revenue from software subscriptions and medication sales. We generally bill software subscription fees in advance.
We remeasure this liability each reporting period and record changes in the fair value as a component of operating expenses. In circumstances where the contingent consideration is classified as equity, we recognize it at fair value at the acquisition date. Contingent consideration classified as equity is not subsequently remeasured.
We re-measure this liability each reporting period and record changes in the fair value as a component of operating expenses. In circumstances where the contingent consideration is classified as equity, we recognize it at fair value at the acquisition date. Contingent consideration classified as equity is not subsequently re-measured.
Patient and Digital Solutions Revenue Our patient and digital solutions revenue is mainly derived from sales of our Ottr software, XynQAPI, MedActionPlan, TransChart and Tx Access licenses, services and SaaS agreements across the digital portfolio, as well as our pharmacy sales at TTP.
Patient and Digital Solutions Revenue Our patient and digital solutions revenue is mainly derived from sales of our Ottr software, XynQAPI, MedActionPlan, mTilda (HLA Data Systems), MediGO, TransChart and Tx Access licenses, services and SaaS agreements across the digital portfolio, as well as our pharmacy sales at TTP.
The CARES Act freezes current (2020) CMS CLFS rates through 2021. Further, the CARES Act delays the reporting cycle under PAMA to January 1 and March 31, 2022. The next data collection period will become January 1 through June 30, 2024. AlloMap Heart has also received positive coverage decisions for reimbursement from many of the largest U.S. private payers.
The CARES Act froze then-current (2020) CMS CLFS rates through 2021. Further, the CARES Act delayed the reporting cycle under PAMA to January 1 and March 31, 2022. The next data collection period is January 1 through June 30, 2024. AlloMap Heart has also received positive coverage decisions for reimbursement from many of the largest U.S. private payers.
Acquired in-process technology assets are considered to be indefinite-lived until the completion or abandonment of the associated research and development efforts.
Acquired in-process technology assets and a favorable license agreement are considered to be indefinite-lived until the completion or abandonment of the associated research and development efforts.
Comparison of the Years Ended December 31, 2021 and 2020 For a discussion regarding our financial condition and results of operations for the year ended December 31, 2021 as compared to the year ended December 31, 2020, please refer to the discussion under the heading “Results of Operations—Comparison of the Years Ended December 31, 2021 and 2020” in Item 7 of our Annual Report on Form 10-K for the fiscal year ended December 31, 2021, filed with the SEC on February 24, 2022. 78 Table of Contents Liquidity and Capital Resources We have incurred significant losses and negative cash flows from operations since our inception and had an accumulated deficit of $460.4 million at December 31, 2022.
Comparison of the Years Ended December 31, 2022 and 2021 For a discussion regarding our financial condition and results of operations for the year ended December 31, 2022 as compared to the year ended December 31, 2021, please refer to the discussion under the heading “Results of Operations—Comparison of the Years Ended December 31, 2022 and 2021” in Item 7 of our Annual Report on Form 10-K for the fiscal year ended December 31, 2022, filed with the SEC on February 27, 2023. 81 Table of Contents Liquidity and Capital Resources We have incurred significant losses and negative cash flows from operations since our inception and had an accumulated deficit of $678.3 million at December 31, 2023.
AlloSeq Tx 17 received CE mark authorization on May 15, 2020. In June 2020, we commercially launched AlloSeq HCT, a NGS solution for chimerism testing for stem cell transplant recipients. This technology has the potential to provide better sensitivity and data analysis compared to current solutions on the market. AlloSeq HCT received CE mark authorization in May 2022.
AlloSeq Tx 17 received CE mark authorization on May 15, 2020. 77 Table of Contents In June 2020, we launched AlloSeq HCT, an NGS solution for chimerism testing for stem cell transplant recipients. This technology has the potential to provide better sensitivity and data analysis compared to current solutions on the market.
Reimbursement for AlloSure Heart In October 2020, we received a final Palmetto MolDx Medicare coverage decision for AlloSure Heart. In November 2020, Noridian Healthcare Solutions, our Medicare Administrative Contractor, issued a parallel coverage policy granting coverage when used in conjunction with AlloMap Heart, which became effective in December 2020. The Medicare reimbursement rate for AlloSure Heart is currently $2,753.
In November 2020, Noridian Healthcare Solutions, our Medicare Administrative Contractor, issued a parallel coverage policy granting coverage when used in conjunction with AlloMap Heart, which became effective in December 2020. The Medicare reimbursement rate for AlloSure Heart is currently $2,753.
This technology enables the most comprehensive sequencing, covering more of the HLA genes than current solutions and adding coverage of non-HLA genes that may impact transplant patient matching and management. AlloSeq Tx has a simple NGS workflow that reduces complexity and can reduce errors. AlloSeq Tx 17 received CE mark authorization on May 15, 2020.
This technology enables the most comprehensive sequencing, covering more of the HLA genes than current solutions and adding coverage of non-HLA genes that may impact transplant patient matching and management. AlloSeq Tx has a simple NGS workflow that reduces complexity and can reduce errors.
TransChart provides EMR software to hospitals throughout the United States to care for patients who have or may need an organ transplant.
In January 2021, we acquired TransChart. TransChart provides EMR software to hospitals throughout the United States to care for patients who have or may need an organ transplant.
Patient and Digital Solutions Revenue Patient and digital solutions revenue is mainly derived from a combination of SaaS and perpetual software license agreements entered into with various transplant centers (customers).
Patient and Digital Solutions Revenue Patient and digital solutions revenue is mainly derived from a combination of SaaS and perpetual software license agreements entered into with various transplant centers, which are our customers for this class of revenue.
Cellular Therapy In April 2020, we initiated a research partnership for AlloCell, a surveillance solution that monitors the level of engraftment and persistence of allogeneic cells for patients who have received cell therapy. AlloCell is being commercialized through research agreements with biopharma companies developing cell therapies.
The Medicare reimbursement rate for AlloSure Lung is $2,753. Cellular Therapy In April 2020, we initiated a research partnership for AlloCell, a surveillance solution that monitors the level of engraftment and persistence of allogeneic cells for patients who have received cell therapy. AlloCell is being commercialized through research 69 Table of Contents agreements with biopharma companies developing cell therapies.
Product Revenue Product revenue increased by $2.4 million, or 9%, for the year ended December 31, 2022, compared to the year ended December 31, 2021, primarily due to growth from the NGS typing products.
Product revenue Product revenue increased by $4.3 million, or 15%, for the year ended December 31, 2023, compared to the year ended December 31, 2022, primarily due to growth from NGS typing products.
Off-Balance Sheet Arrangements Not required. Foreign Operations The accompanying consolidated balance sheets contain certain recorded assets in foreign countries, namely Stockholm, Sweden and Fremantle, Australia.
Foreign Operations The accompanying consolidated balance sheets contain certain recorded assets in foreign countries, namely Stockholm, Sweden and Fremantle, Australia.
Intangible assets not subject to amortization We evaluate the carrying value of intangible assets not subject to amortization, related to acquired in-process technology assets, which are considered to be indefinite-lived until the completion or abandonment of the associated research and development efforts. Accordingly, amortization of the acquired in-process technology assets will not occur until the products reach commercialization.
Intangible assets not subject to amortization We evaluate the carrying value of intangible assets not subject to amortization, related to acquired in-process technology assets and a favorable license agreement, which are considered to be indefinite-lived until the completion or abandonment of the associated research and development efforts.
Continued Growth of Patient and Digital Sales The growth of our patient and digital revenues is tied to the continued successful implementation of our Ottr, MedActionPlan and XynQAPI software businesses, as well as continued support and maintenance of existing MedActionPlan, Ottr and XynManagement customers.
AlloSeq HCT received CE mark authorization in May 2022. Continued Growth of Patient and Digital Sales The growth of our patient and digital revenues is tied to the continued successful implementation of our Ottr, MedActionPlan and XynQAPI software businesses, as well as continued support and maintenance of existing MedActionPlan, Ottr and XynManagement customers.
Our net loss of $30.7 million was our primary use of cash in operating activities.
Our net loss of $76.6 million was our primary use of cash in operating activities.
During the period the assets are considered indefinite-lived, they are tested for impairment on an annual basis, as well as between annual tests if we become aware of any events occurring or changes in circumstances that would indicate that the fair values of the acquired in-process technology assets are less than their carrying amounts.
Accordingly, amortization of the acquired in-process technology assets and favorable license agreement will not occur until the products reach commercialization. 74 Table of Contents During the period the assets are considered indefinite-lived, they are tested for impairment on an annual basis, as well as between annual tests if we become aware of any events occurring or changes in circumstances that would indicate that the fair values of the acquired in-process technology assets are less than their carrying amounts.
Cash used in operating activities was also due to an increase in accounts receivable of $6.7 million. Cash used in operating activities was partially offset by an increase in net operating assets of $7.6 million. Net cash used in operating activities for the year ended December 31, 2021 was $19.3 million.
Cash used in operating activities was also due to an increase in accounts receivable of $16.0 million. Cash used in operating activities was partially offset by an increase in net operating assets of $90.6 million. Net cash used in operating activities for the year ended December 31, 2022 was $25.2 million.
AlloMap Heart has been a covered service for Medicare beneficiaries since January 1, 2006. The Medicare reimbursement rate for AlloMap Heart is currently $3,240. AlloMap Heart has also received positive coverage decisions for reimbursement from many of the largest U.S. private payers. In October 2020, we received a final Palmetto MolDx Medicare coverage decision for AlloSure Heart.
AlloMap Heart has been a covered service for Medicare beneficiaries since January 1, 2006. The Medicare reimbursement rate for AlloMap Heart is currently $3,240. In October 2020, we received a final MolDX Medicare coverage decision for AlloSure Heart.
AlloMap Heart is now recommended as part of the ISHLT (International Society for Heart and Lung Transplantation) guidelines. HeartCare HeartCare includes the gene expression profiling technology of AlloMap Heart with the dd-cfDNA analysis of AlloSure Heart in one surveillance solution.
The results of our clinical trials have also been presented at major medical society congresses. AlloMap Heart is now recommended as part of the International Society for Heart and Lung Transplantation, or ISHLT, guidelines. HeartCare HeartCare includes the gene expression profiling technology of AlloMap Heart with the dd-cfDNA analysis of AlloSure Heart in one surveillance solution.
These NGS products include: AlloSeq Tx, a high-resolution HLA 75 Table of Contents typing solution, AlloSeq cfDNA, our surveillance solution designed to measure dd-cfDNA in blood to detect active rejection in transplant recipients, and AlloSeq HCT, a NGS solution for chimerism testing for stem cell transplant recipients.
Our NGS products include: AlloSeq Tx, a high-resolution HLA typing solution, AlloSeq cfDNA, our surveillance solution designed to measure dd-cfDNA in blood to detect active rejection in transplant recipients, and AlloSeq HCT, an NGS solution for chimerism testing for stem cell transplant recipients. We received CE mark authorization for AlloSeq cfDNA in January 2020.
Research and Development Research and development expenses increased by $13.9 million, or 18%, for the year ended December 31, 2022, compared to the year ended December 31, 2021, primarily due to an increase in headcount and personnel-related costs of $4.5 million, an increase in consulting and professional fees of $5.6 million, an increase in stock-based compensation expense of $0.3 million and an increase in software expense of $2.1 million.
Research and development Research and development expenses decreased by $8.5 million, or (9)%, for the year ended December 31, 2023, compared to the year ended December 31, 2022, primarily due to a decrease in headcount and personnel-related costs of $3.6 million, a decrease in consulting and professional fees of $3.8 million and a decrease in stock-based compensation expense of $0.8 million.
QTYPE enables HLA typing at a low to intermediate resolution for samples that require a fast turn-around-time and uses real-time PCR methodology. Olerup SSP is used to type HLA alleles based on the SSP technology.
QTYPE enables Human Leukocyte Antigen, or HLA, typing at a low to intermediate resolution for samples that require a fast turnaround time and uses real-time polymerase chain reaction, or PCR, methodology. Olerup SSP is used to type HLA alleles based on the sequence specific primer, or SSP, technology.
In 2008, AlloMap Heart received 510(k) clearance from the U.S. Food and Drug Administration for marketing and sale as a test to aid in the identification of heart transplant recipients, who have a low probability of moderate/severe acute cellular rejection at the time of testing, in conjunction with standard clinical assessment.
Food and Drug Administration for marketing and sale as a test in heart transplant recipient who have stable graft function at the time of testing, to aid in the identification of those who have a low probability of moderate/severe acute cellular rejection at the time of testing, in conjunction with standard clinical assessment.
Combined with K-OAR, more than 3,000 patients have been enrolled into the study. Heart AlloMap Heart is a gene expression test that helps clinicians monitor and identify heart transplant recipients with stable graft function who have a low probability of moderate-to-severe acute cellular rejection.
Heart AlloMap Heart is a gene expression test that helps clinicians monitor and identify heart transplant recipients with stable graft function who have a low probability of moderate-to-severe acute cellular rejection.
Interest Income, Net Interest income, net, increased by $3.6 million for the year ended December 31, 2022, compared to the year ended December 31, 2021, primarily due to interest income earned on U.S. agency securities and corporate debt securities.
Interest income, net Interest income, net, increased by $8.1 million for the year ended December 31, 2023, compared to the year ended December 31, 2022, primarily due to interest income earned on U.S. agency securities and corporate debt securities as a result of rising interest rates.
Continued Growth of Product Sales We develop, manufacture, market and sell products that increase the chance of successful transplants by facilitating a better match between a donor and a recipient of stem cells and solid organs.
See the discussion above under “ The Number of AlloMap Heart, AlloSure Lung, AlloSure Kidney and AlloSure Heart Tests We Receive and Report ”. Continued Growth of Product Sales We develop, manufacture, market and sell products that increase the chance of successful transplants by facilitating a better match between a donor and a recipient of stem cells and solid organs.
HeartCare provides robust information about distinct biological processes, such as immune quiescence, active injury, ACR and AMR. In September 2018, we initiated the SHORE study. SHORE is a prospective, multi-center, observational, registry of patients receiving HeartCare for surveillance. Patients enrolled in SHORE will be followed for 5 years with collection of clinical data and assessment of 5-year outcomes.
In September 2018, we initiated the SHORE study, a prospective, multi-center, observational, registry of patients receiving HeartCare for surveillance. Patients enrolled in SHORE will be followed for 5 years with collection of clinical data and assessment of 5-year outcomes.
As of December 31, 2022, $49.4 million remained available for future share repurchase under the Repurchase Program. 79 Table of Contents Cash Flows The following table summarizes our cash flows for the years ended December 31, 2022, 2021 and 2020: Year Ended December 31, 2022 2021 2020 (in thousands) Net cash (used in) provided by: Operating activities $ (25,239) $ (19,294) $ 33,431 Investing activities (228,502) 47,712 (100,394) Financing activities (4,535) 185,642 163,149 Effect of exchange rate changes on cash, cash equivalents and restricted cash 23 (303) 274 Net (decrease) increase in cash, cash equivalents and restricted cash $ (258,253) $ 213,757 $ 96,460 Cash Flows from Operating Activities Net cash (used in) provided by operating activities consists of net loss, adjusted for certain noncash items in the consolidated statements of operations and changes in operating assets and liabilities.
Cash Flows The following table summarizes our cash flows for the years ended December 31, 2023, 2022 and 2021: Year Ended December 31, 2023 2022 2021 (in thousands) Net cash (used in) provided by: Operating activities $ (18,388) $ (25,239) $ (19,294) Investing activities 40,446 (228,502) 47,712 Financing activities (29,606) (4,535) 185,642 Effect of exchange rate changes on cash, cash equivalents and restricted cash (112) 23 (303) Net (decrease) increase in cash, cash equivalents and restricted cash $ (7,660) $ (258,253) $ 213,757 Cash Flows from Operating Activities Net cash used in operating activities consists of net loss, adjusted for certain noncash items in the consolidated statements of operations and changes in operating assets and liabilities.
Sales and Marketing Sales and marketing expenses increased by $18.8 million, or 24%, for the year ended December 31, 2022, compared to the year ended December 31, 2021, primarily due to an increase in headcount and personnel-related costs of $10.9 million, an increase in stock-based compensation expense of $3.5 million, an increase in travel costs of $2.5 million and an increase in tradeshows and events of $1.3 million.
Sales and marketing Sales and marketing expenses decreased by $12.7 million, or (13)%, for the year ended December 31, 2023, compared to the year ended December 31, 2022, primarily due to a decrease in headcount and personnel-related costs of $7.0 million, a decrease in stock-based compensation expense of $1.9 million, a decrease in travel costs of $1.1 million and a decrease in tradeshows and events of $2.3 million.
General and Administrative General and administrative expenses increased by $25.4 million, or 34%, for the year ended December 31, 2022, compared to the year ended December 31, 2021, primarily due to an increase in legal expenses of $11.8 million, an increase in consulting and professional fees of $4.0 million, an increase in stock-based compensation expense of $6.4 million, an increase in software expense of $1.7 million and an increase in travel expenses of $0.3 million, offset by a decrease in personnel-related costs of $1.2 million.
General and administrative General and administrative expenses increased by $17.5 million, or 17%, for the year ended December 31, 2023, compared to the year ended December 31, 2022, primarily due to an increase in legal expenses of $6.3 million, an increase in stock-based compensation expense of $4.9 million, an increase in software expense of $2.8 million and an increase in personnel-related costs of $2.6 million.
Tx9 received CE mark authorization in August 2022. 69 Table of Contents Patient and Digital Solutions In 2019, we began providing digital solutions to transplant centers following the acquisitions of Ottr and XynManagement. On May 7, 2019, we acquired 100% of the outstanding common stock of Ottr.
Patient and Digital Solutions In 2019, we began providing digital solutions to transplant centers following the acquisitions of Ottr and XynManagement. In May 2019, we acquired 100% of the outstanding common stock of Ottr.
Timing of Research and Development Expenses Our spending on research and development may vary substantially from quarter to quarter. We conduct clinical studies to validate our new products, as well as on-going clinical and outcome studies to further the published evidence to support our commercialized tests.
We conduct clinical studies to validate our new products, as well as on-going clinical and outcome studies to further the published evidence to support our commercialized tests.
The prospective multicenter trial, the K-OAR study, has enrolled over 1,700 patients, with plans to survey patients with AlloSure Kidney for 3 years and provide further clinical utility of AlloSure Kidney in the surveillance of kidney transplant recipients.
The prospective multicenter trial K-OAR study, completed with over 1,900 patients enrolled, monitors patients with AlloSure Kidney for 3 years with the objective of providing further evidence of clinical utility of AlloSure Kidney in the surveillance of kidney transplant recipients.
Net cash used in operating activities for the year ended December 31, 2022 was $25.2 million. Our net loss of $76.6 million was our primary use of cash in operating activities.
Net cash used in operating activities for the year ended December 31, 2023 was $18.4 million. Our net loss of $190.3 million was our primary use of cash in operating activities.
KidneyCare KidneyCare combines the dd-cfDNA analysis of AlloSure Kidney with the gene expression profiling technology of AlloMap Kidney and the predictive artificial intelligence technology of iBox in one surveillance solution.
KidneyCare KidneyCare combines the dd-cfDNA analysis of AlloSure Kidney with the gene expression profiling technology of AlloMap Kidney and the predictive artificial intelligence technology of iBox in one surveillance solution. We have not yet made any applications to private payers for reimbursement coverage of AlloMap Kidney or iBox.
The Protecting Access to Medicare Act of 2014, or PAMA, included a substantial new payment system for clinical laboratory tests under the Clinical Laboratory Fee Schedule, or CLFS.
See the discussion above under “ The Number of AlloMap Heart, AlloSure Lung, AlloSure Kidney and AlloSure Heart Tests We Receive and Report ”. The Protecting Access to Medicare Act of 2014, or PAMA, included a substantial new payment system for clinical laboratory tests under the Clinical Laboratory Fee Schedule, or CLFS.
AlloSure Kidney has received positive coverage decisions from several commercial payers, and is reimbursed by other private payers on a case-by-case basis. Multiple studies have demonstrated that significant allograft injury can occur in the absence of changes in serum creatinine. Thus, clinicians have limited ability to detect injury early and intervene to prevent long-term damage using this marker.
Multiple studies have demonstrated that significant allograft injury can occur in the absence of changes in serum creatinine. Thus, clinicians have limited ability to detect injury early and intervene to prevent long-term damage using this marker.
These proceeds were partially offset by taxes paid related to net share settlements of restricted stock units of $18.1 million. 80 Table of Contents For a discussion regarding our cash flows for the year ended December 31, 2020, please refer to the discussion under the heading “Results of Operations—Liquidity and Capital Resources” in Item 7 of our Annual Report on Form 10-K for the fiscal year ended December 31, 2021, filed with the SEC on February 24, 2022.
For a discussion regarding our cash flows for the year ended December 31, 2021, please refer to the discussion under the heading “Results of Operations—Liquidity and Capital Resources” in Item 7 of our Annual Report on Form 10-K for the fiscal year ended December 31, 2022, filed with the SEC on February 27, 2023.
In September 2020, we launched AlloCare, a mobile app that provides a patient-centric resource for transplant recipients to manage medication adherence, coordinate with Patient Care Managers for AlloSure scheduling and measure health metrics. In January 2021, we acquired TransChart.
XynCare includes a team of transplant assistants who maintain regular contact with patients on the waitlist to help prepare for their transplant and maintain eligibility. In September 2020, we launched AlloCare, a mobile app that provides a patient-centric resource for transplant recipients to manage medication adherence, coordinate with Patient Care Managers for AlloSure scheduling, and measure health metrics.
Since the analytical validation paper in the Journal of Molecular Diagnostics in 2016 before the commercial launch of AlloSure Kidney, there has been an increasing body of evidence supporting the use of AlloSure Kidney dd-cfDNA in the assessment and surveillance of kidney transplants.
Monitoring of graft injury through AlloSure Kidney allows clinicians to optimize allograft biopsies, identify allograft injury and guide immunosuppression management more accurately. Since the analytical validation paper in the Journal of Molecular Diagnostics in 2016, there has been an increasing body of evidence supporting the use of AlloSure Kidney dd-cfDNA in the assessment and surveillance of kidney transplants.
This technology enables the most comprehensive sequencing, covering more of the HLA genes than other solutions on the market and adding coverage of non-HLA genes that may impact transplant patient matching and management. AlloSeq Tx has simple NGS workflow, with a single tube for processing and steps to reduce errors.
This technology enables the most comprehensive sequencing, covering more of the HLA genes than other solutions on the market and adding coverage of non-HLA genes that may impact transplant patient matching and management. AlloSeq Tx 17 received CE mark authorization in May 2020.
Together, we and OrganX will develop advanced analytics that integrate AlloSure, the first transplant specific dd-cfDNA assay, with large transplant databases to provide clinical data solutions. This partnership delivers the next level of innovation beyond multi-modality by incorporating a variety of clinical inputs to create a universal composite scoring system.
Together, we and OrganX, will develop advanced analytics that integrate AlloSure with large transplant databases. This partnership delivers the next level of innovation by incorporating a variety of clinical inputs to create a universal composite scoring system. In November 2021, we acquired MedActionPlan, a New Jersey-based provider of medication safety, medication adherence and patient education.
We expect to invest in research and development in order to develop additional products. Our success in developing new products and services will be important in our efforts to grow our business by expanding the potential market for our services and products and diversifying our sources of revenue.
Our success in developing new services and products will be important in our efforts to grow our business by expanding our potential market opportunity and diversifying our sources of revenue. Timing of Research and Development Expenses Our spending on research and development may vary substantially from quarter to quarter.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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However, we have not been exposed to, nor do we anticipate being exposed to, material risks due to changes in interest rates. A hypothetical 100 basis point increase or decrease in interest rates during any of the periods presented would have an approximate impact of $2.9 million on our consolidated balance sheets.
However, we have not been exposed to, nor do we anticipate being exposed to, material risks due to changes in interest rates. A hypothetical 100 basis point increase or decrease in interest rates during any of the periods presented would have an approximate impact of $2.4 million on our consolidated balance sheets.
Currently, we do not have any near-term plans to enter into a formal hedging program to mitigate the effects of foreign currency volatility. We will continue to reassess our approach to managing our risk relating to fluctuations in foreign currency exchange rates. 82 Table of Contents
Currently, we do not have any near-term plans to enter into a formal hedging program to mitigate the effects of foreign currency volatility. We will continue to reassess our approach to managing our risk relating to fluctuations in foreign currency exchange rates. 84 Table of Contents
An unfavorable 10% change in foreign currency exchange rates for our assets and liabilities denominated in foreign currencies at December 31, 2022, would have negatively impacted our financial results for the year ended December 31, 2022 by $0.3 million and our product revenue by $1.3 million.
An unfavorable 10% change in foreign currency exchange rates for our assets and liabilities denominated in foreign currencies at December 31, 2023, would have negatively impacted our financial results for the year ended December 31, 2023 by $0.6 million and our product revenue by $1.4 million.
We had cash and cash equivalents and marketable securities of $293.1 million at December 31, 2022, which consisted of bank deposits and money market funds, and we had cash, cash equivalents and marketable securities of $348.5 million at December 31, 2021, which consisted of bank deposits, money market funds and corporate debt securities.
We had cash and cash equivalents and marketable securities of $235.4 million at December 31, 2023, which consisted of bank deposits and money market funds, and we had cash, cash equivalents and marketable securities of $293.1 million at December 31, 2022, which consisted of bank deposits and money market funds.

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