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What changed in Fulgent Genetics, Inc.'s 10-K — 2023 vs 2024

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Paragraph-level year-over-year comparison of Fulgent Genetics, Inc.'s 2023 and 2024 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2024 report.

+703 added−607 removedSource: 10-K (2025-02-28) vs 10-K (2024-02-28)

Top changes in Fulgent Genetics, Inc.'s 2024 10-K

703 paragraphs added · 607 removed · 481 edited across 8 sections

Item 1. Business

Business — how the company describes what it does

177 edited+84 added−42 removed231 unchanged
Biggest changeWe may become subject to such reporting requirements under the terms of current CMS regulations, however, enacted federal legislation renders our tests regulated by FDA, or if FDA finalizes its recently initiated notice-and-comment rulemaking to exercise authority over LDTs as medical devices or otherwise requires us to obtain premarket clearance or approval for one or more of our tests.
Biggest changeWe may become subject to such reporting requirements under the terms of current CMS regulations, however, if the FDA requires us to obtain premarket authorization for our tests as medical devices (whether because the agency determines that one or more of the tests do not fall within the scope of the agency’s existing LDT definition or because of its recently issued final rule to exercise authority over LDTs as medical devices) or Congress enacts legislative reforms to the federal oversight of LDTs to subject them to FDA regulation and/or the reporting requirements of the Sunshine Act.
Other potential consequences of regulatory non-compliance include, among other things: • Restrictions on the marketing or manufacturing of the product, complete withdrawal of the product from the market or product recalls; • fines, warning letters or other enforcement-related letters or clinical holds on post-approval clinical trials; • refusal of the FDA to approve pending NDAs or supplements to approved NDAs; • product seizure or detention, or refusal to permit the import or export of products; injunctions or the imposition of civil or criminal penalties; • consent decrees, corporate integrity agreements, debarment, or exclusion from federal health care programs; or • mandated modification of promotional materials and labeling and the issuance of corrective information.
Other potential consequences of regulatory non-compliance include, among other things: • Restrictions on the marketing or manufacturing of the product, complete withdrawal of the product from the market or product recalls; • fines, warning letters or other enforcement-related letters or clinical holds on post-approval clinical trials; • refusal of the FDA to approve pending NDAs or supplements to approved NDAs; • product seizure or detention, or refusal to permit the import or export of products; injunctions or the imposition of civil or criminal penalties; • consent decrees, corporate integrity agreements, debarment, or exclusion from federal health care programs; and/or • mandated modification of promotional materials and labeling and the issuance of corrective information.
Patent Term Extension A patent claiming a prescription drug or medical device for which FDA approval is granted may be eligible for a limited patent term extension under the FDC Act, which permits a patent restoration of up to five years for patent term lost during product development and the FDA regulatory review provided that certain statutory and regulatory requirements are met.
Patent Term Extension A patent claiming a prescription drug or medical device for which FDA approval is granted may be eligible for a limited patent term extension under the FDC Act, which permits patent restoration of up to five years for patent term lost during product development and the FDA regulatory review provided that certain statutory and regulatory requirements are met.
Rules and Regulations Relating to Companion or Complementary Diagnostics The success of one or more of our drug candidates may depend, in part, on the development and commercialization of either a companion diagnostic or complementary diagnostic.
Rules and Regulations Relating to Companion or Complementary Diagnostics The success of one or more of our drug candidates may depend, in part, on the development and commercialization of either a companion diagnostic or a complementary diagnostic.
In the United States no uniform policy of coverage and reimbursement for human drug products exists. Accordingly, decisions regarding the extent of coverage and amount of reimbursement to be provided for any of our future drugs will be made on a payor-by-payor basis.
In the United States no uniform policy of coverage and reimbursement for human drug products exists. Accordingly, decisions regarding the extent of coverage and the amount of reimbursement to be provided for any of our future drugs will be made on a payor-by-payor basis.
The healthcare fraud statute prohibits, among other things, knowingly and willfully executing a scheme to defraud any healthcare benefit program, including private payors. A violation of this statute is a felony and may result in fines, imprisonment or exclusion from government payor programs such as the Medicare and Medicaid programs.
The healthcare fraud statute prohibits, among other things, knowingly and willfully executing a scheme to defraud any healthcare benefit program, including private payors. A violation of this statute is a felony and may result in fines, imprisonment or exclusion from government payor programs such as Medicare and Medicaid programs.
For instance, in the United Kingdom, under the Bribery Act of 2010, which became effective in July 2011, a bribery occurs when a person offers, gives, or promises to give a financial or other advantage to induce or reward another individual to improperly perform certain functions or activities, including any function of a public or private nature.
For instance, in the United Kingdom, under the Bribery Act of 2010, which became effective in July 2011, bribery occurs when a person offers, gives, or promises to give a financial or other advantage to induce or reward another individual to improperly perform certain functions or activities, including any function of a public or private nature.
Failure to comply with any applicable FDA requirements could trigger a range of enforcement actions by the FDA, including warning letters, civil monetary penalties, fines, injunctions, criminal prosecution, 8 consent decrees, repairs, replacements, refunds, recalls or seizures of products, operating restrictions, partial suspension or total shutdown of operations and denial of or challenges to applications for clearance or approval, as well as significant adverse publicity.
Failure to comply with any applicable FDA requirements could trigger a range of enforcement actions by the FDA, including warning letters, civil monetary penalties, fines, injunctions, criminal prosecution, consent decrees, repairs, replacements, refunds, recalls or seizures of products, operating restrictions, partial suspension or total shutdown of operations and denial of or challenges to applications for clearance or approval, as well as significant adverse publicity.
The FDA may also grant accelerated approval for such a drug when the product has an effect on an intermediate clinical endpoint that can be measured earlier than an effect on irreversible morbidity or mortality, or IMM, and that is reasonably likely to predict an effect on IMM or other clinical benefit, taking into account the severity, rarity, or prevalence of the condition and the availability or lack of alternative treatments or on the basis of an effect on a clinical endpoint other than survival or irreversible morbidity.
The FDA may also grant accelerated approval for such a drug when the product has an effect on an intermediate clinical endpoint that can be measured earlier than an effect on irreversible morbidity or mortality, or IMM, which is reasonably likely to predict an effect on IMM or other clinical benefit, taking into account the severity, rarity, or prevalence of the condition and the availability or lack of alternative treatments or on the basis of an effect on a clinical endpoint other than survival or irreversible morbidity.
However, the IRA’s impact on the pharmaceutical industry in the United States remains uncertain, in part because multiple large pharmaceutical companies and other stakeholders (e.g., the U.S. Chamber of Commerce) have initiated federal lawsuits against CMS arguing the program is unconstitutional for a variety of reasons, among other complaints. Those lawsuits are currently ongoing.
However, the IRA’s impact on the pharmaceutical industry in the United States remains uncertain, in part because multiple large pharmaceutical companies and other stakeholders (e.g., the U.S. 19 Chamber of Commerce) have initiated federal lawsuits against CMS arguing the program is unconstitutional for a variety of reasons, among other complaints. Those lawsuits are currently ongoing.
Among other things, the Information Blocking Rule requires us to provide patients with on-demand access to laboratory test results. These requirements can be inconsistent with our obligations under state law and/or medical or ethical standards. It is currently unclear how the ONC will approach delays in providing patient access in these situations.
Among other things, the Information Blocking 21 Rule requires us to provide patients with on-demand access to laboratory test results. These requirements can be inconsistent with our obligations under state law and/or medical or ethical standards. It is currently unclear how the ONC will approach delays in providing patient access in these situations.
These criminal penalties increase if the wrongful conduct 19 involves false pretenses or the intent to sell, transfer or use identifiable health information for commercial advantage, personal gain, or malicious harm. Covered entities are also subject to enforcement by state attorneys general who were given authority to enforce HIPAA under HITECH.
These criminal penalties increase if the wrongful conduct involves false pretenses or the intent to sell, transfer or use identifiable health information for commercial advantage, personal gain, or malicious harm. Covered entities are also subject to enforcement by state attorneys general who were given authority to enforce HIPAA under HITECH.
The FDC Act also provides for a period of three years of data exclusivity if an NDA or NDA supplement includes reports of one or more new clinical investigations, other than bioavailability or bioequivalence studies that were conducted or sponsored by the 16 applicant, are deemed by the FDA to be essential to the approval of the application or supplement.
The FDC Act also provides for a period of three years of data exclusivity if an NDA or NDA supplement includes reports of one or more new clinical investigations, other than bioavailability or bioequivalence studies that were conducted or sponsored by the applicant, are deemed by the FDA to be essential to the approval of the application or supplement.
Congress also recently amended the law to give the FDA the option of using expedited procedures to withdraw product approval if the sponsor’s confirmatory trial fails to verify the claimed clinical benefits of the product. All promotional materials for products approved for marketing under the accelerated approval program are subject to prior review by the FDA.
Congress also recently amended the law to give the FDA the option of using 16 expedited procedures to withdraw product approval if the sponsor’s confirmatory trial fails to verify the claimed clinical benefits of the product. All promotional materials for products approved for marketing under the accelerated approval program are subject to prior review by the FDA.
Numerous other federal, state, and foreign laws, including consumer protection laws and regulations, govern the collection, dissemination, use, access to, confidentiality and security of patient health information. In addition, Congress and some states are considering new laws and regulations that further and more broadly protect the privacy and security of medical records or health information.
Numerous other federal, state, and foreign laws, including consumer protection laws and regulations, govern the collection, dissemination, use, access to, confidentiality and security of patient health information. In addition, Congress and some states are 22 considering new laws and regulations that further and more broadly protect the privacy and security of medical records or health information.
The NIH’s Final Rule on ClinicalTrials.gov registration and reporting requirements became effective in 2017, and the government has begun enforcing those requirements against non-compliant clinical trial sponsors. 11 Clinical trials may not be completed successfully within any specified period, if at all.
The NIH’s Final Rule on ClinicalTrials.gov registration and reporting requirements became effective in 2017, and the government has begun enforcing those requirements against non-compliant clinical trial sponsors. Clinical trials may not be completed successfully within any specified period, if at all.
Even if such trials are conducted, the FDA may not approve any expansion of the labeled indications for use in a timely fashion, or at all. 13 In addition, FDA regulations require that products be manufactured in specific approved facilities and in accordance with cGMP.
Even if such trials are conducted, the FDA may not approve any expansion of the labeled indications for use in a timely fashion, or at all. In addition, FDA regulations require that products be manufactured in specific approved facilities and in accordance with cGMP.
The patent families comprising our patent portfolio are primarily focused on our nano-drug delivery platform technology, including FID-007 and other candidates we may develop, for delivery of water insoluble or poorly soluble drugs for treatments of disease conditions, including cancer.
The patent families comprising our patent portfolio are primarily focused on our nano-drug delivery platform technology, including FID-007 and FID-022 and other candidates we may develop, for delivery of water insoluble or poorly soluble drugs for treatments of disease conditions, including cancer.
Chief Scientific Officer Jian (James) Xie President and Chief Operating Officer Regina (Reggie) Groves Non-Employee Director Linda Marsh Non-Employee Director Michael Nohaile, Ph.D. Non-Employee Director Employee Training and Engagement Our dedicated and growing team of over 1,000 employees is a source of pride.
Chief Scientific Officer Jian (James) Xie President and Chief Operating Officer Regina (Reggie) Groves Non-Employee Director Linda Marsh Non-Employee Director Michael Nohaile, Ph.D. Non-Employee Director 27 Employee Training and Engagement Our dedicated and growing team of over 1,000 employees is a source of pride.
Information related to the investigational product, patient population, phase of investigation, study sites and investigators, and other aspects of the clinical trial is made public as part of the registration of the clinical trial. Sponsors are also obligated to disclose the results of their clinical trials after completion.
Information related to the investigational product, patient population, phase of investigation, study sites and investigators, and other aspects of the clinical trial is made public as part of the registration of 12 the clinical trial. Sponsors are also obligated to disclose the results of their clinical trials after completion.
Significant improvement may be illustrated by evidence of increased effectiveness in the treatment of a condition, elimination or substantial reduction of a treatment-limiting drug reaction, documented enhancement of patient compliance that may lead to improvement in serious outcomes, or evidence of safety and effectiveness in a new subpopulation.
Significant improvement may be illustrated by 15 evidence of increased effectiveness in the treatment of a condition, elimination or substantial reduction of a treatment-limiting drug reaction, documented enhancement of patient compliance that may lead to improvement in serious outcomes, or evidence of safety and effectiveness in a new subpopulation.
Covered entities are also subject to audit under HHS’s HITECH-mandated audit program and may be investigated in connection with privacy or data security. There are significant civil and criminal fines and other penalties that may be imposed for violating HIPAA.
Covered entities are also subject to audit under HHS’s HITECH-mandated audit program and may be investigated in connection with privacy or data security. 20 There are significant civil and criminal fines and other penalties that may be imposed for violating HIPAA.
We intend to continue to comprehensively protect all personal information and to comply with applicable laws regarding the protection of such information. 21 In many activities, including the conduct of clinical trials, we are subject to laws and regulations governing data privacy and the protection of health-related and other personal information.
We intend to continue to comprehensively protect all personal information and to comply with applicable laws regarding the protection of such information. In many activities, including the conduct of clinical trials, we are subject to laws and regulations governing data privacy and the protection of health-related and other personal information.
For the purposes of this provision, an NCE is a drug that contains no active moiety that has previously been approved by the FDA in any other NDA. An active moiety is the molecule or ion responsible for the physiological or pharmacological action of the drug substance.
For the purposes of this provision, an NCE is a drug that contains no active moiety that has previously been approved by the FDA in any other NDA. An active moiety is the molecule or ion responsible for the physiological or pharmacological action of the drug 17 substance.
In particular, securing FDA approval for new indications is similar to the process for approval of the original indication and requires, among other things, submitting data from adequate and well-controlled clinical trials to demonstrate the product’s safety and efficacy in the new indication.
In particular, securing 14 FDA approval for new indications is similar to the process for approval of the original indication and requires, among other things, submitting data from adequate and well-controlled clinical trials to demonstrate the product’s safety and efficacy in the new indication.
In addition, providers and suppliers must report and return any overpayments received from the Medicare and Medicaid programs within 60 days of identification. Failure to identify and return such overpayments exposes the provider or supplier to False Claims Act liability.
In addition, providers and suppliers must report and return any overpayments received from the 24 Medicare and Medicaid programs within 60 days of identification. Failure to identify and return such overpayments exposes the provider or supplier to False Claims Act liability.
The Uninsured Program was valid for the period between May 2020 through April 2022 and HRSA announced that the Uninsured Program ceased accepting COVID-19 testing claims as of March 22, 2022, due to a lack of sufficient funds.
The Uninsured Program was valid for the period between May 2020 and April 2022, and HRSA announced that the Uninsured Program ceased accepting COVID-19 testing claims as of March 22, 2022, due to a lack of sufficient funds.
However, unlike the federal 22 Anti-Kickback Statute, EKRA is not limited to services covered by federal or state healthcare programs but applies more broadly to services covered by “healthcare benefit programs,” including commercial insurers.
However, unlike the federal Anti-Kickback Statute, EKRA is not limited to services covered by federal or state healthcare programs but applies more broadly to services covered by “healthcare benefit programs,” including commercial insurers.
Patent Listing and Regulatory Exclusivity under the Hatch-Waxman Act 15 As noted above, Congress created the 505(b)(2) NDA pathway in 1984 as part of the Hatch-Waxman Act amendments to the FDC Act.
Patent Listing and Regulatory Exclusivity under the Hatch-Waxman Act As noted above, Congress created the 505(b)(2) NDA pathway in 1984 as part of the Hatch-Waxman Act amendments to the FDC Act.
State laws establish standards for day-to-day operations of our laboratories, including requirements with respect to the training and skills required of personnel, quality control, and proficiency testing requirements.
State laws establish standards for day-to-day operations of our laboratories, including requirements with respect to the training and skills required of personnel, quality control, and 6 proficiency testing requirements.
Foreign licensure requirements could require review and modification of our tests in order to offer them in certain jurisdictions or could impose other limitations, such as restrictions on international data transfer or on the transport of human blood or other tissue necessary for us to perform our tests, that may limit our ability to make our tests available outside of the United States on a broad scale.
Foreign licensure requirements could require review and modification of our tests in order to offer them in certain jurisdictions or could impose other limitations, such as restrictions on international data transfer or on the transport of human blood or other tissue necessary for us to perform our tests, that may limit our ability to make our tests available outside of the United States on a broader scale.
An ANDA is a comprehensive submission that contains, among other things, data and information pertaining to the active pharmaceutical ingredient, bioequivalence, drug product formulation, specifications and stability of the generic drug, as well as analytical methods, manufacturing process validation data and quality control procedures. ANDAs are “abbreviated” because they cannot include preclinical and clinical data to demonstrate safety and effectiveness.
An ANDA is a comprehensive submission that contains, among other things, data and information pertaining to the active pharmaceutical ingredient, bioequivalence, drug product formulation, specifications and stability of the generic drug, as well as analytical methods, manufacturing process validation data and quality control procedures. ANDAs are “abbreviated” because they cannot include non-clinical and clinical data to demonstrate safety and effectiveness.
If one or more of our laboratories are found to be out of compliance with CLIA requirements, we may be subject to sanctions such as suspension, limitation, or revocation of our CLIA certificate; a directed plan of correction; on-site monitoring; civil monetary penalties; civil injunctive suits; criminal penalties; exclusion from the Medicare and Medicaid programs; and significant adverse publicity.
If one or more of our laboratories is found to be out of compliance with CLIA requirements, we may be subject to sanctions such as suspension, limitation, or revocation of our CLIA certificate; a directed plan of correction; on-site monitoring; civil monetary penalties; civil injunctive suits; criminal penalties; exclusion from the Medicare and Medicaid programs; and significant adverse publicity.
Healthcare Fraud and Abuse Laws Applicable to Our Business In the United States, we must comply with various fraud and abuse laws, and we are subject to regulation by various federal, state , and local authorities, including CMS, other divisions of HHS (such as the Office of Inspector General of the Department of Health and Human Services, or the OIG), the U.S.
Healthcare Fraud and Abuse Laws Applicable to our Business In the United States, we must comply with various fraud and abuse laws, and we are subject to regulation by various federal, state, and local authorities, including CMS, other divisions of HHS (such as the Office of Inspector General of the Department of Health and Human Services, or OIG), the DOJ, individual U.S.
Rules and Regulations Relating to Coverage, Pricing, and Reimbursement for Prescription Pharmaceutical Products Sales of pharmaceutical products approved for marketing by the FDA and foreign regulatory authorities will depend, in part, on the extent to which such products will be covered by third-party payors, such as government health programs, commercial insurance and managed care organizations.
Rules and Regulations Relating to Coverage, Pricing, and Reimbursement for Prescription Pharmaceutical Products Sales of pharmaceutical products approved for marketing by the FDA and foreign regulatory authorities will depend, in part, on the extent to which such products will be covered by insurance payors, such as government health programs, commercial insurance and managed care organizations.
Adoption of general 17 controls and measures, coupled with the tightening of restrictive policies in jurisdictions with existing controls and measures, could limit payments for pharmaceutical drugs.
Adoption of general controls and measures, coupled with the tightening of restrictive policies in jurisdictions with existing controls and measures, could limit payments for pharmaceutical drugs.
We offer a comprehensive compensation program that is designed to attract and reward talented individuals who possess the skills necessary to support our business objectives, assist in the achievement of our strategic goals and create long-term value for our stockholders. We provide competitive salaries, stock-based compensation, and bonus programs.
We offer a comprehensive compensation program that is designed to attract and reward talented individuals who possess the skills necessary to support our business objectives, assist in the achievement of our strategic goals and create long-term value for our stockholders. We provide competitive salaries, equity-based compensation, and bonus programs.
In particular, government authorities in the United States at the federal, state, and local level and in other countries regulate, among other things, the research, development, testing, manufacture, quality control, approval, labeling, packaging, storage, record-keeping, promotion, advertising, distribution, post-approval monitoring and reporting, marketing and export and import of therapeutic products.
In particular, government authorities in the United States at the federal, state, and local levels and in other countries regulate, among other things, the research, development, testing, manufacture, quality control, approval, labeling, packaging, storage, record-keeping, promotion, advertising, distribution, post-approval monitoring and reporting, marketing and export and import of therapeutic products.
Under these recent amendments to the FDC Act, the agency may require a sponsor of a product granted accelerated approval to have a confirmatory trial underway prior to approval. The sponsor must also submit progress reports on a confirmatory trial every six months until the trial is complete, and such reports will be published on the FDA’s website.
Under these recent amendments to the FDC Act, the agency may require a sponsor of a product granted accelerated approval to have a confirmatory trial underway prior to approval. The sponsor must also submit progress reports on a confirmatory trial every six months until the trial is completed, and such reports will be published on the FDA’s website.
As a result, they may be able to respond more quickly to changes in customer requirements or preferences, develop faster and better advancements for their technologies, product candidates and tests, create and implement more successful strategies for the promotion and sale of their tests, obtain more favorable results from third-party payors regarding coverage and reimbursement for their offerings, adopt more aggressive pricing policies for their tests, secure supplies from vendors on more favorable terms, or devote substantially more resources to infrastructure and systems development.
As a result, they may be able to respond more quickly to changes in customer requirements or preferences, develop faster and better advancements for their technologies, product candidates and tests, create and implement more successful strategies for the promotion and sale of their tests, obtain more favorable results from insurance payors regarding coverage and reimbursement for their offerings, adopt more aggressive pricing policies for their tests, secure supplies from vendors on more favorable terms, or devote substantially more resources to infrastructure and systems development.
Patents and/or patent applications in these families are active in multiple jurisdictions, including, the United States, Australia, Canada, China, European Patent Organization, German, New Zealand, Japan, and Switzerland. In addition to these owned and exclusively licensed patents and active patent applications, we also license patents on a non-exclusive and/or territory-restricted basis.
Patents and/or patent applications in these families are active in multiple jurisdictions, including the United States, Australia, Canada, China, European Patent Organization, Germany, New Zealand, Japan, and Switzerland. In addition to these owned and exclusively licensed patents and active patent applications, we also license patents on a non-exclusive and/or territory-restricted basis.
Workplace Safety and Health We are committed to promoting a safe and healthy work environment, to establishing policies and procedures that support the safety program, and to fostering a workplace that is free from hazards, substance abuse, and violence. We currently operate 7 CLIA-certified and CAP-accredited labs across the United States.
Workplace Safety and Health We are committed to promoting a safe and healthy work environment, to establishing policies and procedures that support the safety program, and to fostering a workplace that is free from hazards, substance abuse, and violence. We currently operate five CLIA-certified and CAP-accredited labs across the United States.
A Complete Response Letter indicates that the review cycle of the application is complete, and the application will not be approved in its present form. A Complete Response Letter usually describes all of the specific deficiencies in the NDA and may require substantial additional testing or information in order for the FDA to reconsider the application.
A Complete Response Letter indicates that the review cycle of the application is complete, and that it will not be approved in its present form. A Complete Response Letter usually describes all of the specific deficiencies in the NDA and may require substantial additional testing or information for the FDA to reconsider the application.
Government payment for some of the costs of prescription drugs may increase demand for products for which we receive marketing approval in the future. However, any negotiated prices for future products covered by a Part D prescription drug plan likely will be lower than the prices we might otherwise obtain.
Government payment for some of the costs of prescription drugs may increase demand for products that receive marketing approval in the future. However, any negotiated prices for future products covered by a Part D prescription drug plan likely will be lower than the prices we might otherwise obtain.
EKRA is an all-payer anti-kickback law that makes it a criminal offense to pay any remuneration to induce referrals to, or in exchange for, patients using the services of a recovery home, a substance use clinical treatment facility, or laboratory.
EKRA is an all-payor anti-kickback law that makes it a criminal offense to pay any remuneration to induce referrals to, or in exchange for, patients using the services of a recovery home, a substance use clinical treatment facility, or laboratory.
Bribery of foreign public officials also falls within the scope of the Bribery Act of 2010. An individual found in violation of the Bribery Act of 2010 faces imprisonment of up to 10 years and could be subject to an unlimited fine, as could commercial organizations for failure to prevent bribery.
Bribery of foreign public officials also falls within the scope of the Bribery Act of 2010. An individual found in violation of the Bribery Act of 2010 faces imprisonment of up to 10 years and could be subject to an unlimited fine, as could commercial organizations for failure to prevent bribery. U.S.
We provide numerous flexible and affordable pay options which include: acceptance of commercial insurance plans; availability of cash pricing at a discounted rate to make our tests more accessible; financial assistance resources based on various criteria for patients who are insured with commercial insurance but need additional financial help; a self-pay option for patients who do not meet insurance coverage policies for testing, have high-deductible plans, or have no insurance coverage; and our Compassionate Care Program, which offers financial assistance and non-interest payment plans for patients in the U.S. with no medical insurance and limited financial resources.
We provide numerous flexible and affordable pay options which include: acceptance of commercial insurance plans; availability of cash pricing at a discounted rate to make our tests more accessible; financial assistance resources based on various criteria for patients who are insured with commercial insurance but need additional financial help; a self-pay option for patients who do not meet insurance coverage policies for testing, have high-deductible plans, or have no insurance coverage; and our Compassionate Care Program, which offers financial assistance and non-interest payment plans for patients in the United States with no medical insurance and limited financial resources.
On the basis of the FDA’s evaluation of the NDA and accompanying information, including the results of the inspection of the manufacturing facilities, the FDA may issue either an approval letter or a Complete Response Letter. An approval letter authorizes commercial marketing of the drug with specific prescribing information for specific indications.
Based on the FDA’s evaluation of the NDA and accompanying information, including the results of the inspection of the manufacturing facilities, the FDA may issue either an approval letter or a Complete Response Letter. An approval letter authorizes commercial marketing of the drug with specific prescribing information for specific indications.
Covered entities must also comply with the security regulations of HIPAA and HITECH, which establish requirements for safeguarding the confidentiality, integrity, and availability of electronic PHI. The HIPAA security regulations require the implementation of administrative, physical, and technical safeguards and the adoption of written security policies and procedures.
Covered entities must also comply with the security regulations of HIPAA and HITECH, which establish requirements for safeguarding the confidentiality, integrity, and availability of electronic PHI. The HIPAA security regulations, or HIPAA Security Rule, require the implementation of administrative, physical, and technical safeguards and the adoption of written security policies and procedures.
Even though we presently commercialize our tests as LDTs, the FDA may disagree that our marketed tests are within the scope of its LDT criteria, or our tests may in the future become subject to more onerous regulation by the FDA.
Even though we presently commercialize our tests as LDTs, the FDA may disagree that our currently marketed tests are within the scope of its LDT criteria, or tests we develop may in the future become subject to more onerous regulation by the FDA.
Instead, in support of such applications, a generic manufacturer must rely on the preclinical and clinical testing previously conducted for a drug product previously approved under an NDA, known as the reference listed drug, or RLD.
Instead, in support of such applications, a generic manufacturer must rely on the non-clinical and clinical testing conducted for a drug product previously approved under an NDA, known as the reference listed drug, or RLD.
The Hatch-Waxman Act amendments to the FDC Act provided a five-year period of non-patent data exclusivity within the United States to the first applicant to gain approval of an NDA for a new chemical entity, or NCE.
The Hatch-Waxman Act amendments to the FDC Act provide a five-year period of non-patent data exclusivity within the United States to the first applicant to gain approval of an NDA for a new chemical entity, or NCE.
These tests and testing services are supported by our expansive geographic presence with several Clinical Laboratory Improvement Amendments of 1988, or CLIA, licensed laboratories in the United States. Our precision diagnostics testing services include next-generation sequencing, or NGS, tests for biopharma research and clinical tests for rare disease, hereditary cancer, reproductive health, and many other disease subtypes.
These services are supported by our expansive geographic presence with Clinical Laboratory Improvement Amendments of 1988, or CLIA, licensed laboratories in the United States. Precision diagnostics testing services, including next-generation sequencing, or NGS, tests for biopharma research and clinical tests for rare disease, hereditary cancer, reproductive health, and many other disease subtypes.
We offer and develop flexible and affordable diagnostic and genetic tests and testing services designed to improve patient care and quality of life. We strive to provide the most effective and wide-ranging genetic and diagnostic testing menu on the market. Our long-term vision is to transform from a diagnostic business into a fully integrated precision medicine company focused on oncology.
We offer and develop flexible and affordable diagnostic and genetic tests and laboratory services designed to improve patient care and quality of life. We strive to provide the most effective and wide-ranging genetic and diagnostic testing menu on the market. Our long-term vision is to transform from a diagnostic business into a fully integrated precision medicine company.
Our Laboratory Services Business We have broad testing capabilities with a testing and testing services menu that is scalable and affordable to our customers. Our testing and testing services include: Our comprehensive anatomic pathology tests and testing services include gastrointestinal pathology, dermatopathology, urologic pathology, breast pathology, neuropathology, and hematopathology.
Our Laboratory Services Business We have broad testing capabilities with a testing and testing services menu that is scalable and affordable to our customers. Our testing services include: Comprehensive anatomic pathology testing services, including gastrointestinal pathology, dermatopathology, urologic pathology, breast pathology, neuropathology, and hematopathology.
Our Texas laboratories currently hold the out-of-state licenses from California, New York, Maryland, Pennsylvania, and Rhode Island to perform testing on specimens from these states; and our California laboratory holds the required out-of-state laboratory licenses from New York, Maryland, Pennsylvania, and Rhode Island in order to perform testing on specimens from these states.
Our Texas laboratory currently holds the out-of-state licenses from New York, California, Maryland, Pennsylvania, and Rhode Island to perform testing on specimens from these states, and our California laboratory holds the required out-of-state laboratory licenses from New York, Maryland, Pennsylvania, and Rhode Island in order to perform testing on specimens from these states.
For non-NME NDAs, such as our current and potentially future product candidates, the review goals are ten months from the date of receipt for a standard application and six months from the date of receipt for a priority submission.
For non-NME NDAs, such as our current and, potentially, future product candidates, the review goals are 10 months from the date of receipt for a standard application and six months from the date of receipt for a priority submission.
For example, for many of our multi-gene panels, there may not be an appropriate CPT code for one or more of the genes in a panel, in which case our test may be billed under a miscellaneous code for an unlisted molecular pathology procedure. Many third-party payors do not have a set reimbursement rate for this miscellaneous code.
For example, for many of our multi-gene panels, there may not be an appropriate CPT code for one or more of the genes in a panel, in which case our test may be billed under a miscellaneous code for an unlisted molecular pathology procedure. Many insurance payors do not have a set reimbursement rate for this miscellaneous code.
Additionally, starting for payment year 2026, CMS will negotiate drug prices annually for a select number of single source Part D drugs without generic competition. CMS will also negotiate drug prices for a select number of Part B drugs starting for payment year 2028.
Additionally, starting for payment year 2026, CMS is negotiating drug prices annually for a select number of single source Part D drugs without generic competition. CMS will also negotiate drug prices for a select number of Part B drugs starting for payment year 2028.
False Claims Act Another development affecting the healthcare industry is the increased enforcement of the federal False Claims Act and, in particular, actions brought pursuant to the False Claims Act’s “whistleblower” or “qui tam” provisions.
False Claims Act Another development affecting the U.S. healthcare industry is the increased enforcement of the federal False Claims Act and, in particular, actions brought pursuant to the False Claims Act’s “whistleblower” or “qui tam” provisions.
A single breach incident can violate multiple requirements, resulting in potential penalties in excess of $1.9 million. Additionally, a person who knowingly obtains or discloses individually identifiable health information in violation of HIPAA may face a criminal penalty of up to $50,000 and up to one year of imprisonment.
A single breach incident may violate multiple requirements, resulting in potential penalties in excess of $2.1 million. Additionally, a person who knowingly obtains or discloses individually identifiable health information in violation of HIPAA may face a criminal penalty of up to $50,000 and up to one year of imprisonment.
However, many of our competitors have longer operating histories; larger customer bases; more expansive brand recognition; established manufacturing capabilities and facilities; deeper market penetration; substantially greater financial, technological, and research and development resources; and selling and marketing capabilities and considerably more experience dealing with third-party payors.
However, many of our competitors have longer operating histories; larger customer bases; more expansive brand recognition; established manufacturing capabilities and facilities; deeper market penetration; substantially greater financial, technological, research and development resources and selling and marketing capabilities; and considerably more experience dealing with insurance payors.
Each of our laboratories must obtain a certificate from CMS, the agency that enforces CLIA, and CLIA compliance and certification is a prerequisite to be eligible to bill government payors and many private payors for our tests. Each CLIA certificate is valid for two years from the date of issuance.
Each of our laboratories must obtain a certificate from CMS, the agency that enforces CLIA, and CLIA compliance and certification are prerequisites to be eligible to bill government payors and many private payors for our tests. Each CLIA certificate is valid for two years from the date of issuance.
In addition, various states have enacted false claim laws analogous to the federal False Claims Act, although many of these state laws apply where a claim is submitted to any third-party payor and not merely a government payor program.
In addition, various states have enacted false claim laws analogous to the federal False Claims Act, although many of these state laws apply where a claim is submitted to any insurance payor and not merely a government payor program.
Principal competitors include companies such as Ambry Genetics Corporation, a subsidiary of Konica Minolta, Inc.; Baylor Genetics, LLC; Caris Life Sciences, LLC; Exact Sciences Corporation; Foundation Medicine, Inc.; GeneDx Holdings Corp; Guardant Health, Inc.; Invitae Corporation; Laboratory Corporation of America Holdings; Myriad Genetics, Inc.; Natera, Inc.; NeoGenomics Laboratories, Inc.; PerkinElmer, Inc.; Quest Diagnostics Incorporated; Tempus AI, Inc.; and other commercial and academic laboratories.
Principal competitors include companies such as Ambry Genetics Corporation, a subsidiary of Tempus AI, Inc.; Baylor Genetics Management, LLC; Caris Life Sciences, LLC; Exact Sciences Corporation; Foundation Medicine, Inc.; GeneDx Holdings Corp.; Guardant Health, Inc.; Laboratory Corporation of America Holdings; Myriad Genetics, Inc.; Natera, Inc.; NeoGenomics, Inc.; PerkinElmer, Inc.; Quest Diagnostics Incorporated; Tempus AI, Inc.; and other commercial and academic laboratories.
We also rely on in-licensing opportunities to develop, strengthen, and maintain our proprietary position in the fields targeted by our drug candidates, including FID-007. In June 2017, we entered into an exclusive license agreement with ANP Technologies, Inc., or ANP, as amended on December 28, 2017.
We also rely on in-licensing opportunities to develop, strengthen, and maintain our proprietary position in the fields targeted by our drug candidates, including FID-007 and FID-022. In June 2017, we entered into an exclusive license agreement with ANP Technologies, Inc., or ANP, as amended on December 28, 2017, and May 1, 2024.
Regulation Federal Regulations Applicable to Our Laboratory Operations As we operate clinical laboratories in the United States, we are required to hold certain federal licenses, certifications, and permits to conduct our business. CLIA establishes quality standards for all laboratory testing to ensure the accuracy, reliability and timeliness of patient test results.
Federal Regulations Applicable to Our Laboratory Operations As we operate clinical laboratories in the United States, we are required to hold certain federal licenses, certifications, and permits to conduct our business. Clinical Laboratory Improvement Amendments, or CLIA, establishes quality standards for all laboratory testing to ensure the accuracy, reliability and timeliness of patient test results.
Unlike some drug delivery materials such as Human Serum Albumin, which is only soluble in water, our nano-drug delivery materials used for drug candidate development are soluble not only in water, but also in various organic solvents, as well as capable of hot melt mixing with active pharmaceutical ingredients, or APIs.
Unlike other nano drug delivery materials such as Human Serum Albumin, which is only soluble in water, our nano-drug delivery materials used for our drug candidates in development are soluble not only in water, but also in various organic solvents, as well as capable of hot melt mixing with active pharmaceutical ingredients, or APIs.
Although it appears that EKRA was intended to reach patient brokering and similar arrangements to induce patronage of substance use recovery and treatment, the language in EKRA is broadly written. Further, certain of EKRA’s exceptions are inconsistent with the federal Anti-Kickback Statute and regulations. Significantly, EKRA permits the U.S.
Although it appears that EKRA was intended to reach patient brokering and similar arrangements to induce patronage of substance use recovery and treatment, the language in EKRA is broadly written. Further, certain of EKRA’s exceptions are inconsistent with the federal Anti-Kickback Statute and regulations.
Moreover, cost decreases and increased direct participation, as well as cost-saving initiatives on the part of government entities and other third-party payors could intensify the downward pressure on the price for genetic analysis and interpretation generally.
Moreover, cost decreases and increased direct participation, as well as cost-saving initiatives on the part of government entities and other insurance payors could intensify the downward pressure on the price for genetic analysis and interpretation generally.
Prohibitions on the Corporate Practice of Medicine 24 Numerous states have enacted laws prohibiting business corporations, such as us, from practicing medicine and employing or engaging physicians to practice medicine, generally referred to as the prohibition against the corporate practice of medicine.
Prohibitions on the Corporate Practice of Medicine Numerous states have enacted laws prohibiting business corporations, such as ours, from practicing medicine and employing or engaging physicians to practice medicine, generally referred to as the prohibition against the corporate practice of medicine.
The same series of laws modified the phase-in of payment reductions resulting from private payor rate implementation so that a 0.0 percent reduction limit was applied for calendar years, or CYs, 2021 through 2023, as compared to the payment amounts for a test the preceding year.
The same series of laws modified the phase-in of payment reductions resulting from private payor rate implementation so that a zero percent reduction limit was applied for calendar years, or CYs, 2021 through 2024, as compared to the payment amounts for a test the preceding year.
Sustainability We are committed to operating sustainably and have dedicated the last couple of years to establishing the proper foundation and internal functions that would enable us to monitor and grow our Environmental, Social, and Governance, or ESG, strategy. We placed our ESG efforts and initiatives under the purview and oversight of the Nominating and Governance Committee.
Sustainability We are committed to operating sustainably and have dedicated the last couple of years to establishing the proper foundation and internal functions that would enable us to monitor and grow our sustainability strategy. We placed our sustainability efforts and initiatives under the purview and oversight of the Nominating and Governance Committee.
Although the FDA has statutory authority to assure that medical devices, including IVDs, are safe and effective for their intended uses, the FDA historically exercised enforcement discretion and did not enforce applicable provisions of the FDC Act and regulations with respect to LDTs.
Although the FDA has statutory authority to assure that medical devices, including IVDs, are safe and effective for their intended uses, the FDA had historically exercised enforcement discretion and not enforced applicable provisions of the FDC Act and regulations with respect to LDTs.
FDA Oversight of Our Tests and Testing Services The tests and testing services that we offer may be considered medical devices.
U.S. FDA Oversight of Our Tests and Testing Services The tests and testing services that we offer may be considered medical devices.
Prior to performing a test, we may negotiate the reimbursement rate with the payor if the benefits investigation has determined the test to be medically necessary, and the payor has issued prior authorization. When the test results are delivered, after we file the claim, we may also need to resubmit documentation or appeal a denial.
Prior to performing a test, we may negotiate the reimbursement rate with the payor if the benefits investigation has determined the test to be medically necessary, and the payor has issued prior authorization. After we file the claim, we may also need to resubmit documentation or appeal a denial.
Sales and Marketing Our sales and marketing force for our laboratory services business currently consists of internal teams of sales and marketing professionals, respectively, with deep experience in our industry, as well as a network of field-based sales representatives who are knowledgeable about our tests.
Laboratory Services Sales and Marketing Our sales and marketing force for our laboratory services business currently consists of internal teams of sales and marketing professionals, respectively, with deep experience in our industry, as well as a network of primarily U.S. field-based sales representatives who are knowledgeable about our tests and testing services.
Under the goals and policies agreed to by the FDA under PDUFA, the FDA has ten months, from the filing date, in which to complete its review of a new molecular-entity, or NME, NDA and respond to the applicant, and six months from the filing date of an NME NDA designated for priority review.
Under the goals and policies agreed to by the FDA under PDUFA, the FDA has 10 months from the filing date, to complete its review of a new molecular-entity, or NME, NDA and respond to the applicant, and six months from the filing date of an NME NDA designated for priority review.
Supreme Court held unanimously that federal law does not preempt the states’ ability to regulate pharmacy benefit managers, or PBMs, and other members of the health care and pharmaceutical supply chain, an important decision that appears to be leading to further and more aggressive efforts by states in this area.
Supreme Court held unanimously that federal law does not preempt the states’ ability to regulate pharmacy benefit managers, or PBMs, and other members of the health care and pharmaceutical supply chain, an important decision that has led to further and more aggressive efforts by states in this area.
The CCPA established a new privacy framework for covered businesses by creating an expanded definition of personal information, establishing new data privacy rights for California consumers, imposing special rules on the collection of consumer data from minors, and creating a new and potentially severe statutory damages framework for businesses that violate the CCPA and/or fail to implement reasonable security procedures and practices to prevent data breaches.
CCPA/CPRA The California Consumer Privacy Act, or CCPA, and the California Privacy Rights Act, or CPRA, set forth a privacy framework for covered businesses by creating an expanded definition of personal information, establishing data privacy rights for California consumers and employees, imposing special rules on the collection of consumer data from minors, and creating a new and potentially severe statutory damages framework for businesses that violate the CCPA and/or fail to implement reasonable security procedures and practices to prevent data breaches.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeIntellectual Property Risks • If we are unable to obtain and maintain patent protection for any product candidate we develop, our competitors could develop and commercialize products or technology similar to ours, and our ability to successfully commercialize any product candidate we may develop, and our technology, may be adversely affected. • We rely on trade secret protection, non-disclosure agreements, and invention assignment agreements to protect our proprietary information, which may not be effective. • Litigation or other proceedings or third-party claims of intellectual property infringement or misappropriation could require us to spend significant time and money and prevent us from selling our tests or developing drug candidates. • If we fail to comply with our obligations under license or technology agreements with third parties, we could lose license rights that are important to our business.
Biggest changeIntellectual Property Risks • If we are unable to obtain and maintain patent protection for any drug candidate we develop, our competitors could develop and commercialize products or technology similar to ours, and our ability to successfully commercialize any drug candidate we may develop, and our technology, may be adversely affected. • We rely on trade secret protection, non-disclosure agreements, and invention assignment agreements to protect our proprietary information, which may not be effective. • Litigation or other proceedings or third-party claims of intellectual property infringement or misappropriation could require us to spend significant time and money and prevent us from selling our tests or developing drug candidates. • We may be subject to claims challenging the inventorship of our patents and other intellectual property. • Developments in patent law could have a negative impact on our business. • Obtaining and maintaining our patent protection depends on compliance with various procedural, document submission, fee payment, and other requirements imposed by government patent agencies, and our patent protection could be reduced or eliminated for non-compliance with these requirements. • Our future issued patents covering drug candidates we develop could be found invalid or unenforceable if challenged in court or before administrative bodies in the United States or abroad. • Patent terms may be inadequate to protect our competitive position on our products and services for an adequate amount of time. • If we do not obtain patent term extension and/or data exclusivity for any drug candidate that we may develop, our business may be materially harmed. • We may not be able to enforce our intellectual property rights outside the United States. • Third parties may assert that our employees or consultants have wrongfully used or disclosed confidential information or misappropriated trade secrets. • If we fail to comply with our obligations under license or technology agreements with third parties, we could lose license rights that are important to our business.
As a result, these payor relationships, any other similar relationships we may establish in the future, or any additional payments we may receive from other payors as an out-of-network provider, may not amount to acceptable levels of reimbursement for our tests or meaningful or any increases in our customer base or the number of tests we sell.
As a result, these payor relationships, any other similar relationships we may establish in the future, or any additional payments we may receive from other payors as an out-of-network provider, may not amount to acceptable levels of reimbursement for our tests or meaningful increases in our customer base or the number of tests we sell.
If our third-party licensors fail to comply with the terms of our license arrangements, we may be forced to engage in litigation to protect our rights, which may not be successful.
If our third-party licensors fail to comply with the terms of our license arrangements, we may be forced to engage in litigation to protect our rights, which may not be successful.
A breach or interruption could result in material legal claims or proceedings and could result in material liability or penalties under federal, state, or foreign laws that protect the privacy of personal information, discussed below under “We are subject to broad legal requirements regarding the information we test and analyze, and any failure to comply with these requirements could result in materially significant, penalties, materially damage our reputation and materially harm our business.” Additionally, unauthorized access, manipulation, loss, or dissemination could significantly damage our reputation and disrupt our operations, including our ability to perform our tests, analyze and provide test results, bill customers or other payors, process claims for reimbursement, provide customer service, conduct research and development activities, collect, process, and prepare company financial information, conduct education and outreach activities and manage the administrative aspects of our operations, as described further below under “We depend on our information technology systems and any material failure of 30 these systems, due to hardware or software malfunctions, delays in operation, and/or material failures to implement new or enhanced systems or cybersecurity breaches, could materially harm our business.” Business and Strategy Risks Our results of operations may fluctuate significantly from period to period and can be difficult to predict.
A breach or interruption could result in material legal claims or proceedings and could result in material liability or penalties under federal, state, or foreign laws that protect the privacy of personal information, discussed below under “We are subject to broad legal requirements regarding the information we test and analyze, and any failure to comply with these requirements could result in materially significant penalties, materially damage our reputation and materially harm our business.” Additionally, unauthorized access, manipulation, loss, or dissemination could significantly damage our reputation and disrupt our operations, including our ability to perform our tests, analyze and provide test results, bill customers or other payors, process claims for reimbursement, provide customer service, conduct research and development activities, collect, process, and prepare company financial information, conduct education and outreach activities and manage the administrative aspects of our operations, as described further below under “We depend on our information technology systems and any material failure of these systems, due to hardware or software malfunctions, delays in operation, and/or material failures to implement new or enhanced systems or cybersecurity breaches could materially harm our business.” Business and Strategy Risks Our results of operations may fluctuate significantly from period to period and can be difficult to predict.
In the event that any of our drug candidates receives marketing approval and we, our collaborators or others identify undesirable side effects caused by a product or any other similar drugs, any of the following adverse events could occur: • regulatory authorities may withdraw their approval of the product; • additional restrictions may be imposed on the marketing of the particular product or the manufacturing processes for the product or any component of the product; • we may be subject to fines, injunctions or the imposition of civil or criminal penalties; • regulatory authorities may require the addition of safety-related labeling statements, such as a “black box” warning or a contraindication; • we may be required to create a Medication Guide outlining the risks of such side effects for distribution to patients or to implement other aspects of a REMS such as a restricted distribution program or educational programs for prescribers; • we could be sued and held liable for harm caused to patients; • the product may become less competitive; and 55 • our reputation may suffer.
In the event that any of our drug candidates receives marketing approval and we, our collaborators or others identify undesirable side effects caused by a product or any other similar drugs, any of the following adverse events could occur: • regulatory authorities may withdraw their approval of the product; • additional restrictions may be imposed on the marketing of the particular product or the manufacturing processes for the product or any component of the product; • we may be subject to fines, injunctions or the imposition of civil or criminal penalties; • regulatory authorities may require the addition of safety-related labeling statements, such as a “black box” warning or a contraindication; • we may be required to create a Medication Guide outlining the risks of such side effects for distribution to patients or to implement other aspects of a REMS such as a restricted distribution program or educational programs for prescribers; • we could be sued and held liable for harm caused to patients; • the product may become less competitive; and • our reputation may suffer.
Other factors that may contribute to this volatility include, among others: • actual or anticipated fluctuations in our operating results; • competition from existing tests or new tests that may emerge, particularly if competitive factors in our industry, including prices for testing and testing services, become more acute or the introduction of new products by our competitors; • failures to meet or exceed financial estimates and projections of the investment community or guidance we have provided to the public; • issuance of new or updated research or reports by securities analysts or changed recommendations for our common stock; • announcements by us or our competitors of significant acquisitions, investments, strategic relationships, joint ventures, collaborations or capital commitments; • the timing and amount of our investments in our business and the market’s perception of these investments and their impact on our prospects; • actual or anticipated changes in laws or regulations applicable to our business or our tests; • whether and when we are able to obtain marketing approval to market any of our drug candidates and the outcome of meetings with applicable regulatory agencies, including the FDA; • the outcome, success, costs and timing of preclinical studies and clinical trials for our current or future drug candidates; • failure of any our drug candidates, if approved, to achieve commercial success; • additions or departures of key management or other personnel; • changes in coverage and reimbursement by current or potential payors; • inability to obtain additional funding as and when needed on reasonable terms; • disputes or other developments with respect to our or others’ intellectual property rights; • product liability claims or other litigation; • sales of our common stock by us or our stockholders; • general economic, political, industry and market conditions, including factors not directly related to our operating performance or the operating performance of our competitors, such as increased uncertainty in the U.S. regulatory environment for healthcare, trade and tax-related matters; • events that affect, or have the potential to affect, general economic conditions, including but not limited to political unrest, global trade wars, natural disasters, act of war, terrorism, or disease outbreaks; 63 • and the other risk factors discussed in this report.
Other factors that may contribute to this volatility include, among others: • actual or anticipated fluctuations in our operating results; • competition from existing tests or new tests that may emerge, particularly if competitive factors in our industry, including prices for testing and testing services, become more acute or the introduction of new products by our competitors; • failures to meet or exceed financial estimates and projections of the investment community or guidance we have provided to the public; • issuance of new or updated research or reports by securities analysts or changed recommendations for our common stock; • announcements by us or our competitors of significant acquisitions, investments, strategic relationships, joint ventures, collaborations or capital commitments; • the timing and amount of our investments in our business and the market’s perception of these investments and their impact on our prospects; • actual or anticipated changes in laws or regulations applicable to our business or our tests; • whether and when we are able to obtain marketing approval to market any of our drug candidates and the outcome of meetings with applicable regulatory agencies, including the FDA; • the outcome, success, costs and timing of preclinical studies and clinical trials for our current or future drug candidates; • failure of any our drug candidates, if approved, to achieve commercial success; • additions or departures of key management or other personnel; • changes in coverage and reimbursement by current or potential payors; • inability to obtain additional funding as and when needed on reasonable terms; • disputes or other developments with respect to our or others’ intellectual property rights; • product liability claims or other litigation; • sales of our common stock by us or our stockholders; • general economic, political, industry and market conditions, including factors not directly related to our operating performance or the operating performance of our competitors, such as increased uncertainty in the U.S. regulatory environment for healthcare, trade and tax-related matters; • events that affect, or have the potential to affect, general economic conditions, including but not limited to political unrest, global trade wars, natural disasters, act of war, terrorism, or disease outbreaks; and 67 • the other risk factors discussed in this report.
There are numerous risks associated with any patent infringement claim that may be brought against us, as discussed above under “Litigation or other proceedings or third-party claims of intellectual property infringement or misappropriation could require us to spend significant time and money and prevent us from selling our tests or developing drug candidates.” In addition, the Leahy-Smith America Invents Act, or America Invents Act, which was signed into law in 2011, includes a number of significant changes to U.S. patent law.
There are numerous risks associated with any patent infringement claim that may be brought against us, as discussed above under “Litigation or other proceedings or third-party claims of intellectual property infringement or misappropriation could require us to spend significant time and money and prevent us from selling our tests or developing drug candidates.” 63 In addition, the Leahy-Smith America Invents Act, or America Invents Act, which was signed into law in 2011, includes a number of significant changes to U.S. patent law.
Although we maintain the types and amounts of insurance we view as customary and appropriate in the industries and countries in which we operate, if we are required to pay significant damages or incur significant defense costs in connection with any personal injury claim that is outside the scope of indemnification agreements we have with our clients, if any indemnification agreement is not performed in accordance with its terms or if our liability 37 exceeds the amount of any applicable indemnification limits or available insurance coverage, our financial condition, results of operations and reputation could be materially and adversely affected.
Although we maintain the types and amounts of insurance we view as customary and appropriate in the industries and countries in which we operate, if we are required to pay significant damages or incur significant defense costs in connection with any personal injury claim that is outside the scope of indemnification agreements we have with our clients, if any indemnification agreement is not performed in accordance with its terms or if our liability exceeds the amount of any applicable indemnification limits or available insurance coverage, our financial condition, results of operations and reputation could be materially and adversely affected.
From time to time and in the ordinary course of our business, we have been and again may be subject to litigation or governmental investigation on a variety of matters in the United States or foreign jurisdictions, including, without limitation, regulatory, intellectual property, product liability, antitrust, consumer, false claims, whistleblower, Qui Tam, privacy, anti-kickback, anti-bribery, environmental, commercial, securities and employment litigation and claims and other legal proceedings that may arise from the conduct of our business.
From time to time and in the ordinary course of our business, we have been and again may be subject to litigation or governmental investigation on a variety of matters in the United States or foreign jurisdictions, including, without limitation, 50 regulatory, intellectual property, product liability, antitrust, consumer, false claims, whistleblower, qui tam, privacy, anti-kickback, anti-bribery, environmental, commercial, securities and employment litigation and claims and other legal proceedings that may arise from the conduct of our business.
While there are several sequencer suppliers that we believe could replace Illumina, and while we believe that we have sufficient alternative suppliers for our other needs, transitioning to a new supplier or locating a temporary substitute, if any are available, would be time-consuming and expensive, could result in interruptions in or otherwise affect the performance specifications of our laboratory operations or could require that we revalidate our tests.
While there are several sequencer suppliers that we believe could replace Illumina, and while we believe that we have sufficient alternative suppliers for our other needs, 35 transitioning to a new supplier or locating a temporary substitute, if any are available, would be time-consuming and expensive, could result in interruptions in or otherwise affect the performance specifications of our laboratory operations or could require that we revalidate our tests.
Events that may prevent successful or timely completion of clinical development include but are not limited to: 51 • potential delays in patient enrollment for our clinical trials due to public health emergencies or pandemics, natural disasters, staffing shortages, or other events, which may affect our ability to initiate and/or complete preclinical studies, conduct ongoing clinical trials, and delay initiation of planned and future clinical trials; • inability to generate satisfactory preclinical, toxicology or other in vivo or in vitro data or to develop diagnostics capable of supporting the initiation or continuation of clinical trials; • delays in reaching agreement on acceptable terms with CROs, and clinical trial sites, the terms of which can be subject to extensive negotiation and may vary significantly among different CROs and clinical trial sites; • delays or failure in obtaining required an IRB approval at each clinical trial site; • failure to obtain or delays in obtaining a permit from regulatory authorities to conduct a clinical trial; • delays in recruiting or failure to recruit sufficient eligible volunteers or subjects in our clinical trials; • failure by clinical trial sites or CROs or other third parties to adhere to clinical trial requirements; • failure by our clinical trial sites, CROs or other third parties to perform in accordance with the good clinical practices requirements of the FDA or applicable foreign regulatory guidelines; • subjects withdrawing from our clinical trials; • adverse events or other issues of concern significant enough for the FDA, or comparable foreign regulatory authority, to put a clinical trial or an IND on clinical hold; • occurrence of adverse events associated with our drug candidates; • changes in regulatory requirements and guidance that require amending or submitting new clinical protocols; • the cost of clinical trials of our drug candidates; • negative or inconclusive results from our clinical trials which may result in us deciding, or regulators requiring us, to conduct additional clinical trials or abandon development programs in other ongoing or planned indications for a drug candidate; and • delays in reaching agreement on acceptable terms with third-party manufacturers or an inability to manufacture sufficient quantities of our drug candidates for use in clinical trials.
Events that may prevent successful or timely completion of clinical development include but are not limited to: • potential delays in patient enrollment for our clinical trials due to public health emergencies or pandemics, natural disasters, staffing shortages, or other events, which may affect our ability to initiate and/or complete preclinical studies, conduct ongoing clinical trials, and delay initiation of planned and future clinical trials; • inability to generate satisfactory preclinical, toxicology or other in vivo or in vitro data or to develop diagnostics capable of supporting the initiation or continuation of clinical trials; • delays in reaching agreement on acceptable terms with CROs, and clinical trial sites, the terms of which can be subject to extensive negotiation and may vary significantly among different CROs and clinical trial sites; • delays or failure in obtaining required an IRB approval for clinical trial site; • failure to obtain or delays in obtaining a permit from regulatory authorities to conduct a clinical trial; • delays in recruiting or failure to recruit sufficient eligible volunteers or subjects in our clinical trials; • failure by clinical trial sites or CROs or other third parties to adhere to clinical trial requirements; • failure by our clinical trial sites, CROs or other third parties to perform in accordance with the good clinical practices requirements of the FDA or applicable foreign regulatory guidelines; • subjects withdrawing from our clinical trials; • adverse events or other issues of concern significant enough for the FDA, or comparable foreign regulatory authority, to put a clinical trial or an IND on clinical hold; • occurrence of adverse events associated with our drug candidates; • changes in regulatory requirements and guidance that require amending or submitting new clinical protocols; • the cost of clinical trials of our drug candidates; • negative or inconclusive results from our clinical trials which may result in us deciding, or regulators requiring us, to conduct additional clinical trials or abandon development programs in other ongoing or planned indications for a drug candidate; and • delays in reaching agreement on acceptable terms with third-party manufacturers or an inability to manufacture sufficient quantities of our drug candidates for use in clinical trials.
If any of our employees, consultants, service providers, or commercial partners takes, converts or misuses these funds or data, we could be liable for any resulting damages, which could harm our financial condition and damage our business reputation. 50 We could be adversely affected by alleged violations of the FTC Act or other truth-in-advertising and consumer protection laws.
If any of our employees, consultants, service providers, or commercial partners takes, converts or misuses these funds or data, we could be liable for any resulting damages, which could harm our financial condition and damage our business reputation. We could be adversely affected by alleged violations of the FTC Act or other truth-in-advertising and consumer protection laws.
It is possible that none of the drug candidates we may develop will obtain the marketing approvals necessary for us or our collaborators to sell the products either in the United States or any other country. Furthermore, approval by the FDA of a therapeutic product does not assure approval by regulatory authorities outside the United States or vice versa.
It is possible that none of the drug candidates we may develop will obtain the marketing approvals necessary for us or our collaborators to sell the products either in the United States or any other country. Furthermore, approval by the FDA of a therapeutic product does not assure approval by regulatory authorities outside the United States and vice versa.
The laws and regulations governing the marketing of diagnostic products are evolving, extremely complex and in many instances, have no significant regulatory or judicial interpretations of these laws and regulations. Pursuant to its authority under the federal FDC Act, the FDA has jurisdiction over medical devices, including IVDs, and, therefore, potentially our clinical laboratory tests.
The laws and regulations governing the marketing of diagnostic products are evolving, extremely complex and in many instances, have no significant regulatory or judicial interpretations of these laws and regulations. Pursuant to its authority under the 44 federal FDC Act, the FDA has jurisdiction over medical devices, including IVDs, and, therefore, potentially our clinical laboratory tests.
Our international operations are subject to various anti-bribery laws, including the FCPA and similar anti-bribery laws in the non-U.S. jurisdictions in which we operate. The FCPA prohibits companies and their intermediaries from offering, making, or authorizing improper payments to non-U.S. or foreign officials for the purpose of obtaining or retaining business or securing any other improper advantage.
Our international operations are subject to various anti-bribery laws, including the FCPA and similar anti-bribery laws in the non-U.S. jurisdictions in which we operate. The FCPA prohibits companies and their intermediaries from offering, making, or authorizing improper payments to non-U.S. or foreign officials for the purpose of obtaining or retaining business or securing any other 53 improper advantage.
In addition, competitors may be acquired by, receive investments from, or enter into other commercial relationships with larger, well-established and well-financed companies, which may result in even more resources being concentrated among our competitors. Smaller or early-stage companies may also prove to be significant competitors, particularly through collaborative arrangements with large and established companies.
In addition, competitors may be acquired by, receive investments from, or enter into other 33 commercial relationships with larger, well-established and well-financed companies, which may result in even more resources being concentrated among our competitors. Smaller or early-stage companies may also prove to be significant competitors, particularly through collaborative arrangements with large and established companies.
Even if we are successful in defending against such claims, litigation could result in substantial costs and be a distraction to management and other employees. Any of the foregoing could have a material adverse effect on our business, financial condition, results of operations and prospects. 58 Developments in patent law could have a negative impact on our business.
Even if we are successful in defending against such claims, litigation could result in substantial costs and be a distraction to management and other employees. Any of the foregoing could have a material adverse effect on our business, financial condition, results of operations and prospects. Developments in patent law could have a negative impact on our business.
Inability to obtain or maintain sufficient insurance coverage at an acceptable cost or to otherwise protect against potential product or other legal or administrative liability claims could prevent or inhibit customer relationships, the clinical development, commercial production, and sale of any of our products and product candidates, which could adversely affect our business.
Inability to obtain or maintain sufficient insurance coverage at an acceptable cost or to otherwise protect against potential product or other legal or administrative liability claims could prevent or inhibit customer relationships, the clinical development, commercial production, and sale of any of our products and drug candidates, which could adversely affect our business.
While we believe that we compare favorably to these competitors, some of our competitors may have technical, competitive, or other advantages over us for the development of technologies and processes or greater experience in particular diagnostics or therapeutic development areas, and consolidation among pharmaceutical, diagnostic, and biotechnology companies can enhance such advantages.
While we believe that we compare favorably to these competitors, some of our competitors may have technical, competitive, or other advantages over us for the development of technologies and processes or greater experience in particular diagnostics or therapeutic development areas, and consolidation among pharmaceutical, diagnostic, and biotechnology companies can enhance these advantages.
If we are not able to attract and retain the necessary personnel to accomplish our business objectives, we may experience constraints that could adversely affect our ability to expand our business and support our clinical 35 laboratory operations, and our sales and marketing and research and development efforts, which would negatively affect our prospects for future growth and success.
If we are not able to attract and retain the necessary personnel to accomplish our business objectives, we may experience constraints that could adversely affect our ability to expand our business and support our clinical laboratory operations, and our sales and marketing and research and development efforts, which would negatively affect our prospects for future growth and success.
Failure to comply with government laws and regulations related to submission of claims for our services could result in significant monetary damages and penalties and exclusion from the Medicare and Medicaid programs and corresponding foreign reimbursement programs. We are also subject to governmental audits that could result in material refunds or settlement.
Failure to comply with government laws and regulations related to submission of claims for our services could result in significant monetary damages and penalties and exclusion from the Medicare and Medicaid programs and corresponding foreign reimbursement programs. We are also subject to governmental audits and investigations that could result in material refunds or settlement.
If ANP were to terminate the ANP License Agreement, the development and commercialization of FID-007 would be adversely affected, our potential for generating revenue from this program would be adversely affected and attracting new partners would be made more difficult. As a result, we would likely be subject to increased competition within our market.
If ANP were to terminate the ANP License Agreement, the development and commercialization of FID-007 and FID-022 would be adversely affected, our potential for generating revenue from this program would be adversely affected and attracting new partners would be made more difficult. As a result, we would likely be subject to increased competition within our market.
We may also acquire contingent liabilities in connection with the acquisitions of a business, which may be material, and any estimates we might make regarding any 31 acquired contingent liabilities and the likelihood that these liabilities will materialize could differ materially from the liabilities actually incurred. These circumstances could materially harm our business, results of operations, and prospects.
We may also acquire contingent liabilities in connection with the acquisitions of a business, which may be material, and any estimates we might make regarding any acquired contingent liabilities and the likelihood that these liabilities will materialize could differ materially from the liabilities actually incurred. These circumstances could materially harm our business, results of operations, and prospects.
Furthermore, many of the countries within the European Union are still in the process of drafting supplementary data protection legislation in key fields where the GDPR allows for national variation, including the fields of clinical study and other health-related information. Additionally, in 2021, the United Kingdom’s UK GDPR rules became effective.
Furthermore, many of the countries within the European Union are still in the process of drafting supplementary data protection legislation in key fields where the GDPR allows for national variation, including the fields of clinical study and other health-related information. Additionally, in 2021, the United Kingdom’s GDPR rules became effective.
As regulatory focus on genetic privacy issues continues to increase and laws and regulations concerning the protection of personal information expand and become more complex, these potential risks to our business could intensify. Ethical, legal, and social concerns related to the use of genetic information could reduce demand for our tests.
As regulatory 48 focus on genetic privacy issues continues to increase and laws and regulations concerning the protection of personal information expand and become more complex, these potential risks to our business could intensify. Ethical, legal, and social concerns related to the use of genetic information could reduce demand for our tests.
Although our competitors have utilized and are expected to continue to utilize technologies and methods similar to ours and have aggregated and are expected to continue to aggregate libraries of genetic information similar to ours, we believe our success will depend in part on our ability to develop proprietary methods and libraries and to defend any advantages afforded to us by these methods and libraries relative to our 57 competitors.
Although our competitors have utilized and are expected to continue to utilize technologies and methods similar to ours and have aggregated and are expected to continue to aggregate libraries of genetic information similar to ours, we believe our success will depend in part on our ability to develop proprietary methods and libraries and to defend any advantages afforded to us by these methods and libraries relative to our competitors.
If these third parties do not perform as contractually required, fail to satisfy regulatory or legal requirements, or miss expected deadlines, our development programs could be delayed with material and adverse effects on our business, financial condition, results of operations and prospects.
If these third parties do not perform as contractually required, fail to satisfy regulatory or legal requirements, or miss 60 expected deadlines, our development programs could be delayed with material and adverse effects on our business, financial condition, results of operations and prospects.
Many countries have compulsory licensing laws under which a patent owner may be compelled to grant licenses to third parties. In addition, many countries limit the enforceability of patents against government agencies or government contractors. In these countries, the patent owner may have limited remedies, which could materially diminish the value of such patent.
Many countries have compulsory licensing laws under which a patent owner may be compelled to grant licenses to third parties. In addition, many countries limit the enforceability of patents against 65 government agencies or government contractors. In these countries, the patent owner may have limited remedies, which could materially diminish the value of such patent.
Clinical trial delays could also shorten any periods during which our drug candidates have patent protection and may allow competitors to develop and bring products to market before we do, which could impair our ability to successfully commercialize our drug candidates and may harm our business and results of operation.
Clinical trial delays could also shorten any periods during which our drug candidates have patent protection and may allow competitors to develop and bring products to market before 56 we do, which could impair our ability to successfully commercialize our drug candidates and may harm our business and results of operation.
Our reliance on third parties we do not control will not relieve us of these responsibilities and requirements. 56 Any adverse development or delay in our clinical trials could have a material and adverse effect on our business, financial condition, results of operations and prospects.
Our reliance on third parties we do not control will not relieve us of these responsibilities and requirements. Any adverse development or delay in our clinical trials could have a material and adverse effect on our business, financial condition, results of operations and prospects.
The occurrence of any of these events could have a material adverse effect on our business, reputation and results of operations. Fulgent Pharma’s business involves the testing of new drugs on patients in clinical trials and will continue to involve the additional testing of drugs on patients in the future.
The occurrence of any of these events could have a material adverse effect on our business, reputation and results of operations. 38 Fulgent Pharma’s business involves the testing of new drugs on patients in clinical trials and will continue to involve the additional testing of drugs on patients in the future.
For example, the COVID-19 pandemic initially caused extreme disruption and volatility in the global capital markets followed by a period of high market demand for life science and diagnostic company equities and then a period of less demand for these equities in 2022 and 2023.
For example, the COVID-19 pandemic initially caused extreme disruption and volatility in the global capital markets followed by a period of high market demand for life science and diagnostic company equities and then a period of less demand for these equities in 2022, 2023, and 2024.
Any failure to implement appropriate security measures to protect the confidentiality and integrity of personal information or any breach or other failure of these systems resulting in the unauthorized access, manipulation, disclosure, or loss of this information 44 could result in our noncompliance with these laws.
Any failure to implement appropriate security measures to protect the confidentiality and integrity of personal information or any breach or other failure of these systems resulting in the unauthorized access, manipulation, disclosure, or loss of this information could result in our noncompliance with these laws.
Competitors may use our technologies in jurisdictions where we have not obtained patent protection to develop their own products and, further, may export 61 otherwise infringing products to territories where we have patent protection but where enforcement is not as strong as that in the United States.
Competitors may use our technologies in jurisdictions where we have not obtained patent protection to develop their own products and, further, may export otherwise infringing products to territories where we have patent protection but where enforcement is not as strong as that in the United States.
If the FDA determines that we may not use this regulatory pathway, then we would need to seek regulatory approval via a “full” or “stand-alone” NDA under Section 505(b)(1) of the FDC Act.
If the FDA determines that we may not use this regulatory pathway, then we would need to seek regulatory approval via a “full” or “stand-alone” NDA under 58 Section 505(b)(1) of the FDC Act.
We believe our future success will depend in part on our ability to continue to expand our test and testing service offerings and develop and sell new tests and testing services and on our ability to expand our presence in new and existing markets, including our presence in the molecular diagnostic and cancer testing markets.
We believe our future success will depend in part on our ability to continue to expand our test and testing service offerings and develop and sell new tests and testing services and on our ability to expand our presence in new and existing markets, including our 36 presence in the molecular diagnostic and cancer testing markets.
As a result, we may not have, or we may deem it imprudent to use, additional financial resources to continue development of a drug candidate if there are issues that could delay or prevent marketing approval of, or ability to commercialize, our drug candidates, including: • negative or inconclusive results from clinical trials, or the clinical trials of others for similar drug candidates, leading to a decision or requirement to conduct additional preclinical testing or clinical trials or abandon a program; • therapeutic-related side effects experienced by participants in its clinical trials or by individuals using drugs or other drugs similar to its drug candidates; • delays in submitting INDs or comparable foreign clinical trial applications or delays or failure in obtaining the necessary approvals from regulators to commence a clinical trial, or a suspension or termination of a clinical trial once commenced; • conditions imposed by the FDA or comparable foreign authorities regarding the scope or design of clinical trials; • delays in enrolling research subjects or high drop-out rates of research subjects enrolled in clinical trials; • delays or difficulties in its clinical trials due to quarantines or other restrictions resulting from the COVID-19 pandemic or other public health emergencies; • unfavorable FDA or other regulatory agency inspection and review of a clinical trial site or the manufacturing location(s) for a drug candidate; • inadequate supply or quality of drug candidate clinical material or other raw materials or supplies necessary for the conduct of our clinical trials; • failure of third-party contractors or investigators to comply with regulatory requirements or otherwise meet their contractual obligations in a timely manner, or at all; • delays and changes in regulatory requirements, policy and guidelines, including with respect to our technology in particular; or • varying interpretations of data by the FDA and similar foreign regulatory agencies.
As a result, we may not have, or we may deem it imprudent to use, additional financial resources to continue development of a drug candidate if there are issues that could delay or prevent marketing approval of, or ability to commercialize, our drug candidates, including: • negative or inconclusive results from clinical trials, or the clinical trials of others for similar drug candidates, leading to a decision or requirement to conduct additional preclinical testing or clinical trials or abandon a program; 55 • therapeutic-related side effects experienced by participants in its clinical trials or by individuals using drugs or other drugs similar to its drug candidates; • delays in submitting INDs or comparable foreign clinical trial applications or delays or failure in obtaining the necessary approvals from regulators to commence a clinical trial, or a suspension or termination of a clinical trial once commenced; • conditions imposed by the FDA or comparable foreign authorities regarding the scope or design of clinical trials; • delays in enrolling research subjects or high drop-out rates of research subjects enrolled in clinical trials; • delays or difficulties in its clinical trials due to quarantines or other restrictions resulting from pandemics or other public health emergencies; • unfavorable FDA or other regulatory agency inspection and review of a clinical trial site or the manufacturing location(s) for a drug candidate; • inadequate supply or quality of drug candidate clinical material or other raw materials or supplies necessary for the conduct of our clinical trials; • failure of third-party contractors or investigators to comply with regulatory requirements or otherwise meet their contractual obligations in a timely manner, or at all; • delays and changes in regulatory requirements, policy and guidelines, including with respect to our technology in particular; or • varying interpretations of data by the FDA and similar foreign regulatory agencies.
We intend to develop and seek approval for our drug candidates developed using our nano-drug delivery platform technology, including FID-007 and other candidates it may develop, pursuant to the FDA’s 505(b)(2) pathway.
We intend to develop and seek approval for our drug candidates developed using our nano-drug delivery platform technology, including FID-007, FID-022, and other candidates it may develop, pursuant to the FDA’s 505(b)(2) pathway.
Obtaining and maintaining our patent protection depends on compliance with various procedural, document submission, fee payment, and other requirements imposed by government patent agencies, and its patent protection could be reduced or eliminated for non-compliance with these requirements.
Obtaining and maintaining our patent protection depends on compliance with various procedural, document submission, fee payment, and other requirements imposed by government patent agencies, and our patent protection could be reduced or eliminated for non-compliance with these requirements.
Moreover, China’s legislature has adopted a national security law to substantially change the way Hong Kong has been 49 governed since the territory was handed over by the United Kingdom to China in 1997.
Moreover, China’s legislature has adopted a national security law to substantially change the way Hong Kong has been governed since the territory was handed over by the United Kingdom to China in 1997.
Our certificate of incorporation and bylaws provide that, unless we consent in writing to the selection of an alternative forum, the Court of Chancery of the State of Delaware shall be the sole and exclusive forum for: • any derivative action brought on our behalf; • any direct action brought by a stockholder against us or any of our directors, officers or other employees, alleging a breach of a fiduciary duty; 65 • any action brought by a stockholder against us or any of our directors, officers or other employees, alleging a violation of the DGCL, our certificate of incorporation or our bylaws; and • any action brought by a stockholder against us or any of our directors, officers or other employees, asserting a claim against us governed by the internal affairs doctrine.
Our certificate of incorporation and bylaws provide that, unless we consent in writing to the selection of an alternative forum, the Court of Chancery of the State of Delaware shall be the sole and exclusive forum for: • any derivative action brought on our behalf; • any direct action brought by a stockholder against us or any of our directors, officers or other employees, alleging a breach of a fiduciary duty; 69 • any action brought by a stockholder against us or any of our directors, officers or other employees, alleging a violation of the DGCL, our certificate of incorporation or our bylaws; and • any action brought by a stockholder against us or any of our directors, officers or other employees, asserting a claim against us governed by the internal affairs doctrine.
We have incurred and expect to continue to incur significant expenses and devote substantial management effort toward compliance with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act.
We have incurred and expect to continue to incur significant expenses and devote substantial management effort toward compliance with the auditor attestation requirements of 39 Section 404 of the Sarbanes-Oxley Act.
If we do not pay dividends, our common stock may be less valuable because stockholders must rely on sales of their common stock after price appreciation, which may never occur, to realize any gains on their investment. 64 If securities or industry analysts do not publish research or reports about our business or if they issue an adverse or misleading opinion regarding our common stock, our stock price and trading volume could decline.
If we do not pay dividends, our common stock may be less valuable because stockholders must rely on sales of their common stock after price appreciation, which may never occur, to realize any gains on their investment. 68 If securities or industry analysts do not publish research or reports about our business or if they issue an adverse or misleading opinion regarding our common stock, our stock price and trading volume could decline.
Doing business internationally involves a number of risks, including, among others: • compliance with the laws and regulations of multiple jurisdictions, which may be conflicting or subject to increasing stringency or other changes, including privacy and data protection regulations, tax laws, employment laws, healthcare regulatory requirements, and other related approvals, including permitting and licensing requirements; • logistics associated with the shipment of blood or other tissue specimens, including infrastructure conditions, transportation delays, and the impact of U.S. and local laws and regulations, such as export and import restrictions, tariffs, or other charges and other trade barriers, all of which involve increased risk related to the trade policies of the current administration, which may threaten existing and proposed trade agreements and impose more restrictive U.S. export-import regulations that impact our business; • limits on our ability to penetrate international markets, including legal and regulatory requirements that would force us to conduct our tests locally by building additional laboratories or engaging in joint ventures or other relationships in order to offer our tests in certain countries, which relationships could involve significant time and resources to establish, deny us control over certain aspects of the foreign operations, or reduce the economic value to us of these operations; 36 • failure by us, any joint venturers, or other arrangements we have or may establish, or by any distributors or other commercial partners we have engaged or may engage to obtain any regulatory approvals required to market, sell, and use our tests in various countries; • challenges predicting the market for our tests and services generally and tailoring our test menu to meet varying customer expectations in different countries and territories; • difficulties gaining market share in territories in which we do not have a strong physical presence or brand awareness; • complexities and difficulties obtaining protection for and enforcing our intellectual property rights; • difficulties in staffing and managing foreign operations; • complexities associated with managing multiple payor coverage and reimbursement regimes, government payors, or patient self-pay systems; • financial risks, such as longer payment cycles, difficulty collecting trade accounts receivable and the impact of local and regional financial conditions on demand and payment for our tests; • inflationary pressures, such as those the global market is currently experiencing, which have and may increase costs for materials, supplies, and services; • exposure to foreign currency exchange rate fluctuations, conversions of currencies, and the risk of repatriation of certain foreign currencies; • natural disasters; political and economic instability, including wars , terrorism and political unrest, such as conflicts in the Ukraine and the Middle East; outbreak of disease; boycotts; and other business restrictions; and • regulatory and compliance risks related to applicable anti-bribery laws, including requirements to maintain accurate information and control over activities that may fall within the purview of these laws.
Doing business internationally involves a number of risks, including, among others: • compliance with the laws and regulations of multiple jurisdictions, which may be conflicting or subject to increasing stringency or other changes, including privacy and data protection regulations, tax laws, tariffs, employment laws, healthcare regulatory requirements, and other related approvals, including permitting and licensing requirements; • logistics associated with the shipment of blood or other tissue specimens, including infrastructure conditions, transportation delays, and the impact of United States and local laws and regulations, such as export and import permit requirements or restrictions, tariffs, or other charges and other trade barriers, all of which involve increased risk related to 37 the trade policies of the current administration, which may threaten existing and proposed trade agreements and impose more restrictive U.S. export-import regulations that impact our business; • limits on our ability to penetrate international markets, including legal and regulatory requirements that would force us to conduct our tests locally by building additional laboratories or engaging in joint ventures or other relationships in order to offer our tests in certain countries, which relationships could involve significant time and resources to establish, deny us control over certain aspects of the foreign operations, or reduce the economic value to us of these operations; • failure by us, any joint venturers, or other arrangements we have or may establish, or by any distributors or other commercial partners we have engaged or may engage to obtain any regulatory approvals required to market, sell, and use our tests in various countries; • challenges predicting the market for our tests and services generally and tailoring our test menu to meet varying customer expectations in different countries and territories; • difficulties gaining market share in territories in which we do not have a strong physical presence or brand awareness; • complexities and difficulties obtaining protection for and enforcing our intellectual property rights; • difficulties in staffing and managing foreign operations; • complexities associated with managing multiple payor coverage and reimbursement regimes, government payors, or patient self-pay systems; • financial risks, such as longer payment cycles, difficulty collecting trade accounts receivable and the impact of local and regional financial conditions on demand and payment for our tests; • inflationary pressures, such as those the global market is currently experiencing, which have and may increase costs for materials, supplies, and services; • exposure to foreign currency exchange rate fluctuations, conversions of currencies, and the risk of repatriation of certain foreign currencies; • natural disasters; political and economic instability, including wars, terrorism and political unrest, such as conflicts in the Ukraine and the Middle East and tensions between China and Taiwan; outbreak of disease; boycotts; and other business restrictions; and • regulatory and compliance risks related to applicable anti-bribery laws, including requirements to maintain accurate information and control over activities that may fall within the purview of these laws.
Securing marketing approval also typically requires the submission of information about the product manufacturing process, and in many cases the inspection of manufacturing, processing, and packaging facilities by the regulatory authorities.
Securing marketing approval also typically requires the submission of information about the product manufacturing process, and in many cases the inspection of manufacturing, processing, and packaging facilities by the applicable regulatory authorities.
Any losses would have an adverse effect on our stockholders’ equity and working capital, which could negatively impact our operations and your investment in the Company.
Any losses would have an 31 adverse effect on our stockholders’ equity and working capital, which could negatively impact our operations and your investment in the Company.
The premarket review process can be lengthy, expensive, time-consuming and unpredictable. Further, obtaining premarket clearance may involve, among other things, successfully completing clinical trials. Clinical trials require significant time and cash resources and are subject to a high degree of risk, including risks of experiencing delays, failing to complete the trial or obtaining unexpected or negative results.
The premarket review process can be lengthy, expensive, time-consuming and unpredictable. Further, obtaining premarket authorization may involve, among other things, successfully completing clinical trials. Clinical trials require significant time and cash resources and are subject to a high degree of risk, including risks of experiencing delays, failing to complete the trial or obtaining unexpected or negative results.
Our product candidates may not be effective, may be only moderately effective or may prove to have undesirable or unintended side effects, toxicities or other characteristics that may preclude our obtaining marketing approval or prevent or limit commercial use, or there may be deficiencies in manufacturing compliance by us or by our contract manufacturing organizations and partners that could result in the candidate not being approved.
Our drug candidates may not be effective, may be only moderately effective or may prove to have undesirable or unintended side effects, toxicities or other characteristics that may preclude our obtaining marketing approval or prevent or limit commercial use, or there may be deficiencies in manufacturing compliance by us or by our contract manufacturing organizations and partners that could result in the candidate not being approved.
Any failure to obtain or maintain patent protection with respect to any product candidate we develop could have a material adverse effect on our business, financial condition, results of operations, and prospects. We rely on trade secret protection, non-disclosure agreements. and invention assignment agreements to protect our proprietary information, which may not be effective.
Any failure to obtain or maintain patent protection with respect to any drug candidate we develop could have a material adverse effect on our business, financial condition, results of operations, and prospects. We rely on trade secret protection, non-disclosure agreements. and invention assignment agreements to protect our proprietary information, which may not be effective.
If a third party were to prevail on a legal assertion of invalidity or unenforceability, we would lose at least part, and perhaps all, of the patent protection on any product candidates it develops or other technologies. Such a loss of patent protection would have a material adverse impact on our business, financial condition, results of operations, and prospects.
If a third-party were to prevail on a legal assertion of invalidity or unenforceability, we would lose at least part, and perhaps all, of the patent protection on any drug candidates it develops or other technologies. Such a loss of patent protection would have a material adverse impact on our business, financial condition, results of operations, and prospects.
We believe our ability to succeed will depend in part on our avoidance of infringement of patents and other proprietary rights owned by third parties, including the intellectual property rights of competitors. There are numerous third-party-owned U.S. and foreign patents, pending patent applications and other intellectual property rights that cover technologies relevant to our testing and testing services.
We believe our ability to succeed will depend in part on our avoidance of infringement of patents and other proprietary rights owned by third parties, including the intellectual property rights of competitors. There are numerous third-party-owned U.S. and foreign patents, pending patent applications and other intellectual property rights that cover technologies relevant to our testing, testing services and drug candidates.
Any new test we are able to discover and develop may not be launched in a timely manner, meet applicable regulatory standards, successfully compete with other technologies and available tests, avoid infringing the proprietary rights of others, achieve coverage and adequate reimbursement from third-party payors, be capable of performance at commercial levels and at reasonable costs, be successfully marketed, or achieve sufficient market acceptance for us to recoup our time and capital investment in the development of the test.
Any new test we are able to discover and develop may not be launched in a timely manner, meet applicable regulatory standards, successfully compete with other technologies and available tests, avoid infringing the proprietary rights of others, achieve coverage and adequate reimbursement from insurance payors, be capable of performance at commercial levels and at reasonable costs, be successfully marketed, or achieve sufficient market acceptance for us to recoup our time and capital investment in the development of the test.
Errors, such as failures to detect genomic variants with high accuracy, or mistakes, such as failures to completely and correctly identify the significance of gene variants or to detect disease, could subject us to product liability or professional liability claims. Any such claim against us could result in substantial damages and be costly and time-consuming to defend.
Errors, such as failures to detect genomic variants with high accuracy, or mistakes, such as failures to completely and correctly identify the significance of gene variants, abnormal cells or to detect disease, could subject us to product liability or professional liability claims. Any such claim against us could result in substantial damages and be costly and time-consuming to defend.
These circumstances could have a material adverse effect on our business, development efforts, financial condition, or results of operations. 62 Common Stock Risks An active, liquid trading market for our common stock may not be sustained, which could make it difficult for stockholders to sell their shares of our common stock.
These circumstances could have a material adverse effect on our business, development efforts, financial condition, or results of operations. 66 Common Stock Risks An active, liquid trading market for our common stock may not be sustained, which could make it difficult for stockholders to sell their shares of our common stock.
As a result, they may be able to respond more quickly to changes in customer requirements or preferences, develop faster and better advancements for their technologies, product candidates and tests, create and implement more successful strategies for the promotion and sale of their tests, obtain more favorable results from third-party payors regarding coverage and reimbursement for their offerings, adopt more aggressive pricing policies for their tests, secure supplies from vendors on more favorable terms or devote substantially more resources to infrastructure and systems development.
As a result, they may be able to respond more quickly to changes in customer requirements or preferences, develop faster and better advancements for their technologies, product candidates and tests, create and implement more successful strategies for the promotion and sale of their tests, obtain more favorable results from insurance payors regarding coverage and reimbursement for their offerings, adopt more aggressive pricing policies for their tests, secure supplies from vendors on more favorable terms or devote substantially more resources to infrastructure and systems development.
Patents in these patent families, if granted, are expected to expire in 2034 subject to any patent term disclaimers, adjustments, or extensions. Our future issued patents covering product candidates we develop could be found invalid or unenforceable if challenged in court or before administrative bodies in the United States or abroad.
Patents in these patent families, if granted, are expected to expire in 2034 subject to any patent term disclaimers, adjustments, or extensions. Our future issued patents covering drug candidates we develop could be found invalid or unenforceable if challenged in court or before administrative bodies in the United States or abroad.
To date, we have contracted directly with national health insurance companies to become an in-network provider and enrolled as a supplier in the Medicare program and a provider in some state Medicaid programs, and we have also received payment for our tests from other third-party payors as an out-of-network provider.
To date, we have contracted directly with national health insurance companies to become an in-network provider and enrolled as a supplier in the Medicare program and a provider in some state Medicaid programs, and we have also received payment for our tests from other insurance payors as an out-of-network provider.
If any of our drug candidates is approved for marketing in the U.S. or elsewhere, we will need to expand our internal sales, marketing and distribution capabilities to commercialize such approved drug candidates in the United States and other territories, or we will need to enter into collaborations with third parties to perform these services.
If any of our drug candidates is approved for marketing in the United States or elsewhere, we will need to expand our internal sales, marketing and distribution capabilities to commercialize such approved drug candidates in the United States and other territories, or we will need to enter into collaborations with third parties to perform these services.
We cannot be certain, however, that the claims in our future patent applications covering the composition of matter of any product candidates will be considered patentable by the United States Patent and Trademark Office (“USPTO”), or by patent offices in foreign countries, or that the claims in any of its issued patents will be considered valid and enforceable by courts in the United States or foreign countries.
We cannot be certain, however, that the claims in our future patent applications covering the composition of matter of any drug candidates will be considered patentable by the United States Patent and Trademark Office (“USPTO”), or by patent offices in foreign countries, or that the claims in any of its issued patents will be considered valid and enforceable by courts in the United States or foreign countries.
The OIG and a variety of states’ Attorneys General have issued fraud alerts regarding a variety of cancer genetic testing fraud schemes, and the Department of Justice has announced indictments and guilty pleas in such fraud schemes involving a variety of individuals and entities, including genetic testing and other laboratories, physicians who ordered genetic testing for a large volume of patients without treating them, and third parties who arranged for the genetic testing by approaching patients through telemarketing calls, booths at public events, health fairs, and door-to-door visits.
The OIG and a variety of states’ Attorneys General have issued fraud alerts regarding a variety of cancer genetic testing fraud schemes, and the DOJ has announced indictments and guilty pleas in such fraud schemes involving a variety of individuals and entities, including genetic testing and other laboratories, physicians who ordered genetic testing for a large volume of patients without treating them, and third parties who arranged for the genetic testing by approaching patients through telemarketing calls, booths at public events, health fairs, and door-to-door visits.
These fluctuations can occur because of a variety of factors, including, among others, the amount and timing of sales of our tests and testing services, the prices we charge for our tests and testing services, customer or payor mix, general price degradation for our tests and testing services or other competitive factors, the rate and timing of our billings and collections, our ability to obtain reimbursement for our tests from third-party payors, our ability to maintain a broad and flexible testing menu, the timing and amount of our commitments and other payments, and exchange rate fluctuations, as well as the other risk factors discussed in this report.
These fluctuations can occur because of a variety of factors, including, among others, the amount and timing of sales of our tests and testing services, the prices we charge for our tests and testing services, customer or payor mix, general price degradation for our tests and testing services or other competitive factors, the rate and timing of our billings and collections, our ability to obtain reimbursement for our tests from insurance payors, our ability to maintain a broad and flexible testing menu, the timing and amount of our commitments and other payments, and exchange rate fluctuations, as well as the other risk factors discussed in this report.
If we are not able to obtain coverage and an acceptable level of reimbursement for our tests 40 from third-party payors, the patient for whom the test is ordered typically will owe a greater co-insurance, deductible or co-payment amount or may be expected to pay the entire cost of the test out-of-pocket, which could dissuade practitioners from ordering our tests and, if ordered, could result in a delay in or decreased likelihood of collecting payment, whether from patients or from third-party payors.
If we are not able to obtain coverage and an acceptable level of reimbursement for our tests from insurance payors, the patient for whom the test is ordered typically will owe a greater co-insurance, deductible or co-payment amount or may be expected to pay the entire cost of the test out-of-pocket, which could dissuade practitioners from ordering our tests and, if ordered, could result in a delay in or decreased likelihood of collecting payment, whether from patients or from insurance payors.
Healthcare policy changes, including recently enacted and proposed new legislation reforming the U.S. healthcare system, could cause significant harm to our business, operations and financial condition. The ACA made a number of substantial changes to the way healthcare is financed both by governmental and private payors.
Healthcare policy changes, including recently enacted and proposed new legislation targeting the U.S. healthcare system, could cause significant harm to our business, operations and financial condition. The ACA made a number of substantial changes to the way healthcare is financed both by governmental and private payors.
Under the agreement, ANP granted Fulgent Pharma LLC an exclusive, worldwide, royalty bearing, perpetual, irrevocable, and sublicensable license to certain rights in patents and patent applications under which we may develop and commercialize FID-007 and related formulations for human therapeutic, prophylactic, and diagnostic uses.
Under the agreement, ANP granted Fulgent Pharma LLC an exclusive, worldwide, perpetual, irrevocable, and sublicensable license to certain rights in patents and patent applications under which we may develop and commercialize FID-007 and related formulations for human therapeutic, prophylactic, and diagnostic uses.
We rely on a limited number of suppliers for certain laboratory substances used in the chemical reactions incorporated into our tests and testing services, which we refer to as reagents, as well as for the sequencers, collection kits, and various other equipment and materials we use in our laboratory operations.
We rely on a limited number of suppliers for certain laboratory substances used in the chemical reactions incorporated into our tests and testing services, which we refer to as reagents, as well as for the sequencers and various other equipment and materials we use in our laboratory operations.
Affected stakeholders continue to press for a comprehensive legislative solution to create a harmonized paradigm for oversight of LDTs by both 42 the FDA and CMS, instead of implementation of the proposed FDA administrative action, which may be disruptive to the industry and to patient access to certain diagnostic tests.
Affected stakeholders also continue to press for a comprehensive legislative solution to create a harmonized paradigm for oversight of LDTs by both the FDA and CMS, instead of implementation of the proposed FDA administrative action, which may be disruptive to the industry and to patient access to certain diagnostic tests.
If we fail in defending any such claims, in addition to paying monetary damages, we may lose valuable intellectual property rights, such as exclusive ownership of, or right to use, intellectual property that is important to our products, product candidates and other proprietary technologies we may develop.
If we fail in defending any such claims, in addition to paying monetary damages, we may lose valuable intellectual property rights, such as exclusive ownership of, or right to use, intellectual property that is important to our products, drug candidates and other proprietary technologies we may develop.
These laws and regulations currently include, among others: • CLIA’s and CAP’s regulation of our laboratory activities; • FDA laws and regulations, including but not limited to requirements for offering LDTs; • federal and state laws and standards affecting reimbursement by government healthcare programs, including certain coding requirements to obtain reimbursement and certain changes to the payment mechanism for clinical laboratory services resulting from PAMA; • HIPAA and HITECH, which establish comprehensive federal standards with respect to the privacy and security of PHI, and requirements for the use of certain standardized electronic transactions with respect to transmission of such information, as well as similar laws protecting other types of personal information; • state laws governing the maintenance of personally identifiable information of state residents, including medical information, and which impose varying breach notification requirements, some of which allow private rights of action by individuals for violations and also impose penalties for such violations; • the federal Anti-Kickback Statute, which generally prohibits knowingly and willfully offering, paying, soliciting or receiving remuneration, directly or indirectly, in return for or to induce a person to refer to an individual any good, facility, item or service that is reimbursable under a federal healthcare program; • the federal Stark Law, which generally prohibits a physician from making a referral for certain designated health services covered by the Medicare program, including laboratory and pathology services, if the physician or an immediate family member has a financial relationship with the entity providing the designated health services; • the federal False Claims Act, which imposes civil penalties, and provides for civil whistleblower or qui tam actions, against individuals or entities for knowingly presenting, or causing to be presented, to the federal government, claims for payment that are false or fraudulent or making a false statement to avoid, decrease or conceal an obligation to pay money to the federal government; • the federal Civil Monetary Penalties Law, which generally prohibits, among other things, the offering or transfer of remuneration to a Medicare or Medicaid beneficiary if it is likely to influence the beneficiary’s selection of a particular provider, practitioner or supplier of services reimbursable by Medicare or Medicaid; • EKRA, which imposes criminal penalties for knowing or willful payment or offer, or solicitation or receipt, of any remuneration, whether directly or indirectly, overtly or covertly, in cash or in kind, in exchange for the referral or inducement of laboratory testing (among other health care services) covered by healthcare benefit programs (including commercial insurers) unless a specific exception applies; • the ACA, which, among other things, establishes a requirement for providers and suppliers to report and return any overpayments received from the Medicare and Medicaid programs; • other federal and state fraud and abuse laws, such as anti-kickback laws, prohibitions on self-referral, fee-splitting restrictions, insurance fraud laws, anti-markup laws, prohibitions on the provision of tests at no or discounted cost to induce physician or patient adoption and false claims acts, some of which may extend to services reimbursable by any third-party payor, including private payors; 46 • the federal Physician Payments Sunshine Act and various state laws on reporting relationships with health care providers and customers, which could be determined to apply to our LDTs; • the prohibition on reassignment of Medicare claims and other Medicare and Medicaid billing and coverage requirements; • state laws that prohibit other specified healthcare practices, such as billing physicians for tests that they order, waiving coinsurance, copayments, deductibles and other amounts owed by patients, business corporations practicing medicine or employing or engaging physicians to practice medicine and billing a state Medicaid program at a price that is higher than what is charged to one or more other payors; • FCPA and applicable foreign anti-bribery laws; • federal, state and local regulations relating to the handling and disposal of regulated medical waste, hazardous waste and biohazardous waste and workplace safety for healthcare employees; • laws and regulations relating to health and safety, labor and employment, public reporting, taxation and other areas applicable to businesses generally, all of which are subject to change, including, for example, the significant changes to the taxation of business entities were enacted in December 2017; and • similar foreign laws and regulations that apply to us in the countries in which we operate or may operate in the future.
These laws and regulations currently include, among others: • CLIA’s and CAP’s regulation of our laboratory activities; • FDA laws and regulations, including but not limited to requirements for offering LDTs following the July 2024 effective date of the agency’s LDT final rule; • federal and state laws and standards affecting reimbursement by government healthcare programs, including certain coding requirements to obtain reimbursement and certain changes to the payment mechanism for clinical laboratory services resulting from PAMA; • HIPAA and HITECH, which establish comprehensive federal standards with respect to the privacy and security of PHI, and requirements for the use of certain standardized electronic transactions with respect to transmission of such information, as well as similar laws protecting other types of personal information; • state laws governing the maintenance of personally identifiable information of state residents, including medical information, and which impose varying breach notification requirements, some of which allow private rights of action by individuals for violations and also impose penalties for such violations; • the federal Anti-Kickback Statute, which generally prohibits knowingly and willfully offering, paying, soliciting or receiving remuneration, directly or indirectly, in return for or to induce a person to refer to an individual any good, facility, item or service that is reimbursable under a federal healthcare program; • the federal Stark Law, which generally prohibits a physician from making a referral for certain designated health services covered by the Medicare and Medicaid program, including laboratory and pathology services, if the physician or an immediate family member has a financial relationship with the entity providing the designated health services; • the federal False Claims Act, which imposes civil penalties, and provides for civil whistleblower or qui tam actions, against individuals or entities for knowingly presenting, or causing to be presented, to the federal government, claims for payment that are false or fraudulent or making a false statement to avoid, decrease or conceal an obligation to pay money to the federal government; • the federal Civil Monetary Penalties Law, which generally prohibits, among other things, the offering or transfer of remuneration to a Medicare or Medicaid beneficiary if it is likely to influence the beneficiary’s selection of a particular provider, practitioner or supplier of services reimbursable by Medicare or Medicaid; • EKRA, which imposes criminal penalties for knowing or willful payment or offer, or solicitation or receipt, of any remuneration, whether directly or indirectly, overtly or covertly, in cash or in kind, in exchange for the referral or inducement of laboratory testing (among other health care services) covered by healthcare benefit programs (including commercial insurers) unless a specific exception applies; • the ACA, which, among other things, establishes a requirement for providers and suppliers to report and return any overpayments received from the Medicare and Medicaid programs; • other federal and state fraud and abuse laws, such as anti-kickback laws, prohibitions on self-referral, fee-splitting restrictions, insurance fraud laws, anti-markup laws, prohibitions on the provision of tests at no or discounted cost to induce physician or patient adoption and false claims acts, some of which may extend to services reimbursable by any insurance payor, including private payors; 49 • the federal Physician Payments Sunshine Act and various state laws on reporting relationships with health care providers and customers, which could be determined to apply to our LDTs now that they are treated by FDA as medical devices pursuant to the 2024 final rule; • the prohibition on reassignment of Medicare claims and other Medicare and Medicaid billing and coverage requirements; • state laws that prohibit other specified healthcare practices, such as billing physicians for tests that they order, waiving coinsurance, copayments, deductibles and other amounts owed by patients, business corporations practicing medicine or employing or engaging physicians to practice medicine and billing a state Medicaid program at a price that is higher than what is charged to one or more other payors; • FCPA and applicable foreign anti-bribery laws; • federal, state and local regulations relating to the handling and disposal of regulated medical waste, hazardous waste and biohazardous waste and workplace safety for healthcare employees; • laws and regulations relating to health and safety, labor and employment, public reporting, taxation and other areas applicable to businesses generally, all of which are subject to change, including, for example, the significant changes to the taxation of business entities were enacted in December 2017; and • similar foreign laws and regulations that apply to us in the countries in which we operate or may operate in the future.
Satisfaction of these and other regulatory requirements is costly, time consuming, uncertain and subject to unanticipated delays. The time required to obtain FDA approval, and any other required approvals for pharmaceutical products, including any accelerated approval, is unpredictable but typically requires years to several years and may never be obtained.
Satisfaction of these and other regulatory requirements is costly, time consuming, uncertain and subject to unanticipated delays. The time required to obtain FDA approval, and any other required approvals for pharmaceutical products, is unpredictable but typically requires years to several years and may never be obtained.
Depending upon the timing, duration, and specifics of any FDA marketing approval of any product candidate we may develop, one or more of our future owned U.S. patents may be eligible for limited patent term extension under the Hatch-Waxman Act.
Depending upon the timing, duration, and specifics of any FDA marketing approval of any drug candidate we may develop, one or more of our future owned U.S. patents may be eligible for limited patent term extension under the Hatch-Waxman Act.
Any actions taken by a new U.S. administration may have a negative impact on the United States economies and on our business, financial conditions, and results of operations. Impairment charges relating to our goodwill and intangible assets could negatively affect our financial performance.
Any actions taken by the new administration may have a negative impact on the United States economies and on our business, financial conditions, and results of operations. Impairment charges relating to our goodwill and intangible assets could negatively affect our financial performance.
If we make efforts to seek patent protection for our product candidates, products, technologies, and tests, these efforts may be negatively impacted by the Prometheus , Myriad and Alice decisions, rulings in other cases or guidance or procedures issued by the USPTO.
If we make efforts to seek patent protection for our drug candidates, products, technologies, and tests, these efforts may be negatively impacted by the Prometheus , Myriad and Alice decisions, rulings in other cases or guidance or procedures issued by the USPTO.
Our business, prospects and financial condition may be adversely affected as the result of the current HRSA Audit.
Our business, prospects and financial condition may be adversely affected as the result of the current HRSA Audit and CIDs.
Further, we may be unable to discover or develop and launch new tests for a variety of reasons, including failure of any proposed test to perform as expected, lack of validation or reference data for the test, or failure to demonstrate the utility of the test.
Further, we may be unable to discover or develop and launch new tests or testing services for a variety of reasons, including failure of any proposed test to perform as expected, lack of validation or reference data for the test, or failure to demonstrate the utility of the test.
Drug candidates could fail to receive, or could be delayed in receiving, marketing approval for many reasons, including any one or more of the following: • the FDA, European Medicines Agency, or EMA, or comparable foreign regulatory authorities may disagree with the design or implementation of clinical trials; • we may be unable to demonstrate to the satisfaction of the FDA, EMA or comparable foreign regulatory authorities that a product candidate is safe and effective for its proposed indication(s) for use; • the results of clinical trials may not meet the level of statistical significance required by the FDA, EMA or comparable foreign regulatory authorities for marketing approval; 53 • we may be unable to demonstrate that a product candidate’s clinical and other benefits outweigh its safety risks; • the FDA, EMA or comparable foreign regulatory authorities may disagree with our interpretation of data from preclinical studies or clinical trials; • the data collected from clinical trials of product candidates may not be sufficient to support the submission of an application to obtain marketing approval in the United States or elsewhere; • upon review of clinical trial sites and data, the FDA or comparable foreign regulatory authorities may find record keeping or the record keeping of clinical trial sites to be inadequate or may identify other deficiencies related to the trials; • the manufacturing processes or facilities of third-party manufacturers with which we or Fulgent Pharma contract for clinical and commercial supplies may fail to meet the requirements of the FDA, EMA or comparable foreign regulatory authorities; or • the medical standard of care or the approval policies or regulations of the FDA, EMA or comparable foreign regulatory authorities may significantly change in a manner that renders our clinical data insufficient for approval.
Drug candidates could fail to receive, or could be delayed in receiving, marketing approval for many reasons, including any one or more of the following: • the FDA, EMA, or comparable foreign regulatory authorities may disagree with the design or implementation of clinical trials; • we may be unable to demonstrate to the satisfaction of the FDA, EMA or comparable foreign regulatory authorities that a drug candidate is safe and effective for its proposed indication(s) for use; • the results of clinical trials may not meet the level of statistical significance required by the FDA, EMA or comparable foreign regulatory authorities for marketing approval; • we may be unable to demonstrate that a drug candidate’s clinical and other benefits outweigh its safety risks; • the FDA, EMA or comparable foreign regulatory authorities may disagree with our interpretation of data from non-clinical studies or clinical trials; • the data collected from clinical trials of drug candidates may not be sufficient to support the submission of an application to obtain marketing approval in the United States or elsewhere; • upon review of clinical trial sites and data, the FDA or comparable foreign regulatory authorities may find record keeping or the record keeping of clinical trial sites to be inadequate or may identify other deficiencies related to the trials; • the manufacturing processes or facilities of third-party manufacturers with which we or Fulgent Pharma contract for clinical and commercial supplies may fail to meet the requirements of the FDA, EMA or comparable foreign regulatory authorities; or • the medical standard of care or the approval policies or regulations of the FDA, EMA or comparable foreign regulatory authorities may significantly change in a manner that renders our clinical data insufficient for approval.
We are also subject to governmental audits, such as the current HRSA Audit, that could result in material refunds or settlements. Our business, prospects and financial condition may be adversely affected as the result of the current HRSA Audit.
We are also subject to governmental audits and investigations, such as the current HRSA Audit and CIDs, that could result in material refunds or settlements. Our business, prospects and financial condition may be adversely affected as the result of the current HRSA Audit and CIDs.
Intellectual Property Risks If we are unable to obtain and maintain patent protection for any product candidate we develop, our competitors could develop and commercialize products or technology similar to ours, and our ability to successfully commercialize any product candidate we may develop, and our technology, may be adversely affected.
Intellectual Property Risks If we are unable to obtain and maintain patent protection for any drug candidate we develop, our competitors could develop and commercialize products or technology similar to ours, and our ability to successfully commercialize any drug candidate we may develop, and our technology, may be adversely affected.
These risks include, among others, difficulties predicting the market for genetic testing in Asia; competitive factors in this market, including challenges securing market share; local differences in customer demands and preferences and the regulatory environment and regulatory requirements; the interpretation or enforcement of laws, regulations, and rules in China and many of the other risks of doing business internationally that are discussed above.
These risks include, among others, difficulties predicting the market for genetic testing in Asia; competitive factors in this market, including challenges securing market share; trade wars and tariffs; local differences in customer demands and preferences and the regulatory environment and regulatory requirements; the interpretation or enforcement of laws, regulations, and rules in China and many of the other risks of doing business internationally that are discussed above.
These individuals then shared the proceeds received from Medicare, TRICARE, and other third-party payors, and these activities allegedly violated the federal Anti-Kickback Statute and other criminal laws. This increased regulatory scrutiny could decrease demand for our testing services or increase our costs of regulatory compliance, either of which could have a material adverse effect on our business.
These individuals then shared the proceeds received from Medicare, TRICARE, and other insurance payors, and these activities allegedly violated the federal Anti-Kickback Statute and other criminal laws. This increased regulatory scrutiny could decrease demand for our testing services or increase our costs of regulatory compliance, either of which could have a material adverse effect on our business.
Even if we are allowed to pursue the FDA's 505(b)(2) pathway for one or more of our drug candidates, we cannot assure you that such candidates will receive the requisite approvals for commercialization.
Even if we are allowed to use the FDA’s 505(b)(2) pathway for one or more of our drug candidates, we cannot assure you that such candidates will receive the requisite approvals for commercialization.

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Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

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Biggest changeAs discussed above, our CISO and/or General Counsel and Chief Privacy Officer report to our board of directors about cybersecurity threat risks, among other cybersecurity related matters, on a quarterly basis. In addition, our cybersecurity risk management and data strategy processes are further overseen by management team members.
Biggest changeThey are also a Certified Information Privacy Professional (CIPP/US/E), a Certified Privacy Manager (CIPM), and a Privacy Law Specialist (PLS) with the International Association of Privacy Professionals (IAPP). As discussed above, our CISO and/or General Counsel and Chief Privacy Officer report to our board of directors about cybersecurity threat risks, among other cybersecurity related matters, on a quarterly basis.
To provide for the availability of critical data and systems, maintain regulatory compliance, manage our material risks from cybersecurity threats, and protect against and respond to cybersecurity incidents, we also perform periodic risk assessments, which includes cybersecurity risks, monitor emerging data protection laws and implement changes to our processes that are designed to comply with such laws; through our policies, practices, and/or contracts (as applicable), require employees and certain third parties to treat confidential information and data with care; periodically update our relevant policies and procedures; employ technical safeguards that are designed to protect our information systems from cybersecurity threats, including firewalls, intrusion prevention and detection systems, anti-malware functionality, and access controls, which are evaluated and improved through vulnerability assessments and cybersecurity threat intelligence; provide 66 regular, mandatory training for our employees regarding cybersecurity threats as a means to equip them with effective tools and knowledge necessary to identify or address cybersecurity threats and to communicate our evolving information security policies, standards, processes and practices; conduct regular phishing email simulations to enhance awareness and responsiveness to possible threats; conduct annual cybersecurity training for our board of directors and senior management; run tabletop exercises to simulate a response to a cybersecurity incident and use the findings to improve our processes and technologies; leverage the NIST incident handling framework to help us identify, protect, detect, respond, and recover when there is an actual or potential cybersecurity incident; engage consultants to help us oversee and manage cybersecurity risks, processes, and incident response measures; and carry information security risk insurance that provides protection against the potential losses arising from a cybersecurity incident.
To provide for the availability of critical data and systems, maintain regulatory compliance, manage our material risks from cybersecurity threats, and protect against and respond to cybersecurity incidents, we also perform periodic risk assessments, which includes cybersecurity risks, monitor emerging data protection laws and implement changes to our processes that are designed to comply with such laws; through our policies, practices, and/or contracts (as applicable), require employees and certain third parties to treat confidential information and data with care; periodically update our relevant policies and procedures; employ technical safeguards that are designed to protect our information systems from cybersecurity threats, including firewalls, intrusion prevention and detection systems, anti-malware functionality, and access controls, which are evaluated and improved through vulnerability assessments and cybersecurity threat intelligence; provide 70 regular, mandatory training for our employees regarding cybersecurity threats as a means to equip them with effective tools and knowledge necessary to identify or address cybersecurity threats and to communicate our evolving information security policies, standards, processes and practices; conduct regular phishing email simulations to enhance awareness and responsiveness to possible threats; conduct annual cybersecurity training for our board of directors and senior management; run tabletop exercises to simulate a response to a cybersecurity incident and use the findings to improve our processes and technologies; leverage the NIST incident handling framework to help us identify, protect, detect, respond, and recover when there is an actual or potential cybersecurity incident; engage consultants to help us oversee and manage cybersecurity risks, processes, and incident response measures; and carry information security risk insurance that provides protection against the potential losses arising from a cybersecurity incident.
Our board of directors executes its oversight responsibility for risk management both directly and through delegating oversight of certain of these risks to its committees, and our board of directors has authorized our audit committee to oversee risks from cybersecurity threats.
Our board of directors executes its oversight responsibility for risk management both directly and through delegating oversight of 71 certain of these risks to its committees, and our board of directors has authorized our audit committee to oversee risks from cybersecurity threats.
Our cyber risk management program is integrated within the Company’s enterprise risk management system and addresses both the corporate information technology environment and customer-facing products and services. The risk management program is focused on safeguarding the organization's digital assets, ensuring continuous business operations, and minimizing the potential impact of cyber threats. Regular assessments, including penetration tests, are performed.
Our cyber risk management program is integrated within the Company’s enterprise risk management system and addresses both the corporate information technology environment and customer-facing products and services. The risk management program is focused on safeguarding the organization ’s digital assets, ensuring continuous business operations, and minimizing the potential impact of cyber threats. Regular assessments, including penetration tests, are performed.
In the last three fiscal years, we have not experienced any material cybersecurity incidents. As of the date of this report, we do not believe that risks from any cybersecurity threats, including as a result of any previous cybersecurity incidents, have materially affected or are reasonably likely to affect us, including our business strategy, results of operations or financial condition.
We have not experienced any material cybersecurity incidents. As of the date of this report, we do not believe that risks from any cybersecurity threats, including as a result of any previous cybersecurity incidents, have materially affected or are reasonably likely to affect us, including our business strategy, results of operations or financial condition.
Our CISO has over 20 years of IT experience, including over 18 years of cybersecurity experience, holds an M.S. degree in Information Security, and is a Certified Information Systems Security Professional (CISSP).
Our CISO has over 20 years of IT experience, including over 18 years of cybersecurity experience, holds an M.S. degree in Information Security, and is a Certified Information Systems Security Professional (CISSP). Our General Counsel and Chief Privacy Officer is an attorney with 18 years of experience, including experience in privacy matters.
These management team members are informed about and monitor the prevention, mitigation, detection, and remediation of cybersecurity incidents through their management of, and participation in, the cybersecurity risk management and strategy processes described above, including the operation of our incident response plan.
Together with CISO and our General Counsel and Chief Privacy Officer, these management team members are regularly informed about and routinely monitor the prevention, mitigation, detection, and remediation of cybersecurity incidents through their ongoing management of, and participation in, the cybersecurity risk management and strategy processes described above, including the operation of our incident response plan.
Cybersecurity Governance; Management 67 Cybersecurity is an important part of our risk management processes and an area of focus for our board of directors and management. In general, our board of directors oversees risk management activities designed and implemented by our management and considers specific risks, including, for example, risks associated with our strategic plan, business operations, and capital structure.
In general, our board of directors oversees risk management activities designed and implemented by our management and considers specific risks, including, for example, risks associated with our strategic plan, business operations, and capital structure.
It is possible that our information technology systems and networks, or those managed or provided by third parties, could have vulnerabilities, which could go unnoticed for a period of time.
Cybersecurity attacks could also include attacks targeting patient, employee, or customer data or the security, integrity, and/or reliability of the hardware and software we utilize in our business operations. It is possible that our information technology systems and networks, or those managed or provided by third parties, could have vulnerabilities, which could go unnoticed for a period of time.
However, we are aware that changes in our IT systems, including those provided by third parties, could expose us to risk in the future. We cannot guarantee that controls we will implement to mitigate this risk will eliminate it. See Item 1A of this Annual Report for discussion of this risk.
However, we are aware that changes in our IT systems, including those provided by third parties, could expose us to risk in the future. These threats pose a risk to the security of our systems and networks and the confidentiality, availability, and integrity of our data.
Removed
However, these threats pose a risk to the security of our systems and networks and the confidentiality, availability, and integrity of our data. Cybersecurity attacks could also include attacks targeting patient, employee, or customer data or the security, integrity, and/or reliability of the hardware and software we utilize in our business operations.
Added
For more information, see the risk factors included in Item 1A of this Annual Report. Cybersecurity Governance; Management Cybersecurity is an important part of our risk management processes and an area of focus for our board of directors and management.
Removed
For more information, see the risk factors included in Item 1A of this Annual Report. As of the date of this report, we do not believe that risks from any cybersecurity threats as a result of any previous cybersecurity incidents, have materially affected or are reasonably likely to affect us, including our business strategy, results of operations or financial condition.
Added
In addition, our cybersecurity risk management and data strategy processes are further overseen by certain management team members.

Item 2. Properties

Properties — owned and leased real estate

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Biggest changeWe believe our existing facilities are adequate for our current and expected near-term needs and additional space would be available on commercially reasonable terms if required. 68
Biggest changeIn Needham, Massachusetts, we lease and occupy approximately 21,000 square feet under a lease that will expire in September 2027. We use these facilities for laboratory testing and certain administrative and other functions. We believe our existing facilities are adequate for our current and expected near-term needs and additional space would be available on commercially reasonable terms if required.
In Alpharetta, Georgia, we lease and occupy approximately 65,000 square feet under a lease that will expire in March 2028. In Phoenix, Arizona, we lease and occupy approximately 25,000 square feet under a lease that will expire in November 2025. In Needham, Massachusetts, we lease and occupy approximately 21,000 square feet under a lease that will expire in September 2027.
In Alpharetta, Georgia, we own and occupy approximately 65,000 square feet of building and space situated on 8.5 acres of land. In Phoenix, Arizona, we lease and occupy approximately 25,000 square feet under a lease that will expire in November 2025.
We use these facilities for laboratory testing and management activities and certain research and development, administrative and other functions. We have CLIA-certified laboratories located in Irving, Texas; Alpharetta, Georgia; Phoenix, Arizona; Needham, Massachusetts; and New York, New York. In Irving, Texas, we lease and occupy approximately 172,000 square feet under a lease that will expire in May 2024.
We use these facilities for laboratory testing and management activities and certain research and development, administrative and other functions. We have CLIA-certified laboratories located in Coppell, Texas; Alpharetta, Georgia; Phoenix, Arizona; and Needham, Massachusetts. In Coppell, Texas, we own and occupy approximately 96,500 square feet of building and space situated on 6.8 acres of land.
Removed
In New York, New York, we lease and occupy approximately 400 square feet under a lease that will expire in September 2024. We use these facilities for laboratory testing and certain administrative and other functions.
Removed
We also own another real property located in Coppel, Texas, which consists of approximately 96,500 square feet of building space situated on 6.8 acres of land. We are building a CLIA-certified laboratory at this location.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeThe outcome of these matters are inherently uncertain, and there can be no assurances that a favorable outcome will be obtained. Regardless of outcome, litigation can have an adverse impact on us due to defense and settlement costs, diversion of management resources, negative publicity and reputational harm, among other factors. Item 4. Mine Safe ty Disclosures.
Biggest changeThe outcome of these matters are inherently uncertain, and there can be no assurances that a favorable outcome will be obtained. Regardless of outcome, litigation can have an adverse impact on us due to defense and settlement costs, diversion of management resources, negative publicity and reputational harm, among other factors. Item 4. M ine Safety Disclosures.
As disclosed in Note 8, Debt, Commitments and Contingencies to the Consolidated Financial Statements, we are engaged in certain legal investigations, audits and voluntary disclosure processes, and the disclosure set forth in Note 8 relating to these certain legal matters is incorporated herein by reference.
As disclosed in Note 8, Debt, Commitments and Contingencies to the Consolidated Financial Statements, we are engaged in certain legal investigations, 72 audits and voluntary disclosure processes, and the disclosure set forth in Note 8 relating to these certain legal matters is incorporated herein by reference.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeNote that historic stock price performance is not necessarily indicative of future stock price performance. 70 Information on Share Repurchases The number of shares of common stock repurchased by the Company during the year ended December 31, 2023 and the average price paid per share are as follows: Period (a) Total Number of Shares Purchased (b) Average Price Paid Per Share (1) (c) Total Number of Shares Purchased As Part of Publicly Announced Plans or Programs (d) Maximum Dollar Value that May Yet Be Purchased Under the Plans or Programs May 2022 (5/1/2022 - 5/31/2022) 30,000 $ 49.56 30,000 $ 248,515,000 June 2022 (6/1/2022 - 6/30/2022) 185,000 $ 48.97 185,000 $ 239,429,000 August 2022 (8/1/2022 - 8/31/2022) 247,000 $ 47.68 247,000 $ 227,657,000 September 2022 (9/1/2022 - 9/30/2022) 533,000 $ 43.04 533,000 $ 204,752,000 October 2022 (10/1/2022 - 10/31/2022) 244,000 $ 37.33 244,000 $ 195,661,000 November 2022 (11/1/2022 - 11/30/2022) 234,000 $ 35.83 234,000 $ 187,276,000 December 2022 (12/1/2022 - 12/31/2022) 337,000 $ 34.32 337,000 $ 175,718,000 September 2023 (9/1/2023-9/30/2023) 80,000 $ 27.65 80,000 $ 173,522,000 October 2023 (10/1/2023-10/31/2023) 533,000 $ 25.65 533,000 $ 159,864,000 November 2023 (11/1/2023-11/30/2023) 222,000 $ 26.95 222,000 $ 153,875,000 December 2023 (12/1/2023-12/31/2023) 118,000 $ 27.01 118,000 $ 150,686,000 Total 2,763,000 2,763,000 (1) Includes commissions for the shares repurchased under the stock repurchase program.
Biggest changeNote that historic stock price performance is not necessarily indicative of future stock price performance. 74 Information on Share Repurchases The number of shares of common stock repurchased by the Company during the year ended December 31, 2024 and the average price paid per share are as follows: Period (a) Total Number of Shares Purchased (b) Average Price Paid Per Share (1) (c) Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (d) Maximum Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs March 2024 (3/1/2024-3/31/2024) 10,000 $ 22.02 10,000 $ 150,461,000 Total 10,000 10,000 (1) Includes commissions for the shares repurchased under the stock repurchase program.
Common Stock Performance Graph The following graph compares the cumulative total stockholder return, calculated on a dividend-reinvested basis, in Fulgent's Common Stock, the NASDAQ Composite Index, and the NASDAQ Biotechnology Index for the five years ended December 31, 2023.
Common Stock Performance Graph The following graph compares the cumulative total stockholder return, calculated on a dividend-reinvested basis, in Fulgent's Common Stock, the Nasdaq Composite Index, and the Nasdaq Biotechnology Index for the five years ended December 31, 2024.
The comparison assumes that $100 was invested in the Company’s common stock, the NASDAQ Composite Index, and the NASDAQ Biotechnology Index as of the market close on December 31, 2018.
The comparison assumes that $100 was invested in the Company’s common stock, the NASDAQ Composite Index, and the Nasdaq Biotechnology Index as of the market close on December 31, 2019.
Use of Proceeds from Registered Securities To date, we have used $146.7 million of the net proceeds from sales of our common stock, of which, $4.5 million was used for contributions to FF Gene Biotech prior to the FF Gene Biotech Acquisition, $126.4 million was used to fund the Company’s operation and a business combination, and $15.8 million was used to pay off the investment margin loan.
Use of Proceeds from Registered Securities To date, we have used $190.8 million of the net proceeds from sales of our common stock, of which, $4.5 million was used for contributions to FF Gene Biotech prior to the FF Gene Biotech Acquisition, $170.5 million was used to fund the Company’s operation and a business combination, and $15.8 million was used to pay off the investment margin loan.
Holders of Common Stock As of February 1, 2024, there were 14 holders of record of our common stock, plus an indeterminate number of additional stockholders whose shares of our common stock are held on their behalf by brokerage firms or other agents.
Holders of Common Stock As of February 1, 2025, there were 11 holders of record of our common stock, plus an indeterminate number of additional stockholders whose shares of our common stock are held on their behalf by brokerage firms or other agents.

Item 7. Management's Discussion & Analysis

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

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Biggest changeYear Ended December 31, $ % 2023 2022 Change Change Statement of Operations Data: (dollars in thousands) Revenue $ 289,213 $ 618,968 $ (329,755 ) (53)% Cost of revenue 184,757 252,067 (67,310 ) (27)% Gross profit 104,456 366,901 (262,445 ) (72)% Operating expenses: Research and development 41,440 28,910 12,530 43% Selling and marketing 41,467 38,918 2,549 7% General and administrative 88,999 111,074 (22,075 ) (20)% Amortization of intangible assets 7,845 6,497 1,348 21% Goodwill impairment loss 120,234 — 120,234 * Restructuring costs — 2,975 (2,975 ) * Total operating expenses 299,985 188,374 111,611 59% Operating (loss) income (195,529 ) 178,527 (374,056 ) (210)% Interest and other income, net 21,444 5,498 15,946 290% Income (loss) before income taxes (174,085 ) 184,025 (358,110 ) (195)% Provision for income taxes 1,154 42,102 (40,948 ) (97)% Net (loss) income from consolidated operations (175,239 ) 141,923 (317,162 ) (223)% Net loss attributable to noncontrolling interests 7,414 1,480 5,934 401% Net (loss) income attributable to Fulgent $ (167,825 ) $ 143,403 $ (311,228 ) (217)% Revenue Year Ended December 31, $ % 2023 2022 Change Change Revenue Data: (dollars in thousands) Precision diagnostics $ 131,990 $ 93,685 $ 38,305 41% Anatomic pathology 104,655 74,799 29,856 40% COVID-19 27,152 437,507 (410,355 ) (94)% BioPharma services 25,416 12,977 12,439 96% Total $ 289,213 $ 618,968 $ (329,755 ) (53)% Revenue decreased by $329.8 million, or 53%, from $619.0 million in 2022 to $289.2 million in 2023.
Biggest changeYear Ended December 31, 2024 2023 $ Change % Change (in thousands, except percentages) Statement of Operation Data Revenue $ 283,470 $ 289,213 $ (5,743 ) (2 )% Cost of revenue 176,255 184,757 (8,502 ) (5 )% Gross profit 107,215 104,456 2,759 3 % Operating expenses: Research and development 48,816 41,440 7,376 18 % Selling and marketing 36,246 41,467 (5,221 ) (13 )% General and administrative 88,106 88,999 (893 ) (1 )% Amortization of intangible assets 7,965 7,845 120 2 % Goodwill impairment loss — 120,234 (120,234 ) (100 )% Total operating expenses 181,133 299,985 (118,852 ) (40 )% Operating (loss) income (73,918 ) (195,529 ) 121,611 (62 )% Other income (expenses): Interest income 31,304 21,612 9,692 45 % Interest expense 170 (488 ) 658 (135 )% Impairment of available-for-sale debt securities (10,073 ) — (10,073 ) * Other income, net 561 320 241 75 % Total other income, net 21,962 21,444 518 2 % (Loss) income before income taxes (51,956 ) (174,085 ) 122,129 (70 )% (Benefit from) provision for income taxes (8,136 ) 1,154 (9,290 ) (805 )% Net (loss) income from consolidated operations (43,820 ) (175,239 ) 131,419 (75 )% Net loss attributable to noncontrolling interests 1,112 7,414 (6,302 ) (85 )% Net (loss) income attributable to Fulgent $ (42,708 ) $ (167,825 ) $ 125,117 (75 )% * not meaningful 80 Revenue Year Ended December 31, 2024 2023 $ Change % Change (in thousands, except percentages) Revenue from laboratory services Precision diagnostics $ 167,745 $ 131,990 $ 35,755 27 % Anatomic pathology 97,080 104,655 (7,575 ) (7 )% BioPharma services 16,338 25,416 (9,078 ) (36 )% COVID-19 2,307 27,152 (24,845 ) (92 )% Total laboratory services $ 283,470 $ 289,213 $ (5,743 ) (2 )% Revenue decreased by $5.7 million, or 2%, from $289.2 million in 2023 to $283.5 million in 2024.
Financing Activities Cash used in financing activities in 2023 was $47.8 million, which primarily related to $25.1 million used in the repurchase of common stock $15.0 million used in the repayment for the margin account, $4.3 million used in the repayment of notes payable, and $2.7 million used in common stock withholding for employee tax obligations.
Cash used in financing activities in 2023 was $47.8 million, which primarily related to $25.1 million used in the repurchase of common stock, $15.0 million used in the repayment for the margin account, $4.3 million used in the repayment of notes payable, and $2.7 million used in common stock withholding for employee tax obligations.
For further information, refer to Note 9, Leases, to the Consolidated Financial Statements. (2) Represents non-cancelable finance leases. For further information, refer to Note 9, Leases , to the Consolidated Financial Statements. (3) Represents non-cancelable purchase obligations for medical lab equipment, reagents and other supplies, see Note 8, Debt, Commitment and Contingencies , to the Consolidated Financial Statements.
For further information, refer to Note 9, Leases, to the Consolidated Financial Statements. (2) Represents non-cancelable finance leases. For further information, refer to Note 9, Leases , to the Consolidated Financial Statements. (3) Represents purchase obligations for medical lab equipment, reagents and other supplies, see Note 8, Debt, Commitment and Contingencies , to the Consolidated Financial Statements.
Generally, we do not have long-term purchase agreements with any of our customers, including these key customers, and, as result, any or all of them could decide at any time to increase, accelerate, decrease, delay or discontinue their orders from us.
Generally, 76 we do not have long-term purchase agreements with any of our customers, including these key customers, and, as result, any or all of them could decide at any time to increase, accelerate, decrease, delay or discontinue their orders from us.
Ability to Maintain Low Internal Costs We have developed various proprietary technologies that improve our laboratory efficiency and reduce the costs we incur to perform our tests, including our proprietary gene probes, data algorithms, adaptive learning software and genetic reference library.
Ability to Maintain Low Internal Costs and Inflation We have developed various proprietary technologies that improve our laboratory efficiency and reduce the costs we incur to perform our tests, including our proprietary gene probes, data algorithms, adaptive learning software and genetic reference library.
We expect that these factors could cause our consolidated effective tax rate to differ significantly from the U.S. federal income tax rate in future periods. 76 Results of Operations The table below summarizes the results of our continuing operations for each of the periods presented.
We expect that these factors could cause our consolidated effective tax rate to differ significantly from the U.S. federal income tax rate in future periods. Results of Operations The table below summarizes the results of our continuing operations for each of the periods presented.
In the absence of Medicare coverage, contractually established reimbursement rates or other coverage, we have concluded that our contracts include variable consideration because the amounts paid by Medicare or commercial health insurance carriers may be paid at less than our standard rates or not paid at all, with such differences considered implicit price concessions.
For insurance payors, in the absence of Medicare coverage, contractually established reimbursement rates or other coverage, we have concluded that our contracts include variable consideration because the amounts paid by Medicare or commercial health insurance carriers may be paid at less than our standard rates or not paid at all, with such differences considered implicit price concessions.
For all IPR&D projects, there are major risks and uncertainties associated with the timely and successful completion of development and commercialization of these product candidates, including the ability to confirm their efficacy based on data from clinical trials, the ability to obtain necessary regulatory approvals, and the ability to successfully complete these tasks within budgeted costs.
For all IPR&D projects, there are major risks and uncertainties associated with the timely and successful completion of development and commercialization of these drug candidates, including the ability to confirm their efficacy based on data from clinical trials, the ability to obtain necessary regulatory approvals, and the ability to successfully complete these tasks within budgeted costs.
As a result, the mix of tests delivered in any period, and the customers that order these tests, impacts our financial results for the period. Mix of Customers We consider each single billing and paying unit to be an individual customer, even though a unit may represent multiple physicians and healthcare providers ordering tests.
As a result, the mix of tests delivered in any period, and the customers that order these tests, impacts our financial results for the period. Mix of Customers and Purchasing Terms We consider each single billing and paying unit to be an individual customer, even though a unit may represent multiple physicians and healthcare providers ordering tests.
There was no goodwill impairment loss for the year ended December 31, 2022. The full impairment was driven by a sustained decline in our stock price and market capitalization. There was no impairment loss for the therapeutic development unit for the years ended December 31, 2023 and 2022. See Note 17, Goodwill and Intangible Assets, for more details.
There was no goodwill impairment loss for the year ended December 31, 2024. The full impairment was driven by a sustained decline in our stock price and market capitalization. There was no impairment loss for the therapeutic development unit for the years ended December 31, 2024 and 2023. See Note 17, Goodwill and Intangible Assets, for more details.
We expect to incur more operating expenses and use more cash in operating activities in the coming year as a result of our planned and ongoing clinical trials for FID-007 and as we continue to invest resources to grow our laboratory services business. 81 Investing Activities The cash provided by or used in investing activities are impacted by capital expenditures for operation needs and timing of payments, timing of maturities of marketable securities, and discretionary business combinations and other investment.
We expect to incur more operating expenses and use more cash in operating activities in the coming year as a result of our planned and ongoing clinical trials for FID-007 and FID-022, and as we continue to invest resources to grow our laboratory services business. 84 Investing Activities The cash provided by or used in investing activities are impacted by capital expenditures for operation needs and timing of payments, timing of maturities of marketable securities, and discretionary business combinations and other investment.
Our therapeutic development business is focused on developing drug candidates for treating a broad range of cancers using a novel nanoencapsulation and targeted therapy platform designed to improve the therapeutic window and pharmacokinetic profile, or PK profile, of new and existing cancer drugs.
Our therapeutic development business is focused on developing drug candidates for treating a broad range of cancers using a novel nanoencapsulation and targeted therapy platform designed to improve the therapeutic window and PK profile of new and existing cancer drugs.
We also expect to continue to incur general and administrative expenses as a result of operating as a public company, including expenses related to compliance with the rules and regulations of the SEC, and the Nasdaq Stock Market, additional insurance expenses, investor relations activities and other administrative and professional services.
We also expect to continue to incur general and administrative expenses as a result of operating as a public company, including expenses related to compliance with the rules and regulations of the SEC, and Nasdaq, additional insurance expenses, investor relations activities and other administrative and professional services.
We believe the factors that will affect our ability to grow these revenue streams are 1) the average price point we offer and the reimbursement rate from third-party payors; 2) the concentration of our payor base; 3) the competitive advantage we have due to our broad and flexible test menu, detection rate, and turnaround times; and 4) growth in size of an addressable market.
We believe the factors that will affect our ability to grow these revenue streams are 1) the average price point we offer and the reimbursement rate from insurance payors; 2) the concentration of our payor base; 3) the competitive advantage we have due to our broad and flexible test menu, detection rate, and turnaround times; and 4) growth in size of an addressable market.
Estimated collection amounts from third-party payors are subject to the complexities and ambiguities of billing, reimbursement regulations and claims processing, as well as considerations unique to Medicare and Medicaid programs. Because our proprietary technology platform allows for repaid scaling of a broad, flexible testing menu, we can offer our customers more scalable and affordable testing.
Estimated collection amounts from insurance payors are subject to the complexities and ambiguities of billing, reimbursement regulations and claims processing, as well as considerations unique to Medicare and Medicaid programs. Because our proprietary technology platform allows for repaid scaling of a broad, flexible testing menu, we can offer our customers more scalable and affordable testing.
Although this does not guarantee that we will receive reimbursement for our tests from these or any other payors at adequate levels, we believe our low cost could enhance our ability to compete effectively in the third-party payor market and our flexibility in establishing relationships with additional third-party payors in the future.
Although this does not guarantee that we will receive reimbursement for our tests from these or any other payors at adequate levels, we believe our low cost could enhance our ability to compete effectively in the insurance payor market and our flexibility in establishing relationships with additional insurance payors in the future.
We have omitted discussion of 2021 results where it would be redundant to the discussion previously included in Item 7 of our 2022 Annual Report on Form 10-K.
We have omitted discussion of 2022 results where it would be redundant to the discussion previously included in Item 7 of our 2023 Annual Report on Form 10-K.
A small percentage of our customers are patients, who elect to pay for tests themselves with out-of-pocket payments after their physicians have ordered our tests. We are making efforts to diversify our customer market, including building relationships with hospitals and affiliated specialties related to our service offerings.
A small percentage of our customers are patients, who elect to pay for tests themselves with out-of-pocket payments after their physicians have ordered our tests. We continue to make efforts to diversify our customer market, including building relationships with hospitals and affiliated specialties related to our service offerings.
Factors Affecting Our Performance Mix of Tests Delivered 72 We offer our tests at different price points, and we incur different amounts and types of costs, depending on the nature and level of complexity and customization of the test and the specific terms we have negotiated for the tests, which can vary from customer to customer.
Factors Affecting Our Performance Mix of Tests Delivered We offer our tests and testing services at different price points, and we incur different amounts and types of costs, depending on the nature and level of complexity and customization of the test and the specific terms we have negotiated for the tests and testing services, which can vary from customer to customer.
Further, any relationships we may develop with any government agencies are subject to unique risks associated with government contracts, including cancellation if adequate appropriations for subsequent performance periods are not made and modification or termination at the government’s convenience without prior notice.
Further, any relationships we may or have developed with any government agencies are subject to unique risks associated with government contracts, including cancellation if adequate appropriations for subsequent performance periods are not made and modification or termination at the government’s convenience without prior notice.
However, we cannot predict whether, under what circumstances, or at what payment levels payors will cover and reimburse for our tests, and even if we are successful, we believe it could take several years to achieve coverage and adequate contracted reimbursement with third-party payors.
However, we cannot predict whether, under what circumstances, or at what payment levels payors will cover and reimburse for our tests, and even if we are successful, we believe it could take several years to achieve coverage and adequate contracted reimbursement with insurance payors.
Our marketable securities primarily consist of U.S. government and U.S. agency debt securities, U.S. treasury bills, corporate bonds, municipal bonds, and Yankee debt securities as of December 31, 2023 and 2022.
Our marketable securities primarily consist of U.S. government and U.S. agency debt securities, U.S. treasury bills, corporate bonds, municipal bonds, and Yankee debt securities as of December 31, 2024 and 2023.
The amounts are determined by the historical average collection rates by test type and payor category taking into consideration the range of possible outcomes, the predictive value of our past experiences, the time period of when uncertainties expect to be resolved and the amount of consideration that is susceptible to factors outside of our influence, such as the judgement and actions of third parties.
The amounts are determined by the historical average collection rates by test type taking into consideration the range of possible outcomes, the predictive value of our past experiences, the time period of when uncertainties expect to be resolved and the amount of consideration that is susceptible to factors outside of our influence, such as the judgment and actions of third parties.
Typically, we bill our Institutional customers for our tests, and they are responsible for paying us directly and billing their patients separately or obtaining reimbursement from third-party payors in connection with a patient’s diagnosis related group.
Typically, we bill our Institutional customers for our tests, and they are responsible for paying us directly and billing their patients separately or obtaining reimbursement from insurance payors in connection with a patient’s diagnosis related group.
Our level of success in obtaining and maintaining adequate coverage and reimbursement from third-party payors for our testing services will, we believe, be a key factor in the rate and level of growth of our business over the long term.
Our level of success in obtaining and maintaining adequate coverage and reimbursement from insurance payors for our testing services will, we believe, be a key factor in the rate and level of growth of our business over the long term.
During the year ended December 31 2023, we repurchased 953,000 shares of our common stock at an aggregate cost of $25.1 million under the stock repurchase program. During the year ended December 31 2022, we repurchased 1.8 million shares of our common stock at an aggregate cost of $74.3 million under the stock repurchase program.
During the year ended December 31, 2023, we repurchased 1.0 million shares of our common stock at an aggregate cost of $25.1 million under the stock repurchase program. During the year ended December 31, 2022, we repurchased 1.8 million shares of our common stock at an aggregate cost of $74.3 million under the stock repurchase program.
We are not able to market a human therapeutic without obtaining regulatory approvals, and such approvals require completing clinical trials that demonstrate a product candidate is safe and effective. In addition, the availability and extent of coverage and reimbursement from third-party payers, including government healthcare programs and private insurance plans, impact the revenues a product can generate.
We are not able to market a human therapeutic without obtaining regulatory approvals, and such approvals require completing clinical trials that demonstrate a drug candidate is safe and effective. In addition, the availability and extent of coverage and reimbursement from insurance payors, including government healthcare programs and private insurance plans, impact the revenues a product can generate.
As part of our business plan for future growth, we intend to pursue coverage and reimbursement from third-party payors at a level adequate for us to again achieve and maintain profitability.
As part of our business plan for future growth, we intend to pursue coverage and reimbursement from insurance payors at a level adequate for us to again achieve and maintain profitability.
Cash provided by investing activities in 2023 was $38.9 million, which primarily related to $508.6 million related to maturities of marketable securities, $44.1 million related to proceeds from sales of marketable securities, and $775,000 related to the sale of fixed assets, and partially offset by $491.9 million in purchase of marketable securities, $22.2 million related to the purchase of fixed assets consisting mainly of medical laboratory equipment and building improvement, $399,000 related to a business acquisition.
Cash provided by investing activities in 2023 was $38.9 million, which primarily related to $508.6 million related to maturities of marketable securities, $44.1 million related to proceeds from sales of marketable securities, and $0.8 million related to the sale of fixed assets, and partially offset by $491.9 million in purchase of marketable securities, $22.2 million related to the purchase of fixed assets consisting mainly of medical laboratory equipment and building improvement, and $0.4 million related to a business acquisition.
Critical Accounting Policies and Use of Estimates This discussion and analysis is based on our consolidated financial statements included in this report, which have been prepared in accordance with U.S. Generally Accepted Accounting Principles, or U.S. GAAP. The preparation of consolidated financial statements in accordance with U.S.
Critical Accounting Policies and Use of Estimates This discussion and analysis is based on our consolidated financial statements included in this report, which have been prepared in accordance with U.S. GAAP. The preparation of consolidated financial statements in accordance with U.S.
For each category except for amortization of intangible assets, the largest component is personnel costs, which include salaries, employee benefit costs, bonuses and equity-based compensation expenses. Research and Development Expenses Research and development expenses represent costs incurred to develop our technology and future tests and treatments.
For each category except for amortization of intangible assets and goodwill impairment loss, the largest component is personnel costs, which include salaries, employee benefit costs, bonuses and equity-based compensation expenses. Research and Development Expenses Research and development expenses represent costs incurred to develop our technology and future tests and treatments and our drug candidates.
We record any necessary adjustments in the current period’s revenue. $23.0 million variable consideration was recognized as additional revenue in the year ended December 31, 2023 that related to collections for COVID-19 tests completed in the prior period.
We record any necessary adjustments in the current period’s revenue. $1.8 million and $23.0 million variable consideration was recognized as additional revenue in the year ended December 31, 2024 and 2023, respectively, that related to collections for COVID-19 tests completed in the prior period.
Goodwill Impairment Loss Year Ended December 31, $ % 2023 2022 Change Change Goodwill impairment loss (dollars in thousands) Laboratory services $ 120,234 $ — $ 120,234 * Therapeutic development — — — * $ 120,234 $ — $ 120,234 Goodwill impairment loss for 2023 was comprised of a full goodwill impairment loss of $120.2 million for the Laboratory Service reporting unit.
Goodwill Impairment Loss Year Ended December 31, $ % 2024 2023 Change Change (dollars in thousands) Goodwill impairment loss Laboratory services $ — $ 120,234 $ (120,234 ) * Therapeutic development — — — * $ — $ 120,234 $ (120,234 ) * not meaningful Goodwill impairment loss for 2023 was comprised of a full goodwill impairment loss of $120.2 million for the laboratory services reporting unit.
As of December 31, 2023, a total of approximately $150.7 million remained available for future repurchases of our common stock under our stock repurchase programs.
As of December 31, 2024, a total of approximately $150.5 million remained available for future repurchases of our common stock under our stock repurchase programs.
Costs associated with performing tests are recorded as tests are processed. 74 Operating Expenses Our operating expenses are classified into five categories: research and development; selling and marketing; general and administrative; amortization of intangible assets; and restructuring costs if any.
Costs associated with performing tests are recorded as tests are processed. 78 Operating Expenses Our operating expenses are classified into five categories: research and development; selling and marketing; general and administrative; amortization of intangible assets; and goodwill impairment loss, if any.
The increase in revenue from non-U.S. sources between periods were primarily due to increased sales of our traditional genetic testing services to customers in China through our joint venture, which contributed $11.4 million in total revenue in 2023.
Revenue from non-U.S. sources increased by $4.1 million, or 20%, from $20.2 million in 2023 to $24.3 million in 2024. The increase in revenue from non-U.S. sources between periods were primarily due to increased sales of our traditional genetic testing services to customers in China through our joint venture, which contributed $11.8 million in total revenue in 2024.
Net Loss Attributable to Noncontrolling Interest Net loss attributable to noncontrolling interest represents net loss attributable to minority shareholders from entities not wholly owned. 80 Liquidity and Capital Resources Liquidity and Sources of Cash We had $847.7 million and $852.9 million in cash, cash equivalents and marketable securities as of December 31, 2023 and 2022, respectively.
Net Loss Attributable to Noncontrolling Interest Net loss attributable to noncontrolling interest represents net loss attributable to minority shareholders from entities not wholly owned. 83 Liquidity and Capital Resources Liquidity and Sources of Cash We had $828.6 million and $847.7 million in cash, cash equivalents, restricted cash, and marketable securities as of December 31, 2024 and 2023, respectively.
Amortization of Intangible Assets Our consolidated amortization of intangible assets represents amortization expenses on the intangible assets that arose from the business combinations in 2022 and 2021 and a patent purchased in 2021. The increase in amortization of intangible assets was primarily due to additions in intangible assets from business combinations in 2022.
Amortization of Intangible Assets Our consolidated amortization of intangible assets represents amortization expenses on the intangible assets that arose from the business combinations in 2022 and 2021, and a patent purchased in 2021.
Overview We are a technology-based company with a well-established laboratory services business and a therapeutic development business. Our laboratory services business—to which we formerly referred as our clinical diagnostic business, includes technical laboratory services and professional interpretation of laboratory results by licensed physicians.
Overview We are a technology-based company with a well-established laboratory services business and a therapeutic development business. Our laboratory services business includes technical laboratory and testing services and professional interpretation of laboratory results by licensed physicians.
The expenses of $29.7 million in 2023 primarily consisted of $25.5 million in personnel expenses, including bonuses and equity-based compensation, $1.1 million in reagent and supply expense, $1.1 million in facility expenses, $698,000 in depreciation expense, and $400,000 in software and licensing.
The 2023 expenses primarily consisted of $25.5 million in personnel expenses, including bonuses and equity-based compensation, $1.4 million in reagent and supply costs, $1.1 million in facility expenses, $0.7 million in depreciation expense, and $0.4 million in software and licensing fees.
Variable consideration may be constrained and excluded form the transaction price in situations where there is no contractually agreed upon reimbursement coverage or in the absence of a predictable pattern and history of collectability with a payor.
Variable consideration may be constrained and excluded from the transaction price in situations where there is the absence of a predictable pattern and history of collectability with a payor.
Cash Flows The following table summarizes cash flows from continuing operations for each of the periods presented: Year Ended December 31, 2023 2022 (in thousands) Net cash provided by operating activities $ 27,003 $ 253,520 Net cash provided by (used in) investing activities $ 38,898 $ (261,314 ) Net cash used in financing activities $ (47,785 ) $ (77,141 ) Operating Activities During the year ended December 31, 2023, our operations provided $27.0 million of cash as compared to $253.5 million in 2022.
Cash Flows The following table summarizes cash flows from continuing operations for each of the periods presented: Year Ended December 31, 2024 2023 (in thousands) Net cash provided by operating activities $ 21,060 $ 27,003 Net cash (used in) provided by investing activities $ (58,352 ) $ 38,898 Net cash used in financing activities $ (4,847 ) $ (47,785 ) Operating Activities During the year ended December 31, 2024, our operations provided $21.1 million of cash as compared to $27.0 million in 2023.
The factors that most significantly impact our effective tax rate include the levels of net earnings and certain deductions, including those related to equity-based compensation, the effect of state income taxes, return to provision adjustments, and foreign tax rate differential.
The factors that most significantly impact our effective tax rate include the levels of net earnings and certain deductions, including those related to equity-based compensation, tax credits, the reclassification of stranded tax effects from other comprehensive income, and the effect of state income taxes.
We expect our selling and marketing expenses will continue to increase in absolute dollars, primarily driven by our increased investment in sales and marketing in recent periods, including developing and expanding our sales team, creating and implementing new sales and marketing strategies and increasing the overall scope of our marketing efforts. 75 General and Administrative Expenses General and administrative expenses include executive, finance, accounting, legal and human resources functions.
We expect our selling and marketing expenses will increase in absolute dollars, primarily driven by our increased investment in sales and marketing, including developing and expanding our sales team, creating and implementing new sales and marketing strategies and increasing the overall scope of our marketing efforts.
These payors have complicated rules and procedures regarding submissions for reimbursement and their reimbursement practices and procedures may vary from period to period. Reimbursed amounts are often subject to audit and, and our ability to collect and retain reimbursement from these payors may vary from period to period.
Reimbursed amounts are often subject to audit, and our ability to collect and retain reimbursement from these payors may vary from period to period.
Our consolidated cost of revenues as a percentage of revenue increased from 40.7% to 63.9%. Our gross profit decreased by $262.4 million, or 72%, from $366.9 million in 2022 to $104.5 million in 2023. Our gross profit as a percentage of revenue, or gross margin, decreased from 59.3% to 36.1%.
Our consolidated cost of revenues as a percentage of revenue decreased from 63.9% to 62.2%. Our gross profit increased by $2.8 million, or 3%, from $104.5 million in 2023 to $107.2 million in 2024. Our gross profit as a percentage of revenue, or gross margin, increased from 36.1% to 37.8%.
Moreover, changes in our other operating expenses, due to investments in these aspects of our business or other factors, are not taken into account but impact our overall results, which can limit the utility of cost as an overall cost measurement tool. 73 Ability to Obtain Reimbursement Much of our revenue depends on receiving reimbursement for our tests from third-party payors, including our Insurance and Institutional customers.
Moreover, changes in our other operating expenses, due to investments in these aspects of our business or other factors, are not taken into account but impact our overall results, which can limit the utility of cost as an overall cost measurement tool.
See Note 11, Income Taxes , to our consolidated financial statements included in this report for more information regarding our income taxes.
The increase in the valuation allowance for 2024 was primarily due to the increase in capitalized Section 174 expenditures. See Note 11, Income Taxes , to our consolidated financial statements included in this report for more information regarding our income taxes.
The $226.5 million decrease in cash provided from operating activities in 2023 as compared with the corresponding 2022 period was primarily due to lower cash earnings, cash receipts from customers, and cash payments for operating expenses as COVID-19 revenue dissipated in 2023.
The decrease in cash provided from operating activities in 2024 compared to the corresponding 2023 period was primarily due to timing of cash receipts from customers and cash payments for operating expenses.
Our customer base includes insurance, institutional, and individual payors. In some periods, our revenue is concentrated on a smaller number of customers.
Going forward, we will strive to maintain this competitive advantage and emphasize this in our marketing efforts to grow our testing revenue. Our customer base includes insurance, institutional, and individual payors. In some periods, our revenue is concentrated on a smaller number of customers.
Cost of Revenue Year Ended December 31, $ % 2023 2022 Change Change (dollars in thousands) Cost of revenue $ 184,757 $ 252,067 $ (67,310 ) (27)% Cost of revenue as a % of revenue 63.9 % 40.7 % 23.2 % 56.9% Our consolidated cost of revenue decreased by $67.3 million, or 27%, from $252.1 million in 2022 to $184.8 million in 2023.
Cost of Revenue Year Ended December 31, 2024 2023 $ Change % Change (in thousands, except percentages) Cost of revenue $ 176,255 $ 184,757 $ (8,502 ) (5 )% Cost of revenue as a % of revenue 62.2 % 63.9 % 81 Our consolidated cost of revenue decreased by $8.5 million, or 5%, from $184.8 million in 2023 to $176.3 million in 2024.
Cash used in investing activities in 2022 was $261.3 million, which primarily related to $418.0 million in the purchase of marketable securities, $172.7 million related to business acquisitions, $18.8 million related to the purchase of fixed assets consisting mainly of medical laboratory equipment and building improvement, $15.0 million related to the purchase of redeemable preferred stock and $10.0 million related to contingent consideration payouts related to business acquisitions, and partially offset by $232.5 million related to maturities of marketable securities and $140.2 million related to proceeds from sales of marketable securities.
Cash used in investing activities in 2024 was $58.4 million, which primarily related to $472.4 million in purchase of marketable securities, $40.3 million related to the purchase of fixed assets consisting mainly of building, building improvement, and medical laboratory equipment, and partially offset by $349.8 million related to maturities of marketable securities, $104.3 million related to proceeds from sales of marketable securities, and $0.3 million related to the sale of fixed assets.
Indefinite lived intangible assets are tested for impairment annually or whenever events or circumstances indicate that the carrying amount of the asset may not be recoverable. If impairment is indicated, we measure the amount of the impairment loss as the amount by which the carrying amount exceeds the fair value of the asset.
We amortize finite lived intangible assets over the period of estimated benefit using the straight-line method. Indefinite lived intangible assets are tested for impairment annually or whenever events or circumstances indicate that the carrying amount of the asset may not be recoverable.
These expenses consist of personnel costs, audit and legal expenses, consulting costs and allocated overhead expenses, including rent and utilities. We expense all general and administrative costs as incurred. We expect our general and administrative expenses will continue to increase in absolute dollars as we seek to continue to scale our operations.
General and Administrative Expenses General and administrative expenses include executive, finance, accounting, legal and human resources functions. These expenses consist of personnel costs, audit and legal expenses, consulting costs and allocated overhead expenses, including rent and utilities. We expense all general and administrative costs as incurred.
Accordingly, we expect to incur significant research and development expenses in connection with our initiation of Phase 2 trials for FID-007. Selling and Marketing Expenses Selling and marketing expenses consist of personnel costs, customer service expenses, direct marketing expenses, educational and promotional expenses, market research and analysis and allocated overhead expenses, including rent and utilities.
Accordingly, we expect to incur significant research and development expenses in connection with our Phase 2 trials for FID-007 and the initiation of clinical trials for FID-022.
For the laboratory services segment, aggregating customers that are under common control, one customer comprised $35.7 million or 12% of our revenue in 2023, and a different customer comprised $115.6 million or 19% and $260.2 million or 26% of our revenue in 2022 and 2021, respectively.
For the laboratory services segment, aggregating customers that are under common control, one customer comprised $62.6 million or 22% of our revenue in 2024 and $35.7 million or 12% of our revenue in 2023. To reduce this revenue risk, we will focus on increasing the number of customers and thereby reducing the concentration.
Research and Development Year Ended December 31, $ % 2023 2022 Change Change Research and development (dollars in thousands) Laboratory services $ 29,748 $ 28,164 $ 1,584 6% Therapeutic development 11,692 746 10,946 1467% $ 41,440 $ 28,910 $ 12,530 43% Research and development expenses for the laboratory services segment were mainly for developing our technology and future testing and testing services.
Research and Development Year Ended December 31, 2024 2023 $ Change % Change (in thousands, except percentages) Research and development Laboratory services $ 28,424 $ 29,748 $ (1,324 ) (4 )% Therapeutic development 20,392 11,692 8,700 74 % Total research and development $ 48,816 $ 41,440 $ 7,376 For the laboratory services segment, the research and development expenses were mainly for advancing our technology and future testing and testing services.
We believe our existing cash, cash equivalent, and short-term marketable securities will be sufficient to meet our anticipated cash requirements for at least the next 12 months.
Cash used to fund operating expenses is impacted by the timing of our expense payments, as reflected in the changes in our outstanding accounts payable and accrued expenses. We expect our existing cash, cash equivalent, and short-term marketable securities to continue to be sufficient to meet our anticipated cash requirements for at least the next 12 months.
The decrease was primarily due to decreases of $32.1 million in consulting and outside labor costs for production, $25.9 million in reagent and supply expenses, $12.3 million in depreciation expenses, $5.3 million in shipping expenses, and $1.2 million in travel and meals expense and $2.9 million in facility expense, all related to decreased COVID-19 testing, and partially offset by an increase of $15.4 million in personnel costs, including equity-based compensation expense, due to an additional four months of costs in 2023 compared to 2022 as Inform Diagnostics was acquired at the end of April 2022.
The decrease was primarily due to decreases of $6.7 million in consulting and outside labor costs for production, $1.7 million in software and software licensing expenses, $1.4 million in personnel costs, including equity-based compensation, $0.8 million in shipping expenses, and $0.2 million in dues and subscriptions expense, related to efforts of optimizing cost structures including bringing certain operations in house, consolidating laboratory operations, and the cessation of our COVID-19 testing operations, and partially offset by an increase of $1.8 million in reagent and supply costs and $0.5 million in depreciation expenses.
The decrease was primarily due to decreases of $33.5 million in provision for credit losses due to subsequent collections from customers who were previously reserved, $6.2 million in acquisition related to business combinations in 2022, $2.6 million in one-time license and permit expense incurred by Inform Diagnostics, partially offset by increases of $6.6 million in personnel costs including equity-based compensation expense, $6.1 million in facility expense, and $3.6 million in depreciation expense, due to an additional four months of costs in 2023 compared to 2022 as Inform Diagnostics was acquired at the end of April 2022, and $3.0 million in legal and professional fees due to legal liabilities accrued in connection with our voluntary disclosure process as described in Note 8, Debt, Commitments and Contingencies to the Consolidated Financial Statements, and $1.5 million in accounting expense as the entities acquired in 2022 and 2021 were scoped in for financial statement and internal control audit and reviews.
The decrease was primarily due to decreases of $10.1 million in legal and professional fees related to a voluntary disclosure, see Note 8, Debt, Commitments and Contingencies , of our consolidated financial statements included in this report, $1.6 million in insurance expenses, $0.8 million in provision for credit losses due to subsequent collections from customers who were previously reserved, and $0.7 million in depreciation expenses and partially offset by increases of $11.4 million in personnel costs, including equity-based compensation, and $0.8 million in software and software licensing fees.
Our primary uses of cash are to repurchase our stock, fund our operations, and to fund strategic acquisitions as we continue to invest in and seek to grow our business. Cash used to fund operating expenses is impacted by the timing of our expense payments, as reflected in the changes in our outstanding accounts payable and accrued expenses.
Our primary uses of cash are for capital expenditures mainly in buildings, building improvements, and equipment, to repurchase our stock, fund our operations, and to fund strategic acquisitions as we continue to invest in and seek to grow our business.
Amortization of Intangible Assets Amortization of intangible assets consist of amortization expense on customer relationships, royalty-free technology, trade name, laboratory information system platform and in-place intangible assets that arose from the business combinations and a patent acquired. We amortize finite lived intangible assets over the period of estimated benefit using the straight-line method.
Goodwill Impairment Loss A goodwill impairment loss is measured as the amount by which a reporting unit’s carrying value, including goodwill, exceeds its fair value, not to exceed the carrying amount of goodwill. 79 Amortization of Intangible Assets Amortization of intangible assets consist of amortization expense on customer relationships, royalty-free technology, trade name, laboratory information system platform and in-place intangible assets that arose from the business combinations and a patent acquired.
The expenses of $28.2 million in 2022 primarily consisted of $23.4 million in personnel expenses, including bonuses and equity-based compensation, $2.2 million in reagent and supply expense, $785,000 in depreciation expense, and $587,000 in consulting and outside labor costs.
In 2024, the research and development expenses primarily consisted of $25.3 million in personnel expenses, including bonuses and equity-based compensation, $1.4 million in reagent and supply costs, $0.6 million in facility expenses, $0.4 million in depreciation expense, and $0.4 million in software and licensing fees.
Material Cash Requirements and Contractual Obligations as of December 31, 2023 As of December 31, 2023, we have an outstanding balance of $775,000 in notes payable to Xilong Scientific, which is due in March 2024, and $3.4 million of an installment loan, of which, the current portion is $408,000.
Material Cash Requirements and Contractual Obligations as of December 31, 2024 As of December 31, 2024, we have an outstanding balance of $2.9 million on an installment loan, of which, the current portion is $0.4 million. See Note 8, Debt, Commitments and Contingencies , of our consolidated financial statements included in this report.
Cash used in financing activities in 2022 was $77.1 million, which primarily related to $74.3 million used in the repurchase of common stock and $1.8 million used in common stock withholding for employee tax obligations. We did not expect to use any credit facilities due to the strong cash position as of December 31, 2023.
Financing Activities Cash used in financing activities in 2024 was $4.8 million, which primarily related to $1.2 million used in the repayment of notes payable, and $2.9 million used in common stock withholding for employee tax obligations.
The acquisition method of accounting for business combinations requires us to estimate the fair value of assets acquired, liabilities assumed, and any noncontrolling interest in an acquired business to properly allocate purchase price consideration between assets that are depreciated or amortized and goodwill. 83 We assess goodwill and indefinite-lived intangibles for impairment on an annual basis and between annual tests if an event occurs or circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying amount.
The acquisition method of accounting for business combinations requires us to estimate the fair value of assets acquired, liabilities assumed, and any noncontrolling interest in an acquired business to properly allocate purchase price consideration between assets that are depreciated or amortized and goodwill. 86 See Note 2, Summary of Significant Accounting Policies , to our consolidated financial statements included in this report for information about our valuation and assessment process with regard to potential impairment of goodwill and indefinite-lived intangibles.
Stock Repurchase Program In March 2022, our Board authorized a $250.0 million stock repurchase program. The stock repurchase program has no expiration from the date of authorization. Under the stock repurchase program, the Company may repurchase shares from time to time in the open market or in privately negotiated transactions.
We did not expect to use any credit facilities due to the strong cash position as of December 31, 2024. Stock Repurchase Program In March 2022, our Board authorized a $250.0 million stock repurchase program. The stock repurchase program has no expiration from the date of authorization.
The effective income tax rate was (0.69)% and 22.7% of income before income taxes for 2023 and 2022, respectively. The change in the effective tax rate for 2023 relative to 2022 was due to the establishment of a valuation allowance on the Company’s net deferred tax assets.
The effective income tax rate was 16.11% and (0.69)% of loss before income taxes for 2024 and 2023, respectively. The change in the effective tax rate compared to prior period is due to the valuation allowance in the current period that precludes us from recognizing the benefit from our net operating losses.
The following summarizes our contractual obligations as of December 31, 2023: Payments Due by Period Total Less than 1 year 1-3 years 3-5 years More than 5 years (in thousands) Operating lease obligations (1) $ 12,242 $ 4,309 $ 4,140 $ 2,243 $ 1,550 Finance lease obligations (2) 1,368 532 836 — — Purchase obligations (3) 51,934 29,669 22,265 — — Total contractual obligations $ 65,544 $ 34,510 $ 27,241 $ 2,243 $ 1,550 82 (1) Represents non-cancelable operating leases.
The following summarizes our contractual obligations as of December 31, 2024: Payments Due by Period Total Less than 1 year 1-3 years 3-5 years More than 5 years (in thousands) Operating lease obligations (1) $ 6,651 $ 1,707 $ 2,128 $ 984 $ 1,832 Finance lease obligations (2) 783 417 366 — — Purchase obligations (3) 40,604 31,638 6,639 2,327 — Total contractual obligations $ 48,038 $ 33,762 $ 9,133 $ 3,311 $ 1,832 85 (1) Represents non-cancelable operating leases.
The increase was primarily due to increases of $2.2 million in software expense, $1.5 million in facilities expense, $742,000 in personnel costs, including equity-based compensation expense, and $456,000 in advertising and marketing expenses, mainly due to an additional four months of costs in 2023 compared to 2022 as Inform Diagnostics was acquired at the end of April 2022, and partially offset by a decrease of $2.6 million in consulting and outside labor costs related to decreased COVID-19 testing.
The decrease was primarily due to decreases of $1.9 million in facility expenses due to the consolidation of office space, $1.3 million in consulting and outside labor expenses, $1.0 million in advertising and marketing expenses, $0.9 million in commissions, $0.6 million in depreciation expenses, $0.3 million in losses of fixed asset disposals, and $0.2 million in software and software licensing expenses, and partially offset by an increase of $1.0 million personnel costs, including equity-based compensation expense. 82 General and Administrative Our consolidated general and administrative expenses decreased by $0.9 million, or 1%, from $89.0 million in 2023 to $88.1 million in 2024.
Research and development expenses in 2023 included $6.4 million of personnel expenses, including equity-based compensation under the equity plan assumed as part of the business combination, and $4.5 million in drug study with various CROs.
For the therapeutic development segment, the research and development expenses in 2024 included $10.9 million in CRO costs, $8.6 million in personnel costs, including equity-based compensation, and $0.7 million in depreciation expenses. In 2023, these expenses comprised $6.4 million of personnel expenses, including equity-based compensation, $4.5 million in CRO costs, and $0.7 million in depreciation expenses.
We anticipate research and development expenditures for this segment will significantly increase in the future, as we expect to begin enrollment for a phase 2 study of FID-007 in the second quarter of 2024. 78 Selling and Marketing Our consolidated selling and marketing expenses increased by $2.5 million, or 7%, from $38.9 million in 2022 to $41.5 million in 2023.
Looking ahead, we expect research and development expenses to continue increasing as clinical trials progress for FID-007, FID-022, and other preclinical studies. Selling and Marketing Our consolidated selling and marketing expenses decreased by $5.2 million, or 13%, from $41.5 million in 2023 to $36.2 million in 2024.
See Note 8, Debt, Commitments and Contingencies , of our consolidated financial statements included in this report.
Also see Note 17, Goodwill and Intangible Assets , to our consolidated financial statements included in this report for details on the valuation estimate and results for 2024.
Removed
We recorded revenue and net (loss) from operations of $289.2 million and ($167.8 million), respectively, in 2023, compared to revenue and net income from operations of $619.0 million and $143.4 million, respectively, in 2022. 2023 Developments In 2023, we launched new Beacon787 expanded carrier screening panel. Beacon787 includes a total of 787 genes associated with autosomal recessive and X-linked conditions.
Added
We recorded revenue and net (loss) from operations of $283.5 million and ($42.7) million, respectively, in 2024, compared to revenue and net (loss) from operations of $289.2 million and ($167.8) million, respectively, in 2023. 2024 Developments In 2024, we began enrollment of a Phase 2, randomized, multi-center, open-label trial of FID-007 in patients with recurrent or metastatic H&N squamous cell carcinoma, established seven testing sites, and as of December 31, 2024, we had enrolled 17 patients.
Removed
Included in this panel are all of the American College of Medical Genetics and Genomics, or ACMG, tier 3 genes, which ACMG published in their latest practice guideline for carrier screening, recommending that all pregnant patients and those planning a pregnancy be offered this set of genes as an equitable, pan-ethnic screening approach.
Added
In December 2024, we filed an IND for the investigation of FID-022 in a Phase 1/1b clinical trial, and in January 2025, the IND for this trial was cleared by the FDA.
Removed
The ACMG list includes genes with carrier frequency of >1/200 for autosomal recessive conditions and disease prevalence of >1/40,000 for X-linked conditions. Leveraging our proprietary platform and informatics, Beacon787 frequently excels as it relates to analytical detection rates, ability to discern pseudogenes, and reliable copy number calls.
Added
Similar to other companies in our industry, we have and may again experience the effects of inflation in the costs of labor, materials and services in connection with the marketing of our tests and testing services and in connection with our research and development efforts.
Removed
This was an important product launch for us and a big step forward in carrier screening. Carrier screening assesses the risk for individuals and couples to pass on certain genetic conditions to their children. This testing is for women or couples who are currently expecting, considering pregnancy, or planning to become pregnant in the future.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeIf an adverse 10% foreign currency exchange rate change was applied to total monetary assets denominated in currencies other than the functional currencies at the balance sheet date, it would have resulted in decrease on income before income taxes of approximately $1.3 million as of December 31, 2023, and $844,000 as of December 31, 2022. 85 Item 8.
Biggest changeFor the purpose of analyzing foreign currency exchange risk, we considered the historical trends in foreign currency exchange rates and determined that it was reasonably possible that adverse changes in exchange rates of 10% could be experienced in the near term. 87 If an adverse 10% foreign currency exchange rate change was applied to total monetary assets denominated in currencies other than the functional currencies at the balance sheet date, it would have resulted in decrease in assets of approximately $1.1 million as of December 31, 2024, and $1.3 million as of December 31, 2023.
Unrealized gains or losses on our marketable debt securities are primarily due to interest rate fluctuations as compared to interest rates at the time of purchase. We measure our debt securities at fair value with gains and losses recorded in Other Comprehensive Income until the securities are sold, less any expected credit losses.
Unrealized gains or losses on our marketable debt securities are primarily due to interest rate fluctuations as compared to interest rates at the time of purchase. We measure our debt securities at fair value with gains and losses recorded in other comprehensive income (loss) until the securities are sold, less any expected credit losses.
We typically invest in highly rated securities, with the primary objective of minimizing the potential risk of principal loss. Our investments in fixed rate interest earning securities carry a degree of interest rate 84 risk. Fixed rate securities may have their fair market value adversely affected due to a rise in interest rates.
We typically invest in highly rated securities, with the primary objective of minimizing the potential risk of principal loss. Our investments in fixed rate interest earning securities carry a degree of interest rate risk. Fixed rate securities may have their fair market value adversely affected due to a rise in interest rates.
Based on investment positions as of December 31, 2023 and, 2022, a hypothetical 100 basis point increase in interest rates across all maturities would result in an incremental decline of $10.1 million and $7.3 million, respectively, in the fair market value of the portfolio. Such losses would only be realized if we sold the investments prior to maturity.
Based on investment positions as of December 31, 2024 and 2023, a hypothetical 100 basis point increase in interest rates across all maturities would result in an incremental decline of $14.5 million and $10.1 million, respectively, in the fair market value of the portfolio. Such losses would only be realized if we sold the investments prior to maturity.
Financial Statemen ts and Supplementary Data. The information required by this Item 8 immediately follows the signature page to this report and is incorporated herein by reference. Item 9. Changes in and Disagreements with Accou ntants on Accounting and Financial Disclosure. None.
The impact to income (loss) before income tax was not significant. 88 Item 8. Financial Statemen ts and Supplementary Data. The information required by this Item 8 immediately follows the signature page to this report and is incorporated herein by reference. Item 9. Changes in and Disagreements with Accou ntants on Accounting and Financial Disclosure. None.
Removed
Our foreign currency exposures are primarily concentrated in the Chinese yuan. For the purpose of analyzing foreign currency exchange risk, we considered the historical trends in foreign currency exchange rates and determined that it was reasonably possible that adverse changes in exchange rates of 10% could be experienced in the near term.
Added
Our foreign currency exposures are primarily concentrated in the Chinese yuan.

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