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What changed in VERACYTE, INC.'s 10-K — 2024 vs 2025

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Paragraph-level year-over-year comparison of VERACYTE, INC.'s 2024 and 2025 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 2025 report.

+492 added−523 removedSource: 10-K (2026-02-26) vs 10-K (2025-02-28)

Top changes in VERACYTE, INC.'s 2025 10-K

492 paragraphs added · 523 removed · 417 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

103 edited+18 added−24 removed198 unchanged
Biggest changeHistorically, the FDA generally exercised enforcement discretion, meaning that it did not require premarket review, quality system/current Good Manufacturing Practices regulations, and other applicable medical device requirements for LDT developers and users. 10 Table of Contents However, on May 6, 2024, the FDA issued a final rule under 21 CFR Part 809 to make explicit that IVD products are devices under the Federal Food, Drug, and Cosmetic Act, removing much of the FDA's historical enforcement discretion for most LDTs.
Biggest changeCurrently, the FDA believes these tests meet the definition of a device under the FDC Act and that it has the authority to regulate them. Historically, the FDA generally exercised enforcement discretion, meaning that it did not require premarket review, quality system/current Good Manufacturing Practices regulations, and other applicable medical device requirements for LDT developers and users.
In 2023, we announced a multi-year agreement with Illumina, Inc. to also develop and offer some of our molecular tests Canada, Europe, the Middle East, Asia Pacific and Latin America as decentralized IVD tests on their NextSeq 550Dx NGS instrument thereby leveraging the large installed base.
In 2023, we announced a multi-year agreement with Illumina, Inc. to also develop and offer some of our molecular tests in Canada, Europe, the Middle East, Asia Pacific and Latin America as decentralized IVD tests on their NextSeq 550Dx NGS instrument thereby leveraging the large installed base.
The Veracyte Diagnostics Platform begins by identifying an unmet clinical need, determining the combination of appropriate biomarkers utilizing cutting-edge genomic and other technologies, and then tuning our assays with deep scientific and machine learning capabilities. We then take a comprehensive approach to launching and driving adoption for our tests.
The Veracyte Diagnostics Platform begins by identifying an unmet clinical need, determining the combination of appropriate biomarkers utilizing cutting-edge genomic and other technologies before tuning our assays with deep scientific and machine learning capabilities. We then take a comprehensive approach to launching and driving adoption for our tests.
MRD testing will expand the value we provide to clinicians to inform whether a patient’s intervention was successful or if management escalation is required. Our whole-genome, AI-powered approach generates broad signatures from blood more quickly and efficiently than bespoke tumor informed panels.
MRD testing will expand the value we provide to clinicians to inform whether a patient’s intervention was successful or if management escalation is required. TrueMRD, our whole-genome, AI-powered approach generates broad signatures from blood more quickly and efficiently than bespoke tumor informed panels.
Statutory or regulatory noncompliance may result in a laboratory's operator being found guilty of a misdemeanor under New York law. NYSDOH also must approve laboratory developed tests before the test is offered in New York; approval has been received for the Afirma GSC, Envisia, Decipher Prostate and Decipher Bladder tests.
Statutory or regulatory noncompliance may result in a laboratory's operator being found guilty of a misdemeanor under New York law. NYSDOH also must approve laboratory developed tests before the test is offered in New York; approval has been received for the Afirma GSC, Decipher Prostate and Decipher Bladder tests.
Payment from third-party payers differs depending on whether we have entered into a contract with the payers as a “contracted provider” or do not have a contract and are considered a “non-contracted provider.” Payers will often reimburse non-contracted providers, if at all, at a lower rate than contracted providers.
Payment from third-party payers differs depending on whether we have entered into a contract with the payers as a “contracted, participating provider” or do not have a contract and are considered a “non-contracted, non-participating provider.” Payers will often reimburse non-contracted providers, if at all, at a lower rate than contracted providers.
Factors that impact reimbursement include, among others: • variability in medical policies indicating coverage for our products and services; • network status and claims adjudication as in-network or out of network and corresponding patient co-pay/coinsurance responsibilities; • patient financial assistance programs; • changes to American Medical Association's CPT coding rules and edits; • Medicare clinical laboratory and physician fee schedules; • government sequestration; • Medicaid fee schedules; • contracted rates for our diagnostics; • utilization management or prior authorization processes and steps put in place by commercial payers ensuring medical necessity of services ordered for patients; • billing errors; and • claims disputes.
Factors that impact reimbursement include, among others: • variability in medical policies indicating coverage for our products and services; • contracted/network status and claims adjudication as in-network or out of network and corresponding patient co-pay/coinsurance responsibilities; 5 Table of Contents • patient financial assistance programs; • changes to American Medical Association's CPT coding rules and edits; • Medicare clinical laboratory and physician fee schedules; • government sequestration; • Medicaid fee schedules; • contracted rates for our diagnostics; • utilization management or prior authorization processes and steps put in place by commercial payers ensuring medical necessity of services ordered for patients; • billing errors; and • claims disputes.
Investing in Innovation to Drive Durable Growth Expanding Into Minimal Residual Disease In February 2024, we acquired C2i, an MRD company, or the C2i Acquisition, adding whole-genome MRD capabilities to our novel diagnostics platform and positioning us to serve physicians and their patients further along the care continuum, in combination with our diagnostic and prognostic tests.
Investing in Innovation to Drive Durable Growth Expanding Into Minimal Residual Disease In 2024, we acquired C2i, an MRD company, or the C2i Acquisition, adding whole-genome MRD capabilities to our novel diagnostics platform and positioning us to serve physicians and their patients further along the care continuum, in combination with our prognostic and predictive diagnostic tests.
Corporate Practice of Medicine Numerous states, including California and Texas, have enacted laws prohibiting corporations such as us from practicing medicine and employing or engaging physicians to practice medicine. These laws are designed to prevent interference in the medical decision-making process by anyone who is not a licensed physician.
Corporate Practice of Medicine Numerous states, including California, New York and Texas, have enacted laws prohibiting corporations such as us from practicing medicine and employing or engaging physicians to practice medicine. These laws are designed to prevent interference in the medical decision-making process by anyone who is not a licensed physician.
There were no material capital expenditures related to environmental compliance in the year ended December 31, 2024. Similarly, we do not anticipate any significant expenditures for the year ending December 31, 2025. Raw Materials and Suppliers We procure reagents, equipment, and other materials that we use to perform our tests from sole suppliers.
There were no material capital expenditures related to environmental compliance in the year ended December 31, 2025. Similarly, we do not anticipate any significant expenditures for the year ending December 31, 2026. Raw Materials and Suppliers We procure reagents, equipment, and other materials that we use to perform our tests from sole suppliers.
Reimbursement United States Revenue from sales of our tests comes from several sources, including commercial third-party payers, such as insurance companies and health maintenance organizations, government payers, such as Medicare and Medicaid, and patients. Medicare generally covers molecular diagnostic tests through individual Medicare Administrative Contracts, or MACs.
Reimbursement United States Revenue from sales of our tests comes from several sources, including commercial third-party payers, such as insurance companies and health maintenance organizations, government payers, such as Medicare and Medicaid, and patients. Medicare generally covers molecular diagnostic tests through individual Medicare Administrative Contractors, or MACs.
A specimen transport and storage container is classified as a Class I exempt device, which means that the device is exempt from the 510(k) premarket notification requirement and, if not labeled or otherwise represented as sterile, the QSR, except for recordkeeping and complaint handling requirements.
A specimen transport and storage container is classified as a Class I exempt device, which means that the device is exempt from the 510(k) premarket notification requirement and, if not labeled or otherwise represented as sterile, the QMSR, except for recordkeeping and complaint handling requirements.
In particular, we are subject to the California Confidentiality of Medical Information Act, which is similar to but in some ways more restrictive than the HIPAA regulations, and the California Consumer Privacy Act, or CCPA, which was enacted in California in 2018 and substantially amended and expanded thereafter, most significantly by a ballot initiative adopted in November 2020 that enacted the California Privacy Rights Act, or CPRA.
In particular, we are subject to the California Confidentiality of Medical Information Act, 13 Table of Contents which is similar to but in some ways more restrictive than the HIPAA regulations, and the California Consumer Privacy Act, or CCPA, which was enacted in California in 2018 and substantially amended and expanded thereafter, most significantly by a ballot initiative adopted in November 2020 that enacted the California Privacy Rights Act, or CPRA.
If clearance or approval is required by the FDA, there can be no assurance that our tests will be cleared or 11 Table of Contents approved on a timely basis, if at all, nor can there be any assurance that approved labeling claims or labeling claims subject to cleared indications for use will be consistent with our current claims or adequate to support continued adoption of and reimbursement for our solutions.
If clearance or approval is required by the FDA, there can be no assurance that our tests will be cleared or approved on a timely basis, if at all, nor can there be any assurance that approved labeling claims or labeling claims subject to cleared indications for use will be consistent with our current claims or adequate to support continued adoption of and reimbursement for our solutions.
While we have attempted to comply with the Stark Law, PORA and similar laws of other states, it is possible that some of our financial arrangements with physicians could be subject to regulatory scrutiny at some point in the future, and we cannot provide assurance that we will be found to be in compliance with these laws following any such regulatory review.
While we have attempted to comply with the Stark Law, PORA and similar laws of other states, it is possible that some of our 15 Table of Contents financial arrangements with physicians could be subject to regulatory scrutiny at some point in the future, and we cannot provide assurance that we will be found to be in compliance with these laws following any such regulatory review.
These include: good manufacturing practice requirements for medical devices as set out in the Quality System Regulation, or QSR, labeling regulations, restrictions on promotion and advertising, the Medical Device Reporting regulation, or MDR (which requires manufacturers to report certain adverse events and product malfunctions to the FDA), and the Reports of Corrections and Removals regulation (which requires manufacturers to report certain field actions to the FDA).
These include: good manufacturing practice requirements for medical devices as set out in the Quality Management System Regulation, or QMSR, labeling regulations, restrictions on promotion and advertising, the Medical Device Reporting regulation, or MDR (which requires manufacturers to report certain adverse events and product malfunctions to the FDA), and the Reports of Corrections and Removals regulation (which requires manufacturers to report certain field actions to the FDA).
In 2022, a meta-analysis of 13 independent studies assessing the test's performance in a real-world clinical setting found a sensitivity of 97%, a specificity of 88%, and an NPV of 99%, reinforcing Afirma's performance. Afirma GSC and its predecessor, the Afirma Gene Expression Classifier, have been featured in more than 160 peer-reviewed, published studies.
In 2022, a meta-analysis of 2 Table of Contents 13 independent studies assessing the test's performance in a real-world clinical setting found a sensitivity of 97%, a specificity of 88%, and an NPV of 99%, reinforcing Afirma's performance. Afirma GSC and its predecessor, the Afirma Gene Expression Classifier, have been featured in more than 160 peer-reviewed, published studies.
When reporting data under PAMA, the President, CEO, or CFO of a reporting entity, or an individual who has been delegated authority to sign for, and who reports directly to, such an 17 Table of Contents officer, must sign the certification statement and be responsible for assuring that the data provided are accurate, complete, and truthful, and meets all the required reporting parameters.
When reporting data under PAMA, the President, CEO, or CFO of a reporting entity, or an individual who has been delegated authority to sign for, and who reports directly to, such an officer, must sign the certification statement and be responsible for assuring that the data provided are accurate, complete, and truthful, and meets all the required reporting parameters.
Among the implementing regulations, covered entities are vicariously liable for violations of HIPAA resulting from acts or 13 Table of Contents omissions of their business associates where the business associate is an agent of the covered entity and was acting within the scope of its agency, regardless of whether the covered entity and business associate entered into a business associate agreement in compliance with HIPAA.
Among the implementing regulations, covered entities are vicariously liable for violations of HIPAA resulting from acts or omissions of their business associates where the business associate is an agent of the covered entity and was acting within the scope of its agency, regardless of whether the covered entity and business associate entered into a business associate agreement in compliance with HIPAA.
The device is currently undergoing transition (via Notified Body review and quality system audit) as an IVDR Class C device. The IVDR also introduces new requirements for conformity assessments. In particular, substantially more IVDs will require the involvement of a notified body to be able to affix a CE mark to the IVD.
The device is currently undergoing transition (via Notified Body review and quality system audit) as an IVDR Class C device. The IVDR also introduces new requirements for conformity assessments. In particular, substantially more IVD MDs will require the involvement of a notified body to be able to affix a CE mark to the IVD MD.
If these suppliers can no longer provide us with the materials we need to perform the tests or for our collection kits, if the materials do not meet our quality specifications or are otherwise unusable, if we cannot obtain acceptable substitute materials, if materials become unavailable, or 7 Table of Contents if we elect to change suppliers, an interruption in test processing could occur, we may not be able to deliver patient reports and we may incur high switching costs.
If these suppliers can no longer provide us with the materials we need to perform the tests or for our collection kits, if the materials do not meet our quality specifications or are otherwise unusable, if we cannot obtain acceptable substitute materials, if materials become unavailable, or if we elect to change suppliers, an interruption in test processing could occur, we may not be able to deliver patient reports and we may incur high switching costs.
Additionally, in Great Britain, all medical devices will require a UK Conformity Assessed, or UKCA, mark but CE marks (IVDD self-certified or IVDR issued by EU notified regulatory bodies, subject to validity of the certificate in the EU) will remain valid until June 30, 2030.
Additionally, in Great Britain, all medical 12 Table of Contents devices will require a UK Conformity Assessed, or UKCA, mark but CE marks (IVDD self-certified or IVDR issued by EU notified regulatory bodies, subject to validity of the certificate in the EU) will remain valid until June 30, 2030.
We generate extensive genomic and clinical data through our whole-omic approach, fueling insights, evidence and, ultimately, further utility. While we currently take a whole-transcriptome approach to our diagnostic, prognostic and predictive tests, we believe our MRD technology will add a whole-genome approach for treatment effectiveness, monitoring, and disease recurrence detection.
We generate extensive genomic and clinical data through our whole-omic approach, fueling insights, evidence and, ultimately, further utility. We currently take a whole-transcriptome approach to our diagnostic, prognostic and predictive tests and with our MRD technology will add a whole-genome approach for treatment effectiveness, monitoring, and disease recurrence detection.
This individual has regulatory oversight of all IVD medical devices placed on the market by Veracyte as manufacturer in the EU and reports directly to senior management. Together with the CEO, the PRRC is legally responsible for ensuring regulatory compliance, including safety, under the IVDR.
This individual has regulatory oversight of all IVD MDs placed on the market by Veracyte as manufacturer in the EU and reports directly to senior management. Together with the CEO, the PRRC is legally responsible for ensuring regulatory compliance, including safety, under the IVDR.
If satisfied that the IVD conforms to the relevant essential requirements, the notified body issues a certificate of conformity, which the manufacturer uses as a basis for its own declaration of conformity.
If satisfied that the IVD MD conforms to the relevant requirements, the notified body issues a certificate of conformity, which the manufacturer uses as a basis for its own declaration of conformity.
We believe this ability will enable physicians to track a tumor’s progression as it evolves from early diagnosis through patient treatment and follow-up. We expect our first application of our MRD technology will be a muscle-invasive bladder cancer, or MIBC, MRD test, where we plan to leverage our strong urology commercial channel and have a clear pathway to expected reimbursement.
We believe this ability will enable physicians to track a tumor’s progression as it evolves from early diagnosis through patient treatment and follow-up. We expect our first application for TrueMRD will be a muscle-invasive bladder cancer, or MIBC, MRD test, where we plan to leverage our strong urology commercial channel and have a clear pathway to expected reimbursement.
The IVDR introduced a rule-based classification system, whereby IVDs must be classified into one of four classes: A, B, C or D. Class A is the lowest risk, and Class D is the highest. These take into account the intended purpose of the IVD and its inherent risks.
The IVDR introduced a rule-based classification system, whereby IVD MDs must be classified into one of four classes: A, B, C or D. Class A is the lowest risk, and Class D is the highest. These take into account the intended purpose of the IVD MD and its inherent risks.
If the terms of the discount safe harbor are met, the discounts will not be considered prohibited remuneration under the Anti-kickback Statute. 16 Table of Contents California does not have a discount safe harbor. However, as noted above, Section 650 has generally been interpreted consistent with the Anti-kickback Statute.
If the terms of the discount safe harbor are met, the discounts will not be considered prohibited remuneration under the Anti-kickback Statute. California does not have a discount safe harbor. However, as noted above, Section 650 has generally been interpreted consistent with the Anti-kickback Statute.
In July 2024, certain transition timelines were extended, where IVDs can continue to be placed on the market under the IVDD for a certain period of time based on the risk class of the IVD, provided manufacturers meet the expectations set forth when the transition timelines were extended.
In July 2024, certain transition timelines were extended, where IVD MDs can continue to be placed on the market under the IVDD for a certain period of time based on the risk class of the IVD MD, provided manufacturers meet the expectations set forth when the transition timelines were extended.
While it is intended to last for at least four years, the European Commission may unilaterally revoke the adequacy decision at any point, and, if this occurs, it could lead to additional costs and increase our overall risk exposure. Other Privacy Laws Laws governing privacy may continue to be adopted in the future from time to time.
While it is intended to last for at least four years, the European Commission may unilaterally revoke the adequacy decision at any point, and, if this occurs, it could lead to additional costs and increase our overall risk exposure. 14 Table of Contents Other Privacy Laws Laws governing privacy may continue to be adopted in the future from time to time.
Our high-performing tests enable clinicians to make more confident diagnostic, prognostic and treatment decisions. Insights from these tests help patients avoid unnecessary procedures and interventions and accelerate time to appropriate treatment, thereby improving outcomes for patients in our global markets.
Our high-performing tests enable clinicians to make more confident diagnostic, prognostic and predictive treatment decisions. Insights from these tests help patients avoid unnecessary procedures and interventions and accelerate time to appropriate treatment, thereby improving outcomes for patients across our global markets.
We currently offer our Prosigna breast cancer IVD test in the U.S., Canada, Europe, the Middle East, Asia Pacific and Latin America on the nCounter Analysis System, for which we acquired the exclusive worldwide license for clinical IVD test use in 2019.
We currently offer our Prosigna breast cancer IVD test in Europe, the Middle East, Asia Pacific and Latin America on the nCounter Analysis System, for which we acquired the exclusive worldwide license for clinical IVD test use in 2019.
The main aims of the IVDR are to standardize diagnostic procedures throughout the EU, increase reliability of diagnostic analysis and enhance patient safety. As such, IVDs are subject to additional regulatory scrutiny now that the IVDR has come into force fully.
The main aims of the IVDR are to standardize diagnostic procedures throughout the EU, increase reliability of diagnostic analysis and enhance patient safety. As such, IVD MDs are subject to additional regulatory scrutiny now that the IVDR has come into force fully.
In addition, under the IVDR there is a 12 Table of Contents greater emphasis on post-market surveillance and submission of post-market performance follow-up reports. In addition, the EU introduced a new compulsory role, the Person Responsible for Regulatory Compliance (PRRC).
In addition, under the IVDR there is a greater emphasis on post-market surveillance and submission of post-market performance follow-up reports. In addition, the EU introduced a new compulsory role, the Person Responsible for Regulatory Compliance (PRRC).
We developed the noninvasive Percepta Nasal Swab test to help physicians more accurately, quickly and confidently determine lung cancer risk so that patients whose lung 4 Table of Contents nodules are benign may avoid unnecessary invasive procedures and patients whose nodules are likely cancerous may proceed to further diagnostic work-up and, if necessary, treatment.
We developed the noninvasive Percepta Nasal Swab test to help physicians more accurately, quickly and confidently determine lung cancer risk so that patients whose lung nodules are benign may avoid unnecessary invasive procedures and patients whose nodules are likely cancerous may proceed to further diagnostic work-up and, if necessary, treatment.
Moreover, the GDPR grants data subjects the right to claim material and non-material damages resulting 14 Table of Contents from infringement of the GDPR. In June 2021, the CJEU issued a ruling that expanded the scope of the “one stop shop” under the GDPR.
Moreover, the GDPR grants data subjects the right to claim material and non-material damages resulting from infringement of the GDPR. In June 2021, the CJEU issued a ruling that expanded the scope of the “one stop shop” under the GDPR.
Given these data, we believe the Percepta Nasal Swab test would assist physicians in directing these patients to further procedures so they could obtain an accurate diagnosis and speed time to treatment, if necessary. Patients in the moderate risk group could be managed according to current clinical guidelines.
Given these data, we believe the Percepta Nasal Swab test would assist physicians in directing these 4 Table of Contents patients to further procedures so they could obtain an accurate diagnosis and speed time to treatment, if necessary. Patients in the moderate risk group could be managed according to current clinical guidelines.
If imposed for any reason, sanctions under the Anti-kickback Statute, Section 650, or Section 14107.2 could have a negative effect on our business. Other Federal and State Fraud and Abuse Laws In addition to the requirements discussed above, several other health care fraud and abuse laws could have an effect on our business.
If imposed for any reason, sanctions under the Anti-kickback Statute, Section 650, or Section 14107.2 could have a negative effect on our business. 16 Table of Contents Other Federal and State Fraud and Abuse Laws In addition to the requirements discussed above, several other health care fraud and abuse laws could have an effect on our business.
Approximately 1 million Americans are screened annually for lung cancer, and about 1.6 million lung nodules are found incidentally each year.
Approximately 2.7 million Americans are screened annually for lung cancer, and about 1.6 million lung nodules are found incidentally each year.
Our MRD solution requires less than a tube of blood (as little as 3-4 ml blood, or 1-2 ml plasma), can go from sample to result in just two weeks, and delivers improved performance compared to imaging and other molecular tests.
TrueMRD requires less than a tube of blood (as little as 3-4 ml blood, or 1-2 ml plasma), can go from sample to result in just two weeks, and delivers improved performance compared to imaging and other molecular tests.
We believe key factors contributing to our success in the market include our Veracyte Diagnostics Platform, scientific and technological excellence, evidence of clinical differentiation, strong KOL support and payer coverage policies for our tests. We believe our strength across these areas form a barrier to entry and a competitive advantage.
We believe key factors contributing to our success in the market include our Veracyte Diagnostics Platform, scientific and technological excellence, evidence of clinical differentiation underscored by the breadth of publications supporting our tests, strong KOL support and payer coverage policies for our tests. We believe our strength across these areas form a barrier to entry and a competitive advantage.
We also plan to utilize our MRD platform to offer additional MRD tests in several other indications. We have submitted a tech 3 Table of Contents assessment to MolDx, who administers Medicare reimbursement in our lab jurisdiction, and subject to a positive response, expect to launch our first MRD test in the first half of 2026.
We also plan to utilize TrueMRD to offer additional MRD tests in several other indications. We have submitted a tech assessment to MolDx, who administers Medicare reimbursement in our lab jurisdiction and, subject to a positive response, expect to launch our first MRD test in the first half of 2026.
If there is sufficient evidence to show that the device is a lower risk device, a manufacturer may ask FDA to reclassify the device into Class II or Class I by submitting a De Novo classification request.
If there is sufficient evidence to show that the device is a lower risk device, a manufacturer may ask FDA to reclassify the device into Class II or Class I by submitting a 9 Table of Contents De Novo classification request.
Medicare pays for clinical diagnostic laboratory tests, or CDLTs, on the Clinical Laboratory Fee Schedule, or CLFS, under section 1833(h) of the Social Security Act, or the SSA.
Medicare prices clinical diagnostic laboratory tests, or CDLTs, on the Clinical Laboratory Fee Schedule, or CLFS, under section 1833(h) of the Social Security Act, or the SSA.
RUOs cannot be marketed with any claims, or in a manner indicating, that the device is safe, effective, or has diagnostic utility, or is intended for human clinical diagnostic or prognostic use.
RUOs 10 Table of Contents cannot be marketed with any claims, or in a manner indicating, that the device is safe, effective, or has diagnostic utility, or is intended for human clinical diagnostic or prognostic use.
In 2016, the Centers for Medicare and Medicaid Services, or CMS, issued the final rule to implement the requirements of PAMA, which significantly revised the Medicare payment system for CDLTs.
In 2016, the Centers for Medicare and Medicaid Services, or CMS, issued the final rule to implement the requirements of the Protecting Access to Medicare Act of 2014, or PAMA, which significantly revised the Medicare payment system for CDLTs.
We expect to launch our Prosigna Breast Cancer Assay on the NextSeq 550Dx system in 2026. We are also currently developing our Decipher Prostate test as a quantitative polymerase chain reaction-based, or qPCR-based, test to be launched as a decentralized IVD test in 2026 outside of the U.S.
We expect to launch our Prosigna Breast Cancer Assay on the NextSeq 550Dx system. We are also currently developing our Decipher Prostate test as a quantitative polymerase chain reaction-based, or qPCR-based, test to be launched as a decentralized IVD test outside of the United States.
As we add new tests and services, we will face many of these same competitive risks for these new tests as well. Patents and Proprietary Technology In order to remain competitive, we must develop and maintain protection of the proprietary aspects of our technologies.
As we add new tests and services, we will face many of these same competitive risks. 6 Table of Contents Patents and Proprietary Technology In order to remain competitive, we must develop and maintain protection of the proprietary aspects of our technologies.
The IVDD and IVDR prohibit the offer of inducements, particularly financial, that might influence the judgement of notified regulatory bodies and their personnel to carry out their conformity assessment activities.
The IVDR prohibits (and the IVDD previously prohibited) the offer of inducements, particularly financial, that might influence the judgement of notified regulatory bodies and their personnel to carry out their conformity assessment activities.
If the data and 9 Table of Contents information are sufficient to show that the device is substantially equivalent to the predicate device, FDA issues a Substantially Equivalent letter clearing the device for marketing.
If the data and information are sufficient to show that the device is substantially equivalent to the predicate device, FDA issues a Substantially Equivalent letter clearing the device for marketing.
Historically, most of these patients were referred to diagnostic surgery, even though 70% to 80% of the time, the nodules proved to be benign.
Historically, most of the patients with indeterminate results were referred to diagnostic surgery, even though 70% to 80% of the time, the nodules proved to be benign.
Within that, there are approximately 225,000 patients in the United States and 270,000 patients across Europe diagnosed with HR+ disease annually and currently eligible for the Prosigna Breast Cancer Assay. Information about individual patients’ prognosis is the foundation of treatment decision-making and recommendations in breast cancer.
We estimate that there are approximately 225,000 patients in the United States and 270,000 patients across Europe diagnosed with HR+ disease annually and potentially eligible for the Prosigna Breast Cancer Assay. 3 Table of Contents Information about individual patients’ prognosis is the foundation of treatment decision-making and recommendations in breast cancer.
Outside of the United States, the test is included in leading medical guidelines, including from the National Institute for Health and Care Excellence in the United Kingdom and the European Society for Medical Oncology.
The test is recommended in guidelines from the National Comprehensive Cancer Network and the American Society of Clinical Oncology in the United States. Outside of the United States, the test is included in leading medical guidelines, including from the National Institute for Health and Care Excellence in the United Kingdom and the European Society for Medical Oncology.
We have received and may in the future receive notices of claims of potential infringement from third parties. We hold registered trademarks in the United States for “Veracyte,” “Afirma,” “Percepta,” “Envisia,” “Prosigna,” “Lymphmark,” “Decipher,” “GRID,” “C2i,” “C2i Genomics” and the Veracyte logo. We also hold registered trademarks in various jurisdictions outside of the United States.
We have received and may in the future receive notices of claims of potential infringement from third parties. We hold registered trademarks in the United States for “Veracyte,” “Afirma,” “Percepta,” “Envisia,” “Prosigna,” “Lymphmark,” “Decipher,” “GRID,” “C2i,” “C2i Genomics” and the Veracyte logo, and a pending trademark application for “TrueMRD”.
These requirements vary by jurisdiction, differ from those in the United States and may in some cases require us to perform additional pre-clinical or clinical testing. In many countries outside of the United States, coverage, pricing and reimbursement approvals are also required. 18 Table of Contents Human Capital Our People. At December 31, 2024, we had 824 employees.
These requirements vary by jurisdiction, differ from those in the United States and may in some cases require us to perform additional pre-clinical or clinical testing. In many countries outside of the United States, coverage, pricing and reimbursement approvals are also required. Human Capital As of December 31, 2025, we had 755 employees.
We require all employees and consultants working for us to execute confidentiality agreements, which provide that all information received by them during the course of the employment or consulting relationship be kept confidential, except in specified circumstances.
We also hold registered trademarks in various jurisdictions outside of the United States. We require all employees and consultants working for us to execute confidentiality agreements, which provide that all information received by them during the course of the employment or consulting relationship be kept confidential, except in specified circumstances.
Thyroid Cancer - Afirma Genomic Sequencing Classifier Each year in the U.S, approximately 600,000 people undergo fine needle aspiration, or FNA, biopsy evaluation for potentially cancerous thyroid nodules. Many of these patients receive indeterminate results (i.e., not clearly benign or malignant) based on traditional cytopathology evaluation.
Thyroid Cancer - Afirma Genomic Sequencing Classifier Each year in the U.S, approximately 650,000 people undergo fine needle aspiration, or FNA, biopsy evaluation for potentially cancerous thyroid nodules. Using traditional cytopathology evaluation many of these patients receive indeterminate results (i.e., not clearly benign or malignant), while many others receive a suspicious for malignancy or malignant result.
Third-party payers, including Medicare, have specific and often complex billing rules, failure to abide by which may result in denials, audits, and/or refund requests. We work with commercial payers to establish medical coverage policies for our tests and services, negotiate network status and contracted rates.
This could result in updated reimbursement rates effective January 1, 2027 through December 31, 2029. Third-party payers, including Medicare, have specific and often complex billing rules, failure to abide by which may result in denials, audits, and/or refund requests. We work with commercial payers to establish medical coverage policies for our tests and services, negotiate network status and contracted rates.
Under the IVDD, for most IVDs manufacturers used to “self-declare” the conformity of their IVDs with the essential requirements of the IVDD. For some types of IVDs listed in Annex II of the IVDD, a conformity assessment procedure required the intervention of a notified body.
Under the IVDD, for most IVD MDs, manufacturers used to “self-declare” the conformity of their IVD MDs with the essential requirements of the IVDD. For types of IVD MDs listed in Annex II of the IVDD and devices for self-testing, a conformity assessment procedure required the intervention of a notified body.
Prosigna continues to be marketed in the EU/EEA as a self-declared CE marked device under the IVD Directive (98/79/EC) as regulated under the IVDR transition arrangement defined in EU 2017/746 and amended under EU 2022/112. In Vitro Diagnostic Medical Device Regulations (2017/746) The EU regulatory landscape concerning medical devices and IVDs has and continues to change significantly.
Prosigna continues to be marketed in the EU/EEA as a self-declared CE marked device under the IVDD as regulated under a transition arrangement defined in the Regulation EU 2017/746, or IVDR, and as amended. In Vitro Diagnostic Medical Device Regulations (2017/746) The EU regulatory landscape concerning medical devices and IVD MDs has and continues to change significantly.
We believe that the Afirma and Envisia classifiers, as well as our Decipher Prostate and Bladder tests, have been developed and are performed in a manner consistent with the FDA’s enforcement discretion policy.
We believe that our Decipher Prostate test, Afirma classifier and Decipher Bladder test, have been developed and are performed in a manner consistent with the FDA’s enforcement discretion policy.
We submit claims to payers directly using unique American Medical Association Current Procedural Terminology, or CPT, codes when they exist for our products and services and use either miscellaneous or common CPT codes for non-proprietary testing services or when unique codes do not exist.
We submit claims to payers directly using unique American Medical Association Current Procedural Terminology, or CPT, codes when they exist for our products and services and use either miscellaneous or common CPT codes for non-proprietary testing services or when unique codes do not exist. When miscellaneous CPT codes are used for testing, Medicare pricing is determined by the local MAC.
The IVDD and IVDR do not address the question of inducements offered to healthcare professionals or other third parties, though Member States may implement their own national laws in this regard.
The IVDR does not address the question of inducements offered to healthcare 17 Table of Contents professionals or other third parties, though EU member states may implement their own national laws in this regard.
Compliance with the IVDD essential requirements is a prerequisite for a manufacturer to be able to affix a CE mark, which is a declaration by the manufacturer that the IVD meets all the appropriate requirements under the IVDD and corresponding national provisions, as applicable.
Compliance with the IVDD essential requirements was a prerequisite for a manufacturer to be able to affix a CE mark, which 11 Table of Contents was a declaration by the manufacturer that the IVD MD met all the appropriate requirements under the IVDD and corresponding national provisions, as applicable.
IVDs must bear the CE marking of conformity when they are placed on the market, unless a specific exemption applies.
IVD MDs must bear the CE marking of conformity when placed on the market, unless a specific exemption applies.
Regulations implementing the new regime were originally scheduled to come into force in July 2023, but have recently been postponed to July 2025. Until the final legislation and accompanying guidance has been published there will remain uncertainty as to the future IVD regulatory requirements in Great Britain.
Regulations implementing the new regime came into force in July 2025. Until the final legislation and accompanying guidance has been published there will remain uncertainty as to the future IVD regulatory requirements in Great Britain.
Our Afirma test faces competition from companies that use next generation sequencing technology or other methods to measure mutational markers such as BRAF and KRAS, along with numerous other mutations.
Competition Our main competition are companies that use next generation sequencing technology or other methods to measure genomic biomarkers in disease areas addressed by our tests. Our Afirma test faces competition from companies that use next generation sequencing technology or other methods to measure mutational markers such as BRAF and KRAS, along with numerous other mutations.
When we contract to serve as a contracted provider, reimbursements are made pursuant to a negotiated fee schedule and are limited to only covered indications. Becoming a contracted provider generally results in higher reimbursement for covered 5 Table of Contents indications and lack of reimbursement for non-covered indications.
When we contract to serve as a contracted provider, reimbursements are made pursuant to a negotiated fee schedule and are limited to only covered indications. Becoming a contracted provider generally results in higher reimbursement for covered indications and lack of reimbursement for non-covered indications. As a result, the impact of becoming a contracted provider with a specific payer will vary.
We would be required to refund any payments we receive pursuant to a referral prohibited by these laws to the patient, the payer or the Medicare program, as applicable. 15 Table of Contents Sanctions for a violation of the Stark Law include the following: • denial of payment for the services provided in violation of the prohibition; • refunds of amounts collected by an entity in violation of the Stark Law; • a civil penalty of up to $15,000 for each service arising out of the prohibited referral; • possible exclusion from federal healthcare programs, including Medicare and Medicaid; and • a civil penalty of up to $100,000 against parties that enter into a scheme to circumvent the Stark Law's prohibition.
Sanctions for a violation of the Stark Law include the following: • denial of payment for the services provided in violation of the prohibition; • refunds of amounts collected by an entity in violation of the Stark Law; • a civil penalty of up to $15,000 for each service arising out of the prohibited referral; • possible exclusion from federal healthcare programs, including Medicare and Medicaid; and • a civil penalty of up to $100,000 against parties that enter into a scheme to circumvent the Stark Law's prohibition.
The majority of our revenue presently comes from sales of our Decipher Prostate and Afirma tests. In the near-term, we are focused on continuing to expand Decipher Prostate's market size, penetration, and leadership position while also sustaining strong growth for Afirma. We are also focused on investing in innovation to drive durable growth over the medium and long term.
In the near-term, we are focused on continuing to expand Decipher Prostate's penetration and leadership position while also sustaining strong growth for Afirma. We are also focused on investing in innovation to drive durable growth over the medium and long term.
As a result, the impact of becoming a contracted provider with a specific payer will vary. In some cases, third party payers may request audits of the amounts paid to us. This may require us to repay certain amounts to payers as a result of such audits.
In some cases, third party payers may request audits of the amounts paid to us. This may require us to repay certain amounts to payers as a result of such audits.
MRD is a large emerging market, currently estimated at a total addressable market, or TAM, of $20 billion annually. We believe we can leverage our specialist commercial channels while also building relationships with medical oncologists to partner early in a patient’s care, using our indication-specific focus and expertise to drive adoption from the first diagnostic test onward.
We believe we can leverage our specialist commercial channels while also building relationships with medical oncologists to partner early in a patient’s care, using our indication-specific focus and expertise to drive adoption from the first diagnostic test onward.
If our test volume decreases or we switch suppliers, we may hold excess inventory with expiration dates that occur before use which would adversely affect our losses and cash flow position. As we introduce any new test or make changes to existing tests, we may experience supply issues as we ramp test volume.
If our test volume decreases or we switch suppliers, we may hold excess inventory with expiration dates that occur before use which would adversely affect our losses and cash flow position.
To demonstrate compliance with the essential requirements, IVDs must undergo a conformity assessment procedure. As a general rule, demonstration of conformity of IVDs and their manufacturers with the essential requirements must be based, among other things, on the evaluation of clinical data supporting the safety and performance of the products during normal conditions of use.
As a general rule, demonstration of conformity of IVD MDs and their manufacturers with the essential requirements needed to be based, among other things, on adequate performance evaluation data supporting the safety and performance of the products during the intended conditions of use.
Notified regulatory bodies are independent organizations designated by Member States to assess the conformity with the essential requirements of medical devices, including IVDs when required, before a CE mark is affixed to the device and the device is placed on the market.
Notified bodies are independent organizations designated by EU member states to assess the conformity of medical devices, including IVD MDs that qualify as such when required, with all relevant requirements under the applicable laws before a CE mark is affixed to the device and the device is placed on the market.
Regulation Clinical Laboratory Improvement Amendments of 1988, or CLIA As a clinical reference laboratory, we are required to hold certain federal, state and local licenses, certifications and permits to conduct our business.
Certain legal proceedings in which we are involved are discussed in Note 7, Commitments and Contingencies, to the accompanying consolidated financial statements. Regulation Clinical Laboratory Improvement Amendments of 1988, or CLIA As a clinical reference laboratory, we are required to hold certain federal, state and local licenses, certifications and permits to conduct our business.
This could result in updated reimbursement rates effective January 1, 2030.
This could result in updated reimbursement rates effective January 1, 2027 through December 31, 2029.
For the years ended December 31, 2024, 2023 and 2022, respectively, revenue was represented by the indicated percent for each payer: Medicare accounted for 33%, 35% and 36% of our testing revenue. Medicaid accounted for 1%, 1%, and 3% of our testing revenue. Private commercial payers, including Medicare advantage, accounted for 66%, 64%, and 61% of our testing revenue.
For the years ended December 31, 2025, 2024 and 2023, respectively, revenue was represented by the indicated percent for each payer: Medicare Fee-For-Service accounted for 34%, 33% and 35% of our testing revenue. Medicare Advantage, paid for by commercial payers, accounted for 18%, 17%, and 14% of our testing revenue.
Biopharmaceutical and Other Revenue From time to time, we partner with biopharmaceutical companies that rely on data from our CLIA tests to provide unique insights into the genetic underpinnings of disease. Additionally, we have provided immuno-oncology services in our Marseille, France facility for biopharmaceutical customers, as well as IVD test development and manufacturing services.
Biopharmaceutical and Other Revenue From time to time, we partner with biopharmaceutical companies that rely on data from our CLIA tests to provide unique insights into the genetic underpinnings of disease.
For future indications we choose to serve, competition may come from numerous other companies, including but not limited to, Natera, Inc., Guardant Health, Inc., Personalis, Inc., NeoGenomics, Inc., Exact Sciences Corporation, and Myriad Genetics, Inc. 6 Table of Contents In addition, competitors may develop their own versions of our solutions in countries we may seek to enter where we do not have patents or where our intellectual property rights are not recognized, and compete with us in those countries, including encouraging the use of their solutions by physicians in other countries.
In addition, competitors may develop their own versions of our solutions in countries we may seek to enter where we do not have patents or where our intellectual property rights are not recognized, and compete with us in those countries, including encouraging the use of their solutions by physicians in other countries.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeSupreme Court judicial decisions and potential changes in the regulatory environment, may have a material adverse effect on our financial condition and operations. • If the FDA or other foreign authorities regulate those of our tests that they do not currently regulate, we could incur substantial costs and delays associated with trying to obtain premarket clearance, approval or certification. • Obtaining marketing authorization or certification by the FDA and foreign regulatory authorities or notifying regulatory bodies for our diagnostic tests will take significant time and require significant research, development and clinical study expenditures and ultimately may not succeed. • If we are unable to compete successfully, we may be unable to increase or sustain our revenue and profitability. • We depend on our senior management team, and the loss of one or more of our executive officers, or the inability to attract and retain highly-skilled employees or other key personnel in our highly competitive industry, could adversely affect our business. • Billing for our diagnostic tests is complex, and we must dedicate substantial time and resources to the billing process in order to collect cash and be paid. 20 Table of Contents • If our internal sales force is less successful than anticipated, our business expansion plans could suffer and our ability to generate revenue could be diminished. • Developing, commercializing and gaining reimbursement for new products involves a lengthy and complex process, and if we do not achieve our projected development, commercialization and reimbursement goals in the timeframes we announce and expect, our business may suffer, and our stock price may decline. • Aspects of our international business expose us to business, personnel, regulatory, political, operational, financial, and economic risks associated with doing business outside of the United States. • Security breaches, loss of data and other disruptions to our or our third-party service providers' data systems could compromise sensitive information related to our business or prevent us from accessing critical information and expose us to liability, which could adversely affect our business and our reputation. • Risks associated with data privacy issues, including evolving laws, regulations and associated compliance efforts, may adversely impact our business and financial results. • If we are unable to protect or successfully defend our intellectual property effectively, our business may be harmed. • We may be involved in litigation related to intellectual property, which may be time-intensive and costly and may adversely affect our business, operating results or financial condition.
Biggest changeWe may not be able to find replacements or transition to alternative suppliers or service providers, which may materially impact our ability to generate revenue. • We may be unable to manage our future growth effectively, which could make it difficult to execute our business strategy. • If we are unable to support demand for our tests, products or services, our business could suffer. • Changes in healthcare p olicy, including legislation reforming the U.S. healthcare system, recent U.S. judicial decisions and potential changes in the regulatory environment, may have a material adverse effect on our financial condition and operations. • If the FDA or other foreign authorities regulate those of our tests that they do not currently regulate, we could incur substantial costs and delays associated with trying to obtain premarket clearance, approval or certification. • Obtaining marketing authorization or certification by the FDA and foreign regulatory authorities or notifying regulatory bodies for our diagnostic tests will take significant time and require significant research, development and clinical study expenditures and ultimately may not succeed. • If we are unable to compete successfully, we may be unable to increase or sustain our revenue and profitability. • We depend on our senior management team, and the loss of one or more of our executive officers, or the inability to attract and retain highly skilled employees or other key personnel in our highly competitive industry, could adversely affect our business. • Billing for our diagnostic tests is complex, and we must dedicate substantial time and resources to the billing process in order to collect cash and be paid. 20 Table of Contents • If our internal sales force is less successful than anticipated, our business expansion plans could suffer and our ability to generate revenue could be diminished. • Developing, commercializing and gaining reimbursement for new products involves a lengthy and complex process, and if we do not achieve our projected development, commercialization and reimbursement goals in the timeframes we announce and expect, our business may suffer, and our stock price may decline. • Aspects of our international business expose us to business, personnel, regulatory, political, operational, financial, and economic risks associated with doing business outside of the United States. • Security breaches, loss of data and other disruptions to our or our third-party service providers' data systems could compromise sensitive information related to our business or prevent us from accessing critical information and expose us to liability, which could adversely affect our business and our reputation. • Risks associated with data privacy issues, including evolving laws, regulations and associated compliance efforts, may adversely impact our business and financial results. • If we are unable to protect or successfully defend our intellectual property effectively, our business may be harmed. • We may be involved in litigation related to intellectual property, which may be time-intensive and costly and may adversely affect our business, operating results or financial condition.
In order to develop and commercialize diagnostic tests to be run in our CLIA lab, we need to: • expend significant funds to conduct substantial research and development; • conduct successful analytical and clinical studies; • scale our laboratory processes to accommodate new tests; and • build the commercial, regulatory, and compliance infrastructure to market and sell new products.
In order to develop and commercialize diagnostic tests to be run in our CLIA lab, we need to: • expend significant funds to conduct substantial research and development; • conduct successful analytical and clinical studies; • scale our laboratory processes and infrastructure to accommodate new tests; and • build the commercial, regulatory, and compliance infrastructure to market and sell new products.
Risks Related to Our Business • Our financial results currently depend mainly on sales of our Decipher Prostate and Afirma tests, and we may not generate sufficient revenue from these and our other diagnostic tests to grow our business. • If we are unable to grow sales of our tests or products, or we are unable to launch or commercialize our new tests or products, our business may suffer. • We have incurred losses in the past, we could incur net losses in the future, and we may not sustain our level of profitability in the future. • We depend on a few payers for a significant portion of our revenue; if one or more significant payers stops providing reimbursement or decreases the amount of reimbursement for our tests our revenue could decline. • If payers do not provide reimbursement, rescind or modify their reimbursement policies, delay payments for our tests, recoup past payments, or if we are unable to successfully negotiate additional reimbursement contracts, our commercial success could be compromised. • We may experience limits on our revenue if physicians decide not to order our tests or if patients decide not to use our tests as a result of increased costs, fees or changing insurer policies. • If we fail to comply with federal, state and foreign licensing requirements, we could lose the ability to perform our tests or experience disruptions to our business. • We have and may continue to engage in acquisitions, dispositions or other strategic transactions that could disrupt our business, cause dilution to our st ockholders or reduce our financial resources.
Risks Related to Our Business • Our financial results currently depend mainly on sales of our Decipher Prostate and Afirma tests, and we may not generate sufficient revenue from these and our other diagnostic tests to grow our business. • If we are unable to grow sales of our tests or products, or we are unable to launch or commercialize our new tests or products, our business may suffer. • We have incurred losses in the past, we could incur net losses in the future, and we may not sustain our level of profitability in the future. • We depend on a few payers for a significant portion of our revenue; if one or more significant payers stops providing reimbursement or decreases the amount of reimbursement for our tests our revenue could decline. • If payers do not provide reimbursement, rescind or modify their reimbursement policies, delay payments for our tests, recoup past payments, or if we are unable to successfully negotiate additional reimbursement contracts, our commercial success could be compromised. • We may experience limits on our revenue if physicians decide not to order our tests or if patients decide not to use our tests as a result of increased costs, fees or changing insurer policies. • If we fail to comply with federal, state and foreign licensing requirements, we could lose the ability to perform our tests or experience disruptions to our business. • We have engaged, and may continue to engage, in acquisitions, dispositions or other strategic transactions that could disrupt our business, cause dilution to our st ockholders or reduce our financial resources.
If we fail to remain in compliance with applicable EU laws and directives, we would be unable to continue to affix the CE mark to our products, which would prevent us from selling them within the EU and European Economic Area, or EEA (which consists of the 27 EU member states plus Norway, Liechtenstein and Iceland), and any other regions that tie their product registrations or regulations to the EU requirements.
If we fail to remain in compliance with applicable EU laws, we would be unable to continue to affix the CE mark to our products, which would prevent us from selling them within the EU and European Economic Area, or EEA (which consists of the 27 EU member states plus Norway, Liechtenstein and Iceland), and any other regions that tie their product registrations or regulations to the EU requirements.
Currently, the Prosigna Breast Cancer Assay is available as an IVD test that runs on the nCounter Analysis System platform. If we are not able to adapt our other current or future tests to be performed on IVD platforms or if our tests fail to be competitive against competing products in international markets, our prospects for growth could suffer.
Currently, the Prosigna Breast Cancer Assay is available globally as an IVD test that runs on the nCounter Analysis System platform. If we are not able to adapt our other current or future tests to be performed on IVD platforms or if our tests fail to be competitive against competing products in international markets, our prospects for growth could suffer.
In the CY 2020 Hospital Outpatient Prospective Payment System Proposed Rule, CMS solicited comments on potential revisions to these billing rules that could have impacted our ability to bill Medicare directly for our Decipher Prostate, Afirma, Envisia, and Decipher Bladder classifiers, as well as for Prosigna, when performed on specimens collected from hospital outpatients.
In the CY 2020 Hospital Outpatient Prospective Payment System Proposed Rule, CMS solicited comments on potential revisions to these billing rules that could have impacted our ability to bill Medicare directly for our Decipher Prostate, Afirma and Decipher Bladder classifiers, as well as for Prosigna, when performed on specimens collected from hospital outpatients.
We rely on sole suppliers for critical supply of reagents, equipment and other materials and services that we use to perform our CLIA tests as well as to satisfy demand for our Prosigna test kits, service kits and service on the nCounter Analysis System. We also purchase components used in our sample collection kits from sole-source suppliers.
We rely on sole suppliers for critical supply of reagents, equipment and other materials and services that we use to perform our CLIA tests as well as to satisfy demand for our Prosigna test kits, service kits and service on the nCounter Analysis System. We also purchase components used in our extraction and sample collection kits from sole-source suppliers.
We believe that our Decipher Prostate, Afirma, Envisia, and Decipher Bladder classifiers, along with Prosigna, are covered by this policy. Accordingly, we bill Medicare for these tests when we perform them on specimens collected from hospital outpatients and meet the conditions set forth in CMS's revised billing rules.
We believe that our Decipher Prostate, Afirma and Decipher Bladder classifiers, along with Prosigna, are covered by this policy. Accordingly, we bill Medicare for these tests when we perform them on specimens collected from hospital outpatients and meet the conditions set forth in CMS's revised billing rules.
For example, the former Trump administration issued various executive orders which eliminated cost sharing subsidies and various provisions that would impose a financial burden on states or a cost, fee, tax, penalty or regulatory burden on individuals, healthcare providers, health insurers, or manufacturers of pharmaceuticals or medical devices. Additionally, the U.S.
For example, a former administration issued various executive orders which eliminated cost sharing subsidies and various provisions that would impose a financial burden on states or a cost, fee, tax, penalty or regulatory burden on individuals, healthcare providers, health insurers, or manufacturers of pharmaceuticals or medical devices. Additionally, the U.S.
In addition, in recent years “anti-ESG” sentiment has gained momentum across the U.S., with several states and Congress having proposed or enacted “anti-ESG” policies, legislation, or initiatives or issued related legal opinions, and the current administration having recently issued an executive order opposing diversity equity and inclusion (“DEI”) initiatives in the private sector.
In addition, in recent years “anti-ESG” sentiment has gained momentum across the U.S., with several states and Congress having proposed or enacted “anti-ESG” policies, legislation, or initiatives or issued related legal opinions, and the current administration having issued an executive order opposing diversity equity and inclusion (“DEI”) initiatives in the private sector.
Litigation may be necessary for us to enforce our patent and proprietary rights or to determine the scope, coverage, and validity of the intellectual property and proprietary rights of others. We may in the future initiate or become involved in legal proceedings against a third party to enforce a patent covering their tests, products or services.
Litigation may be necessary for us to enforce our patent and proprietary rights or to determine the scope, coverage, and validity of the intellectual property and proprietary rights of others. We may also in the future initiate or become involved in legal proceedings against a third party to enforce a patent covering their tests, products or services.
If our operations are found to be in violation of any of these laws and regulations, we may be subject to any applicable penalty associated with the violation, including civil and criminal penalties, damages and fines, we could be required to refund payments received by us, and we could be required to curtail or cease our operations.
If our operations are found to be in violation of any of these laws and regulations, we may be subject to applicable penalties associated with the violation, including civil and criminal penalties, damages and fines, we could be required to refund payments received by us, and we could be required to curtail or cease our operations.
If our general strategy of seeking incremental growth through acquisitions and collaborations is not successful, or if we do not successfully integrate companies or assets that we acquire into our business, our prospects and financial condition will suffer. • Our future success and international growth depend, in part, on our ability to adapt, manufacture and distribute our tests as IVD tests. • We rely on sole suppliers for some of the reagents, equipment, and other materials used to perform or develop our tests, as well as certain sole source providers for kit components, instruments and associated services.
If our general strategy of seeking incremental growth through acquisitions and collaborations is not successful, or if we do not successfully integrate companies or assets that we acquire into our business, our prospects and financial condition may suffer. • Our future success and international growth depend, in part, on our ability to adapt, manufacture and distribute our tests as IVD tests. • We rely on sole suppliers for some of the reagents, equipment, and other materials used to perform or develop our tests, as well as certain sole source providers for kit components, instruments and associated services.
Upon election, each class is now subject to an election for a term of one year expiring at the next succeeding annual meeting of stockholders; • provide that our directors serving in a class of directors for a term expiring at the third annual meeting of stockholders following the election of such class may be removed only for cause; • provide that vacancies on our board of directors may, except as otherwise required by law, be filled only by a majority of directors then in office, even if less than a quorum; • provide that the federal district courts of the United States shall be the exclusive forum for the resolution of any complaint asserting a cause of action arising under the Securities Act of 1933, as amended; • specify that no stockholder is permitted to cumulate votes at any election of directors; and • require a super-majority of votes for the stockholders to amend certain of the above-mentioned provisions.
Upon election, each class is now subject to an election for a term of one year expiring at the next succeeding annual meeting of stockholders; 53 Table of Contents • provide that our directors serving in a class of directors for a term expiring at the third annual meeting of stockholders following the election of such class may be removed only for cause; • provide that vacancies on our board of directors may, except as otherwise required by law, be filled only by a majority of directors then in office, even if less than a quorum; • provide that the federal district courts of the United States shall be the exclusive forum for the resolution of any complaint asserting a cause of action arising under the Securities Act of 1933, as amended; • specify that no stockholder is permitted to cumulate votes at any election of directors; and • require a super-majority of votes for the stockholders to amend certain of the above-mentioned provisions.
Several factors make the billing process complex, including: • differences between the list price for our tests and the reimbursement rates of payers; • compliance with complex federal and state regulations related to billing government payers, such as Medicare and Medicaid, including requirements to have an active CLIA certificate; • risk of government audits related to billing Medicare and other government payers; • disputes among payers as to which party is responsible for payment; • differences in coverage and in information and billing requirements among payers, including the need for prior authorization and/or advanced notification; • the effect of patient co-payments or co-insurance; 38 Table of Contents • individual payers may argue technical contract noncompliance and withhold payment; • challenges obtaining medical records from the ordering providers; • changes to billing codes used for our tests; • incorrect or missing billing information; and • the resources required to manage the billing and claims appeals process.
Several factors make the billing process complex, including: • differences between the list price for our tests and the reimbursement rates of payers; • compliance with complex federal and state regulations related to billing government payers, such as Medicare and Medicaid, including requirements to have an active CLIA certificate; • risk of government audits related to billing Medicare and other government payers; • disputes among payers as to which party is responsible for payment; • differences in coverage and in information and billing requirements among payers, including the need for prior authorization and/or advanced notification; • the effect of patient co-payments or co-insurance; • individual payers may argue technical contract noncompliance and withhold payment; • challenges obtaining medical records from the ordering providers; • changes to billing codes used for our tests; • incorrect or missing billing information; and • the resources required to manage the billing and claims appeals process.
We may also be subject to similar types of claims related to our Decipher Prostate, Prosigna, Envisia, and Decipher Bladder tests, as well as tests we may develop or acquire in the future, including MRD.
We may also be subject to similar types of claims related to our Decipher Prostate, Prosigna, and Decipher Bladder tests, as well as tests we may develop or acquire in the future, including MRD.
Our test development and commercialization efforts may be delayed or fail for many reasons, including: • fai lure of the test at the research or development stage; • difficulty in accessing suitable testing samples, especially testing samples with known clinical results; • lack of analytical and clinical validation data to support the effectiveness of the test, or lack of clinical utility data to support the value of the test; • delays resulting from the failure of third-party suppliers or contractors to meet their obligations in a timely and cost-effective manner; • failure to obtain or maintain necessary clearances, approvals or certifications to market the test; • manufacturing constraints due to limited energy supply in Europe or other supply constraints; or • lack of commercial acc eptance by patients, clinicians or third-party payers.
Our test development and commercialization efforts may be delayed or fail for many reasons, including: • fai lure of the test at the research or development stage; • difficulty in accessing suitable testing samples, especially testing samples with known clinical results; • lack of analytical and clinical validation data to support the effectiveness of the test, or lack of clinical utility data to support the value of the test; 54 Table of Contents • delays resulting from the failure of third-party suppliers or contractors to meet their obligations in a timely and cost-effective manner; • failure to obtain or maintain necessary clearances, approvals or certifications to market the test; • manufacturing constraints due to limited energy supply in Europe or other supply constraints; or • lack of commercial acc eptance by patients, clinicians or third-party payers.
We have and may continue to engage in acquisitions, dispositions or other strategic transactions that could disrupt our business, cause dilution to our stockholders or reduce our financial resources.
We have engaged, and may continue to engage, in acquisitions, dispositions or other strategic transactions that could disrupt our business, cause dilution to our stockholders or reduce our financial resources.
Supreme Court reversed its longstanding approach under the Chevron doctrine, which provided for judicial deference to regulatory agencies, including the FDA. As a result of this decision, there may be increased challenges to existing agency regulations and policies, and it is uncertain how lower courts will apply the decision in the context of other regulatory schemes.
Supreme Court reversed its longstanding approach under the Chevron doctrine, which provided for judicial deference to regulatory agencies, including the FDA, in certain circumstances. As a result of this decision, there may be increased challenges to existing agency regulations and policies, and it is uncertain how lower courts will apply the decision in the context of other regulatory schemes.
The IVDR has increased the regulatory requirements applicable to IVD MDs in the EU and requires that we re-classify and obtain new certificates of conformity for our existing CE-marked IVD MDs within the transitional provisions of the IVDR, meaning that where such transitional provisions apply, the products can continue to be placed on the market under the IVDD for a certain period of time.
The IVDR has increased the regulatory requirements applicable to IVD MDs in the EU and requires that we re-classify and obtain new certificates of conformity for our existing CE-marked IVD MDs subject to transitional provisions of the IVDR, meaning that where such transitional provisions apply, the products can continue to be placed on the market under the IVDD for a certain period of time.
Before we can successfully develop and commercialize any of our currently planned or other new diagnostic solutions, we will need to: • co nduct substantial research and development; 54 Table of Contents • obtain the necessary testing samples and related data; • conduct analytical and clinical validation studies, as well as clinical utility studies; • expend significant funds; • expand and scale-up our laboratory processes; • expand and train our sales force; • gain acceptance from a large number of ordering clinicians; • gain acceptance from ordering laboratories; and • seek and obtain regulatory clearances, approvals or certifications of our new solutions, as required by applicable regulatory bodies.
Before we can successfully develop and commercialize any of our currently planned or other new diagnostic solutions, we will need to: • co nduct substantial research and development; • obtain the necessary testing samples and related data; • conduct analytical and clinical validation studies, as well as clinical utility studies; • expend significant funds; • expand and scale-up our laboratory processes; • expand and train our sales force; • gain acceptance from a large number of ordering clinicians; • gain acceptance from ordering laboratories; and • seek and obtain regulatory clearances, approvals or certifications of our new solutions, as required by applicable regulatory bodies.
If the FDA or foreign authorities were to require us to seek clearance, approval or certification for our existing tests that are not currently cleared, approved, or certified or any of our future products for clinical use, we may not be able to obtain such clearances, approvals or certifications on a timely basis, or at all.
If the FDA or foreign authorities were to require us to seek clearance, approval or certification for our existing LDTs that are not currently cleared, approved, or certified or any of our future products for clinical use, we may not be able to obtain such clearances, approvals or certifications on a timely basis, or at all.
Critical accounting policies and estimates used in preparing our consolidated financial statements include those related to: revenue recognition; 58 Table of Contents write-down of supplies; the useful lives of property, plant and equipment; the recoverability of long-lived assets; the incremental borrowing rate for leases; the estimation of the fair value of intangible assets and contingent consideration; variable interest entity assessment; impairment of equity investment, at cost; stock options; income tax uncertainties, including a valuation allowance for deferred tax assets; reserve on accounts receivable and contingencies.
Critical accounting policies and estimates used in preparing our consolidated financial statements include those related to: revenue recognition; write-down of supplies; the useful lives of property, plant and equipment; the recoverability of long-lived assets; the incremental borrowing rate for leases; the estimation of the fair value of intangible assets and contingent consideration; variable interest entity assessment; impairment of equity investment, at cost; stock options; income tax uncertainties, including a valuation allowance for deferred tax assets; reserve on accounts receivable and contingencies.
Our inability to forecast customer demand could negatively impact our ability to meet customer demand, which can harm our operating results. Changes in healthcare policy, including legislation reforming the U.S. healthcare system, recent U.S. Supreme Court judicial decisions and potential changes in the regulatory environment, may have a material adverse effect on our financial condition and operations.
Our inability to forecast customer demand could negatively impact our ability to meet customer demand, which can harm our operating results. Changes in healthcare policy, including legislation reforming the U.S. healthcare system, recent U.S. judicial decisions and potential changes in the regulatory environment, may have a material adverse effect on our financial condition and operations.
While the FDA has historically maintained its authority to regulate LDTs as devices, it has generally exercised enforcement discretion, meaning that it has not required premarket review, quality system/current Good Manufacturing Practices regulations, and other applicable medical device requirements for LDT developers and users.
While the FDA has historically maintained its authority to regulate LDTs as devices, it has generally exercised enforcement discretion, meaning that it has not required premarket review, quality system/current Good Manufacturing Practice regulations, and other applicable medical device requirements for LDT developers and users.
In addition, the device must achieve the performances intended by the manufacturer and be designed, manufactured, and packaged in a suitable manner. To demonstrate compliance with the General Safety and Performance Requirements we must undergo a conformity assessment procedure, which varies according to the type of medical device and its (risk) classification.
In addition, the device must achieve the performances intended by the manufacturer and be designed, manufactured, and packaged in a suitable manner. To demonstrate compliance with the general safety and performance requirements and other IVDR requirements we must undergo a conformity assessment procedure, which varies according to the type of medical device and its (risk) classification.
These may include routine inspections by notified bodies, the FDA, CMS, and other health authorities, of our manufacturing facilities and our records for compliance with standards such as ISO 13485 and the QSR, which establish extensive requirements for quality assurance and control as well as manufacturing and change control procedures, among other things.
These may include routine inspections by notified bodies, the FDA, CMS, and other health authorities, of our manufacturing facilities and our records for compliance with standards such as ISO 13485 and the QMSR, which establish extensive requirements for quality assurance and control as well as manufacturing and change control procedures, among other things.
Further, we experience supply chain disruptions, although, to date, this has not resulted in delays in our ability to timely return test results. Any such interruption may significantly affect our future revenue, cause us to incur higher costs, and harm our customer relationships and reputation.
Further, we experience supply chain disruptions, although, to date, this has not resulted in delays in our ability to return test results in a timely manner. Any such interruption may significantly affect our future revenue, cause us to incur higher costs, and harm our customer relationships and reputation.
Additionally, with respect to the manufacturing of our IVD test kits, we have addressed and must continue to address any quality issues associated with our products, including in our engineering, design, manufacturing and delivery processes, as well as issues with third-party raw materials or components included in our products.
Additionally, with respect to the manufacturing of our IVD test kits, we have addressed and must continue to address any quality issues associated with our products, including in our engineering, design, manufacturing and delivery processes, as well as issues with third-party raw materials or components included in our products or with third-party contract manufacturers.
Risks associated with data privacy issues, including evolving laws, regulations and associated compliance efforts, may adversely impact our business and financial results. Legislation in various countries around the world with regard to cybersecurity, privacy and data protection is rapidly expanding and creating a complex compliance environment.
Risks associated with data privacy issues, including evolving laws, regulations and associated compliance efforts, may adversely impact our business and financial results. Legislation in various countries around the world with regard to cybersecurity, artificial intelligence, privacy and data protection is rapidly expanding and creating a complex compliance environment.
The strength of the clinical data supporting the use of the Decipher Prostate Genomic Classifier has led to the test’s inclusion in leading clinical guidelines. For example, the Decipher Prostate test has Simon Level IB evidence, resulting in inclusion in the 2025 NCCN Guidelines for prostate cancer, distinguishing it as the only gene-expression test to do so.
The strength of the clinical data supporting the use of the Decipher Prostate Genomic Classifier has led to the test’s inclusion in leading clinical guidelines. For example, the Decipher Prostate test has Simon Level IB evidence, resulting in inclusion in the 2026 NCCN Guidelines for prostate cancer, distinguishing it as the only gene-expression test to do so.
We believe that PAMA and its implementing regulations are generally favorable to us, however, there can be no assurance that the payment rate for Afirma, Prosigna, Decipher Prostate, Decipher Bladder and Envisia will not decrease in the future or will not be adversely affected by the PAMA law and regulations.
We believe that PAMA and its implementing regulations are generally favorable to us, however, there can be no assurance that the payment rate for Afirma, Decipher Prostate and Decipher Bladder will not decrease in the future or will not be adversely affected by the PAMA law and regulations.
Currently Prosigna for use on the nCounter Analysis System is our only product that required recertification, which is currently in progress. For most IVD MDs, the manufacturer used to self-declare the conformity of its products with the essential requirements of the IVDD.
Currently Prosigna for use on the nCounter Analysis System is our only product that required recertification, which is currently in progress. For many IVD MDs, the manufacturer used to self-declare the conformity of its products with the essential requirements of the IVDD.
The PPL was most recently amended in August 2024, to take effect in August 2025 as PPL, 5774-2024. Personal data acquired through the C2i Acquisition may be subject to third-party contractual restrictions, as well as privacy and data protection laws in additional jurisdictions.
The PPL was most recently amended in August 2024 and took effect in August 2025 as PPL, 5774-2024. Personal data acquired through the C2i Acquisition may be subject to third-party contractual restrictions, as well as privacy and data protection laws in additional jurisdictions.
As a general rule, demonstration of conformity of IVD MDs and their manufacturers with the essential requirements must be based, among other things, on the evaluation of clinical data supporting the safety and performance of the products during normal conditions of use.
As a general rule, demonstration of conformity of IVD MDs with the essential requirements must be based, among other things, on the evaluation of clinical data supporting the safety and performance of the products during normal conditions of use.
As we add new tests, products and services, we will face many of these same competitive risks. 37 Table of Contents We depend on our senior management team, and the loss of one or more of our executive officers, or any inability to attract and retain highly-skilled employees and other key personnel in our highly competitive industry, could adversely affect our business.
As we add new tests, products and services, we will face many of these same competitive risks. We depend on our senior management team, and the loss of one or more of our executive officers, or any inability to attract and retain highly skilled employees and other key personnel in our highly competitive industry, could adversely affect our business.
The Swiss regulation aligns closely with the IVDR in terms of requirements for manufacturers, and follows the IVDR’s transitional timelines regarding compliance deadlines according to IVD risk classifications as well as designations of Swiss Authorized Representatives. These modifications may have an effect on the way we intend to conduct our business in these countries.
The Swiss regulation aligns closely with the IVDR in terms of requirements for manufacturers, and follows the 34 Table of Contents IVDR’s transitional timelines regarding compliance deadlines according to IVD risk classifications as well as designations of Swiss Authorized Representatives. These modifications may have an effect on the way we intend to conduct our business in these countries.
All of our U.S. employees are at will, which means that either we or the employee may terminate their employment at any time. We do not carry key person insurance for any of our employees. Finally, we rely, in part, on equity awards to compensate and incentivize our employees to drive our further growth.
All of our U.S. employees are at will, which means that either we or the employee may terminate their employment at any time. We do not carry key person insurance for any of our employees. 37 Table of Contents Finally, we rely, in part, on equity awards to compensate and incentivize our employees to drive our further growth.
Goodwill and indefinite-lived intangible assets are evaluated for impairment annually, or more frequently if conditions warrant, by comparing the carrying value of a reporting unit to its estimated fair value. Intangible assets with definite lives are reviewed for impairment when events or circumstances indicate that their carrying value may not be recoverable.
Goodwill and indefinite-lived intangible assets are evaluated for impairment annually, or more frequently if conditions warrant, by comparing the carrying value of a 57 Table of Contents reporting unit to its estimated fair value. Intangible assets with definite lives are reviewed for impairment when events or circumstances indicate that their carrying value may not be recoverable.
It is possible that none of our pending patent applications will result in issued patents in a timely fashion or at all. Even if patents are granted, they may not provide a basis for intellectual property protection of commercially viable products or may 48 Table of Contents not provide us with any competitive advantages.
It is possible that none of our pending patent applications will result in issued patents in a timely fashion or at all. Even if patents are granted, they may not provide a basis for intellectual property protection of commercially viable products or may not provide us with any competitive advantages.
Reductions resulting from the congressional sequester are applied to total claims payment made by providers to Medicare; however, they do not currently result in a rebasing of the negotiated or established Medicare or Medicaid reimbursement rates. 29 Table of Contents Furthermore, state legislation on reimbursement applies to Medicaid reimbursement and managed Medicaid reimbursement rates within that state.
Reductions resulting from the congressional sequester are applied to total claims payment made by providers to Medicare; however, they do not currently result in a rebasing of the negotiated or established Medicare or Medicaid reimbursement rates. Furthermore, state legislation on reimbursement applies to Medicaid reimbursement and managed Medicaid reimbursement rates within that state.
Continued compliance with these obligations could cause us to change our 46 Table of Contents business practices, and we risk financial penalties for noncompliance (including possible fines of up to 4% of global annual turnover for the preceding financial year or €20 million (whichever is higher) for the most serious infringements).
Continued compliance with these obligations could cause us to change our business practices, and we risk financial penalties for noncompliance (including possible fines of up to 4% of global annual turnover for the preceding financial year or €20 million (whichever is higher) for the most serious infringements).
Our ability to process, use and transfer such personal data may be subject to Israel’s privacy and data protection laws including but not limited to Basic Law: Human Dignity and Liberty, 5752 -1992; the Protection of Privacy Law, 5741-1981 and the regulations promulgated thereunder, or the PPL, and the guidelines of the Israel Privacy Authority.
Our ability to process, use and transfer such personal data may 47 Table of Contents be subject to Israel’s privacy and data protection laws including but not limited to Basic Law: Human Dignity and Liberty, 5752 -1992; the Protection of Privacy Law, 5741-1981 and the regulations promulgated thereunder, or the PPL, and the guidelines of the Israel Privacy Authority.
This litigation, if instituted against us, could result in substantial costs and a diversion of our management’s attention and resources. 53 Table of Contents Anti-takeover provisions in our charter documents and under Delaware law could discourage, delay or prevent a change in control and may affect the trading price of our common stock.
This litigation, if instituted against us, could result in substantial costs and a diversion of our management’s attention and resources. Anti-takeover provisions in our charter documents and under Delaware law could discourage, delay or prevent a change in control and may affect the trading price of our common stock.
The occurrence of any one of these events could have an adverse effect on our business, financial condition, operating results or cash flows. In addition, the issuance of additional equity securities by us, or the possibility of such issuance, may cause the market price of our common stock to decline.
The occurrence of any one of these events could have an adverse effect on our business, financial condition, operating results or 56 Table of Contents cash flows. In addition, the issuance of additional equity securities by us, or the possibility of such issuance, may cause the market price of our common stock to decline.
Specifically, a manufacturer must demonstrate that the device achieves its intended performance during normal conditions of use, that the known and foreseeable risks, and any adverse events, are minimized and acceptable when weighed against the benefits of its intended performance, and that any claims made about the performance and safety of the device are supported by suitable evidence.
Specifically, a manufacturer must demonstrate that the device achieves its intended performance during normal conditions of use, that the known and foreseeable risks, and any adverse events, are minimized and acceptable when weighed against the 33 Table of Contents benefits of its intended performance, and that any claims made about the performance and safety of the device are supported by suitable evidence.
These bodies have all issued subpoenas and other requests for information to conduct investigations of, and commenced civil and criminal litigation against, healthcare companies based on financial arrangements with health-care providers (including physicians and labs), regulatory compliance, product promotional practices and documentation, and coding and billing practices.
These bodies have issued subpoenas and other requests for information to conduct investigations of, and commenced civil and criminal actions against, healthcare companies based on financial arrangements with health-care providers (including physicians and labs), regulatory compliance, product promotional practices and documentation, and coding and billing practices.
Investors’ expectations of our performance relating to environmental, social and governance factors may impose additional costs and expose us to new risks. There is an increasing focus from certain investors, employees, regulators and other stakeholders concerning corporate responsibility, specifically related to environmental, social and governance, or ESG, matters.
Investors’ expectations of our performance relating to environmental, social and governance factors may impose additional costs and expose us to new risks. There is a focus from certain investors, employees, regulators and other stakeholders concerning corporate responsibility, specifically related to environmental, social and governance, or ESG, matters.
Therefore, these patents and applications may not be prosecuted and enforced in a manner consistent with the best interests of our business, and the licensor may fail to prevent infringement by third parties, or the licensed patents or other rights could be found to be invalid or unenforceable.
Therefore, these patents and applications may not be prosecuted and enforced in a manner consistent with the best interests of our business, and the licensor 50 Table of Contents may fail to prevent infringement by third parties, or the licensed patents or other rights could be found to be invalid or unenforceable.
The FDC Act and FDA regulations place considerable requirements on medical devices, including, but not limited to, compliance with the quality system regulation, or QSR, establishment registration and product listing with the FDA, and compliance with labeling, marketing, complaint handling, medical device reporting requirements, and reporting certain corrections and removals.
The FDC Act and FDA regulations place considerable requirements on medical devices, including, but not limited to, compliance with the quality management system regulation, or QMSR, establishment registration and product listing with the FDA, and compliance with labeling, marketing, complaint handling, medical device reporting requirements, and reporting certain corrections and removals.
Further, we cannot be certain that such agreements have been entered into with all 49 Table of Contents relevant parties, or that competitors will not otherwise gain access to our trade secrets or independently develop substantially equivalent information and techniques. If we are required to assert our rights against such parties, it may result in significant cost and distraction.
Further, we cannot be certain that such agreements have been entered into with all relevant parties, or that competitors will not otherwise gain access to our trade secrets or independently develop substantially equivalent information and techniques. If we are required to assert our rights against such parties, it may result in significant cost and distraction.
Some of these items are unique to these suppliers and vendors and their inability to provide us with reagents that perform to specifications, could negatively impact our ability to provide timely response and reports to our customers and, as a result, may materially impact our ability to generate revenue.
Some of these items are unique to these suppliers and vendors and their inability to provide us with reagents that perform to 27 Table of Contents specifications, could negatively impact our ability to provide timely response and reports to our customers and, as a result, may materially impact our ability to generate revenue.
Further, competitors may attempt to replicate some or all of the competitive advantages we derive from our development efforts, willfully infringe our intellectual property rights, design around our protected technology, or develop their own competitive technologies that fall outside of our intellectual property rights.
Further, competitors may attempt to replicate some or all of the competitive advantages we derive from our development efforts, willfully infringe our intellectual property rights, design around our protected technology, or develop their own 49 Table of Contents competitive technologies that fall outside of our intellectual property rights.
For example, if we are unable to provide payers with sufficient evidence of the clinical utility and validity of our test, they may not provide coverage, may provide limited coverage or may terminate coverage, which will adversely affect our revenues and our financial condition.
For example, if we are unable to provide payers with sufficient evidence of the clinical utility and validity of our test, they may not provide coverage, may provide limited coverage or may terminate coverage, which will adversely affect our revenues 23 Table of Contents and our financial condition.
The legal systems of many other countries do not favor the enforcement of patents and other intellectual property protection, particularly those relating to biotechnology and diagnostics, which may make it difficult for us to stop the infringement of our patents in such countries.
The legal systems of many other countries do not favor the enforcement of patents and other intellectual property protection, particularly those relating to biotechnology and diagnostics, which may make it difficult for us to stop the infringement of our patents in such 48 Table of Contents countries.
Doing business internationally involves a number of risks, including: • multiple, conflicting and changing laws and regulations such as tax laws, privacy laws, export and import restrictions, employment laws, regulatory requirements and other governmental approvals, permits and licenses; • potential disruptions to the development and launch of additional products or services as a result of having technology and research and development operations in Israel, including disruptions related to maintaining key research and development employees in Israel and the potential impact of the escalating hostilities in the Middle East on operations and business continuity as well as Company personnel who are performing, or on reserve to perform, military services as a result of such conflict; • failure by us to obtain regulatory approvals, authorizations, or certifications where required for the use of our solutions in various countries; • complexities associated with managing multiple payer reimbursement regimes, rebate requirements, government payers or patient self-pay systems, including payers mandating additional evidence requirements for reimbursement consideration; • disagreements, challenges, work stoppage, labor shortages, strikes or other labor unrest, and litigation, including with the French employee work council or French union; • logistics and regulations associated with shipping tissue samples, including infrastructure conditions and transportation delays; • challenges associated with establishing laboratory partners, including proper sample collection techniques, management of supplies, sample logistics, billing and promotional activities; • difficulties in staffing and managing foreign operations; • limits on our ability to penetrate international markets if we are not able to process tests locally; • financial risks, such as longer payment cycles, difficulty in collecting from payers, the effect of local and regional financial crises, and exposure to foreign currency exchange rate fluctuations; • changes in international trade policies, including tariffs, sanctions, or other import or export restrictions; • natural disasters, political and economic instability, including wars, terrorism, political unrest and other regional conflicts, outbreak of disease, including pandemics, boycotts, curtailment of trade and other business restrictions (including as a direct or indirect result of the conflict in Ukraine); and • regulatory and compliance risks that relate to maintaining accurate information and control over activities that may fall within the purview of the Foreign Corrupt Practices Act of 1977, including both its books and records provisions and its anti-bribery provisions. 43 Table of Contents Any of these factors could significantly harm our future international expansion and operations and, consequently, our revenue and results of operations.
Doing business internationally involves a number of risks, including: • multiple, conflicting and changing laws and regulations such as tax laws, privacy laws, export and import restrictions, employment laws, regulatory requirements and other governmental approvals, permits and licenses; • potential disruptions to the development and launch of additional products or services as a result of having technology and research and development operations in Israel, including disruptions related to maintaining key research and development employees in Israel and the potential impact of the escalating hostilities in the Middle East on operations and business continuity as well as Company personnel who are performing, or on reserve to perform, military services as a result of such conflict; • failure by us to obtain regulatory approvals, authorizations, or certifications where required for the use of our solutions in various countries; • complexities associated with managing multiple payer reimbursement regimes, rebate requirements, government payers or patient self-pay systems, including payers mandating additional evidence requirements for reimbursement consideration; • disagreements, challenges, work stoppage, labor shortages, strikes or other labor unrest, and litigation; • logistics and regulations associated with shipping tissue samples, including infrastructure conditions and transportation delays; • challenges associated with establishing laboratory partners, including proper sample collection techniques, management of supplies, sample logistics, billing and promotional activities; • difficulties in staffing and managing foreign operations; • limits on our ability to penetrate international markets if we are not able to process tests locally; • financial risks, such as longer payment cycles, difficulty in collecting from payers, the effect of local and regional financial crises, and exposure to foreign currency exchange rate fluctuations; • changes in international trade policies, including tariffs, sanctions, or other import or export restrictions; • natural disasters, political and economic instability, including wars, terrorism, political unrest and other regional conflicts, outbreak of disease, including pandemics, boycotts, curtailment of trade and other business restrictions (including as a direct or indirect result of the conflict in Ukraine); and • regulatory and compliance risks that relate to maintaining accurate information and control over activities that may fall within the purview of the Foreign Corrupt Practices Act of 1977, including both its books and records provisions and its anti-bribery provisions.
Additionally, we may need to obtain the appropriate marketing clearance, approval, and authorization, as applicable, for any future tests that are offered as LDTs in accordance with the timelines provided in the final rule issued May 6, 2024, as discussed under the heading “If the FDA or other foreign authorities regulate those of our tests that they do not currently regulate, we could incur substantial costs and delays associated with trying to obtain premarket clearance, approval or certification.” The process of obtaining a PMA is a rigorous, costly, lengthy and uncertain process.
Additionally, we may need to obtain the appropriate marketing clearance, approval, and authorization, as applicable, for any future tests that are offered as LDTs in accordance with the timelines provided in the policies discussed under the heading “If the FDA or other foreign authorities regulate those of our tests that they do not currently regulate, we could incur substantial costs and delays associated with trying to obtain premarket clearance, approval or certification.” The process of obtaining a PMA is a rigorous, costly, lengthy and uncertain process.
However, beginning with our annual meeting of stockholders to be held in 2024, our board of directors is being declassified over a three-year period.
However, beginning with our annual meeting of stockholders held in 2024, our board of directors is being declassified over a three-year period.
Any of these factors could cause us to experience an effective tax rate significantly different from previous 57 Table of Contents periods or our current expectations, which could have an adverse effect on our business and results of operations.
Any of these factors could cause us to experience an effective tax rate significantly different from previous periods or our current expectations, which could have an adverse effect on our business and results of operations.
Additionally, if we choose to or are required to 39 Table of Contents switch to a different provider to handle insurance eligibility, prior authorization or claim submissions, we may not be able to enter into arrangements with alternative third parties or do so on commercially reasonable terms or in a time frame acceptable to us.
Additionally, if we choose to or are required to switch to a different provider to handle insurance eligibility, prior authorization or claim submissions, we may not be able to enter into arrangements with alternative third parties or do so on commercially reasonable terms or in a time frame acceptable to us.
If we encounter difficulty meeting market demand or quality standards, our reputation could be harmed and our future prospects and our business could suffer. Further, our ability to produce total test volumes that meet customer demand is dependent upon our ability to forecast accurately and plan production capacities accordingly.
If 28 Table of Contents we encounter difficulty meeting market demand or quality standards, our reputation could be harmed and our future prospects and our business could suffer. Further, our ability to produce total test volumes that meet customer demand is dependent upon our ability to forecast accurately and plan production capacities accordingly.
Risks Related to Our Business Our financial results currently depend mainly on sales of our Decipher Prostate and Afirma tests, and we may not generate sufficient revenue from these and our other diagnostic tests to grow our business.
Risks Related to Our Business Our financial results currently depend mainly on sales of our Decipher Prostate and Afirma laboratory developed tests (LDTs), and we may not generate sufficient revenue from these and our other diagnostic tests to grow our business.
There is a growing trend among insurers to shift more of the cost of healthcare to patients in the form of higher co-payments or premiums, putting patients in the position of having to pay more 24 Table of Contents for our tests.
There is a growing trend among insurers to shift more of the cost of healthcare to patients in the form of higher co-payments or premiums, putting patients in the position of having to pay more for our tests.
For example, cyberattacks, security breaches, computer viruses, malware and other incidents could cause misappropriation, loss or other unauthorized disclosure of confidential data, materials or information, including those concerning our customers and 45 Table of Contents employees.
For example, cyberattacks, security breaches, computer viruses, malware and other incidents could cause misappropriation, loss or other unauthorized disclosure of confidential data, materials or information, including those concerning our customers and employees.
In the EU, the IVDR expressly provides that products intended for RUO are excluded from the scope of the regulation. A material intended for RUO, without any medical purpose or objective, is therefore not considered as an IVD medical device, or IVD MD, and is not subject to compliance with the IVD MDs requirements.
In the EU, the IVDR expressly provides that products intended for RUO are excluded from the scope of the regulation. A product intended for RUO, without any medical purpose or objective, is therefore not considered as an IVD MD, and is not subject to compliance with the IVDR requirements.
In other words, the applicant must justify the “down-classification” to Class I or II for a new product type, and clinical data may be required. For laboratory tests for which FDA clearance, authorization or approval is required, the FDA may also require data to support analytical and clinical validity.
In other words, the applicant must justify the “down-classification” 32 Table of Contents to Class I or II for a new product type, and clinical data may be required. For laboratory tests for which FDA clearance, authorization or approval is required, the FDA may also require data to support analytical and clinical validity.
For example, the war in Ukraine and the conflict in the Middle East have caused disruptions of the global supply chain and energy markets, and other ongoing implications of the wars may be difficult to predict and prepare for, including as it relates to our sites in Marseille, France and Haifa, Israel.
For example, the war in Ukraine and the conflict in the Middle East have caused disruptions of the global supply chain and energy markets, and other ongoing implications of the wars may be difficult to predict and prepare for, including as it relates to our site in Haifa, Israel.
As we expand our portfolio of tests, including into the MRD space, we may also face competition from companies informing treatment decisions such as Natera, Inc., Guardant Health, Inc., Exact Sciences Corporation, Personalis, Myriad Genetics, Neogenomics, Inc., Quest Diagnostics, or TempusAI, Inc. However, we believe our primary competition in MRD for MIBC is Natera, Inc.
As we expand our portfolio of tests, including into the MRD space, we may also face competition from companies informing treatment decisions such as Natera, Inc., Guardant Health, Inc., Exact Sciences Corporation, Personalis, Myriad Genetics, Neogenomics, Inc., Quest Diagnostics, Billion-To-One, Caris Life Sciences or TempusAI, Inc. However, we believe our primary competition in MRD for MIBC is Natera, Inc.
These laws and regulations currently include, among others: • HIPAA, which established comprehensive federal standards with respect to the privacy and security of protected health information and requirements for the use of certain standardized electronic transactions, and amendments made to those standards in 2013 pursuant to the HITECH Act, which strengthened and expanded HIPAA privacy and security compliance requirements, increased penalties for violators, extended enforcement authority to state attorneys general, and imposed new requirements for breach notification; • Medicare billing and payment regulations applicable to clinical laboratories, including requirements to have an active CLIA certificate; • the Federal Anti-kickback Statute (and state equivalents), which prohibits knowingly and willfully offering, paying, soliciting, or receiving remuneration, directly or indirectly, in exchange for or to induce either the referral of an individual, or the furnishing, arranging for, or recommending of an item or service that is reimbursable, in whole or in part, by a federal healthcare program; • the Eliminating Kickbacks in Recovery Act of 2018, which prohibits the solicitation, receipt, payment or offering of any remuneration in return for referring a patient or patronage to a recovery home, clinical treatment facility, or laboratory for services covered by both government and private payers; • the Federal Physician Self-Referral Law (or the “Stark law” and state equivalents), which 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, unless the financial relationship falls within an applicable exception to the prohibition; • the Federal Civil Monetary Penalties Law, which prohibits, among other things, the offering or transfer of remuneration to a Medicare or state healthcare program beneficiary if the person knows or should know it is likely to influence the beneficiary’s selection of a particular provider, practitioner, or supplier of services reimbursable by Medicare or a state healthcare program, unless an exception applies; • the Federal False Claims Act, which imposes liability on any person or entity who knowingly presents, or causes to be presented, a false, fictitious, or fraudulent claim for payment to the federal government; • the Physician Payments Sunshine Act, enacted as part of the ACA, which imposes annual reporting requirements on manufacturers of certain devices, drugs and biologics for certain payments and transfers of value by them and in some cases their distributors to covered recipients, including physicians, as defined by such law, teaching hospitals, and certain healthcare providers as well as ownership or investment interests that physicians or physicians’ immediate family members hold with the reporting entity; • other federal and state fraud and abuse laws, such as anti-kickback laws, prohibitions on self-referral, fee-splitting restrictions, prohibitions on the provision of products at no or discounted cost to induce physician or patient adoption, and false claims acts, which may extend to services reimbursable by any third-party payer, including private insurers; • the prohibition on reassignment of Medicare claims, which, subject to certain exceptions, precludes the reassignment of Medicare claims to any other party; • the Protecting Access to Medicare Act of 2014, which requires us to report private payer rates and test volumes for specific CPT codes on a triennial basis and imposes penalties for failures to report, omissions, or misrepresentations; 41 Table of Contents • the No Surprises Act and its implementing regulations, which prohibit an out-of-network provider from billing a patient at an amount in excess of the in-network cost sharing for services furnished with respect to a visit at certain in-network healthcare facilities, as well as various state laws restricting balance billing of patients; • the rules regarding billing for diagnostic tests reimbursable by the Medicare program, which prohibit a physician or other supplier from marking up the price of the technical component or professional component of a diagnostic test ordered by the physician or other supplier and supervised or performed by a physician who does not “share a practice” with the billing physician or supplier; • state laws that prohibit other specified practices related to billing such as billing physicians for testing that they order, waiving co-insurance, co-payments, deductibles, and other amounts owed by patients, and billing a state Medicaid program at a price that is higher than what is charged to other payers; • the Foreign Corrupt Practices Act of 1977, and other similar laws, which apply to our international activities; • unclaimed property (escheat) laws and regulations, which may require us to turn over to governmental authorities the property of others held by us that has been unclaimed for a specified period of time; • enforcing our intellectual property rights; and • foreign laws and regulations equivalent to the above.
These laws and regulations currently include, among others: • HIPAA, which established comprehensive federal standards with respect to the privacy and security of protected health information and requirements for the use of certain standardized electronic transactions, and amendments made to those standards in 2013 pursuant to the HITECH Act, which strengthened and expanded HIPAA privacy and security compliance requirements, increased penalties for violators, extended enforcement authority to state attorneys general, and imposed new requirements for breach notification; • Medicare billing and payment regulations applicable to clinical laboratories, including requirements to have an active CLIA certificate; 40 Table of Contents • the Federal Anti-kickback Statute (and state equivalents), which prohibits knowingly and willfully offering, paying, soliciting, or receiving remuneration, directly or indirectly, in exchange for or to induce either the referral of an individual, or the furnishing, arranging for, or recommending of an item or service that is reimbursable, in whole or in part, by a federal healthcare program; • the Eliminating Kickbacks in Recovery Act of 2018, which prohibits the solicitation, receipt, payment or offering of any remuneration in return for referring a patient or patronage to a recovery home, clinical treatment facility, or laboratory for services covered by both government and private payers; • the Federal Physician Self-Referral Law (or the “Stark law” and state equivalents), which 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, unless the financial relationship falls within an applicable exception to the prohibition; • the Federal Civil Monetary Penalties Law, which prohibits, among other things, the offering or transfer of remuneration to a Medicare or state healthcare program beneficiary if the person knows or should know it is likely to influence the beneficiary’s selection of a particular provider, practitioner, or supplier of services reimbursable by Medicare or a state healthcare program, unless an exception applies; • the Federal False Claims Act, which imposes liability on any person or entity who knowingly presents, or causes to be presented, a false, fictitious, or fraudulent claim for payment to the federal government; • the Physician Payments Sunshine Act, enacted as part of the ACA, which imposes annual reporting requirements on manufacturers of certain devices, drugs and biologics for certain payments and transfers of value by them and in some cases their distributors to covered recipients, including physicians, as defined by such law, teaching hospitals, and certain healthcare providers as well as ownership or investment interests that physicians or physicians’ immediate family members hold with the reporting entity; • other federal and state fraud and abuse laws, such as anti-kickback laws, prohibitions on self-referral, fee-splitting restrictions, prohibitions on the provision of products at no or discounted cost to induce physician or patient adoption, and false claims acts, which may extend to services reimbursable by any third-party payer, including private insurers; • the prohibition on reassignment of Medicare claims, which, subject to certain exceptions, precludes the reassignment of Medicare claims to any other party; • the Protecting Access to Medicare Act of 2014, which requires us to report private payer rates and test volumes for specific CPT codes on a triennial basis and imposes penalties for failures to report, omissions, or misrepresentations; • the No Surprises Act, which prohibits an out-of-network provider from billing a patient at an amount in excess of the in-network cost sharing for services furnished with respect to a visit at certain in-network healthcare facilities, as well as various state laws restricting balance billing of patients; • the rules regarding billing for diagnostic tests reimbursable by the Medicare program, which prohibit a physician or other supplier from marking up the price of the technical component or professional component of a diagnostic test ordered by the physician or other supplier and supervised or performed by a physician who does not “share a practice” with the billing physician or supplier; • state laws that prohibit other specified practices related to billing such as billing physicians for testing that they order, waiving co-insurance, co-payments, deductibles, and other amounts owed by patients, and billing a state Medicaid program at a price that is higher than what is charged to other payers; • the Foreign Corrupt Practices Act of 1977, and other similar anti-bribery and anti-corruption laws, which apply to our business activities; • in California, the Private Attorneys General Act, or PAGA, which empowers employees to bring representative actions for alleged violations of the California Labor Code.
Given our current earnings, we believe that, within the next two years, sufficient positive evidence may become available to allow us to reach a conclusion that a portion of the valuation allowance recorded against the deferred tax assets held may be reversed.
Given our current earnings, we believe that, within the next 12 months, sufficient positive evidence may become available to allow us to reach a conclusion that a portion of the valuation allowance recorded against the deferred tax assets held may be reversed.
While we manage the overall processing of claims, we rely on third-party providers to ascertain insurance eligibility, obtain prior authorizations, obtain prior authorizations, transmit the actual claims to payers based on the specific payer billing format and process payments from approved claims.
While we manage the overall processing of claims, we rely on third-party providers to ascertain insurance eligibility, obtain prior authorizations, transmit the actual claims to payers based on the specific payer billing format and process payments from approved claims and submit appeals for denied claims.
We must provide sufficient clinical and analytical validity, as well as clinical utility studies that meet individual payer evidence requirements to obtain reimbursement. Even after launching new products, we must complete additional studies that meet the clinical evidence required by individual payers to obtain reimbursement.
We must provide sufficient clinical and analytical validity, as well as clinical 39 Table of Contents utility studies that meet individual payer evidence requirements to obtain reimbursement. Even after launching new products, we must complete additional studies that meet the clinical evidence required by individual payers to obtain reimbursement.
While the FDA has cleared the Prosigna test for marketing in the United States, and Prosigna is CE marked, which permits us to market the test in the EU, and Prosigna has received marketing authorizations in selected other jurisdictions, we intend to seek regulatory authorizations or certifications for Prosigna in other jurisdictions and for IVD tests focused on other 35 Table of Contents indications.
While the FDA has cleared the Prosigna test for marketing in the United States, and Prosigna is CE marked, which currently permits us to market the test in the EU, and Prosigna has received marketing authorizations in selected other jurisdictions, we intend to seek regulatory authorizations or certifications for Prosigna in other jurisdictions and for IVD tests focused on other indications.
Moreover, our assays may have quality or design errors, and we may have inadequate procedures or instrumentation to process samples, assemble our proprietary primer mixes and commercial materials, upload and analyze data, or otherwise conduct our laboratory 44 Table of Contents operations.
Moreover, our assays may have quality or design errors, and we may have inadequate procedures or instrumentation to process samples, assemble our proprietary primer mixes and commercial materials, upload and analyze data, or otherwise conduct our laboratory operations.
It is unclear how any such challenges and any healthcare reform measures of the incoming Trump administration, or any future presidential administration, will impact the ACA or our business.
It is unclear how any such challenges and any healthcare reform measures of the current administration, or any future presidential administration, will impact the ACA or our business.
Depending on the facts and circumstances, we could be subject to civil and criminal penalties if we obtain, use, or disclose individually identifiable health information maintained by a HIPAA-covered entity in a manner that is not authorized or permitted by HIPAA.
Depending on the facts and circumstances, we could be subject to civil and criminal penalties if we obtain, use, or disclose individually identifiable health information that we create, receive, maintain or transmit, including information maintained by a HIPAA-covered entity, in a manner that is not authorized or permitted by HIPAA.
We may also voluntarily agree to defend or indemnify third parties in instances where we are not obligated to do so if we determine it would be important to our business relationships.
We may also voluntarily agree to defend or indemnify third parties in instances where we are not 51 Table of Contents obligated to do so if we determine it would be important to our business relationships.
These laws and regulations are complex and are subject to interpretation by the courts and by government agencies, and we cannot ensure that all our employees, agents, contractors, vendors, licensees, partners or collaborators will comply, or have historically complied, with all applicable laws and regulations.
These laws and regulations are complex and are subject to interpretation by the courts and by government agencies, and it is difficult to ensure that all our employees, agents, contractors, vendors, licensees, partners or collaborators will comply, or have historically complied, with all applicable laws and regulations.
Any product liability or errors and omissions liability claim brought against us, with or without merit, could increase our insurance rates or prevent us from securing insurance coverage in the future.
Any product liability or errors 44 Table of Contents and omissions liability claim brought against us, with or without merit, could increase our insurance rates or prevent us from securing insurance coverage in the future.
The revised SCCs are not to be relied on for data transfers to non-EEA entities subject to the GDPR, and we are waiting for further guidance on valid mechanisms for data transfers from the EEA to such entities.
The revised SCCs are not to be relied on for data transfers to non-EEA entities subject to the 46 Table of Contents GDPR, and we are waiting for further guidance on valid mechanisms for data transfers from the EEA to such entities.

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Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

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Biggest changeIn general, we seek to address cybersecurity risks through a cross-functional approach that is focused on preserving the confidentiality, security and availability of the information that we collect and store by identifying, preventing and mitigating cybersecurity threats and effectively responding to cybersecurity incidents when they occur. 59 Table of Contents Risk Management and Strategy As one of the critical elements of our overall ERM approach, our cybersecurity program is focused on the following key areas: Governance: As discussed in more detail under the heading “Governance,” the board of directors' oversight of cybersecurity risk management is supported by the Audit Committee of the board of directors, or the Audit Committee, our Chief Information Officer, or CIO, other members of management and relevant management committees as appropriate.
Biggest changeRisk Management and Strategy As one of the critical elements of our overall ERM approach, our cybersecurity program is focused on the following key areas: Governance: As discussed in more detail under the heading “Governance,” the board of directors' oversight of cybersecurity risk management is supported by the Audit Committee of the board of directors, or the Audit Committee, our Chief Information Officer, or CIO, other members of management and relevant management committees as appropriate.
Our CIO brings more than 20 years of information and operational leadership experience in the life sciences and technology industries to his role at Veracyte. He holds a B.B.A. and an M.B.A from the University of San Diego. Our VP, Global IT Operation oversees IT operations for all sites globally, and has more than 20 years’ of experience.
Our CIO brings more than 20 years of information and operational leadership experience in the life sciences and technology industries to his role at Veracyte. He holds a B.B.A. and an M.B.A from the University of San Diego. Our VP, Global IT Operations oversees IT operations for all sites globally, and has more than 20 years of experience.
On an annual basis, the board of directors and the Audit Committee discuss our approach to cybersecurity risk management with the members of management, including the CIO. 60 Table of Contents The Cybersecurity Executive Leadership Team is composed of the CIO, in coordination with our Chief Executive Officer, or CEO, Chief Financial Officer, or CFO, Chief Compliance Officer and General Counsel, or GC.
On an annual basis, the board of directors and the Audit Committee discuss our approach to cybersecurity risk management with the members of management, including the CIO. The Cybersecurity Executive Leadership Team is composed of the CIO, in coordination with our Chief Executive Officer, or CEO, Chief Financial Officer, or CFO, Chief Compliance Officer and General Counsel, or GC.
Technical Safeguards: We deploy 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. Physical Safeguards: We deploy physical safeguards such as facility access control via keycard access and security cameras.
Technical Safeguards: We deploy 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. 59 Table of Contents Physical Safeguards: We deploy physical safeguards such as facility access control via keycard access and security cameras.
He holds a M.S. in Business Technology Management, and a B.S. in Computer Applications and Networks from Coleman University. Our Director of Cybersecurity has over 25 years’ of experience in enhancing digital security and driving technological innovation. He holds a B.Sc. (Honors) in Computer Information Systems from the National University along with several industry related Cybersecurity certifications.
He holds an M.S. in Business Technology Management, and a B.S. in Computer Applications and Networks from Coleman University. Our Director of Cybersecurity has over 25 years of experience in enhancing digital security and driving technological innovation. He holds a B.Sc.
Cybersecurity threats, including as a result of any previous cybersecurity incidents, have not, to date, materially affected us, including our business strategy, results of operations or financial condition. If we were to experience a material cybersecurity incident in the future, such incident may have an adverse effect, including on our business operations, operating results, or financial condition.
If we were to experience a material cybersecurity incident in the future, such incident may have an adverse effect, including on our business operations, operating results, or financial condition.
Added
In general, we seek to address cybersecurity risks through a cross-functional approach that is focused on preserving the confidentiality, security and availability of the information that we collect and store by identifying, preventing and mitigating cybersecurity threats and effectively responding to cybersecurity incidents when they occur.
Added
(Honors) in Computer Information Systems from the National University along with several industry related Cybersecurity certifications. 60 Table of Contents Cybersecurity threats, including as a result of any previous cybersecurity incidents, have not, to date, materially affected us, including our business strategy, results of operations or financial condition.

Item 2. Properties

Properties — owned and leased real estate

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Biggest changeITEM 2. PROPERTIES We lease office and laboratory facilities in South San Francisco (approximately 59,000 square feet) and San Diego (approximately 50,900 square feet), California; Austin, Texas (approximately 10,400 square feet); and Marseille, France (approximately 31,400 square feet). We believe our facilities are in good condition and adequate for their current use.
Biggest changeITEM 2. PROPERTIES We lease office and laboratory facilities in South San Francisco (approximately 65,700 square feet) and San Diego (approximately 50,900 square feet), California; and Austin, Texas (approximately 10,400 square feet). We believe our facilities are in good condition and adequate for their current use.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeThe comparisons in the table are required by the SEC and are not intended to forecast or be indicative of future performance of our common stock. 62 Table of Contents December 31, 2019 December 31, 2020 December 31, 2021 December 31, 2022 December 31, 2023 December 31, 2024 Veracyte, Inc. $ 100 $ 175 $ 148 $ 85 $ 99 $ 142 Nasdaq Global Market Index $ 100 $ 144 $ 174 $ 117 $ 167 $ 215 Nasdaq Biotechnology Index $ 100 $ 126 $ 126 $ 114 $ 119 $ 118
Biggest changeThe comparisons in the table are required by the SEC and are not intended to forecast or be indicative of future performance of our common stock. 62 Table of Contents December 31, 2020 December 31, 2021 December 31, 2022 December 31, 2023 December 31, 2024 December 31, 2025 Veracyte, Inc. $ 100 $ 84 $ 48 $ 56 $ 81 $ 86 Nasdaq Global Market Index $ 100 $ 121 $ 81 $ 116 $ 150 $ 180 Nasdaq Biotechnology Index $ 100 $ 100 $ 90 $ 94 $ 93 $ 125
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Market Information Our common stock is traded on the Nasdaq Global Market under the symbol "VCYT". Holders of Record As of February 21, 2025, there were 16 holders of record of our common stock.
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Market Information Our common stock is traded on the Nasdaq Global Market under the symbol "VCYT". Holders of Record As of February 20, 2026, there were 15 holders of record of our common stock.

Item 7. Management's Discussion & Analysis

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

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Biggest changeOur comprehensive income (loss) includes our net income (loss) and gains and losses from the foreign currency translation of the assets and liabilities of our foreign subsidiaries. 72 Table of Contents Results of Operations Comparison of the Years Ended December 31, 2024 and 2023 (in thousands of dollars, except percentages and test volume) Year Ended December 31, 2024 Change % 2023 Revenue: Testing revenue $ 418,961 $ 92,419 28 % $ 326,542 Product revenue 13,650 (1,938) (12) % 15,588 Biopharmaceutical and other revenue 13,153 (5,768) (30) % 18,921 Total revenue 445,764 84,713 23 % 361,051 Cost of revenue: Cost of testing revenue 114,573 25,660 29 % 88,913 Cost of product revenue 9,110 444 5 % 8,666 Cost of biopharmaceutical and other revenue 12,384 (2,940) (19) % 15,324 Intangible asset amortization - cost of revenue 11,552 (6,912) (37) % 18,464 Total cost of revenue 147,619 16,252 12 % 131,367 Gross profit 298,145 68,461 30 % 229,684 Operating expenses: Research and development 69,294 11,989 21 % 57,305 Selling and marketing 95,434 (6,056) (6) % 101,490 General and administrative 110,610 24,381 28 % 86,229 Impairment of long-lived assets 3,368 (64,981) (95) % 68,349 Intangible asset amortization - operating expenses 3,297 1,191 57 % 2,106 Total operating expenses 282,003 (33,476) (11) % 315,479 Income (loss) from operations 16,142 101,937 119 % (85,795) Other income, net 9,602 419 5 % 9,183 Income (loss) before income taxes 25,744 102,356 (134) % (76,612) Income tax provision (benefit) 1,606 3,814 (173) % (2,208) Net income (loss) $ 24,138 $ 98,542 132 % $ (74,404) Other Operating Data: Diagnostic tests reported 142,925 27,140 23 % 115,785 Product tests sold 9,825 (1,367) (12) % 11,192 Total test volume 152,750 25,773 20 % 126,977 Depreciation and amortization expense $ 23,459 $ (3,729) (14) % $ 27,188 Stock-based compensation expense $ 36,249 $ 2,760 8 % $ 33,489 Revenue Revenue increased $84.7 million, or 23%, for the year ended December 31, 2024 compared to 2023.
Biggest changeOur comprehensive income (loss) includes our net income (loss) and gains and losses from the foreign currency translation of the assets and liabilities of our foreign subsidiary. 71 Table of Contents Results of Operations Comparison of the Years Ended December 31, 2025 and 2024 (in thousands of dollars, except percentages and test volume) Year Ended December 31, 2025 Change % 2024 Revenue: Testing revenue $ 493,154 $ 74,193 18 % $ 418,961 Product revenue 14,327 677 5 % 13,650 Biopharmaceutical and other revenue 9,664 (3,489) (27) % 13,153 Total revenue 517,145 71,381 16 % 445,764 Cost of revenue: Cost of testing revenue 127,562 12,989 11 % 114,573 Cost of product revenue 8,807 (303) (3) % 9,110 Cost of biopharmaceutical and other revenue 7,578 (4,806) (39) % 12,384 Intangible asset amortization - cost of revenue 10,666 (886) (8) % 11,552 Total cost of revenue 154,613 6,994 5 % 147,619 Gross profit 362,532 64,387 22 % 298,145 Operating expenses: Research and development 70,814 1,520 2 % 69,294 Selling and marketing 100,165 4,731 5 % 95,434 General and administrative 110,784 174 — % 110,610 Impairment of assets 20,505 17,137 509 % 3,368 Intangible asset amortization - operating expenses 2,487 (810) (25) % 3,297 Total operating expenses 304,755 22,752 8 % 282,003 Income (loss) from operations 57,777 41,635 258 % 16,142 Other income, net 10,424 822 9 % 9,602 Income (loss) before income taxes 68,201 42,457 165 % 25,744 Income tax provision (benefit) 1,848 242 15 % 1,606 Net income (loss) $ 66,353 $ 42,215 175 % $ 24,138 Other Operating Data: Diagnostic tests reported 169,714 26,789 19 % 142,925 Product tests sold 9,814 (11) — % 9,825 Total test volume 179,528 26,778 18 % 152,750 Depreciation and amortization expense $ 21,415 $ (2,044) (9) % $ 23,459 Stock-based compensation expense $ 43,601 $ 7,352 20 % $ 36,249 Revenue Revenue increased $71.4 million, or 16%, for the year ended December 31, 2025 compared to 2024.
This process involves identifying the contract with a customer, determining the performance obligations in the contract, determining the contract price, allocating the contract price to the distinct performance obligations in the contract, and recognizing revenue when the performance obligations have been satisfied.
This process involves identifying the contract with a customer, determining the performance obligations in the contract, determining the contract price, allocating the contract price to the distinct performance obligations in the contract, and recognizing revenue when the performance obligations have been satisfied.
A performance obligation is considered distinct from other obligations in a contract when it provides a benefit to the customer, either on its own or together with other resources that are readily available to the customer, and is separately 66 Table of Contents identified in the contract.
A performance obligation is considered distinct from other obligations in a contract when it provides a 66 Table of Contents benefit to the customer, either on its own or together with other resources that are readily available to the customer, and is separately identified in the contract.
Factors impacting our reported total test volume include, but are not limited to: • the number of samples that we receive that meet the medical indication for each test performed; • the quantity and quality of the sample received; • receipt of the necessary documentation, such as physician order and patient consent, required to perform, bill and collect for our tests; • the patient's ability to pay or provide necessary insurance coverage for the tests performed; • the time it takes us or our customers to perform our tests and report the results, including as a result of supply chain challenges (including quality of single-source reagents); • the seasonality inherent in our business, such as the impact of workdays per period, timing of industry conferences and timing of when patient deductibles are exceeded, which also impacts the reimbursement we receive from insurers; • fluctuations in demand for our product test kits, including as a result of higher average selling prices and overall spending constraints across our industry; and • our ability to obtain prior authorization or meet other requirements instituted by payers, benefit managers, or regulators necessary to be paid for our tests.
Factors impacting our reported total test volume include, but are not limited to: • the number of samples that we receive that meet the medical indication for each test performed; • the quantity and quality of the sample received; • receipt of the necessary documentation, such as physician order and patient consent, required to perform, bill and collect for our tests; • the patient's ability to pay or provide necessary insurance coverage for the tests performed; • the time it takes us or our customers to perform our tests and report the results, including as a result of supply chain challenges (including quality and supply of single-source reagents and consumables); • the seasonality inherent in our business, such as the impact of workdays per period, timing of industry conferences and timing of when patient deductibles are exceeded, which also impacts the reimbursement we receive from insurers; • fluctuations in demand for our product test kits, including as a result of higher average selling prices and overall spending constraints across our industry; and • our ability to obtain prior authorization or meet other requirements instituted by payers, benefit managers, or regulators necessary to be paid for our tests.
Historical results are not necessarily indicative of future results. Overview We are a global diagnostics company that empowers clinicians with the high-value insights they need to guide and assure patients at pivotal moments in the race to diagnose and treat cancer. Our high-performing tests enable clinicians to make more confident diagnostic, prognostic and treatment decisions.
Historical results are not necessarily indicative of future results. Overview We are a global diagnostics company that empowers clinicians with the high-value insights they need to guide and assure patients at pivotal moments in the race to diagnose and treat cancer. Our high-performing tests enable clinicians to make more confident diagnostic, prognostic and predictive treatment decisions.
As we introduce new tests, initially our cost of testing revenue will be high as we expect to run suboptimal batch sizes, run quality control batches, test batches, registry samples, and generally incur costs that may suppress or reduce gross margins. This will disproportionately increase our aggregate cost of testing revenue until we achieve processing efficiencies.
As we introduce new tests, initially our cost per test will be high as we expect to run suboptimal batch sizes, quality control batches, test batches, registry samples, and generally incur costs that may suppress or reduce gross margins. This will disproportionately increase our aggregate cost of testing revenue until we achieve processing efficiencies.
The net income of $24.1 million includes non-cash charges of $36.2 million of stock-based compensation expense, $23.5 million of depreciation and amortization, of which $14.8 million was related to intangible asset amortization, $3.4 million tied to the impairment of long-lived assets, $2.2 million from the revaluation of contingent consideration, and noncash lease expense of $5.0 million.
The net income of $24.1 million includes non-cash charges of $36.2 million of stock-based compensation expense, $23.5 million of depreciation and amortization, of which $14.8 million was related to intangible asset amortization, $3.4 million tied to the impairment of long-lived assets, $2.2 million from the revaluation of contingent consideration, and non-cash lease expense of $5.0 million.
The net loss of $74.4 million includes non-cash charges of $68.3 million tied to the impairment of long-lived assets, $33.1 million of stock-based compensation expense, $27.2 million of depreciation and amortization, of which $20.6 million was related to intangible asset amortization, $5.4 million from the revaluation of contingent consideration, and noncash lease expense of $4.2 million.
The net loss of $74.4 million includes non-cash charges of $68.3 million tied to the impairment of long-lived assets, $33.1 million of stock-based compensation expense, $27.2 million of depreciation and amortization, of which $20.6 million was related to intangible asset amortization, $5.4 million from the revaluation of contingent consideration, and non-cash lease expense of $4.2 million.
Cash Flows from Investing Activities Cash used in investing activities for the year ended December 31, 2024 was $56.3 million consisting of $50.0 million from the purchase of short-term investments and $11.3 million used in the acquisition of property and equipment, offset by $5.0 million net cash acquired from C2i excluding post-close transactions costs.
Cash used in investing activities for the year ended December 31, 2024 was $56.3 million consisting of $50.0 million from the purchase of short-term investments and $11.3 million used in the acquisition of property and equipment, offset by $5.0 million net cash acquired from C2i excluding post-close transactions costs.
See "Risk Factors" for further discussion. 64 Table of Contents Factors Affecting Our Performance Reported Total Test Volume Our performance currently depends on the number of tests that we perform and report as completed in our CLIA-certified laboratories and the number of Prosigna tests purchased by our customers, which we refer to as our reported total test volume.
See "Risk Factors" for further discussion. 64 Table of Contents Factors Affecting Our Performance Reported Total Test Volume Our performance currently depends on the number of tests that we perform and report as completed in our CLIA-certified laboratories and the number of tests purchased by our customers, which we refer to as our reported total test volume.
Impairment of long-lived assets During the year ended December 31, 2024 impairment of long-lived assets was $3.4 million primarily from impairment charges associated with the HalioDx developed technology, customer relationships and customer backlog finite-lived intangible assets and impairment of right-of-use asset in relation to exiting the C2i Watertown, Massachusetts facility.
Impairment of assets during the year ended December 31, 2024 was $3.4 million primarily from impairment charges associated with the HalioDx developed technology, customer relationships and customer backlog finite-lived intangible assets and impairment of right-of-use asset in relation to exiting the C2i facility in Watertown, Massachusetts.
Insights from these tests help patients avoid unnecessary procedures and interventions and accelerate time to appropriate treatment, thereby improving outcomes for patients in our global markets. In the United States, we currently offer tests in prostate cancer (Decipher Prostate), thyroid cancer (Afirma), breast cancer (Prosigna) and bladder cancer (Decipher Bladder).
Insights from these tests help patients avoid unnecessary procedures and interventions and accelerate time to appropriate treatment, thereby improving outcomes for patients across our global markets. In the United States, we currently offer tests in prostate cancer (Decipher Prostate), thyroid cancer (Afirma), breast cancer (Prosigna) and bladder cancer (Decipher Bladder).
Selling and Marketing Selling and marketing expenses consist of compensation expenses, direct marketing expenses, professional fees, other expenses such as travel and communications costs, as well as allocation of facility and information technology expenses. Our sales team of approximately 110 representatives is organized by business unit in the U.S., with separate teams calling on thyroid cancer and urologic cancer physicians.
Selling and Marketing Selling and marketing expenses consist of compensation expenses, direct marketing expenses, professional fees, other expenses such as travel and communications costs, as well as allocation of facility and information technology expenses. Our sales team of approximately 120 representatives is organized by business unit in the U.S., with separate teams calling on thyroid cancer and urologic cancer physicians.
Cash used as a result of changes in operating assets and liabilities was $21.3 million, primarily comprising an increase in accounts receivable of $6.4 million, an increase in supplies and inventory of $5.9 million, a decrease in operating lease liability of $5.4 million, a decrease in accounts payable of $4.3 million, an increase in other assets of $1.6 million, and an increase in prepaid expense and other current assets of $1.3 million, partially offset by an increase in accrued liabilities of $3.5 million.
Cash used as a result of changes in operating assets and liabilities was $21.0 million, primarily comprising an increase in accounts receivable of $6.4 million, an increase in supplies and inventory of $5.9 million, a decrease in operating lease liability of $5.4 million, a decrease in accounts payable of $4.3 million, an increase in other assets of $1.2 million, and an increase in prepaid expense and other current assets of $1.3 million, partially offset by an increase in accrued liabilities of $3.5 million.
Cash used as a result of changes in operating assets and liabilities was $4.2 million, primarily comprising a decrease in operating lease liability of $4.3 million, an increase in supplies and inventory of $1.7 million, a decrease in accrued liabilities of $0.7 million, an increase in prepaid expense and other current assets of $0.5 million, and an increase in other assets of $0.8 million, partially offset by a decrease in accounts receivable of $3.9 million.
Cash used as a result of changes in operating assets and liabilities was $3.7 million, primarily comprising a decrease in operating lease liability of $4.3 million, an increase in supplies and inventory of $1.7 million, a decrease in accrued liabilities of $0.7 million, an increase in prepaid expense and other current assets of $0.5 million, and an increase in other assets of $0.3 million, partially offset by a decrease in accounts receivable of $3.9 million.
Moreover, the continued fluctuation of the U.S. dollar compared to other currencies has impacted and may continue to impact our results of operations. We intend to continue to monitor macroeconomic conditions closely and may determine to take certain financial or operational actions in response to such conditions as appropriate.
Moreover, the continued fluctuation and reduced valuation of the U.S. dollar compared to other currencies has impacted and may continue to impact our results of operations. We intend to continue to monitor macroeconomic conditions closely and may determine to take certain financial or operational actions in response to such conditions as appropriate.
The underlying terms of these arrangements generally provide for consideration paid to us in the form of nonrefundable fees; payments on delivery of data, test results or manufactured products; costs of service plus margin; performance milestone payments; expense reimbursements and possibly royalty and/or other payments.
The underlying terms of these arrangements generally provide for consideration paid to us in the form of nonrefundable fees; payments on delivery of data or test results; costs of service plus margin; performance milestone payments; expense reimbursements and possibly royalty and/or other payments.
The estimation of the fair value of the contingent consideration is based on the present value of the expected payments calculated by assessing the likelihood of when the related milestones would be achieved, discounted using our estimated borrowing rate. 70 Table of Contents Intangible Asset Amortization We have acquired finite-lived and indefinite-lived intangible assets in business combinations.
The estimation of the fair value of the contingent consideration is based on the present value of the expected payments calculated by assessing the likelihood of when the related milestones would be achieved, discounted using our estimated borrowing rate. Intangible Asset Amortization We have acquired finite-lived and indefinite-lived intangible assets in business combinations.
We estimate the fair value of stock options using a Black-Scholes option-pricing model, which requires the input of highly subjective assumptions, including the option's expected term and stock price volatility. In addition, judgment is also required in estimating the number of stock-based awards that are expected to be forfeited.
We estimate the fair value of stock options using a Black-Scholes option-pricing model, which requires the input of highly subjective assumptions, including the option's expected term and stock price volatility. In addition, judgment is also required in estimating the number of stock-based 70 Table of Contents awards that are expected to be forfeited.
Shipping and handling costs incurred for product shipments are charged to our customers and included in product revenue. Revenue is presented net of the taxes that are collected from customers and remitted to governmental authorities.
Shipping and handling costs incurred for product shipments are charged to our customers and included in product revenue. Revenue is presented net of the taxes that are collected from customers and remitted to government authorities.
Product Revenue Our product revenue consists primarily of sales of the Prosigna breast cancer assay and related diagnostic kits and services. We recognize product revenue when control of the promised goods is transferred to our customers, in an amount that reflects the consideration expected to be received in exchange for those products.
Product Revenue Our product revenue consists primarily of international sales of the Prosigna breast cancer IVD and related diagnostic kits, and services. We recognize product revenue when control of the promised goods is transferred to our customers, in an amount that reflects the consideration expected to be received in exchange for those products.
We perform our annual evaluation of goodwill during the fourth quarter of each fiscal year. There was no impairment recognized during the years ended December 31, 2024, 2023, or 2022.
We perform our annual evaluation of goodwill during the fourth quarter of each fiscal year. There was no impairment recognized during the years ended December 31, 2025, 2024, or 2023.
We believe our broad menu of advanced diagnostic tests, combined with our ability to deliver them globally, differentiates us in the diagnostics industry. We are aiming to expand our role across the cancer continuum with the addition of minimal residual disease, or MRD assays.
We believe our broad menu of advanced diagnostic tests, combined with our ability to deliver them globally, differentiates us in the diagnostics industry. We are aiming to expand our role across the cancer continuum with the addition of our minimal residual disease, or MRD platform, TrueMRD, and our assays.
We expect to continue to see pressure from payers to limit the utilization of tests, generally, and we believe more payers are deploying cost containment tactics, such as pre-authorization, reduction of the payer portion of reimbursement and employing laboratory benefit managers to reduce utilization rates.
We expect to continue to see pressure from payers to limit the utilization of tests, generally, and we believe more payers are deploying cost containment tactics, such as requiring prior authorization, reduction of the payer portion of reimbursement and employing laboratory benefit managers to reduce utilization rates.
Continued Adoption of and Reimbursement for our Products Revenue growth depends on our ability to secure coverage decisions, achieve broader reimbursement from third-party payers, expand our base of prescribing physicians and increase our penetration in existing accounts.
Continued Adoption of and Reimbursement for our Products Revenue growth depends on our ability to secure coverage decisions, achieve broader reimbursement from third-party payers, obtain prior authorization, expand our base of prescribing physicians and increase our penetration in existing accounts.
Right-of-use, or ROU, assets and lease 71 Table of Contents liabilities are recognized at commencement based on the present value of lease payments over the lease term. We use our incremental borrowing rate based on the estimated rate of interest for collateralized borrowing over a similar term of the lease payments.
Right-of-use, or ROU, assets and lease liabilities are recognized at commencement based on the present value of lease payments over the lease term. We use our incremental borrowing rate based on the estimated rate of interest for collateralized borrowing over a similar term of the lease payments.
Testing Revenue We generally bill for testing services at the time of test completion, upon delivery of a patient report to the prescribing physician. We recognize revenue based on estimates of the amount that will ultimately be realized.
Testing Revenue We generally bill for testing services at the time of test completion, upon delivery of a patient report to the prescribing physician. We recognize revenue based on estimates of the cash amount that will ultimately be collected.
Going forward, we expect to incur 68 Table of Contents significant expense as we invest in the continued development of our innovation engine, early-stage products including our MRD tests, required clinical studies and the development of current IVD tests.
Going forward, we expect to incur significant expense as we invest in the continued development of our innovation engine, early-stage products including our MRD tests, required clinical studies and the development of current IVD tests.
Given our current earnings, we believe that, within the next two years, sufficient positive evidence may become available to allow us to reach a conclusion that a portion of the valuation allowance recorded against the deferred tax assets held may be reversed.
Given our current earnings, we believe that, within the next 12 months, sufficient positive evidence may become available to allow us to reach a conclusion that a portion of the valuation allowance recorded against the deferred tax assets held may be reversed.
If we are not able to generate cash flows from our revenue to finance our cash requirements, we 77 Table of Contents will need to finance future cash needs primarily through public or private equity offerings, debt financings, borrowings or strategic collaborations or licensing arrangements.
If we are not able to generate cash flows from our revenue to finance our cash requirements, we will need to finance future cash needs primarily through public or private equity offerings, debt financings, borrowings or strategic collaborations or licensing arrangements.
These expenses consist of compensation expenses, direct research and development expenses such as laboratory supplies and costs associated with setting up and conducting clinical studies at domestic and international sites, professional fees, depreciation and amortization, other miscellaneous expenses and allocation of facility and information technology expenses.
Research and Development Research and development expenses primarily include compensation expense, direct research and development expenses such as laboratory supplies and costs associated with setting up and conducting clinical studies at domestic and international sites, professional fees, depreciation and amortization, other miscellaneous expenses and allocation of facility and information technology expenses.
Comparison of impairment of long-lived assets expense for the years ended December 31, 2023 and 2022 are included in Item 8 of Part II of the Annual Report on Form 10-K for the year ended December 31, 2023, filed with the Securities and Exchange Commission on February 29, 2024.
Comparison of impairment of long-lived assets expense for the years ended December 31, 2024 and 2023 are included in Item 7 of Part II of the Annual Report on Form 10-K for the year ended December 31, 2024, filed with the Securities and Exchange Commission on February 28, 2025.
Comparison of selling and marketing expense for the years ended December 31, 2023 and 2022 are included in Item 8 of Part II of the Annual Report on Form 10-K for the year ended December 31, 2023, filed with the Securities and Exchange Commission on February 29, 2024.
Comparison of selling and marketing expense for the years ended December 31, 2024 and 2023 are included in Item 7 of Part II of the Annual Report on Form 10-K for the year ended December 31, 2024, filed with the Securities and Exchange Commission on February 28, 2025.
Comparison of Other income, net, for the years ended December 31, 2023 and 2022 are included in Item 8 of Part II of the Annual Report on Form 10-K for the year ended December 31, 2023, filed with the Securities and Exchange Commission on February 29, 2024.
Comparison of Other income, net, for the years ended December 31, 2024 and 2023 are included in Item 7 of Part II of the Annual Report on Form 10-K for the year ended December 31, 2024, filed with the Securities and Exchange Commission on February 28, 2025.
Comparison of cost of revenue for the years ended December 31, 2023 and 2022 are included in Item 8 of Part II of the Annual Report on Form 10-K for the year ended December 31, 2023, filed with the Securities and Exchange Commission on February 29, 2024.
Comparison of cost of revenue for the years ended December 31, 2024 and 2023 are included in Item 7 of Part II of the Annual Report on Form 10-K for the year ended December 31, 2024, filed with the Securities and Exchange Commission on February 28, 2025.
Comparison of revenue for the years ended December 31, 2023 and 2022 is included in Item 8 of Part II of the Annual Report on Form 10-K for the year ended December 31, 2023, filed with the Securities and Exchange Commission on February 29, 2024.
Comparison of revenue for the years ended December 31, 2024 and 2023 is included in Item 7 of Part II of the Annual Report on Form 10-K for the year ended December 31, 2024, filed with the Securities and Exchange Commission on February 28, 2025.
Additionally, primarily outside of the United States, we provide IVD tests to patients through distribution to laboratories and hospitals that can perform the tests locally. Our international distribution of IVDs is currently limited to our Prosigna test, however, in the future, we intend to offer Decipher Prostate and Percepta Nasal Swab as IVD tests.
Additionally, outside of the United States, we provide IVD tests to patients through distribution to laboratories and hospitals that can perform the tests locally. Our international distribution of IVDs is currently focused on our Prosigna test and, in the future, we intend to offer Decipher Prostate as an IVD test.
We periodically analyze supply and inventory levels and expiration dates, and write down supply or inventory that has become obsolete, that has a cost basis in excess of its net realizable value, or in excess of expected sales requirements as cost of revenue.
Inventory is stated at the lower of cost or net realizable value on a weighted average basis. We periodically analyze supply and inventory levels and expiration dates, and write down supply or inventory that has become obsolete, that has a cost basis in excess of its net realizable value, or in excess of expected sales requirements as cost of revenue.
New Product Development A significant aspect of our business is our investment in research and development activities, including activities related to the development of new tests and the ongoing development of our IVD and MRD strategies.
New Product Development A significant aspect of our business is our investment in development activities, including activities related to the development of new tests and modifications and enhancements to our current tests, including the ongoing development of our Prosigna LDT, MRD and IVD strategies.
As our Prosigna test kits and any additional IVDs we produce are sold in various configurations with different number of tests, our product cost per test will continue to vary based on the specific kit configuration purchased by customers.
As our Prosigna test kits are sold in various configurations with different numbers of tests, our product cost per test will continue to vary based on the specific kit configuration purchased by customers.
We expect that our near- and longer-term liquidity requirements will continue to consist of costs to run our laboratories, research and development expenses, selling and marketing expenses, general and administrative expenses, working capital, capital expenditures, lease obligations, potential milestones associated with the C2i Acquisition, costs to fund our overseas operations, and general corporate expenses associated with the growth of our business.
We expect to continue to generate cash and our near- and longer-term liquidity requirements will continue to consist of costs to run our laboratories, research and development expenses, selling and marketing expenses, general and administrative expenses, working capital, capital expenditures, lease obligations, and general corporate expenses associated with the growth of our business.
Cash provided by financing activities for the year ended December 31, 2023 was $2.8 million, consisting of $9.6 million in proceeds from the exercise of options to purchase our common stock and purchase of stock under our Employee Stock Purchase Plan, or ESPP, partially offset by $6.7 million in tax payments during the period related to the vesting of restricted stock units granted to employees.
Cash Flows from Financing Activities Cash used in financing activities for the year ended December 31, 2025 was $4.2 million, consisting of $18.3 million in tax payments during the period related to the vesting of restricted stock units granted to employees, partially offset by $14.1 million in proceeds from the exercise of options to purchase our common stock and purchase of stock under our Employee Stock Purchase Plan, or ESPP.
Third-party payers and other customers in excess of 10% of total revenue and their related revenue as a percentage of total revenue were as follows for the years presented: Year Ended December 31, 2024 2023 2022 Medicare 31 % 31 % 31 % UnitedHealthcare 13 % 11 % 11 % 44 % 42 % 42 % Cost of Testing Revenue The components of our cost of testing revenue are sample collection kit costs, reagent expenses, compensation expense, license fees and royalties, depreciation, other expenses such as equipment and laboratory supplies, and allocations of facility and information technology expenses.
Third-party payers and other customers in excess of 10% of total revenue and their related revenue as a percentage of total revenue were as follows for the years presented: Year Ended December 31, 2025 2024 2023 Medicare 33 % 31 % 31 % UnitedHealthcare 14 % 13 % 11 % 47 % 44 % 42 % In the above table, Medicare Advantage plans are included with their associated private payer amounts and Medicare amounts do not include Medicare Advantage. 67 Table of Contents Cost of Testing Revenue The components of our cost of testing revenue are sample collection kit costs, reagent expenses, compensation expense, license fees and royalties, depreciation, other expenses such as equipment and laboratory supplies, and allocations of facility and information technology expenses.
Cash used in investing activities for the year ended December 31, 2022 was $29.4 million for the purchase and maturity of short-term investments and acquisition of property and equipment. 79 Table of Contents Cash Flows from Financing Activities Cash provided by financing activities for the year ended December 31, 2024 was $4.9 million, consisting of $20.0 million in proceeds from the exercise of options to purchase our common stock and purchase of stock under our Employee Stock Purchase Plan, or ESPP, partially offset by $10.6 million in tax payments during the period related to the vesting of restricted stock units granted to employees and $4.5 million in payment of contingent consideration.
Cash provided by financing activities for the year ended December 31, 2024 was $4.9 million, consisting of $20.0 million in proceeds from the exercise of options to purchase our common stock and purchase of stock under our ESPP, partially offset by $10.6 million in tax payments during the period related to the vesting of restricted stock units granted to employees and $4.5 million in payment of contingent consideration.
However, we expect that the cost per test will decrease over time due to leveraging fixed costs, efficiencies we may gain as test volume increases and process enhancements such as automation, and other cost reductions.
We expect cost of testing revenue in absolute dollars to increase as the number of tests we perform increases. However, we expect that the cost per test will decrease over time due to leveraging fixed costs, efficiencies we may gain as test volume increases and process enhancements such as automation, implementation of new technologies and other cost reductions.
Cash provided by operating activities for the year ended December 31, 2022 was $7.5 million.
Cash provided by operating activities for the year ended December 31, 2024 was $75.1 million.
Biopharmaceutical and Other Revenue We enter into arrangements to license or provide access to our assets or services to third parties, including clinical and testing services, research and development, contract manufacturing and development, as well as other services.
Biopharmaceutical and Other Revenue We enter into arrangements to license or provide access to our assets or services to third parties, including clinical and testing services, research and development, as well as other services. Such arrangements may require us to deliver various rights, data, services, access and/or testing services to partner biopharmaceutical and other companies.
Comparison of research and development expense for the years ended December 31, 2023 and 2022 are included in Item 8 of Part II of the Annual Report on Form 10-K for the year ended December 31, 2023, filed with the Securities and Exchange Commission on February 29, 2024. 75 Table of Contents Selling and marketing Comparison of the years ended December 31, 2024 and 2023 was as follows (in thousands of dollars, except percentages): Year Ended December 31, 2024 Change % 2023 Selling and marketing expense: Compensation expense $ 67,662 $ (7,224) (10) % $ 74,886 Direct marketing expense 6,283 861 16 % 5,422 Other expenses 13,488 (1,096) (8) % 14,584 Allocations 8,001 1,403 21 % 6,598 Total $ 95,434 $ (6,056) (6) % $ 101,490 Selling and marketing expense decreased $6.1 million, or 6%, for the year ended December 31, 2024 compared to 2023.
Comparison of research and development expense for the years ended December 31, 2024 and 2023 are included in Item 7 of Part II of the Annual Report on Form 10-K for the year ended December 31, 2024, filed with the Securities and Exchange Commission on February 28, 2025. 74 Table of Contents Selling and marketing Comparison of the years ended December 31, 2025 and 2024 was as follows (in thousands of dollars, except percentages): Year Ended December 31, 2025 Change % 2024 Selling and marketing expense: Compensation expense $ 69,209 $ 1,547 2 % $ 67,662 Direct marketing expense 5,563 (720) (11) % 6,283 Other expenses 14,943 1,455 11 % 13,488 Allocations 10,450 2,449 31 % 8,001 Total $ 100,165 $ 4,731 5 % $ 95,434 Selling and marketing expense increased $4.7 million, or 5%, for the year ended December 31, 2025 compared to 2024.
Income tax expense We recorded income tax expense of $1.6 million for the year ended December 31, 2024 and recorded income tax benefit of $2.2 million for the year ended December 31, 2023.
Income tax expense We recorded income tax expense of $1.8 million and $1.6 million for the years ended December 31, 2025 and 2024, respectively.
Macroeconomic Factors Recent macroeconomic factors, such as interest rate fluctuations and inflation in the United States and other markets, as well as volatility in the global banking and finance systems, have resulted in volatility in the capital and credit markets globally.
Macroeconomic Factors Recent macroeconomic factors, such as interest rate fluctuations and inflation in the United States and other markets, evolving international trade policies and government actions relating to tariffs, as well as volatility in the global banking and finance systems, geopolitical challenges and other measures that restrict international trade, have resulted in volatility in the capital and credit markets globally.
Other Income (Loss), Net Other income (loss), net consists primarily of interest income from our cash held in interest bearing accounts, realized and unrealized gains and losses on foreign currency transactions, and French research tax credits.
Other Income (Loss), Net Other income (loss), net consists primarily of interest income from our cash held in interest bearing accounts, realized and unrealized gains and losses on foreign currency transactions, and, prior to the restructuring proceedings affecting Veracyte SAS in August 2025, French tax credits, as well as loss on deconsolidation of Veracyte SAS.
Research and Development Research and development expenses include expenses incurred to collect clinical samples and conduct clinical studies to develop and support our products and pipeline, as well as develop future technology.
Further, research and development expenses include costs to collect clinical samples and conduct clinical studies to develop and support our products and pipeline, as well as develop future technology. We expense all research and development costs in the periods in which they are incurred.
The increase in cost of testing revenue is due to increased variable costs associated with supplies and reagents due to volume, higher 74 Table of Contents staffing to support testing performance and the build out of infrastructure related to current and future growth expectations, primarily related to Decipher Prostate and Afirma tests.
The increase in cost of testing revenue was due to increased volume in testing, higher staffing to support higher volume and the 73 Table of Contents build out of infrastructure related to current and future growth expectations, primarily related to Decipher Prostate and Afirma tests, partially offset by lab efficiencies.
Other income, net Other income, net, increased $0.4 million for the year ended December 31, 2024 compared to 2023, primarily due to an increase of $3.8 million of interest and dividend income, partially offset by an increased loss of $2.8 million related to unrealized foreign currency gain(loss).
Other income, net Other income, net, increased $0.8 million for the year ended December 31, 2025 compared to 2024, primarily due to an increase of $6.0 million due to foreign currency revaluation and an increase of $1.6 million of interest and dividend income, partially offset by a loss of $6.7 million due to the deconsolidation of Veracyte SAS.
In addition to the development of new product candidates, we believe these studies are critical to gaining clinician adoption of new products and driving favorable coverage decisions by payors for such products. 65 Table of Contents How We Recognize Revenue We recognize revenue in accordance with the provisions of ASC 606, Revenue from Contracts with Customers , or ASC 606.
In addition to these development activities, we also perform clinical evidence studies which are critical to gaining clinician adoption of our tests, driving favorable coverage decisions by payers, as well as gaining guideline inclusion for such tests. 65 Table of Contents How We Recognize Revenue We recognize revenue in accordance with the provisions of ASC 606, Revenue from Contracts with Customers , or ASC 606.
Foreign currency transaction gains and losses are recorded in other income (loss), net, on the consolidated statements of operations. Comprehensive Income (Loss) Comprehensive income (loss) is the change in stockholders’ equity from transactions and other events and circumstances other than those resulting from investments by stockholders and distributions to stockholders.
Comprehensive Income (Loss) Comprehensive income (loss) is the change in stockholders’ equity from transactions and other events and circumstances other than those resulting from investments by stockholders and distributions to stockholders.
General and Administrative General and administrative expenses include compensation expenses for executive officers and administrative, billing and client service personnel, professional fees for legal and audit services, occupancy costs, depreciation and amortization, and other expenses such as information technology, acquisition related costs and miscellaneous expenses, offset by allocation of facility and information technology expenses to other functions.
Prosigna sales outside of the U.S. are led by country managers and sales teams that call on laboratories and breast cancer oncologists. 68 Table of Contents General and Administrative General and administrative expenses include compensation expenses for executive officers and administrative, billing and client service personnel, professional fees for legal and audit services, occupancy costs, depreciation and amortization, and other expenses such as information technology, acquisition related costs and miscellaneous expenses, offset by allocation of facility and information technology expenses to other functions.
Testing volume increased by 23% driven by Decipher volume growing to over 73 Table of Contents 80,000 tests, representing a year-over-year growth of 36%, additionally Afirma volume grew to over 61,000 tests or 12% growth over prior year.
Testing volume increased by 19%, driven by Decipher volume growing to 72 Table of Contents approximately 102,000 tests, representing a year-over-year growth of 27%, additionally Afirma volume grew to approximately 67,700 tests or 11% growth over prior year.
We estimate the variable consideration under the 69 Table of Contents portfolio approach and consider the historical reimbursement data from third-party commercial and governmental payers and patients, as well as known or anticipated reimbursement trends not reflected in the historical data.
A stated contract price does not exist and the transaction price for each implied contract with our customer represents variable consideration. We estimate the variable consideration under the portfolio approach and consider the historical reimbursement data from third-party commercial and governmental payers and patients, as well as known or anticipated reimbursement trends not reflected in the historical data.
Foreign Currency Translation The functional currency of our foreign subsidiaries, Veracyte SAS and C2i Genomics, Ltd., are the Euro and the Israeli Shekel, respectively. Assets and liabilities denominated in foreign currencies are translated to U.S. dollars using the exchange rates at the balance sheet date.
Foreign Currency Translation The functional currency of our foreign subsidiary, C2i Genomics, Ltd., is the Israeli Shekel. Assets and liabilities denominated in foreign currencies are translated to U.S. dollars using the exchange rates at the balance sheet date. Foreign currency translation adjustments are recorded as a component of accumulated other comprehensive income (loss) within stockholders’ equity.
Our material cash requirements include the following obligations: Operating Leases We lease office and laboratory facilities in South San Francisco and San Diego, California; Austin, Texas; Marseille, France; Richmond, Virginia; and Watertown, Massachusetts, and lease certain equipment under various non-cancelable lease agreements. The lease terms extend to March 2040 and contain extension of lease term and expansion options.
Our material cash requirements include the following obligations: Operating Leases We lease office and laboratory facilities in the United States, including in South San Francisco and San Diego, California and Austin, Texas, and lease certain equipment under various non-cancelable lease agreements.
In addition, our Percepta Nasal Swab test is being run in our CLIA labs in support of clinical studies. We serve global markets with two complementary models. In the United States, we offer LDTs through our centralized CLIA certified laboratories in South San Francisco and San Diego, California, supported by our cytopathology expertise in Austin, Texas.
In addition, we are planning to offer our Prosigna test for breast cancer as an LDT in 2026. We serve global markets with two complementary models. In the United States, we offer LDTs through our centralized CLIA certified laboratories in South San Francisco and San Diego, California, supported by our cytopathology expertise in Austin, Texas.
Integrating Acquisitions Revenue growth, operational results and advances to our business strategy depends on our ability to integrate any acquisitions, such as our recent acquisitions of C2i and HalioDx, into our existing business and effectively scale their operations.
Any such reductions could negatively affect our revenues and margins. Integrating Acquisitions Revenue growth, operational results and advances to our test offering strategy depend on our ability to integrate any acquisitions into our existing business and effectively scale their operations.
As of December 31, 2024, the achievement of one of the milestones is forecasted to occur within the next 12 months, requiring payments totaling $3.5 million. 78 Table of Contents Cash Flows The following table summarizes our cash flows for the years ended December 31, 2024, 2023 and 2022 (in thousands of dollars): Years Ended December 31, 2024 2023 2022 Net cash provided by operating activities $ 75,096 $ 44,222 $ 7,535 Net cash provided by (used in) investing activities (56,275) 15,112 (29,387) Net cash provided by financing activities 4,904 2,837 3,494 Cash Flows from Operating Activities Cash provided by operating activities for the year ended December 31, 2024 was $75.1 million.
Cash Flows The following table summarizes our cash flows for the years ended December 31, 2025, 2024 and 2023 (in thousands of dollars): Years Ended December 31, 2025 2024 2023 Net cash provided by operating activities $ 136,307 $ 75,096 $ 44,222 Net cash (used in) provided by investing activities (9,209) (56,275) 15,112 Net cash (used in) provided by financing activities (4,222) 4,904 2,837 Cash Flows from Operating Activities Cash provided by operating activities for the year ended December 31, 2025 was $136.3 million.
This was primarily due to a $92.4 million increase in testing revenue driven by a 23% volume increase and a 4% average selling price increase, partially offset by a $5.8 million decrease in our Biopharmaceutical and other revenue, as well as a $1.9 million decrease in our product revenue.
This was primarily due to a $74.2 million increase in testing revenue driven by a 19% volume increase and a $0.7 million increase in our product revenue, partially offset by a $3.5 million decrease in our Biopharmaceutical and other revenue.
Foreign currency translation adjustments are recorded as a component of accumulated other comprehensive income (loss) within stockholders’ equity. Revenue and expenses from our foreign subsidiaries are translated using the monthly average exchange rates in effect during the period in which the transactions occur.
Revenue and expenses from our foreign subsidiary are translated using the monthly average exchange rates in effect during the period in which the transactions occur. Foreign currency transaction gains and losses are recorded in other income (loss), net, on the consolidated statements of operations.
We analyze actual cash collections over the expected reimbursement period and compare it with the estimated variable consideration for each portfolio and any difference is recognized as an adjustment to estimated revenue after the expected reimbursement period, subject to assessment of the risk of future revenue reversal.
We analyze actual cash collections over the expected reimbursement period and compare it with the estimated variable consideration for each payer group and any difference is recognized as an adjustment to estimated revenue after the expected reimbursement period, subject to assessment of the risk of future revenue reversal. 69 Table of Contents Other Significant Accounting Policies Acquisitions We first determine whether a set of assets acquired and liabilities assumed constitute a business and should be accounted for as a business combination.
We generally invoice third-party payers upon delivery of a patient report to the prescribing physician. As such, we take the assignment of benefits and the risk of cash collection from 67 Table of Contents the third-party payer and individual patients.
As such, we take the assignment of benefits and the risk of cash collection from the third-party payer and individual patients.
We expense all research and development costs in the periods in which they are incurred. We incurred a majority of our research and development expenses in the year ended December 31, 2023 in support of our early-stage products, including Percepta Nasal Swab, as well as the development of new IVD products and discovery.
We incurred a majority of our research and development expenses in the year ended December 31, 2025 in support of our early-stage products, support for the development and validation of our MRD tests, as well as our Prosigna LDT test, the development of new IVD products and discovery.
Cash provided by financing activities for the year ended December 31, 2022 was $3.5 million, consisting of $7.9 million in proceeds from the exercise of options to purchase our common stock and purchase of stock under our ESPP, partially offset by $3.2 million in tax payments during the period related to the vesting of restricted stock units granted to employees and $1.3 million in payment of long-term debt.
Cash provided by financing activities for the year ended December 31, 2023 was $2.8 million, consisting of $9.6 million in proceeds from the exercise of options to purchase our common stock and purchase of stock under our ESPP, partially offset by $6.7 million in tax payments during the period related to the vesting of restricted stock units granted to employees. 78 Table of Contents Recently issued accounting pronouncements For a discussion of recent accounting pronouncements, see Note 2, Summary of Significant Accounting Policies, in the notes to our audited consolidated financial statements included elsewhere in this report.
General and administrative expenses related to occupancy costs and information technology costs are allocated to general and administrative expense, selling and marketing expense, research and development expense, and cost of revenue based on the headcount and employee location. 76 Table of Contents Comparison of general and administrative expense for the years ended December 31, 2023 and 2022 are included in Item 8 of Part II of the Annual Report on Form 10-K for the year ended December 31, 2023, filed with the Securities and Exchange Commission on February 29, 2024.
Comparison of general and administrative expense for the years ended December 31, 2024 and 2023 are included in Item 7 of Part II of the Annual Report on Form 10-K for the year ended December 31, 2024, filed with the Securities and Exchange Commission on February 28, 2025.
We have determined that we operate in a single segment and have a single reporting unit associated with the development and commercialization of diagnostic products.
Our goodwill evaluation is based on both qualitative and quantitative assessments regarding the fair value of goodwill relative to its carrying value. We have determined that we operate in a single segment and have a single reporting unit associated with the development and commercialization of diagnostic products.
Research and development Comparison of the years ended December 31, 2024 and 2023 was as follows (in thousands of dollars, except percentages): Year Ended December 31, 2024 Change % 2023 Research and development expense Compensation expense $ 37,068 $ 7,888 27 % $ 29,180 Direct research and development expense 19,237 6,319 49 % 12,918 Depreciation and amortization 1,276 337 36 % 939 Other expenses 4,969 (4,372) (47) % 9,341 Allocations 6,744 1,817 37 % 4,927 Total $ 69,294 $ 11,989 21 % $ 57,305 Research and development expense increased $12.0 million, or 21%, for the year ended December 31, 2024 compared to 2023.
Research and development Comparison of the years ended December 31, 2025 and 2024 was as follows (in thousands of dollars, except percentages): Year Ended December 31, 2025 Change % 2024 Research and development expense Compensation expense $ 37,784 $ 716 2 % $ 37,068 Direct research and development expense 16,596 (2,641) (14) % 19,237 Depreciation and amortization 1,647 371 29 % 1,276 Other expenses 6,845 1,876 38 % 4,969 Allocations 7,942 1,198 18 % 6,744 Total $ 70,814 $ 1,520 2 % $ 69,294 Research and development expense increased $1.5 million, or 2%, for the year ended December 31, 2025 compared to 2024.
General and administrative Comparison of the years ended December 31, 2024 and 2023 was as follows (in thousands of dollars, except percentages): Year Ended December 31, 2024 Change % 2023 General and administrative expense: Compensation expense $ 74,815 $ 11,046 17 % $ 63,769 Professional fees 30,396 7,179 31 % 23,217 Information technology expense 12,264 4,668 61 % 7,596 Occupancy costs 10,438 2,326 29 % 8,112 Depreciation and amortization 4,092 605 17 % 3,487 Contingent consideration 2,167 7,550 (140) % (5,383) Other expenses 5,640 (573) (9) % 6,213 Allocations (29,202) (8,420) 41 % (20,782) Total $ 110,610 $ 24,381 28 % $ 86,229 General and administrative expense increased $24.4 million, or 28%, for the year ended December 31, 2024 compared to 2023.
General and administrative Comparison of the years ended December 31, 2025 and 2024 was as follows (in thousands of dollars, except percentages): Year Ended December 31, 2025 Change % 2024 General and administrative expense: Compensation expense $ 82,909 $ 8,094 11 % $ 74,815 Professional fees 42,299 11,903 39 % 30,396 Information technology expense 14,777 2,513 20 % 12,264 Occupancy costs 10,980 542 5 % 10,438 Depreciation and amortization 3,774 (318) (8) % 4,092 Contingent consideration (15,294) (17,461) (806) % 2,167 Other expenses 4,698 (942) (17) % 5,640 Allocations (33,359) (4,157) 14 % (29,202) Total $ 110,784 $ 174 — % $ 110,610 General and administrative expense increased $0.2 million, for the year ended December 31, 2025 compared to 2024.
Testing revenue increased by $92.4 million, or 28%, driven by a $73.4 million increase in Decipher revenue and a $19.8 million increase in Afirma revenue.
Testing revenue increased by $74.2 million, or 18%, driven by a $66.7 million increase in Decipher revenue and a $13.7 million increase in Afirma revenue.
Revenue growth also depends on our ability to secure reimbursement from government payers at a reimbursement rate that is consistent with past reimbursement rates.
Revenue growth also depends on our ability to secure reimbursement from government payers at a reimbursement rate that is consistent with past reimbursement rates. Changes or implementation of government regulations or reimbursement policies, including under the Protecting Access to Medicare Act of 2014, or PAMA, could result in lower reimbursement rates for our tests.
Liquidity and Capital Resources As of December 31, 2024, we had cash and cash equivalents and short-term investments of $289.4 million. During 2024, our cash and cash equivalents and short-term investments increased by $73.0 million. Historically, we have obtained financing primarily through sales of our equity securities.
During 2025, our cash and cash equivalents and short-term investments increased by $123.4 million. Historically, we have obtained financing primarily through sales of our equity securities. Beginning in 2023, our operations have been financed primarily by cash flows generated by our revenue.
Under the acquisition method, assets acquired, and liabilities assumed are recorded at their respective fair values as of the acquisition date in our consolidated financial statements. The excess of the fair value of consideration transferred over the fair value of the net assets acquired is recorded as goodwill.
If the assets acquired are not a business, we account for the transaction as an asset acquisition. Business combinations are accounted for by using the acquisition method of accounting. Under the acquisition method, assets acquired, and liabilities assumed are recorded at their respective fair values as of the acquisition date in our consolidated financial statements.
Cash used as a result of changes in operating assets and liabilities was $16.4 million, primarily comprising an increase in accounts receivable of $4.5 million, a decrease in accrued liabilities of $3.9 million, a decrease in operating lease liability of $3.4 million, an increase in supplies and inventory of $3.0 million, and an increase in other assets of $3.0 million, partially offset by a decrease in prepaid expense and other current assets of $1.4 million.
The net income of $66.4 million includes non-cash charges of $43.6 million of stock-based compensation expense, $21.4 million of depreciation and amortization, of which $13.2 million was related to intangible asset amortization, $20.5 million tied to the impairment of long-lived assets, $15.3 million from the revaluation of contingent consideration, and non-cash lease expense of $3.0 million. 77 Table of Contents Cash used as a result of changes in operating assets and liabilities was $2.3 million, primarily comprising a decrease in operating lease liability of $2.5 million, an increase in prepaid expense and other current assets of $2.1 million, an increase in supplies and inventory of $2.9 million, a decrease in accounts payable of $1.0 million, and an increase in accounts receivable of $0.7 million, partially offset by an increase in accrued liabilities of $6.3 million and a decrease in other assets of $0.5 million.
Cost of revenue Comparison of the years ended December 31, 2024 and 2023 was as follows (in thousands of dollars, except percentages): Year Ended December 31, 2024 Change % 2023 Cost of testing revenue: Laboratory supplies and reagents expense $ 54,378 $ 12,320 29 % $ 42,058 Sample collection expense 13,868 3,054 28 % 10,814 Compensation expense 22,392 3,858 21 % 18,534 Cytopathology services 5,931 1,113 23 % 4,818 Depreciation and amortization 1,648 127 8 % 1,521 Other expenses 4,568 532 13 % 4,036 Allocations 11,788 4,656 65 % 7,132 Total $ 114,573 $ 25,660 29 % $ 88,913 Cost of product revenue: Product costs $ 3,369 $ (2,993) (47) % $ 6,362 License fees and royalties 1,263 21 2 % 1,242 Depreciation and amortization 1,337 1,021 323 % 316 Other expenses 2,478 1,892 323 % 586 Allocations 663 503 314 % 160 Total $ 9,110 $ 444 5 % $ 8,666 Cost of biopharmaceutical and other revenue: Compensation expense $ 6,015 $ (1,732) (22) % $ 7,747 License fees and royalties 150 152 (7,600) % (2) Depreciation and amortization 212 (135) (39) % 347 Other expenses 4,001 (1,266) (24) % 5,267 Allocations 2,006 41 2 % 1,965 Total $ 12,384 $ (2,940) (19) % $ 15,324 Cost of testing revenue increased $25.7 million, or 29%, for the year ended December 31, 2024 compared to 2023.
Cost of revenue Comparison of the years ended December 31, 2025 and 2024 was as follows (in thousands of dollars, except percentages): Year Ended December 31, 2025 Change % 2024 Cost of testing revenue: Laboratory supplies and reagents expense $ 57,284 $ 2,906 5 % $ 54,378 Sample collection expense 12,436 (1,432) (10) % 13,868 Compensation expense 24,611 2,219 10 % 22,392 Cytopathology services 6,326 395 7 % 5,931 Depreciation and amortization 2,131 483 29 % 1,648 Other expenses 11,198 6,630 145 % 4,568 Allocations 13,576 1,788 15 % 11,788 Total $ 127,562 $ 12,989 11 % $ 114,573 Cost of product revenue: Product costs $ 3,787 $ 418 12 % $ 3,369 License fees and royalties 1,206 (57) (5) % 1,263 Depreciation and amortization 542 (795) (59) % 1,337 Other expenses 2,806 328 13 % 2,478 Allocations 466 (197) (30) % 663 Total $ 8,807 $ (303) (3) % $ 9,110 Cost of biopharmaceutical and other revenue: Compensation expense $ 3,320 $ (2,695) (45) % $ 6,015 License fees and royalties — (150) (100) % 150 Depreciation and amortization 117 (95) (45) % 212 Other expenses 3,216 (785) (20) % 4,001 Allocations 925 (1,081) (54) % 2,006 Total $ 7,578 $ (4,806) (39) % $ 12,384 Cost of testing revenue increased $13.0 million, or 11%, for the year ended December 31, 2025, compared to 2024.

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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 changeSuch interest-bearing instruments carry a degree of risk; however, as of December 31, 2024, a hypothetical 10% change in interest rates would not have had a material impact on our consolidated financial statements. This analysis is based on a sensitivity model that measures market value changes when changes in interest rates occur.
Biggest changeSuch interest-bearing instruments carry a degree of risk; however, as of December 31, 2025, a hypothetical 10% change in interest rates during any of the periods presented would not have had a material impact on our consolidated financial statements. This analysis is based on a sensitivity model that measures market value changes when changes in interest rates occur.
As of December 31, 2024 a hypothetical 10% appreciation or depreciation of the U.S. dollar relative to the Euro would not have had a material impact on our consolidated financial statements.
As of December 31, 2025 a hypothetical 10% appreciation or depreciation of the U.S. dollar relative to the Euro would not have had a material impact on our consolidated financial statements.
However, we do not believe that inflation has had a material effect on our business, financial condition, or operating results to date. 80 Table of Contents
However, we do not believe that inflation has had a material effect on our business, financial condition, or operating results to date. 79 Table of Contents
Foreign Currency Risk As of December 31, 2024, we held $3.6 million of bank deposits denominated in Euros. Such Euro denominated deposits carry a degree of risk from changes in currency exchange rates as the gains or losses from changes in exchange rates are included in our net income (loss) and comprehensive income (loss).
Foreign Currency Risk As of December 31, 2025, we held $1.5 million of bank deposits denominated in Euros. Such Euro denominated deposits carry a degree of risk from changes in currency exchange rates as the gains or losses from changes in exchange rates are included in our net income (loss) and comprehensive income (loss).
We had cash and cash equivalents and short-term investments of $289.4 million as of December 31, 2024 which consisted of bank deposits, money market funds and United States treasury securities.
We had cash and cash equivalents and short-term investments of $412.9 million as of December 31, 2025 which consisted of bank deposits, money market funds and United States treasury securities.

Other VCYT 10-K year-over-year comparisons