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What changed in GeneDx Holdings Corp.'s 10-K — 2023 vs 2024

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

+375 added−445 removedSource: 10-K (2025-02-20) vs 10-K (2024-02-23)

Top changes in GeneDx Holdings Corp.'s 2024 10-K

375 paragraphs added · 445 removed · 299 edited across 9 sections

Item 1. Business

Business — how the company describes what it does

94 edited+24 added−15 removed134 unchanged
Biggest change(“CMLS”) on July 22, 2021 (the “Business Combination”); and • “we,” “us” and “our,” the “Company” and “GeneDx” refer, as the context requires, to: ◦ Legacy Sema4 prior to the Business Combination, and GeneDx Holdings and its consolidated subsidiaries following the consummation of the Business Combination; and ◦ Legacy GeneDx prior to the Acquisition, and GeneDx Holdings and its consolidated subsidiaries following the consummation of the Acquisition. • “Company,” or “GeneDx” refer to (i) Legacy Sema4 prior to the consummation of the Business Combination; and (ii) GeneDx Holdings and its subsidiaries following the consummation of the Business Combination (including, following the consummation of the Acquisition, Legacy GeneDx).
Biggest change(“CMLS”) on July 22, 2021 (the “Business Combination”); and • “we,” “us” and “our,” the “Company” and “GeneDx” refer, as the context requires, to GeneDx Holdings and its consolidated subsidiaries. The Company’s Class A common stock and public warrants are listed on the Nasdaq Global Select Market under the symbols “WGS” and “WGSWW,” respectively.
Reimbursement and billing for diagnostic services is highly complex, and errors in billing potentially can result denied claims and/or in substantial obligations to repay overpayments to payors.
Reimbursement and billing for diagnostic services is highly complex, and errors in billing potentially can result in denied claims and/or in substantial obligations to repay overpayments to payors.
Two such studies currently underway include the SeqFirst study—in collaboration with Seattle Children’s Hospital and University of Washington—which is designed to demonstrate the broad utility of rapid whole genome sequencing for critically ill newborns and, the Genomic Uniform-Screening Against Rare Diseases In All Newborns (“GUARDIAN”) study—in collaboration with New York-Presbyterian, Columbia University, New York State Department of Health and Illumina—which is designed to assess whole genome sequencing to screen newborns for more conditions than those currently included in standard newborn screening in the United States.
Two such studies currently underway include the SeqFirst study—in collaboration with Seattle Children’s Hospital and University of Washington—which is designed to demonstrate the broad utility of rapid whole genome sequencing for critically ill newborns and, the Genomic Uniform-Screening Against Rare Diseases In All Newborns (“GUARDIAN”) study—in collaboration with New York-Presbyterian, Columbia University, New York State Department of Health and Illumina, Inc.—which is designed to assess whole genome sequencing to screen newborns for more conditions than those currently included in standard newborn screening in the United States.
In addition, the federal Eliminating Kickbacks in Recovery Act (the “EKRA”), prohibits knowingly and willfully soliciting or receiving any remuneration (including any kickback, bribe or rebate) directly or indirectly, overtly or covertly, in cash or in kind, in return for referring a patient or patronage to a laboratory; or paying or offering any remuneration (including any kickback, bribe or rebate) directly or indirectly, overtly or covertly, in cash or in kind, to induce a referral of an individual to a laboratory and certain other entities or in exchange for an individual using the services of such entities.
In addition, the federal Eliminating Kickbacks in Recovery Act of 2018 (the “EKRA”), prohibits knowingly and willfully soliciting or receiving any remuneration (including any kickback, bribe or rebate) directly or indirectly, overtly or covertly, in cash or in kind, in return for referring a patient or patronage to a laboratory; or paying or offering any remuneration (including any kickback, bribe or rebate) directly or indirectly, overtly or covertly, in cash or in kind, to induce a referral of an individual to a laboratory and certain other entities or in exchange for an individual using the services of such entities.
We believe we are particularly well-suited for helping rare disease and pediatric developmental disorder patients, their care teams and biopharma companies today. This is a large market with immense unmet medical need. There are nearly 7,000 individual diseases affecting nearly 10% of the total population in the United States, of which 50% are children.
We believe we are particularly well-suited for helping rare disease and pediatric developmental disorder patients, their care teams and biopharma companies today. This is a large market with immense unmet medical need. There are over 7,000 individual diseases affecting nearly 10% of the total population in the United States, of which 50% are children.
Additionally, certain of our diagnostic products in development may be subject to regulation by the FDA and similar international health authorities. For these products, we would have an obligation to adhere to the FDA’s current Good Manufacturing Practices (“cGMP”) and diagnostic product regulations, including providing for an establishment and product listing with the FDA.
Additionally, certain of our diagnostic products in development may be subject to regulation by the FDA and similar international health authorities. For these products, we would have an obligation to adhere to the FDA’s current Good Manufacturing Practices and diagnostic product regulations, including providing for an establishment and product listing with the FDA.
Market Opportunity Our primary growth engine in the short term will be expanding our current market-leading exome sequencing capabilities in the outpatient setting, including geneticists, pediatric development specialists, and other pediatric specialists, as well as the in-patient setting, also referred to as Neonatal Intensive Care Units (“NICU”).
Market Opportunity Our primary growth engine in the short term will be expanding our current market-leading exome and genome sequencing capabilities in the outpatient setting, including geneticists, pediatric development specialists, and other pediatric specialists, as well as the neonatal in-patient setting, also referred to as Neonatal Intensive Care Units (“NICU”).
As we plan for longer-term growth, we believe there is a large data partnership opportunity with biopharmaceutical (“biopharma”) companies, international testing opportunities, as well as a market to provide interpretation and information services for customers that sequence locally but look to GeneDx for analysis and interpretation.
Also, as we plan for longer-term growth, we believe there is a large data partnership opportunity with biopharmaceutical (“biopharma”) companies, international testing opportunities, as well as a market to provide interpretation and information services for customers that sequence locally but look to GeneDx for analysis and interpretation.
We have performed over a million genetic tests and worked tirelessly to develop: • A curated database of disease-associated genomic variants; • Proprietary bioinformatics and variant interpretation pipelines; and • Rapid exome and whole genome sequencing testing options.
We have performed over one million genetic tests and worked tirelessly to develop: • A curated database of disease-associated genomic variants; • Proprietary bioinformatics and variant interpretation pipelines; and • Rapid exome and whole genome sequencing testing options.
The CCPA also requires a business to implement reasonable security procedures to safeguard personal information against unauthorized access, use, or disclosure and imposes purpose limitation, data minimization, data retention and other security compliance obligations on regulated businesses.
The CCPA requires a business to implement reasonable security procedures to safeguard personal information against unauthorized access, use, or disclosure and imposes purpose limitation, data minimization, data retention and other security compliance obligations on regulated businesses.
PAMA codified Medicare coverage rules for laboratory tests by requiring any local coverage determination to be made following the local coverage determination process. PAMA also authorizes CMS to consolidate coverage policies for clinical laboratory tests among one to four laboratory-specific Medicare Administrative Contractors (“MACs”).
PAMA codified Medicare coverage rules for laboratory tests by requiring any local coverage determination to be made following the local coverage determination process. PAMA also authorizes CMS to consolidate coverage policies for clinical laboratory tests among one to four laboratory-specific Medicare Administrative Contractors.
Under PAMA (as amended) and its implementing regulations, laboratories that realize at least $12,500 in Medicare Clinical Laboratory Fee Schedule (“CLFS”) revenues during the six month reporting period and that receive the majority of their Medicare revenue from payments made under the CLFS or the Physician Fee Schedule must report, beginning in 2017, and then in 2024 and every three years thereafter (or annually for “advanced diagnostic laboratory tests”), private payor payment rates and volumes for their tests.
Under PAMA (as amended) and its implementing regulations, laboratories that realize at least $12,500 in Medicare Clinical Laboratory Fee Schedule (“CLFS”) revenues during the six month reporting period and that receive the majority of their Medicare revenue from payments made under the CLFS or the Physician Fee Schedule must report, beginning in 2017, and then in 2026 and every three years thereafter (or annually for “advanced diagnostic laboratory tests”), private payor payment rates and volumes for their tests.
We do not presently have any patents or patent applications directed to the sequences of specific genes or variants of such genes, nor do we currently rely on any in-licensed gene patent rights of any third party.
We do not presently have any patents directed to the sequences of specific genes or variants of such genes, nor do we currently rely on any in-licensed gene patent rights of any third party.
Substantially all of our revenue for the year ended December 31, 2023 has been primarily derived from diagnostic test reports and we expect this trend to continue in the near-term. We expect over time to achieve a mix of revenue from diagnostic tests, data and information solutions, newborn screening products and information and interpretation services.
Substantially all of our revenue for the year ended December 31, 2024 has been primarily derived from diagnostic test reports and we expect this trend to continue in the near-term. We expect over time to achieve a mix of revenue from diagnostic tests, data and information solutions, newborn screening products and information and interpretation services.
CLIA provides that a state may adopt laboratory regulations that are not inconsistent with those under federal law, and a number of states have implemented their own (sometimes more stringent) laboratory regulatory requirements. CLIA does not preempt state laws that have established laboratory quality standards that are at least as stringent as the federal law requirements under CLIA.
CLIA provides that a state may adopt laboratory regulations consistent with those under federal law, and a number of states have implemented their own (sometimes more stringent) laboratory regulatory requirements. CLIA does not preempt state laws that have established laboratory quality standards that are at least as stringent as the federal law requirements under CLIA.
In addition to the FTC Act, most U.S. states have unfair and deceptive acts and practices statutes, known as Unfair Deceptive Acts and Practices ("UDAP") statutes, that substantially mirror the FTC Act and have been applied in the privacy and data security context. These vary in substance and strength from state to state.
In addition to the FTC Act, most U.S. states have unfair and deceptive acts and practices statutes, known as Unfair Deceptive Acts and Practices (“UDAP”) statutes, that substantially mirror the FTC Act and have been applied in the privacy and data security context. These vary in substance and strength from state to state.
Clinical and Human Subjects Research Regulations We may collaborate or support ongoing clinical or other human subjects research that could subject us to a number of laws and regulations pertaining to such research, including, but not limited to the Federal Policy for Protection of Human Subjects (as set forth in the implementing regulations of any signatory federal department or agency), the FDCA and its applicable 13 Table of Contents implementing regulations at 21 C.F.R.
Clinical and Human Subjects Research Regulations We may collaborate or support ongoing clinical or other human subjects research that could subject us to a number of laws and regulations pertaining to such research, including, but not limited to the Federal Policy for Protection of Human Subjects (as set forth in the implementing regulations of any signatory federal department or agency), the FDCA and its applicable implementing regulations at 21 C.F.R.
Such programs will focus on: 6 Table of Contents ◦ support for rapid whole genome sequencing in the NICU and Pediatric Developmental Disorder settings; ◦ diagnosis of disease and prevention of chronic conditions in adults; and ◦ use of rapid whole genome sequencing for broad newborn screening. • Plan to open new markets and geographies and unlock the value of our dataset with independently scalable cloud-based interpretation and information service offerings.
Such programs will focus on: ◦ support for rapid whole genome sequencing in the NICU and Pediatric Developmental Disorder settings; ◦ diagnosis of disease and prevention of chronic conditions in adults; and ◦ use of rapid whole genome sequencing for broad newborn screening. • Plan to open new markets and geographies and unlock the value of our dataset with independently scalable cloud-based interpretation and information service offerings.
Other factors that complicate billing include: • variability in coverage and information requirements among various payors; • patient financial assistance programs; 17 Table of Contents • missing, incomplete or inaccurate billing information provided by ordering physicians; • billings to payors with whom we do not have contracts; • disputes with payors as to which party is responsible for payment; and • disputes with payors as to the appropriate level of reimbursement.
Other factors that complicate billing include: • variability in coverage and information requirements among various payors; • patient financial assistance programs; • missing, incomplete or inaccurate billing information provided by ordering physicians; • billings to payors with whom we do not have contracts; • disputes with payors as to which party is responsible for payment; and • disputes with payors as to the appropriate level of reimbursement.
Legislative proposals addressing the FDA's oversight of LDTs have also been introduced in previous Congresses, and we expect that new legislative proposals will be introduced from time- to- time. For example, versions of the Verifying Accurate Leading-edge IVCT Development (“VALID”) Act have been introduced in Congress several times in recent years, but the VALID Act has not been enacted.
Legislative proposals addressing the FDA’s oversight of LDTs have also been introduced in previous Congresses, and we expect that new legislative proposals will be introduced from time-to-time. For example, versions of the Verifying Accurate Leading-edge IVCT Development Act (the “VALID Act”) have been introduced in Congress several times in recent years, but the VALID Act has not been enacted.
While panel testing can be immensely valuable, it has an increasing limitation as we move towards genetic-based healthcare. Panels only allow you to test for insights that physicians predefine based on symptoms, which can lead to inconclusive results and an inefficient process. It is hypothesis-based medicine based on symptoms that may overlap across diseases.
While panel testing can be useful, it has an increasing limitation as we move towards genetic-based healthcare. Panels only allow you to test for insights that physicians predefine based on symptoms, which can lead to inconclusive results and an inefficient process. It is hypothesis-based medicine based on symptoms that may overlap across diseases.
Exome and genome sequencing can find different genetic alterations, or variants, that more targeted tests miss and are especially useful when the timing is critical to directing or altering medical management. With over 20 years of operation, GeneDx has a proven track record of expertise in genetic testing.
Exome and genome sequencing can find different genetic alterations, or variants, that more targeted tests miss and are especially useful when the timing is critical to directing or altering medical management. With 25 years of operation, GeneDx has a proven track record of expertise in genetic testing.
In the near term, our principal target markets will be settings with the most vulnerable patients who can benefit the most including, but not limited to, NICU and patients with Pediatric Developmental Disorders.
In the near term, our principal target markets will be settings with the most vulnerable patients who can benefit the most including, but not limited to, NICU and patients with pediatric developmental disorders (“Pediatric Developmental Disorders”).
In addition, privacy notices should clearly and accurately disclose the type(s) of personal information the company collects, how the company uses and shares that information, and the security measures used by the company to protect that information. 16 Table of Contents In recent years, the FTC’s enforcement under Section 5 related to data security has included alleged violations of the “unfairness” prong.
In addition, privacy notices should clearly and accurately disclose the type(s) of personal information the company collects, how the company uses and shares that information, and the security measures used by the company to protect that information. In recent years, the FTC’s enforcement under Section 5 related to data security has included alleged violations of the “unfairness” prong.
These laws are typically triggered by a company’s establishment or physical location in the jurisdiction, data processing activities that take place in the jurisdiction, and/or the processing of personal information about individuals located in that jurisdiction that are targeted, for example, by an offer of 15 Table of Contents goods or services.
These laws are typically triggered by a company’s establishment or physical location in the jurisdiction, data processing activities that take place in the jurisdiction, and/or the processing of personal information about individuals located in that jurisdiction that are targeted, for example, by an offer of goods or services.
Information Blocking Prohibition On May 1, 2020, the Office of the National Coordinator for Health Information Technology promulgated final regulations under the authority of the 21st Century Cures Act to impose new conditions to obtain and maintain certification of certified health information technology and prohibit certain covered actors, including developers of certified health information technology, health information networks/health information exchanges, and health care providers, from engaging in activities that are likely to interfere with the access, exchange, or use of electronic health information (information blocking).
Information Blocking Prohibition On May 1, 2020, the Office of the National Coordinator for Health Information Technology (“ONC”) promulgated final regulations under the authority of the 21st Century Cures Act to impose new conditions to obtain and maintain certification of certified health information technology and prohibit certain covered actors, including developers of certified health information 15 Table of Co ntents technology, health information networks/health information exchanges, and health care providers, from engaging in activities that are likely to interfere with the access, exchange, or use of electronic health information (information blocking).
Competition Our competitors include companies that offer molecular genetic testing and consulting services, including specialty and reference laboratories that offer traditional single- and multi-gene tests and biopharmaceutical companies.
Competition Our competitors include companies that offer molecular genetic testing and consulting services, including specialty and reference laboratories that offer traditional single- and multi-gene tests and biopharma companies.
Public Health Service, the U.S. Postal Service, the Office of Foreign Assets Control and the International Air Transport Association. We generally use third-party vendors to dispose of regulated medical waste, hazardous waste and radioactive materials and contractually require them to comply with applicable laws and regulations. These vendors are licensed or otherwise qualified to handle and dispose of such wastes.
Postal Service, the Office of Foreign Assets Control and the International Air Transport Association. We generally use third-party vendors to dispose of regulated medical waste, hazardous waste and radioactive materials and contractually require them to comply with applicable laws and regulations. These vendors are licensed or otherwise qualified to handle and dispose of such wastes.
The CCPA also confers rights to access, delete, correct, or request a portable data set, the right to limit processing of “sensitive personal information,” and the right to receive equal service and pricing from a business after exercising a consumer right granted by the CCPA.
The CCPA also confers rights to access, delete, correct, or request a portable dataset, the right to limit processing of “sensitive personal information,” and the right to receive equal service and pricing from a business after exercising a consumer right granted by the CCPA.
Advanced Technology with a Human Touch Our team includes approximately 250 genetic counselors, physicians, scientists, and clinical and molecular genomics specialists. We believe we are one of the industry’s leading genetic testing experts. We share the same goal as healthcare providers, patients, and families: to provide personalized and actionable health insights.
Advanced Technology with a Human Touch Our team includes over 200 genetic counselors, physicians, scientists, and clinical and molecular genomics specialists. We believe we are one of the industry’s leading genetic testing experts. We share the same goal as healthcare providers, patients, and families: to provide personalized and actionable health insights.
For example, the U.S. Occupational Safety and Health Administration (“OSHA”) has established extensive requirements relating specifically to workplace safety for healthcare employers in the United States. For purposes of transportation, some biological materials and laboratory supplies are classified as hazardous materials and are subject to regulation by one or more of the following: the U.S. Department of Transportation, the U.S.
Occupational Safety and Health Administration has established extensive requirements relating specifically to workplace safety for healthcare employers in the United States. For purposes of transportation, some biological materials and laboratory supplies are classified as hazardous materials and are subject to regulation by one or more of the following: the U.S. Department of Transportation, the U.S. Public Health Service, the U.S.
While most of the industry has focused on panels, we have focused on exome and whole genome developing structured gene-disease knowledge curated by our team of experts to power automated interpretation and reporting. One Test The genome is composed of 3 billion “letters”, or base pairs, of DNA.
While most of the industry has focused on panels, we have focused on exome and whole genome developing structured gene-disease knowledge curated by our team of experts to power automated interpretation and reporting. 4 Table of Co ntents One Test The genome is composed of 3 billion “letters”, or base pairs, of DNA.
Accordingly, we may not be able to meaningfully protect our trade secrets. Trademarks We own or are applying for various trademarks, service marks, trade names, and product service names in the U.S and other commercially important markets. We intend to invest significant resources in the growth and protection of our reputation and trademarks.
Accordingly, we may not be able to meaningfully protect our trade secrets. 8 Table of Co ntents Trademarks We own or are applying for various trademarks, service marks, trade names, and product service names in the U.S and other commercially important markets. We intend to invest significant resources in the growth and protection of our reputation and trademarks.
For clinical diagnostic laboratory tests that are assigned a new or substantially revised code, initial payment rates for clinical diagnostic laboratory tests that are not advanced diagnostic laboratory tests will be assigned by the cross-walk or gap-fill methodology, as under prior law.
For clinical diagnostic laboratory tests that are assigned a new or substantially revised code, initial payment rates for clinical diagnostic laboratory tests that are not advanced diagnostic laboratory tests will be assigned by the crosswalk or gap-fill methodology, as under prior law.
If such a financial relationship exists, referrals are prohibited unless a statutory or regulatory exception applies. The Stark Law also prohibits us from billing for any such prohibited referral. These prohibitions apply regardless of any intent by the parties to induce or reward referrals or the reasons for the financial relationship and the referral.
If such a financial relationship exists, referrals are prohibited unless a statutory or regulatory exception applies. The Stark Law also prohibits us from billing for any such prohibited referral. These prohibitions apply regardless of any intent by the parties to induce or reward referrals or the 11 Table of Co ntents reasons for the financial relationship and the referral.
Much of this decline was driven by reduced sequencing costs shared across the industry; however, we have reduced costs in the interpretation layer through accumulating data and experience, and we expect further decline in costs going forward.
Much of this decline was driven by reduced sequencing costs shared across the industry; however, we have reduced wet labor and processing costs and in the interpretation layer through accumulating data and experience, and we expect further decline in costs going forward.
The significant areas of regulation are summarized below: 9 Table of Contents Clinical Laboratory Improvement Amendments of 1988 and State Regulation Our clinical laboratories must hold certain federal , state and local licenses, certifications and permits to conduct our business.
The significant areas of regulation are summarized below: Clinical Laboratory Improvement Amendments of 1988 and State Regulation Our clinical laboratories must hold certain federal , state and local licenses, certifications and permits to conduct our business.
Certain data protection laws, such as those in the European Union, (the “EU”) and United Kingdom, are comprehensive in nature and include significant requirements around the processing of personal information, while other jurisdictions may have laws less restrictive or prescriptive than those in the U.S.
Certain data protection laws, such as those in the European Union, (the “EU”) and United Kingdom (the “UK”), are comprehensive in nature and include significant requirements around the processing of personal information, while other jurisdictions may have laws less restrictive or prescriptive than those in the United States.
Our operations could be interrupted if we encounter delays or difficulties in securing reagents, sequencers or other equipment or materials, and if we cannot obtain an acceptable substitute. Any such interruption could significantly affect our business, financial condition, results of operations and reputation.
Our operations could be interrupted if we 7 Table of Co ntents encounter delays or difficulties in securing reagents, sequencers or other equipment or materials, and if we cannot obtain an acceptable substitute. Any such interruption could significantly affect our business, financial condition, results of operations and reputation.
The utility patent applications include a U.S. patent application related to identifying cancer diagnosis from electronic health records using a cancer diagnosis analysis system, a U.S. patent application related to providing a homologous recombination DNA repair deficiency score for a cancer patient, and U.S. and European patent applications related to therapeutic treatment for subjects having certain polymorphic markers associated with specific human leukocyte antigen alleles.
The utility patent applications include a U.S. patent application related to generating a cancer determination from electronic health records using a cancer determination analysis system, a U.S. patent application related to providing a homologous recombination DNA repair deficiency score for a cancer patient, and a U.S. patent application related to therapeutic treatment for subjects having certain polymorphic markers associated with specific human leukocyte antigen alleles.
Where applicable, reductions to payment rates resulting from the new methodology were limited to 10% per test per year in each of the years 2018 through 2020. Rates were held at 2020 levels during 2021 and 2022 and will continue to be held at such levels in 2023.
Where applicable, reductions to payment rates resulting from the new methodology were limited to 10% per test per year in each of the years 2018 through 2020. Rates were held at 2020 levels during 2021 through 2024 and will continue to be held at such levels in 2025.
Then, where applicable based upon median private payor rates reported in 2017 or 2024, reduced by up to 15% per test per year in each of 2024 through 2026 (with a second round of private payor rate reporting in 2024 to establish rates for 2025 through 2027).
Then, where applicable based upon median private payor rates reported in 2017 or 2026, reduced by up to 15% per test per year in each of 2026 through 2028 (with a second round of private payor rate reporting in 2026 to establish rates for 2027 through 2029).
We launched the industry’s first commercially available next generation sequencing panels in 2008, pioneered exome sequencing in 2012 and have sequenced over 500,000 exomes to date.
We launched the industry’s first commercially available next generation sequencing panels in 2008, pioneered exome sequencing in 2012 and have sequenced over 750,000 exomes and genomes to date.
Such solutions will focus on three value-added services: ◦ FIND: Finding rare disease patients for clinical trial recruitment and/or delivery of targeted therapeutics. ◦ UNDERSTAND: Supporting research and development for targeted therapies with analytic reports leveraging clinicogenomics data across multiple therapeutic areas with an initial emphasis in rare disease. ◦ PLATFORM: In the long term, providing a therapeutic area agnostic platform to access to data, patients and insights for real world evidence and data to support end-to-end drug discovery pipeline.
Such solutions will focus on value-added services such as: ◦ Finding rare disease patients for clinical trial recruitment and/or delivery of targeted therapeutics. ◦ Supporting research and development for targeted therapies with analytic reports leveraging clinicogenomics data across multiple therapeutic areas with an initial emphasis in rare disease. ◦ Providing a therapeutic area agnostic platform to access to data, patients and insights for real world evidence and data to support end-to-end drug discovery pipeline.
Other Data Protection Laws There are a growing number of jurisdictions around the globe that have privacy and data protection laws that may apply to us as we enter or expand our business in jurisdictions outside of the U.S.
Other Data Protection Laws There are a growing number of jurisdictions around the globe that have privacy and data protection laws that may apply to us as we enter or expand our business in jurisdictions outside of the United States.
Research and Development Our research and development activities include information technology, product development, customer experience, medical affairs, collaborations and research. These activities are principally focused on our efforts to develop and improve the software we use to analyze data, process genomic test orders, deliver reports, and improve customer experience.
Research and Development Our research and development activities include information technology, product development, customer experience, medical affairs, collaborations and research, including health economic and outcomes research (“HEOR”). These activities are principally focused on our efforts to develop and improve the software we use to analyze data, process genomic test orders, deliver reports, and improve customer experience.
The less-discussed barrier to having actionable information lies in the ability to process a genome’s worth of information—quickly and scalably—and to deliver 4 Table of Contents both a result that a clinician can easily act upon to help a patient and a robust dataset that enables clinicians to drive precise diagnosis and researchers to develop and advance therapeutics.
The less-discussed barrier to having actionable information lies in the ability to process a genome’s worth of information—quickly and scalably—and to deliver both a result that a clinician can easily act upon to help a patient and a robust dataset that enables clinicians to drive precise diagnosis and personalized health plans, and researchers to develop and advance therapeutics.
The EKRA applies to all payors including commercial payors and government payors, and EKRA violations result in significant fines and/or up 12 Table of Contents to 10 years in jail, separate and apart from existing AKS liability.
The EKRA applies to all payors including commercial payors and government payors, and EKRA violations result in significant fines and/or up to 10 years in jail, separate and apart from existing AKS liability.
Regulation by governmental authorities in the U.S. and other countries may be a significant factor in how we develop, test, produce and market our diagnostic test products.
Regulation by governmental authorities in the United States and other countries may be a significant factor in how we develop, test, produce and market our diagnostic test products.
The FTC’s primary legal authority with respect to data privacy and security comes from Section 5 of the FTC Act, which prohibits unfair or deceptive acts or practices in the marketplace. The FTC has increasingly used this broad authority to police data privacy and security, using its powers to investigate and bring lawsuits.
The FTC’s primary legal authority with respect to data privacy and security comes from Section 5 (“Section 5”) of the Federal Trade Commission Act (the “FTC Act”), which prohibits unfair or deceptive acts or practices in the marketplace. The FTC has increasingly used this broad authority to police data privacy and security, using its powers to investigate and bring lawsuits.
The company quickly became a leader in genomics, creating the foundation for how to provide genomic information at scale and pioneering exome and genome sequencing for rare and ultra-rare genetic pediatric disorders. More than 20 years later, we have amassed one of the world’s largest rare disease data sets and remain a leader in genomics.
The company quickly became a leader in genomics, creating the foundation for how to provide genomic information at scale and pioneering exome and genome sequencing for rare and ultra-rare genetic pediatric disorders. 25 years later, we have amassed one of the world’s largest rare disease datasets and remain a leader in genomics.
None of our tests meet the current definition of advanced diagnostic laboratory tests, and therefore we believe we are required to report private payor rates for our tests on an every-three-years basis, starting next in 2024.
None of our tests meet the current definition of advanced diagnostic laboratory tests, and therefore we believe we are required to report private payor rates 16 Table of Co ntents for our tests on an every-three-years basis, starting next in 2026.
Our years of exome and genome sequencing experience have provided us with a substantial dataset, including over 2.7 million structured phenotypes with nearly 60% of all exomes to date processed as parent-child trios.
Our years of exome and genome sequencing experience have provided us with a substantial dataset, including over 6 million structured phenotypes with approximately 60% of all exomes/genomes to date processed as parent-child trios.
Our patent protection strategy has focused on seeking protection for certain of our non-gene specific technology and our specific biomarkers. In this regard, we have three pending U.S. non-provisional utility patent applications and one patent application pending in the European Patent Office.
Our patent protection strategy has focused on seeking protection for certain of our non-gene specific technology and our specific biomarkers. In this regard, we have three pending U.S. non-provisional utility patent applications and seven U.S. provisional patent applications.
The claim scope of any potentially issued patents stemming from the present applications may be narrowed from initial filings due to any amendments that may arise throughout their prosecution.
The claim scope of any potentially issued patents stemming from the present applications may be narrower than included in the initial filings due to any amendments that may arise throughout their prosecution.
CMS uses the rates and volumes reported by laboratories to develop Medicare payment rates for the tests equal to the volume-weighted median of the private payor payment rates for the tests. Laboratories that fail to report the required payment information may be subject to substantial civil money penalties.
The Centers for Medicare & Medicaid Services (“CMS”) use the rates and volumes reported by laboratories to develop Medicare payment rates for the tests equal to the volume-weighted median of the private payor payment rates for the tests. Laboratories that fail to report the required payment information may be subject to substantial civil money penalties.
Our employees' total compensation package includes competitive salary, bonuses or sales incentives, equity and a 401(K) plan with matching opportunities. Equity participation is provided for certain positions because ownership in the company drives commitment to our long-term success.
Our employees' total compensation package includes competitive salary, bonuses or sales incentives, equity through our equity incentive plans, 401(K) plan with matching opportunities, and the opportunity to participate in our employee stock purchase plan. Equity participation is provided for certain positions because ownership in the company drives commitment to our long-term success.
We will sequence once, and analyze for life. • Plan to optimize our services to become a solutions provider of choice for biopharma.
We will sequence once, and analyze for life. 6 Table of Co ntents • Plan to optimize our services to become a solutions provider of choice for biopharma companies.
We currently do not offer direct access testing and our CLIA tests may only be ordered by authorized healthcare providers. Diagnostic Products and FDA Oversight of Laboratory Developed Tests FDA Oversight of Laboratory Developed Tests We provide our tests as LDTs.
We currently do not offer direct access testing and our CLIA tests may only be ordered by authorized healthcare providers. Diagnostic Products and FDA Oversight of Laboratory Developed Tests FDA Oversight of Laboratory Developed Tests We currently offer an LDT version of certain tests.
The final regulations further defined exceptions for activities that are permissible, even though they may have the effect of interfering with the access, exchange, or use of electronic health information. The information blocking regulations became effective on April 5, 2021.
The final regulations further defined exceptions for activities that are permissible, even though they may have the effect of interfering with the access, exchange, or use of electronic health information.
The information contained on our website is not incorporated by reference in this document. 18 Table of Contents
The information contained on our website is not incorporated by reference in this document.
In addition to the companies that currently offer traditional genetic testing services and research centers, other established and emerging healthcare, information technology and service companies may commercialize competitive products including informatics, analysis, integrated genetic tools and services for health and wellness.
In addition to the companies that currently offer traditional genetic testing services and research centers, other established and emerging healthcare, information technology and service companies may commercialize competitive products including informatics, analysis, integrated genetic tools and services for health and wellness. Principal competitors include companies such as Baylor Genetics, Exact Sciences Corp.
In addition, we take other appropriate precautions, such as physical and technological security measures, to guard against misappropriation of our proprietary information by third parties. 8 Table of Contents Our valuable trade secrets relate to proprietary bioinformatic tools such as: • custom data processing methods and analytical pipelines for NGS, aCGH, MLPA, Sanger, and other genomic data, optimized and validated to the highest performance standards; • a novel detection method to uncover notoriously difficult to detect sequence variants called mobile element insertions and partial-exon deletions; and • custom variant analysis platforms built from the ground up for exome and genome-scale data interpretation.
Our valuable trade secrets relate to proprietary bioinformatic tools such as: • custom data processing methods and analytical pipelines for NGS, aCGH, MLPA, Sanger, and other genomic data, optimized and validated to the highest performance standards; • a novel detection method to uncover notoriously difficult to detect sequence variants called mobile element insertions and partial-exon deletions; and • custom variant analysis platforms built from the ground up for exome and genome-scale data interpretation.
By unlocking the value of the products, our knowledge base, network of relationships, and expertise, our team is well positioned to lead what we believe is a nearly $30 billion global market opportunity.
By unlocking the value of the products, our knowledge base, network of relationships, and expertise, our team is well positioned to lead what we believe is a nearly a $25 billion global market opportunity in pediatric and rare disease and a nearly $20 billion global market opportunity for adult disease and disorders.
The HHS Office of Inspector General has not yet issued a final rule. Federal and State Consumer Protection Laws The Federal Trade Commission (the “FTC”) is an independent U.S. law enforcement agency charged with protecting consumers and enhancing competition across broad sectors of the economy.
Federal and State Consumer Protection Laws The Federal Trade Commission (the “FTC”) is an independent U.S. law enforcement agency charged with protecting consumers and enhancing competition across broad sectors of the economy.
As most recently proposed, the VALID Act would modify the Federal Food, Drug, and Cosmetic Act (the “FDCA”) and establish a risk-based approach to imposing requirements related to premarket review, quality systems, and labeling requirements on all IVCTs, including LDTs, but a grandfathering provision would create exemptions from certain requirements for certain LDTs offered for clinical use within 45 days of enactment of the bill.
As most recently proposed, the VALID Act would modify the Federal Food, Drug, and Cosmetic Act (the “FDCA”) and establish a risk-based approach to imposing requirements related to premarket review, quality systems, and labeling requirements on all IVCTs, including LDTs, but a grandfathering provision would create exemptions from certain requirements for certain LDTs (e.g., LDTs first offered for clinical use not later than May 10 Table of Co ntents 6, 2024).
The Social Security Act includes civil monetary penalty provisions that impose penalties against any person or entity that, among other things, is determined to have presented or caused to be presented a claim to a federal health program that the person knows or should know is for an item or service that was not provided as claimed or is false or fraudulent.
Several states have enacted comparable false claims laws which may be broader in scope and apply regardless of payor. 12 Table of Co ntents The Social Security Act includes civil monetary penalty provisions that impose penalties against any person or entity that, among other things, is determined to have presented or caused to be presented a claim to a federal health program that the person knows or should know is for an item or service that was not provided as claimed or is false or fraudulent.
Principal competitors include companies such as Baylor, Centogene, Exact Sciences, Rady Children’s Hospital as well as other commercial and academic labs. Customers and Seasonality We receive payment for our products and services from third-party payors, patients, business-to-business clients, and from other healthcare partners.
(via Prevention), Rady Children’s Hospital and Tempus (via Ambry Genetics) as well as other commercial and academic labs. Customers and Seasonality We receive payment for our products and services from third-party payors, patients, business-to-business clients, and from other healthcare partners.
As the number of new patients we test grows, so does our database, as new data increases the potential for greater insights. As we capture more genomic and phenotypic data, we hope to fuel a positive feedback cycle of discovery that continuously delivers more value for patients, providers and healthcare partners.
As we capture more genomic and phenotypic data, we hope to fuel a positive feedback cycle of discovery that continuously delivers more value for patients, providers and healthcare partners.
The privacy regulations also set forth certain rights that an individual has with respect to his or her PHI maintained by a covered entity or business associate, including the right to access or amend certain records containing his, her or their PHI, request restrictions on the use or disclosure of his, her or their PHI, or request an accounting of disclosures of his or her PHI.
The privacy regulations also set forth certain rights that an individual has with respect to his or her PHI maintained by a covered entity or business associate, including the right to access or amend certain records containing his, her or their PHI, request restrictions on the use or disclosure of his, her or their PHI, or request an accounting of disclosures of his or her PHI. 13 Table of Co ntents Covered entities and business associates also must comply with the security regulations, which establish requirements for safeguarding the confidentiality, integrity, and availability of PHI that is electronically transmitted or electronically stored.
We have invested resources over time to annotate the phenotypes and sequence the parents of patients, because their genetic sequences can often provide additional diagnostic information, potentially improving the precision of genetic analysis. In addition, the data from more families allows us to continually improve interpretation of genetic code and variants that may cause disease.
We have invested resources over time to annotate the phenotypes and sequence the parents of patients, because their genetic sequences can often provide additional diagnostic information, potentially improving the precision of genetic analysis.
Our longer-term growth strategy is the expansion into whole genome testing for Adult Disorders and Newborn Screening, supported with the launch of a new customer experience platform for non-geneticists, patients and caregivers, and evidence generation to establish the clinical and economic benefits of screening.
As we plan for longer-term growth, we aim to bring whole genome newborn screening to 5 Table of Co ntents the market, supported with the launch of a new customer experience platform for non-geneticists, patients and caregivers, and evidence generation to establish the clinical and economic benefits of screening.
If the government intervenes and is ultimately successful in obtaining redress in the matter or if the plaintiff succeeds in obtaining redress without the government’s involvement, then the plaintiff will receive a percentage of the recovery. Several states have enacted comparable false claims laws which may be broader in scope and apply regardless of payor.
If the government intervenes and is ultimately successful in obtaining redress in the matter or if the plaintiff succeeds in obtaining redress without the government’s involvement, then the plaintiff will receive a percentage of the recovery.
Our Strategy We believe that the span and depth of our experience and dataset allows us to return more positive findings and thus clinical utility both immediately and over time through reanalysis. Importantly, we believe that we return fewer uncertain findings compared to public data sets, which makes our analysis easier to interpret outside of the medical genetics community.
Our Strategy We believe that the span and depth of our experience and dataset allows us to return more positive findings and thus clinical utility, both immediately and over time through reanalysis, than other sources.
However, changes in our product and payor mix might cause these historical seasonal patterns to be different than future patterns of revenue or financial performance. For information regarding our customer concentration in relation to certain of the Company’s third-party payors, see Note 2, “ Summary of Significant Accounting Policies ” in the notes to our consolidated financial statements.
For information regarding our customer concentration in relation to certain of the Company’s third-party payors, see Note 2, “ Summary of Significant Accounting Policies ” in the notes to our consolidated financial statements.
It also tasks HHS with establishing a methodology whereby harmed individuals who were the victims of breaches of unsecured PHI may receive a percentage of the civil monetary penalty paid by the violator. Further, there are a number of state laws regarding the privacy and security of health information and personal data that are applicable to our clinical laboratories.
It also tasks HHS with establishing a methodology whereby harmed individuals who were the victims of breaches of unsecured PHI may receive a percentage of the civil monetary penalty paid by the violator.
We believe we have more expertly annotated disease-causing variants than the largest public archive. Internally developed with over one million sequenced specimens, our database is designed to lead to increasingly reliable diagnostic test results. The structured gene-disease knowledge curated by our team of experts is powering automated interpretation and reporting built to handle genomic data at scale.
In addition, the data from more families allows us to continually improve interpretation of genetic code and variants that may cause disease. We believe we have more expertly annotated disease-causing variants than the largest public archive. Internally developed with over one million sequenced specimens, our database is designed to lead to increasingly reliable diagnostic test results.
Violation of these corporate practice of medicine prohibitions may result in civil or criminal fines, as well as sanctions imposed against us and/or the professional through licensure proceedings. 11 Table of Contents Other Regulatory Requirements We are subject to laws and regulations related to the protection of the environment, the health and safety of employees and the handling, transportation and disposal of regulated medical waste, hazardous waste and biohazardous waste, including chemical, biological agents and compounds, blood and bone marrow samples and other human tissue, and radioactive materials.
Other Regulatory Requirements We are subject to laws and regulations related to the protection of the environment, the health and safety of employees and the handling, transportation and disposal of regulated medical waste, hazardous waste and biohazardous waste, including chemical, biological agents and compounds, blood and bone marrow samples and other human tissue, and radioactive materials. For example, the U.S.
In particular, a covered entity must notify any individual whose unsecured PHI is breached according to the specifications set forth in the breach notification rule. A covered entity must also notify the Secretary of HHS and, under certain circumstances, the media of a breach of unsecured PHI.
A covered entity must also notify the Secretary of HHS and, under certain circumstances, the media of a breach of unsecured PHI.
(“Sema4 Holdings”)); • “Legacy GeneDx” refer to GeneDx, LLC, a Delaware limited liability company (formerly, GeneDx, Inc., a New Jersey corporation), which we acquired on April 29, 2022 (the “Acquisition”); • “Legacy Sema4” refer to Mount Sinai Genomics, Inc. d/b/a as Sema4, a Delaware corporation, which consummated the business combination with CM Life Sciences, Inc.
Business Unless otherwise stated in this Annual Report or the context otherwise requires, references to: • “GeneDx Holdings” refer to GeneDx Holdings Corp., a Delaware corporation; • “Legacy GeneDx” refer to GeneDx, LLC, a Delaware limited liability company, which we acquired on April 29, 2022 (the “Acquisition”); • “Legacy Sema4” refer to Sema4 OpCo Inc., a Delaware corporation, which consummated the business combination with CM Life Sciences, Inc.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeOur failure to remedy these matters could result in a material misstatement of our financial statements. • We may be unable to realize the level of the anticipated benefits that we expect from exiting businesses and restructuring our operations, which may adversely impact our business and results of operations. 19 Table of Contents • Future changes in FDA enforcement discretion for LDTs could subject our operations to much more significant regulatory requirements. • Compliance with the HIPAA security, privacy and breach notification regulations may increase our costs. • We face uncertainty related to healthcare reform, pricing, coverage and reimbursement, which could reduce our revenue. • Our inability to effectively protect our proprietary products, processes, and technologies, including the confidentiality of our trade secrets, could harm our competitive position. • Security breaches, privacy issues, loss of data and other incidents could compromise sensitive, protected, or personal information related to our business, could prevent it from accessing critical information, and could expose it to regulatory liability, which could adversely affect our business.
Biggest changeAs a result, our projected revenues, market share, expenses and profitability may differ materially from our expectations in any given quarter or fiscal year. • Uncertainty in the development and commercialization of our enhanced or new tests or services could materially adversely affect our business, financial condition and results of operations. • We currently use, and in the future expect to increase our use of, information and rights from customers, strategic partners, and collaborators for several aspects of our operations, and if we cannot maintain current and enter new relationships with these parties with adequate access and authorization to such information, our business will suffer. • Our operating results could be subject to significant fluctuation, which could increase the volatility of our stock and warrant prices and cause losses to our stockholders. • We may be unable to realize the level of the anticipated benefits that we expect from exiting businesses and restructuring our operations, which may adversely impact our business and results of operations. • Changes in FDA enforcement discretion for LDTs could subject our operations to much more significant regulatory requirements. • Compliance with the HIPAA security, privacy and breach notification regulations may increase our costs. • We face uncertainty related to healthcare reform, pricing, coverage and reimbursement, which could reduce our revenue. • Our inability to effectively protect our proprietary products, processes, and technologies, including the confidentiality of our trade secrets, could harm our competitive position. 18 Table of Co ntents • Security breaches, privacy issues, loss of data and other incidents could compromise sensitive, protected, or personal information related to our business, could prevent it from accessing critical information, and could expose it to regulatory liability, which could adversely affect our business.
Parts 11, 50, 54, 56, 58 and 812, and all equivalent legal requirements in other jurisdictions. • the federal Anti-Kickback Statute, which prohibits knowingly and willfully offering, paying, soliciting or receiving remuneration, directly or indirectly, overtly or covertly, in cash or in kind, to induce or in return for the referral of an individual, for the furnishing of or arrangement for the furnishing of any item or service for which payment may be made in whole or in part by a federal healthcare program, or the purchasing, leasing, ordering, arranging for, or recommend purchasing, leasing or ordering, any good, item or service for which payment may be made, in whole or in part, under a federal healthcare program; • EKRA, which prohibits payments for referrals to recovery homes, clinical treatment facilities, and laboratories and reaches beyond federal health care programs, to include private insurance; • the federal physician self-referral law, known as the Stark Law, which prohibits a physician from making a referral to an entity 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 40 Table of Contents unless an exception applies, and prohibits an entity from billing for designated health services furnished pursuant to a prohibited referral; • the federal False Claims Act, which imposes liability on any person or entity that, among other things, knowingly presents, or causes to be presented, a false or fraudulent claim for payment to the federal government; • 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 HIPAA fraud and abuse provisions, which create new federal criminal statutes that prohibit, among other things, defrauding health care benefit programs, willfully obstructing a criminal investigation of a healthcare offense and falsifying or concealing a material fact or making any materially false statements in connection with the payment for healthcare benefits, items or services; • other federal and state fraud and abuse laws, such as anti-kickback laws, prohibitions on self-referral, fee-splitting restrictions, insurance fraud laws, anti-markup laws, prohibitions on the provision of tests at no or discounted cost to induce physician or patient adoption, and false claims acts, which may extend to services reimbursable by any third-party payor, including private insurers; • the 21st Century Cures Act information blocking prohibition, which prohibits covered actors from engaging in certain practices that are likely to interfere with the access, exchange, or use of electronic health information; • the Physician Payments Sunshine Act and similar state laws that require reporting of certain payments and other transfers of value made by applicable manufacturers, directly or indirectly, to or on behalf of covered recipients including physicians (defined to include doctors of medicine, osteopathy, dentists, optometrists, podiatrists and chiropractors), physician assistants, nurse practitioners, clinical nurse specialists, certified registered nurse anesthetists, anesthesiologist assistants, certified nurse midwives and teaching hospitals as well as ownership and investment interests held by physicians and their immediate family members; • state laws that limit or prohibit the provision of certain payments and other transfers of value to certain covered healthcare providers; • the prohibition on reassignment of Medicare claims, which, subject to certain exceptions, precludes the reassignment of Medicare claims to any other party; • state laws that prohibit other specified practices, such as billing clinicians for testing that they order; waiving coinsurance, copayments, deductibles and other amounts owed by patients; billing a state Medicaid program at a price that is higher than what is charged to one or more other payors; • similar foreign laws and regulations that may apply to us in the countries in which we operate or may operate in the future; and • laws that relate to maintaining accurate information and control over activities that may fall within the purview of the U.S.
Parts 11, 50, 54, 56, 58 and 812, and all equivalent legal requirements in other jurisdictions; • the federal Anti-Kickback Statute, which prohibits knowingly and willfully offering, paying, soliciting or receiving remuneration, directly or indirectly, overtly or covertly, in cash or in kind, to induce or in return for the referral of an individual, for the furnishing of or arrangement for the furnishing of any item or service for which payment may be made in whole or in part by a federal healthcare program, or the purchasing, leasing, ordering, arranging for, or recommend purchasing, leasing or ordering, any good, item or service for which payment may be made, in whole or in part, under a federal healthcare program; • EKRA, which prohibits payments for referrals to recovery homes, clinical treatment facilities, and laboratories and reaches beyond federal health care programs, to include private insurance; • the federal physician self-referral law, known as the Stark Law, which prohibits a physician from making a referral to an entity 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 unless an exception applies, and prohibits an entity from billing for designated health services furnished pursuant to a prohibited referral; • the federal False Claims Act, which imposes liability on any person or entity that, among other things, knowingly presents, or causes to be presented, a false or fraudulent claim for payment to the federal government; • 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 HIPAA fraud and abuse provisions, which create new federal criminal statutes that prohibit, among other things, defrauding health care benefit programs, willfully obstructing a criminal investigation of a healthcare offense and falsifying or concealing a material fact or making any materially false statements in connection with the payment for healthcare benefits, items or services; • other federal and state fraud and abuse laws, such as anti-kickback laws, prohibitions on self-referral, fee-splitting restrictions, insurance fraud laws, anti-markup laws, prohibitions on the provision of tests at no or discounted cost to induce physician or patient adoption, and false claims acts, which may extend to services reimbursable by any third-party payor, including private insurers; • the 21st Century Cures Act information blocking prohibition, which prohibits covered actors from engaging in certain practices that are likely to interfere with the access, exchange, or use of electronic health information; 37 Table of Co ntents • the Physician Payments Sunshine Act and similar state laws that require reporting of certain payments and other transfers of value made by applicable manufacturers, directly or indirectly, to or on behalf of covered recipients including physicians (defined to include doctors of medicine, osteopathy, dentists, optometrists, podiatrists and chiropractors), physician assistants, nurse practitioners, clinical nurse specialists, certified registered nurse anesthetists, anesthesiologist assistants, certified nurse midwives and teaching hospitals as well as ownership and investment interests held by physicians and their immediate family members; • state laws that limit or prohibit the provision of certain payments and other transfers of value to certain covered healthcare providers; • the prohibition on reassignment of Medicare claims, which, subject to certain exceptions, precludes the reassignment of Medicare claims to any other party; • state laws that prohibit other specified practices, such as billing clinicians for testing that they order; waiving coinsurance, copayments, deductibles and other amounts owed by patients; billing a state Medicaid program at a price that is higher than what is charged to one or more other payors; • similar foreign laws and regulations that may apply to us in the countries in which we operate or may operate in the future; and • laws that relate to maintaining accurate information and control over activities that may fall within the purview of the U.S.
If required, the regulatory marketing authorization process required to bring our current or future LDTs into compliance may involve, among other things, successfully completing additional clinical validations and submitting to and obtaining clearance from the FDA for a premarket clearance (510(k)) submission or authorization for a de novo or approval of a premarket approval.
If required, the regulatory marketing authorization process required to bring our current or future LDTs into compliance may involve, among other things, successfully completing additional clinical validations and submitting to and obtaining clearance from the FDA for a premarket clearance (510(k)) submission or authorization for a de novo submission or approval of a premarket approval application.
We are also required to comply with FDA regulations, including with respect to our labeling and promotion activities. In addition, advertising and marketing of our clinical products are subject to regulation by the Federal Trade Commission (the “FTC”), and advertising of laboratory services is regulated by certain state laws.
We are also required to comply with applicable FDA regulations, including with respect to our labeling and promotion activities. In addition, advertising and marketing of our clinical products are subject to regulation by the Federal Trade Commission (the “FTC”), and advertising of laboratory services is regulated by certain state laws.
These provisions will include: • no cumulative voting in the election of directors, which limits the ability of minority stockholders to elect director candidates; • a classified board of directors with three-year staggered terms, which could delay the ability of stockholders to change the membership of a majority of the Board; • the requirement that directors may only be removed from the Board for cause; • the right of our Board to elect a director to fill a vacancy created by the expansion of our Board or the resignation, death or removal of a director in certain circumstances, which prevents stockholders from being able to fill vacancies on our Board; • a prohibition on stockholder action by written consent, which forces stockholder action to be taken at an annual or special meeting of our stockholders; • a prohibition on stockholders calling a special meeting and the requirement that a meeting of stockholders may only be called by a majority of the board, our chairman of the board or our chief executive officer and may not be called by any other person, which may delay the ability of our stockholders to force consideration of a proposal or to take action, including the removal of directors; • the requirement that changes or amendments to certain provisions of our Charter must be approved by holders of at least two-thirds of our Class A common stock; and • advance notice procedures that stockholders must comply with in order to nominate candidates to our Board or to propose matters to be acted upon at a meeting of stockholders, which may discourage or deter a potential acquirer from conducting a solicitation of proxies to elect the acquirer’s own slate of directors or otherwise attempting to obtain control of us.
These provisions will include: • no cumulative voting in the election of directors, which limits the ability of minority stockholders to elect director candidates; • a classified board of directors with three-year staggered terms, which could delay the ability of stockholders to change the membership of a majority of the Board; • the requirement that directors may only be removed from the Board for cause; • the right of our Board to elect a director to fill a vacancy created by the expansion of our Board or the resignation, death or removal of a director in certain circumstances, which prevents stockholders from being able to fill vacancies on our Board; • a prohibition on stockholder action by written consent, which forces stockholder action to be taken at an annual or special meeting of our stockholders; • a prohibition on stockholders calling a special meeting and the requirement that a meeting of stockholders may only be called by a majority of the board, our chairman of the board or our chief executive officer and may not be called by any other person, which may delay the ability of our stockholders to force consideration of a proposal or to take action, including the removal of directors; 48 Table of Co ntents • the requirement that changes or amendments to certain provisions of our Charter must be approved by holders of at least two-thirds of our Class A common stock; and • advance notice procedures that stockholders must comply with in order to nominate candidates to our Board or to propose matters to be acted upon at a meeting of stockholders, which may discourage or deter a potential acquirer from conducting a solicitation of proxies to elect the acquirer’s own slate of directors or otherwise attempting to obtain control of us.
Our revenues and results of operations may fluctuate significantly, depending on a variety of factors, including the following: • our success in marketing and selling, and changes in demand for, our tests, and the level of reimbursement and collection obtained for such tests; • seasonal and environmental variations affecting healthcare provider recommendations for our tests and patient compliance with healthcare provider recommendations, including without limitation holidays, weather events, and 32 Table of Contents circumstances such as the outbreak of coronavirus or influenza that may limit patient access to medical practices for diagnostic tests and preventive services; • our success in collecting payments from third-party payors, patients and collaborative partners, variation in the timing of these payments and recognition of these payments as revenues; • the pricing of our tests, including potential changes in CMS or other reimbursement rates; • circumstances affecting our ability to provide our tests, including weather events, supply shortages, or regulatory or other circumstances that adversely affect our ability to manufacture our tests or process tests in our clinical laboratories; • circumstances affecting our ability to provide health information and data science services to biopharma partners, including software or hardware failures, insufficient capacity, regulatory changes or other circumstances that adversely affect the ability of us to deliver these services; • fluctuations in the amount and timing of our selling and marketing costs and our ability to manage costs and expenses and effectively implement our business; • our research and development activities; and • our ability to collect, use, and commercialize data in a changing regulatory environment at a time when the public is growing increasingly concerned about privacy.
Our operating results may fluctuate significantly, depending on a variety of factors, including the following: • our success in marketing and selling, and changes in demand for, our tests, and the level of reimbursement and collection obtained for such tests; • seasonal and environmental variations affecting healthcare provider recommendations for our tests and patient compliance with healthcare provider recommendations, including without limitation holidays, weather events, and circumstances such as the outbreak of coronavirus or influenza that may limit patient access to medical practices for diagnostic tests and preventive services; • our success in collecting payments from third-party payors, patients and collaborative partners, variation in the timing of these payments and recognition of these payments as revenues; • the pricing of our tests, including potential changes in CMS or other reimbursement rates; • circumstances affecting our ability to provide our tests, including weather events, supply shortages, or regulatory or other circumstances that adversely affect our ability to manufacture our tests or process tests in our clinical laboratories; • circumstances affecting our ability to provide health information and data science services to biopharma partners, including software or hardware failures, insufficient capacity, regulatory changes or other circumstances that adversely affect the ability of us to deliver these services; • fluctuations in the amount and timing of our selling and marketing costs and our ability to manage costs and expenses and effectively implement our business; • our research and development activities; and • our ability to collect, use, and commercialize data in a changing regulatory environment at a time when the public is growing increasingly concerned about privacy.
Factors affecting the trading price of our securities may include: • actual or anticipated fluctuations in our quarterly financial results or the quarterly financial results of companies perceived to be similar to us; • changes in the market’s expectations about our operating results; • the public’s reaction to our press releases, our other public announcements and our filings with the SEC; • speculation in the press or investment community; • announcements of technological innovation, new products, acquisitions, strategic alliances, significant agreements by us or competitors; • success of competitors; 50 Table of Contents • our operating results falling below our financial guidance or other projections or failing to meet the expectation of securities analysts or investors in a particular period; • changes in financial estimates and recommendations by securities analysts concerning us or the market in general; • operating and stock price performance of other companies that investors deem comparable to us; • our ability to market new and enhanced products on a timely basis; • changes in laws and regulations affecting our business; • commencement of, or involvement in, litigation involving us; • changes in our capital structure, such as future issuances of securities or the incurrence of additional debt; • the volume of shares of our Class A common stock available for public sale; • any major change in our Board or management; • sales of substantial amounts of Class A common stock by our directors, officers or significant stockholders or the perception that such sales could occur; • the expiration of the market stand-off or contractual lock-up agreements; • the realization of any of the risk factors described herein; • additions or departures of key personnel; • failure to comply with the requirements of the Nasdaq; • failure to comply with the Sarbanes-Oxley Act or other laws or regulations; • actual, potential or perceived control, accounting or reporting problems; • changes in accounting principles, policies and guidelines; and • general economic and political conditions such as recessions, rising inflation and interest rates, uncertainty with respect to the U.S. federal budget, global conflicts such as the war in Ukraine and the war in Israel, fuel prices, international currency fluctuations and acts of war or terrorism.
Factors affecting the trading price of our securities may include: • actual or anticipated fluctuations in our quarterly financial results or the quarterly financial results of companies perceived to be similar to us; • changes in the market’s expectations about our operating results; • the public’s reaction to our press releases, our other public announcements and our filings with the SEC; • speculation in the press or investment community; • announcements of technological innovation, new products, acquisitions, strategic alliances, significant agreements by us or competitors; • success of competitors; • our operating results falling below our financial guidance or other projections or failing to meet the expectation of securities analysts or investors in a particular period; • changes in financial estimates and recommendations by securities analysts concerning us or the market in general; • operating and stock price performance of other companies that investors deem comparable to us; • our ability to market new and enhanced products on a timely basis; • changes in laws and regulations affecting our business; • commencement of, or involvement in, litigation involving us; • changes in our capital structure, such as future issuances of securities or the incurrence of additional debt; • the volume of shares of our Class A common stock available for public sale; • any major change in our Board or management; • sales of substantial amounts of Class A common stock by our directors, officers or significant stockholders or the perception that such sales could occur; • the expiration of any market stand-off or contractual lock-up agreements; • the realization of any of the risk factors described herein; • additions or departures of key personnel; • failure to comply with the requirements of the Nasdaq; • failure to comply with the Sarbanes-Oxley Act or other laws or regulations; • actual, potential or perceived control, accounting or reporting problems; • changes in accounting principles, policies and guidelines; and • general economic and political conditions such as recessions, fluctuating inflation, interest and tariff rates, uncertainty with respect to the U.S. federal budget, rising global tensions, global conflicts such as the war in Ukraine, fuel prices, international currency fluctuations and acts of war or terrorism.
As of December 31, 2023 and December 31, 2022, the Company performed an evaluation to determine whether a valuation allowance was needed. Based on the Company’s analysis, which considered all available evidence, both positive and negative, the Company determined that it is more likely than not that a significant portion of its deferred tax assets will not be realized.
As of December 31, 2024 and December 31, 2023, the Company performed an evaluation to determine whether a valuation allowance was needed. Based on the Company’s analysis, which considered all available evidence, both positive and negative, the Company determined that it is more likely than not that a significant portion of its deferred tax assets will not be realized.
Our present and future funding requirements will depend on many factors, including: • our ability to achieve revenue growth; • our rate of progress in establishing payor coverage and reimbursement arrangements with commercial third-party payors and government payors; • the cost of expanding our laboratory operations and offerings, including our sales and marketing efforts; 23 Table of Contents • our rate of progress in, and cost of the sales and marketing activities associated with, establishing adoption of our services for biopharma partners; • our rate of progress in, and cost of research and development activities associated with, products and services in research and early development; • the effect of competing technological, product and market developments; • costs related to international expansion; and • the potential cost of and delays in product development as a result of any regulatory oversight applicable to our products and services.
Our present and future funding requirements will depend on many factors, including: • our ability to achieve revenue growth; • our rate of progress in establishing payor coverage and reimbursement arrangements with commercial third-party payors and government payors; • the cost of expanding our laboratory operations and offerings, including our sales and marketing efforts; • our rate of progress in, and cost of the sales and marketing activities associated with, establishing adoption of our services for biopharma partners; • our rate of progress in, and cost of research and development activities associated with, products and services in research and early development; • the effect of competing technological, product and market developments; • costs related to international expansion; and • the potential cost of and delays in product development as a result of any regulatory oversight applicable to our products and services.
To varying degrees some of those services are proprietary to how each platform performs in connection with our current usage of the services. Nearly all of our data storage and analytics are conducted on, and the data and content we generate on our platforms are processed through, servers hosted by these providers, particularly Azure, AWS and GCP.
To varying degrees some of those services are proprietary to how each platform performs in connection with our current usage of the services. Nearly all of our data storage and analytics are conducted on, and the data and content we generate on our platforms are processed through, servers hosted by these providers, particularly Azure, AWS and OCI.
Myriad Genetics, Inc, that an isolated genomic DNA sequence is not patent eligible, but complimentary DNA, or “cDNA,” is eligible. The Prometheus and Myriad decisions, as well as subsequent case law, affect the legal concept of subject matter eligibility by seemingly narrowing the scope of the statute defining patentable inventions.
Myriad Genetics, Inc, that an isolated genomic DNA sequence is not patent eligible, but complementary DNA, or “cDNA,” is eligible. The Prometheus and Myriad decisions, as well as subsequent case law, affect the legal concept of subject matter eligibility by seemingly narrowing the scope of the statute defining patentable inventions.
Included on our consolidated balance sheet as of December 31, 2023, are liabilities related to our public and private warrants which are each remeasured at fair value at each balance sheet date, with a resulting non-cash gain or loss related to the change in the fair value being recognized in earnings in the statement of operations.
Included on our consolidated balance sheet as of December 31, 2024, are liabilities related to our public and private warrants which are each remeasured at fair value at each balance sheet date, with a resulting non-cash gain or loss related to the change in the fair value being recognized in earnings in the statement of operations.
If we do not continue to innovate and provide products and services that are useful to customers, including providers and patients, and partners, we may not remain competitive, which could harm our business and operating results. • If third-party payors, including managed care organizations, private health insurers and government health plans, do not provide adequate reimbursement for our tests, or seek to amend or renegotiate their fee reimbursement schedules, or if we are unable to comply with their requirements for reimbursement, our commercial success could be negatively affected. • We have limited experience with the development and commercialization of our databases and our health information and genomic platforms. • We may need to raise additional capital to fund our existing operations, develop additional products and services, commercialize new products and services or expand our operations. • If we fail to comply with federal and state laboratory licensing requirements or standards, we could lose the ability to perform our tests or experience disruptions to our business. • We rely on highly skilled personnel in a broad array of disciplines and, if we are unable to hire, retain or motivate these individuals, or maintain our corporate culture, we may not be able to maintain the quality of our services or grow effectively. • We rely on a limited number of suppliers or, in some cases, single suppliers, for some of our laboratory instruments and materials and may not be able to find replacements or immediately transition to alternative suppliers or service providers. • We rely on a limited number of product and service providers for data infrastructure and analytics capabilities, and any disruption of, or interference with, our use of data and workflow services could adversely affect our business, financial condition, and results of operations, and we may not be able to find replacements or immediately transition to alternative products or service providers. • Our projections are subject to significant risks, assumptions, estimates and uncertainties, including assumptions regarding adoption of our products and services.
If we do not continue to innovate and provide products and services that are useful to customers, including providers and patients, and partners, we may not remain competitive, which could harm our business and operating results. • If third-party payors, including managed care organizations, private health insurers and government health plans, do not provide adequate reimbursement for our tests, or seek to amend or renegotiate their fee reimbursement schedules, or if we are unable to comply with their requirements for reimbursement, our commercial success could be negatively affected. • We may need to raise additional capital to fund our existing operations, develop additional products and services, commercialize new products and services or expand our operations. • If we fail to comply with federal and state laboratory licensing requirements or standards, we could lose the ability to perform our tests or experience disruptions to our business. • We rely on highly skilled personnel in a broad array of disciplines and, if we are unable to hire, retain or motivate these individuals, or maintain our corporate culture, we may not be able to maintain the quality of our services or grow effectively. • We rely on a limited number of suppliers or, in some cases, single suppliers, for some of our laboratory instruments and materials and may not be able to find replacements or immediately transition to alternative suppliers or service providers. • We rely on a limited number of product and service providers for data infrastructure and analytics capabilities, and any disruption of, or interference with, our use of data and workflow services could adversely affect our business, financial condition, and results of operations, and we may not be able to find replacements or immediately transition to alternative products or service providers. • Our projections are subject to significant risks, assumptions, estimates and uncertainties, including assumptions regarding adoption of our products and services.
Some of our vendor agreements may be unilaterally terminated by the licensor for convenience, including with respect to Azure, AWS or GCP, and if such agreements are terminated, we may not be able to enter into similar relationships in the future on reasonable terms or at all.
Some of our vendor agreements may be unilaterally terminated by the licensor for convenience, including with respect to Azure, AWS or OCI, and if such agreements are terminated, we may not be able to enter into similar relationships in the future on reasonable terms or at all.
Despite the precautionary measures we have taken to prevent unanticipated problems that could affect our information technology and telecommunications systems, failures or significant downtime of these systems or those used by our collaborators or subcontractors could prevent it from conducting our comprehensive 49 Table of Contents screening analysis, clinical diagnostics and drug discovery, preparing and providing reports to researchers, clinicians and our collaborators, billing payors, handling physician inquiries, conducting research and development activities and managing the administrative aspects of our business.
Despite the precautionary measures we have taken to prevent unanticipated problems that could affect our information technology and telecommunications systems, failures or significant downtime of these systems or those used by our collaborators or subcontractors could prevent it from conducting our comprehensive screening analysis, clinical diagnostics and drug discovery, preparing and providing reports to researchers, clinicians and our collaborators, billing payors, handling physician inquiries, conducting research and development activities and managing the administrative aspects of our business.
Risks Related to Being a Public Company We will incur increased costs and demands on management as a result of compliance with laws and regulations applicable to public companies, which could harm our operating results. As a public company, we incur significant legal, accounting and other expenses, including costs associated with public company reporting requirements.
Risks Related to Being a Public Company We incur significant costs and demands on management as a result of compliance with laws and regulations applicable to public companies, which could harm our operating results. As a public company, we incur significant legal, accounting and other expenses, including costs associated with public company reporting requirements.
Furthermore, pending legislative proposals, if passed, such as the VALID Act, could create new or different regulatory and compliance burdens on us and could have a negative effect on our ability to keep products on the market or develop new products, which could have a material effect on our business.
Furthermore, pending legislative proposals, if enacted, such as the VALID Act, could create new or different regulatory and compliance burdens on us and could have a negative effect on our ability to keep products on the market or develop new products, which could have a material effect on our business.
Casdin, one of our directors, is affiliated with Casdin Partners and CMLS Holdings, LLC (“CMLS Holdings”), which owned approximately 1% of our outstanding shares of our Class A common stock as of December 31, 2023, and Mr. Keith Meister, one of our directors, is affiliated with Corvex Management and CMLS Holdings.
Casdin, one of our directors, is affiliated with Casdin Partners and CMLS Holdings, LLC (“CMLS Holdings”), which owned approximately 1% of our outstanding shares of our Class A common stock as of December 31, 2024, and Mr. Keith Meister, one of our directors, is affiliated with Corvex Management and CMLS Holdings.
Existing legislation, and possible future legal and regulatory changes, including potential repeal or modification of the ACA, 41 Table of Contents elimination of penalties regarding the individual mandate for coverage, or approval of health plans that allow lower levels of coverage for preventive services, could materially change the structure and finances of the health insurance system and the methodology for reimbursing medical services, drugs and devices, including our current and future products and services.
Existing legislation, and possible future legal and regulatory changes, including potential repeal or modification of the ACA, elimination of penalties regarding the individual mandate for coverage, or approval of health plans that allow lower levels of coverage for preventive services, could materially change the structure and finances of the health insurance system and the methodology for reimbursing medical services, drugs and devices, including our current and future products and services.
The JOBS Act permits “emerging growth companies” like us to take advantage of certain exemptions from various reporting requirements applicable to other public companies that are not emerging growth companies. We currently qualify as an “emerging growth company” as defined in Section 2(a)(19) of the Securities Act, as modified by the Jumpstart Our Business Startups Act (“JOBS”).
The JOBS Act permits “emerging growth companies” like us to take advantage of certain exemptions from various reporting requirements applicable to other public companies that are not emerging growth companies. We currently qualify as an “emerging growth company” as defined in Section 2(a)(19) of the Securities Act, as modified by the Jumpstart Our Business Startups Act (the “JOBS Act”).
A weak declining or inflationary economy could also strain 27 Table of Contents our collaborators and suppliers, resulting in supply disruption, or cause delays in their payments to us. For example, we have experienced and may continue to experience interruptions in the supply of the diagnostic testing materials necessary for our testing products and material and shipping cost increases.
A weak declining or inflationary economy could also strain our collaborators and suppliers, resulting in supply disruption, or cause delays in their payments to us. For example, we have experienced and may continue to experience interruptions in the supply of the diagnostic testing materials necessary for our testing products and material and shipping cost increases.
Because EKRA is a relatively new law, there is no agency 38 Table of Contents guidance and only two courts have addressed the application of EKRA and those courts reached opposite conclusions. One Court ruled that the commission-based compensation provisions of a laboratory employee’s contract did not violate EKRA while the other court expressly disagreed.
Because EKRA is a relatively new law, there is no agency guidance and only two courts have addressed the application of EKRA and those courts reached opposite conclusions. One Court ruled that the commission-based compensation provisions of a laboratory employee’s contract did not violate EKRA while the other court expressly disagreed.
Furthermore, in accordance with our Bylaws, unless we consent in writing to the selection of an alternative forum, the federal district courts of the U.S. will be, to the fullest extent permitted by law, the 53 Table of Contents exclusive forum for the resolution of any complaint asserting a cause of action arising under the Securities Act.
Furthermore, in accordance with our Bylaws, unless we consent in writing to the selection of an alternative forum, the federal district courts of the U.S. will be, to the fullest extent permitted by law, the exclusive forum for the resolution of any complaint asserting a cause of action arising under the Securities Act.
We cannot eliminate the risk of accidental contamination or injury to employees or third parties from the use, storage, handling or disposal of these materials. 35 Table of Contents In the event of contamination or injury, we could be held liable for any resulting damages, and any liability could exceed our resources or any applicable insurance coverage we may have.
We cannot eliminate the risk of accidental contamination or injury to employees or third parties from the use, storage, handling or disposal of these materials. In the event of contamination or injury, we could be held liable for any resulting damages, and any liability could exceed our resources or any applicable insurance coverage we may have.
Our Class A common stock and public warrants are listed on the Nasdaq under the symbols “WGS” and “WGSWW,” respectively. However, we cannot ensure that we will be able to satisfy the continued listing standards of Nasdaq, including the minimum closing bid price requirement, going forward.
Our Class A common stock and public warrants are listed on the Nasdaq Global Select Market under the symbols “WGS” and “WGSWW,” respectively. However, we cannot ensure that we will be able to satisfy the continued listing standards of Nasdaq, including the minimum closing bid price requirement, going forward.
If we provide products or services with undiscovered errors to our customers, our clinical diagnostics 42 Table of Contents may falsely indicate a patient has a disease or genetic variant, fail to assess a patient’s risk of getting a disease or having a child with a disease, or fail to detect disease or variant in a patient who requires or could benefit from treatment or intervention.
If we provide products or services with undiscovered errors to our customers, our clinical diagnostics may falsely indicate a patient has a disease or genetic variant, fail to assess a patient’s risk of getting a disease or having a child with a disease, or fail to detect disease or variant in a patient who requires or could benefit from treatment or intervention.
In addition, our agreements with some of our customers, suppliers, and other entities with whom we do business require us to defend or indemnify these parties to the extent they become involved in patent infringement claims, including the types of 45 Table of Contents claims described in this risk factor.
In addition, our agreements with some of our customers, suppliers, and other entities with whom we do business require us to defend or indemnify these parties to the extent they become involved in patent infringement claims, including the types of claims described in this risk factor.
Some of our systems are not fully redundant, and disaster recovery planning cannot account for all eventualities. 46 Table of Contents The occurrence of a natural disaster, closure of a facility, or other unanticipated problems at our data centers could result in lengthy interruptions in our service.
Some of our systems are not fully redundant, and disaster recovery planning cannot account for all eventualities. The occurrence of a natural disaster, closure of a facility, or other unanticipated problems at our data centers could result in lengthy interruptions in our service.
If our diagnostic solutions or the technology 30 Table of Contents underlying our current and future diagnostic solutions do not receive sufficient favorable exposure in peer-reviewed publications, the rate of clinician adoption of our diagnostic solutions and positive reimbursement coverage determinations for our diagnostic solutions could be negatively affected.
If our diagnostic solutions or the technology underlying our current and future diagnostic solutions do not receive sufficient favorable exposure in peer-reviewed publications, the rate of clinician adoption of our diagnostic solutions and positive reimbursement coverage determinations for our diagnostic solutions could be negatively affected.
In particular, the clinical laboratory and healthcare industry is subject to significant governmental certification and licensing regulations, as well as federal, state and foreign laws regarding: • test ordering and billing practices; • marketing, sales and pricing practices; • health information privacy and security, including HIPAA and comparable state laws; • insurance; • anti-markup legislation; • fraud and abuse; and 36 Table of Contents • consumer protection.
In particular, the clinical laboratory and healthcare industry is subject to significant governmental certification and licensing regulations, as well as federal, state and foreign laws regarding: • test ordering and billing practices; • marketing, sales and pricing practices; • health information privacy and security, including HIPAA and comparable state laws; • insurance; • anti-markup legislation; • fraud and abuse; and • consumer protection.
If for any reason our arrangements with our data centers or third-party providers are terminated or interrupted, such termination or interruption could adversely affect our business, financial condition and results of operations. We exercise little control over these providers, which increases our vulnerability to problems with the services they provide.
If for any reason our arrangements with our data centers or third-party providers are terminated or interrupted, such termination or interruption could adversely affect our business, financial 26 Table of Co ntents condition and results of operations. We exercise little control over these providers, which increases our vulnerability to problems with the services they provide.
The taxes imposed by new legislation, cost reduction measures and the expansion in the government’s role in the U.S. healthcare industry may result in decreased profits to us, which may adversely affect our business, financial condition and results of operations. PAMA presents significant uncertainty for future CMS reimbursement rates for our tests.
The taxes imposed by new legislation, cost reduction measures and the expansion in the government’s role in the 38 Table of Co ntents U.S. healthcare industry may result in decreased profits to us, which may adversely affect our business, financial condition and results of operations. PAMA presents significant uncertainty for future CMS reimbursement rates for our tests.
Among other things, the CCPA confers to California consumers the right to receive notice of the categories of personal information that will be collected by a business, how the business will use and share the personal information, and the third parties who will receive the personal information; the CCPA also confers rights to access, delete, or transfer personal information; and the right to receive equal service and pricing from a business after exercising a consumer right granted by the CCPA.
Among other things, the CCPA confers to California consumers the right to receive notice of the categories of personal information that will be collected by a business, 44 Table of Co ntents how the business will use and share the personal information, and the third parties who will receive the personal information; the CCPA also confers rights to access, delete, or transfer personal information; and the right to receive equal service and pricing from a business after exercising a consumer right granted by the CCPA.
Although HIPAA does not provide for private rights of action, HIPAA gives OCR and the Department of Justice the authority to assess significant fines and other penalties for wrongful use or disclosure of PHI, including potential civil and 37 Table of Contents criminal fines and penalties.
Although HIPAA does not provide for private rights of action, HIPAA gives OCR and the Department of Justice the authority to assess significant fines and other penalties for wrongful use or disclosure of PHI, including potential civil and criminal fines and penalties.
Our compliance may also be subject to governmental review and, in the event of a violation of certain legal requirements, any deficiencies in our policies, procedures, and controls may subject us to increased sanctions that could materially affect our business.
Our compliance may also be subject to governmental review and, in the event of a violation of certain legal requirements, any deficiencies in our policies, procedures, and controls may subject us to increased sanctions that could materially affect our business. Furthermore, the U.S.
The trading prices and valuations of these stocks, and of our securities, may not be predictable. A loss of investor confidence in the market for the stocks of other companies which investors perceive to be similar to us could depress our stock price regardless of our business, prospects, financial conditions or results of operations.
The trading prices and valuations of these stocks, and of our securities, may not be predictable. A loss of investor confidence in the market for the stocks of other 47 Table of Co ntents companies which investors perceive to be similar to us could depress our stock price regardless of our business, prospects, financial conditions or results of operations.
When cleared, authorized or approved, we and our collaborators may market, sell, and distribute our products and services outside of the U.S., and our business would be subject to risks associated with doing business outside of the U.S., including an increase in our expenses and diversion of our management’s attention from the development of future products and services.
When cleared, authorized or approved, we and our collaborators may market, sell, and distribute our products and services outside of the U.S., and our business would be subject to risks associated with doing business outside of the U.S., including an increase in 24 Table of Co ntents our expenses and diversion of our management’s attention from the development of future products and services.
Medicare payments are subject to audit, including through the Comprehensive Error Rate Testing (“CERT”), program, and payments may be recouped by CMS if it is determined that they were improperly made. Currently, a small percentage of our revenues are generated by payments from Medicare.
Medicare payments are subject to audit, including through the Comprehensive Error Rate Testing (“CERT”), 35 Table of Co ntents program, and payments may be recouped by CMS if it is determined that they were improperly made. Currently, a small percentage of our revenues are generated by payments from Medicare.
Those laws, regulations or rules and their interpretation and application may also change from time to time and those changes could have a material 51 Table of Contents adverse effect on our business, investments and results of operations.
Those laws, regulations or rules and their interpretation and application may also change from time to time and those changes could have a material adverse effect on our business, investments and results of operations.
For example, we have an effective shelf registration statement that we filed with the SEC in August of 2022, registering $300 million shares of our Class A common stock and other securities. As of December 31, 2023, approximately $150 million of securities remained available under this registration statement.
For example, we have an effective shelf registration statement that we filed with the SEC in August of 2022, registering $300 million of shares of our Class A common stock and other securities. As of December 31, 2024, approximately $102 million of securities remained available under this registration statement.
If an author or other third party that distributes such open-source software were to allege that we had not complied with the conditions of one or more of these licenses, we could be required to incur significant legal expenses defending against such allegations.
If an author or other third party that distributes such open-source software were to allege 42 Table of Co ntents that we had not complied with the conditions of one or more of these licenses, we could be required to incur significant legal expenses defending against such allegations.
Our management and other personnel will need to devote a substantial amount of time to these compliance and disclosure obligations. If these requirements divert the attention of our management and personnel from other aspects of our business concerns, they could have a material adverse effect on our business, financial condition and results of operations.
Our management and other personnel will need to devote a substantial amount of time to these 46 Table of Co ntents compliance and disclosure obligations. If these requirements divert the attention of our management and personnel from other aspects of our business concerns, they could have a material adverse effect on our business, financial condition and results of operations.
As technologies continue to develop, our competitors may be able to offer products and services that are, or that are 21 Table of Contents seen to be, substantially similar to or better than our current products and services. This may force us to compete in different ways and expend significant resources in order to remain competitive.
As technologies continue to develop, our competitors may be able to offer products and services that are, or that are seen to be, substantially similar to or better than our current products and services. This may force us to compete in different ways and expend significant resources in order to remain competitive.
Enforcing a claim that a party illegally disclosed or 43 Table of Contents misappropriated a trade secret can be difficult, expensive and time-consuming, and the outcome is unpredictable. In addition, trade secrets may be independently developed by others in a manner that could prevent legal recourse by us.
Enforcing a claim that a party illegally disclosed or misappropriated a trade secret can be difficult, expensive and time-consuming, and the outcome is unpredictable. In addition, trade secrets may be independently developed by others in a manner that could prevent legal recourse by us.
Even if successful, the resulting 44 Table of Contents remedy may not adequately compensate us for the harm caused by the breach. These risks are heightened in countries where laws or law enforcement practices may not protect proprietary rights as fully as in the U.S. or Europe.
Even if successful, the resulting remedy may not adequately compensate us for the harm caused by the breach. These risks are heightened in countries where laws or law enforcement practices may not protect proprietary rights as fully as in the U.S. or Europe.
The use of AI applications has resulted in, and may in the future result in, cybersecurity incidents that implicate the personal medical and genetic data of patients analyzed within such applications. Any such cybersecurity incidents related to our use of AI applications to analyze personal data could adversely affect our reputation and results of operations.
The use of AI applications has resulted in, and may in the future result in, cybersecurity incidents that implicate the personal medical and genetic data of patients analyzed within 21 Table of Co ntents such applications. Any such cybersecurity incidents related to our use of AI applications to analyze personal data could adversely affect our reputation and results of operations.
To comply with the requirements of being a public company, we are required to provide management’s assessment on internal controls, and we may need to undertake various actions, such as implementing additional internal controls and procedures and hiring additional accounting or internal audit staff.
To comply with the requirements of being a public company, we are required to provide management’s assessment on internal controls, and we may need to undertake 49 Table of Co ntents various actions, such as implementing additional internal controls and procedures and hiring additional accounting or internal audit staff.
Sales of substantial numbers of such shares in the public market could adversely affect the market price of our Class A common stock. Our warrants are accounted for as liabilities and the changes in value of our warrants could have a material effect on our financial results.
Sales of substantial numbers of such shares in the public market could adversely affect the market price of our Class A common stock. 51 Table of Co ntents Our warrants are accounted for as liabilities and the changes in value of our warrants could have a material effect on our financial results.
CLIA certification is also required in order for us to be eligible to bill state and federal healthcare programs, as well as many private third-party payors, for our tests. We have current CLIA, College of American Pathologists ("CAP"), and other certifications 24 Table of Contents to conduct our tests at our laboratory in Maryland.
CLIA certification is also required in order for us to be eligible to bill state and federal healthcare programs, as well as many private third-party payors, for our tests. We have current CLIA, College of American Pathologists (“CAP”), and other certifications to conduct our tests at our laboratory in Maryland.
As of December 31, 2023, our total gross deferred tax assets were approximately $326 million. Future realization of the tax benefits of existing temporary differences and carryforwards ultimately depends on the existence of sufficient taxable income within the carryforward period.
As of December 31, 2024, our total gross deferred tax assets were approximately $318 million. Future realization of the tax benefits of existing temporary differences and carryforwards ultimately depends on the existence of sufficient taxable income within the carryforward period.
If and when the public warrants become redeemable by us, we may exercise our redemption right even if we are unable to register or qualify the underlying securities for sale under all applicable state 54 Table of Contents securities laws.
If and when the public warrants become redeemable by us, we may exercise our redemption right even if we are unable to register or qualify the underlying securities for sale under all applicable state securities laws.
We may need to raise additional capital to fund our existing operations, develop additional products and services, commercialize new products and services or expand our operations. We have incurred net losses and negative cash flows from operations since its inception, with an accumulated deficit of $1.3 billion as of December 31, 2023.
We may need to raise additional capital to fund our existing operations, develop additional products and services, commercialize new products and services or expand our operations. We have incurred net losses and negative cash flows from operations since our inception, with an accumulated deficit of $1.4 billion as of December 31, 2024.
We continue to face a number of risks relative to protecting this critical information, including loss of access risk, inappropriate disclosure, inappropriate modification, and the risk of our being unable to adequately monitor and modify our controls over our critical information.
We continue to face a number of risks relative to protecting this critical information, including loss of access risk, inappropriate disclosure, inappropriate modification, and the risk 43 Table of Co ntents of our being unable to adequately monitor and modify our controls over our critical information.
In addition, the credit agreement requires us to maintain aggregate unrestricted cash of not less than $5.0 million and minimum levels of quarterly core revenue through the third quarter of 2028.
In addition, the credit agreement requires us to maintain aggregate 22 Table of Co ntents unrestricted cash of not less than $5.0 million and minimum levels of quarterly core revenue through the third quarter of 2028.
Data privacy and security concerns relating to our technology and our practices could damage our reputation, subject it to significant legal and financial exposure, and deter current and potential users or customers from using our products and 48 Table of Contents services.
Data privacy and security concerns relating to our technology and our practices could damage our reputation, subject it to significant legal and financial exposure, and deter current and potential users or customers from using our products and services.
Accordingly, the Company maintained a full valuation allowance as of December 31, 2023 and December 31, 2022.
Accordingly, the Company maintained a full valuation allowance as of December 31, 2024 and December 31, 2023.
We currently rely upon third-party services for data storage and workflow management, including cloud storage solution providers, such as Microsoft Azure (“Azure”), Amazon Web Services (“AWS”), and Google Cloud Platform (“GCP”). We rely on each of these providers to complete several vital workflows in our health information and data science service delivery.
We currently rely upon third-party services for data storage and workflow management, including cloud storage solution providers, such as Microsoft Azure (“Azure”), Amazon Web Services (“AWS”), and Oracle Cloud Infrastructure (“OCI”). We rely on each of these providers to complete several vital workflows in our health information and data science service delivery.
We may seek to grow our business through additional acquisitions of complementary products or technologies and we may from time to time dispose of businesses or assets, and the failure to manage these acquisitions or dispositions, or the failure to integrate acquired businesses with our existing business, could have a material adverse effect on our business, financial condition and operating results.
Risks Related to Acquisitions and Other Strategic Transactions We may seek to grow our business through additional acquisitions of complementary products or technologies and we may from time to time dispose of or discontinue businesses or assets, and the failure to manage these acquisitions or dispositions, or the failure to integrate acquired businesses with our existing business, could have a material adverse effect on our business, financial condition and operating results.
The laws of some foreign countries do not protect proprietary rights to the same extent as the laws of the U.S., and we may encounter difficulties in establishing and enforcing its proprietary rights in some jurisdictions.
The laws of some foreign countries do not protect proprietary 40 Table of Co ntents rights to the same extent as the laws of the U.S., and we may encounter difficulties in establishing and enforcing its proprietary rights in some jurisdictions.
The rapid evolution of AI, including potential government regulation of AI and its various uses, will require significant resources to develop, test and maintain our Centrellis® platform, offerings, services, and features to help us implement AI ethically in order to minimize unintended, harmful impact.
The rapid evolution of AI, including potential government regulation of AI and its various uses, may require significant resources to develop, test and maintain offerings, services, and features to help us implement AI ethically in order to minimize unintended, harmful impact.
Further, we must expend resources to operationalize our existing collaborations with our health system partners, which requires substantial effort in areas such as integrations for testing workflow, electronic medical record, consents, marketing, and billing.
Further, we must expend resources to operationalize our existing collaborations with our health system partners, which requires 29 Table of Co ntents substantial effort in areas such as integrations for testing workflow, electronic medical record, consents, marketing, and billing.
Furthermore, on December 1, 2022, the U.S. Department of Health and Human Services, Office for Civil Rights (“OCR”) issued a Bulletin highlighting the obligations of HIPAA covered entities and business associates with respect to the use of online tracking technologies.
Furthermore, on December 1, 2022, the U.S. Department of Health and Human Services, Office for Civil Rights (“OCR”) issued a Bulletin highlighting the obligations of HIPAA covered entities and business associates with respect to the use of online tracking technologies. OCR updated this Bulletin on March 18, 2024.
Any of the factors listed below could have a material adverse effect on your investment in our securities and our securities may trade at prices significantly below the price you paid for them. In such circumstances, the trading price of our securities may not recover and may experience a further decline.
Any of the risk factors noted in this Annual Report could have a material adverse effect on your investment in our securities and our securities may trade at prices significantly below the price you paid for them. In such circumstances, the trading price of our securities may not recover and may experience a further decline.
In particular, on September 7, 2022, a shareholder class action lawsuit was filed in the U.S. District Court for the District of Connecticut against the Company and certain of the Company’s current and former officers.
In particular, on September 7, 2022, a shareholder class action lawsuit was filed in the U.S. District Court for the District of Connecticut against the Company and certain of the Company’s current and former officers. In addition, on November 28, 2023, a stockholder filed a lawsuit in the U.S.
We do not know if we will be able to identify any other acquisitions we deem suitable, whether we will be able to successfully complete any acquisitions on favorable terms or at all, or whether we will be able to successfully integrate any acquired products or technologies.
We do not know if we will be able to identify any other acquisitions we deem suitable, whether we will be able to successfully complete any acquisitions on favorable terms or at all, or whether we will be able to successfully integrate any acquired products 31 Table of Co ntents or technologies.
Our laboratories and the equipment we use to perform our tests would be costly to replace and could require 20 Table of Contents substantial lead time to replace and qualify for use.
Our laboratories and the equipment we use to perform our tests would be costly to replace and could require substantial lead time to replace and qualify for use.
Any of these occurrences could have a material adverse effect on our business, financial condition and results of operations. 28 Table of Contents We rely on a limited number of product and service providers for data infrastructure and analytics capabilities, and any disruption of, or interference with, our use of data and workflow services could adversely affect our business, financial condition, and results of operations, and we may not be able to find replacements or immediately transition to alternative products or service providers.
We rely on a limited number of product and service providers for data infrastructure and analytics capabilities, and any disruption of, or interference with, our use of data and workflow services could adversely affect our business, financial condition, and results of operations, and we may not be able to find replacements or immediately transition to alternative products or service providers.
If the FDA were to determine that certain tests offered by us as LDTs are not within the policy for LDTs for any reason, including new rules, policies or guidance, or due to changes in statute, our tests may become subject to extensive FDA requirements or our business may otherwise be adversely affected.
If the FDA were to determine that certain tests offered by us as LDTs are no longer eligible for enforcement discretion for any reason, including new rules, policies or guidance, or due to changes in statute, our tests may become subject to extensive FDA requirements or our business may otherwise be adversely affected.
Accessing, combining, curating, and analyzing health information, including longitudinal patient medical history data and genetic data, are core features of the Centrellis ® platform.
Accessing, combining, curating, and analyzing health information, including longitudinal patient medical history data and genetic data, are core features of our heath information platform.
A subset of these incidents was determined to be reportable breaches requiring disclosure to OCR, as well as to the affected patients.
A subset of these incidents was determined to be reportable breaches requiring disclosure to 34 Table of Co ntents OCR, as well as to the affected patients.
The cost of compliance with these laws and regulations may become significant, and our failure to comply may result in substantial fines or other consequences, and either could negatively affect our operating results. Future changes in FDA enforcement discretion for LDTs could subject our operations to much more significant regulatory requirements. We currently offer an LDT version of certain tests.
The cost of compliance with these laws and regulations may become significant, and our failure to comply may result in substantial fines or other consequences, and either could negatively affect our operating results. Changes in FDA enforcement discretion for laboratory developed tests LDTs could subject our operations to much more significant regulatory requirements.
If we were to lose one or more key executives, including our Chief Executive Officer, Katherine Stueland, we may experience difficulties in competing effectively, developing our tests and technologies and implementing our business strategy.
If we were to lose one or more key executives, we may experience difficulties in competing effectively, developing our tests and technologies and implementing our business strategy.
We and our collaborators may not succeed in achieving significant commercial market acceptance for our current or future products and services due to a number of factors, including: • our ability to demonstrate the utility of our platforms and related products and services and their potential advantages over existing clinical AI technology, life sciences research, clinical diagnostic and drug discovery technologies to academic institutions, biopharma companies and the medical community; • our ability, and that of our collaborators, to perform clinical trials or other research to gather adequate evidence and/or to secure and maintain FDA and other regulatory clearance authorization or approval for our products or products developed based off our platform; • the agreement by third-party payors to reimburse our products or services, the scope and extent of which will affect patients’ willingness or ability to pay for our products or services and will likely heavily influence physicians’ decisions to recommend our products or services; • the rate of adoption of our platforms and related products and services by academic institutions, clinicians, patients, key opinion leaders, advocacy groups and biopharma companies; and • the impact of our investments in product and services, and technological innovation and commercial growth. 29 Table of Contents Additionally, our customers and collaborators may decide to decrease or discontinue their use of our products and services due to changes in their research and development plans, failures in their clinical trials, financial constraints, the regulatory environment, negative publicity about our products and services, competing products or the reimbursement landscape, all of which are circumstances outside of our control.
We and our collaborators may not succeed in achieving significant commercial market acceptance for our current or future products and services due to a number of factors, including: • our ability to demonstrate the utility of our platforms and related products and services and their potential advantages over existing clinical AI technology, life sciences research, clinical diagnostic and drug discovery technologies to academic institutions, biopharma companies and the medical community; • our ability, and that of our collaborators, to perform clinical trials or other research to gather adequate evidence and/or to secure and maintain FDA and other regulatory clearance authorization or approval for our products or products developed based off our platform; • the agreement by third-party payors to reimburse our products or services, the scope and extent of which will affect patients’ willingness or ability to pay for our products or services and will likely heavily influence physicians’ decisions to recommend our products or services; • the rate of adoption of our platforms and related products and services by academic institutions, clinicians, patients, key opinion leaders, advocacy groups and biopharma companies; and • the impact of our investments in product and services, and technological innovation and commercial growth.
In addition, if the FDA inspects our laboratory in relation to the marketing of any FDA-authorized test, any enforcement action the FDA takes might not be limited to the FDA-authorized test carried by us and could encompass our other testing services.
In addition, if the FDA inspects our laboratory in relation to the marketing of any FDA-authorized test, any enforcement action the FDA takes might not be limited to the FDA-authorized test carried by us and could encompass our other testing services. Our business is subject to various complex laws and regulations applicable to clinical diagnostics.
In the event that the FDA requires marketing authorization of our LDTs in the future, the FDA may not ultimately grant any clearance, authorization or approval requested by us in a timely manner, or at all.
In the event that the FDA requires marketing authorization of our LDTs in the future, the FDA may not ultimately grant any clearance, authorization or approval requested by us in a timely manner, may limit our indication in a way that is not commercially desirable, or refuse to provide such authorization at all.
As our business grows, we are required to comply with increasingly complex taxation rules and practices. We are subject to tax in multiple U.S. tax jurisdictions and may be subject to foreign tax jurisdictions in the future. The development of our tax strategies requires additional expertise and may impact how we conduct our business.
We are subject to tax in multiple U.S. tax jurisdictions and may be subject to foreign tax jurisdictions in the future. The development of our tax strategies requires additional expertise and may impact how we conduct our business.
There has been unprecedented activity in the development of data protection regulation around the world. As a result, the interpretation and application of consumer, health-related and data protection laws in the U.S., Europe and elsewhere are often uncertain, contradictory and in flux.
As a result, the interpretation and application of consumer, health-related and data protection laws in the U.S., Europe and elsewhere are often uncertain, contradictory and in flux.
If the FDA were to disagree with our LDT status or modify its approach to regulating LDTs, we could experience reduced revenue or increased costs, which could adversely affect our business, prospects, results of operations and financial condition.
If the FDA were to actively regulate our LDTs, we could experience reduced revenue or increased costs, which could adversely affect our business, prospects, results of operations and financial condition.
Approval processes vary among countries and can involve additional product testing and validation and additional administrative review periods. Seeking foreign regulatory clearance, authorization or approval could result in difficulties and costs for us and our collaborators and require additional preclinical studies, clinical trials or clinical investigations which could be costly and time-consuming.
Seeking foreign regulatory clearance, authorization or approval could result in difficulties and costs for us and our collaborators and require additional preclinical studies, clinical trials or clinical investigations which could be costly and time-consuming.
To the extent shares of our Class A common stock are sold into the market pursuant to an effective registration statement, under Rule 144 under the Securities Act or otherwise, particularly in substantial quantities and following the end of the transfer restrictions provided for in the shareholder agreements in the case of OPKO and the other stockholders party to such shareholder agreements, the market price of our Class A common stock could decline.
To the extent shares of our Class A common stock are sold into the market pursuant to an effective registration statement, under Rule 144 under the Securities Act or otherwise, particularly in substantial quantities the market price of our Class A common stock could decline.

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Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

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Biggest changeGovernance Our board of directors, in coordination with our audit committee, oversees our ERM process, including the management of risks arising from cybersecurity threats. Our audit committee receives regular presentations and reports on cybersecurity risks.
Biggest changeWe actively identify prevent, detect and mitigate cybersecurity threats and are positioned to effectively respond to cybersecurity incidents. Key components of our cybersecurity program include: Governance: Our board of directors, in coordination with its audit committee, oversees the risks arising from cybersecurity threats, which are embedded in our enterprise risk management (“ERM”) approach.
We engage in the routine, periodic assessment and testing of our policies, standards, processes and practices that are designed to address cybersecurity threats and incidents. These efforts include a wide range of activities, including audits, assessments and other exercises focused on evaluating the effectiveness of our cybersecurity measures and planning.
Continuous Monitoring : We engage in the routine, periodic assessment and testing of our standards, policies, processes and practices that are designed to address cybersecurity threats and incidents. These efforts include a wide range of activities, including audits, assessments and other exercises focused on evaluating the effectiveness of our cybersecurity measures and planning.
Third-Party Risk Management: We maintain a risk-based approach to identifying and overseeing cybersecurity risks presented by third parties, including vendors, service providers and other external users of our systems, as well as the systems of third parties that could adversely impact our business in the event of a cybersecurity incident affecting those third-party systems.
In addition, we maintain a risk-based approach to identifying and overseeing cybersecurity risks presented by third parties, including vendors, service providers and other external users of our systems, as well as the systems of third parties that could adversely impact our business in the event of a cybersecurity incident affecting those third-party systems.
For more information on our cybersecurity risks, see “Risk Factors —Risks Related to Cybersecurity, Privacy and Information Technology ".
For more information on our cybersecurity risks, see “Risk Factors —Risks Related to Cybersecurity, Privacy and Information Technology ”.
Risks from cybersecurity threats, including as a result of any previous cybersecurity incidents, have not materially affected, and the Company believes that such risks are not reasonably likely to materially affect the Company, including its business strategy, results of operations or financial condition.
Cybersecurity Threats Risks from cybersecurity threats, including as a result of any previous cybersecurity incidents, have not materially affected, and we believe that such risks are not reasonably likely to materially affect the Company, including its business strategy, results of operations or financial condition.
Education and Awareness: We provide regular, mandatory training for personnel regarding cybersecurity threats as a means to equip our personnel with effective tools to address cybersecurity threats, and to communicate our evolving information security policies, standards, processes and practices.
Employee Education and Awareness: We provide regular mandatory training for employees regarding cybersecurity threats to equip them with effective tools to address cybersecurity threats and to communicate our evolving information security policies, standards, processes and practices.
Technical Safeguards: We deploy commercially reasonable 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.
Incident Response Planning: We have established protocols to detect, respond to and recover from cybersecurity incidents promptly. Technical Safeguards: We deploy commercially reasonable 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.
Our HIS has served in various roles in information technology and information security for over 14 years and holds an undergraduate degree in Management Information System and a graduate degree in Human Resource Management and has attained the professional certification of Certified Chief Information Security Officer.
Our Head of Information Security has served in various roles in information technology and information security for over 15 years and holds an undergraduate degree in Management Information System and a graduate degree in Human Resource Management and has attained multiple professional information security certification.
The results of such assessments, audits and reviews are reported to our audit committee, and we adjust our cybersecurity policies, standards, processes, and practices as necessary based on the information provided by these assessments, audits and reviews.
We regularly engage third parties to perform assessments on our cybersecurity measures, including assessments, audits and independent reviews of our information security control environment and operating effectiveness. The results of such exercises are reported to our audit committee, and we adjust our cybersecurity policies, standards, processes and practices as necessary.
Through ongoing communications with these teams, our HIS monitors the prevention, detection, mitigation and remediation of cybersecurity threats and incidents in real time, and such threats and incidents are reported to our audit committee when appropriate.
Through ongoing interactions with these teams, our Head of Information 52 Table of Co ntents Security monitors the prevention, detection, mitigation and remediation of cybersecurity threats and incidents in real time.
Our board of directors and audit committee receives and reviews prompt and timely information regarding any incident that may be considered material to investor or otherwise could materially affect core company operations.
The Board’s audit committee receives regular reports on cybersecurity risks from our Head of Information Security, with prompt escalation of any incident that could materially affect core company operations to the Board. Further, our Head of Information Security works collaboratively across the company to implement and enhance our cybersecurity program.
Item 1C. Cybersecurity Our board of directors recognizes the critical importance of maintaining the trust and confidence of our customers, healthcare providers, clients, business partners, and employees. Our board of directors actively oversees our risk management program, and cybersecurity represents an important component of our overall approach to enterprise risk management (“ERM”).
Item 1C. Cybersecurity The Company is committed to maintaining the trust and confidence of our customers, healthcare providers, clients, business partners and employees through a cybersecurity program focused on protecting the confidentiality, security and availability of the information that we collect and store.
Removed
In general, we seek to address cybersecurity risks through a cross-functional approach 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
Artificial Intelligence Artificial intelligence (“AI”) has the potential to transform various work sectors significantly. We continue to enhance and broaden our offerings with AI technologies, and we are exploring potential third-party partnerships to help us offer more robust solutions for providers and patients.
Removed
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 audit committee of our board of directors supports the board of directors oversight of cybersecurity risk management, which regularly interacts with our ERM function, our Head of Information Security (“HIS”) and other members of management.
Added
For example, we currently deploy a phenotype-driven algorithm that uses machine learning and is used to help identify genes to that may cause disease. While we are dedicated to actualizing AI’s potential in our offerings, we are equally committed to ensuring the security of patient data in line with data privacy laws through the Company’s AI Guidelines.
Removed
Cross-Functional Approach: We have implemented a cross-functional approach to identifying, preventing, and mitigating cybersecurity threats and incidents, while also implementing controls and procedures that provide for the prompt escalation of certain cybersecurity incidents so that decisions regarding the public disclosure and reporting of such incidents can be made by management in a timely manner.
Removed
We regularly engage third parties to perform assessments on our cybersecurity measures, including information security maturity assessments, 56 Table of Contents audits and independent reviews of our information security control environment and operating effectiveness.
Removed
Our HIS works collaboratively across the company to implement a program designed to protect our information systems from cybersecurity threats and to promptly respond to any cybersecurity incidents in accordance with our incident response and recovery plans.
Removed
Although we are subject to ongoing and evolving cybersecurity threats, we are not aware of any material risks from cybersecurity threats in 2023 that have materially affected or are reasonably likely to materially affect 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 changeThese facilities as well as a portion of our headquarters located in Stamford, Connecticut are actively being marketed for sublet; however, the outstanding lease obligations remain obligations. The lease agreements for these properties expire in 2030 and 2036, respectively. We believe that our current facilities are suitable and adequate to meet our current needs.
Biggest changeThe lease agreements for these properties expire in 2030 and 2036, respectively. We believe that our current facilities are suitable and adequate to meet our current needs. See Note 9, “ Leases ” to our consolidated financial statements for more information on our future lease obligations. 53 Table of Co ntents
The lease agreements for these properties expire in 2034, 2031, and 2025, respectively. As previously disclosed, our laboratories in Branford, Connecticut and Stamford, Connecticut have ceased operations as part of our announced exits in 2022 from reproductive health and somatic tumor testing.
The lease agreements for these properties expire in 2034, 2031, and 2026, respectively. As previously disclosed, we exited our reproductive health and somatic tumor testing business in 2022. We are actively marketing for sublet our two laboratories in Connecticut as well as a portion of our headquarters in Stamford, Connecticut.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeItem 3. Legal Proceedings Information regarding legal proceedings can be found in the consolidated financial statements in Note 11, “ Purchase Commitments and Contingencies ” included in this Annual Report. Item 4. Mine Safety Disclosures None. 57 Table of Contents Part II
Biggest changeItem 3. Legal Proceedings Information regarding legal proceedings can be found in the consolidated financial statements in Note 10, “ Purchase Commitments and Contingencies ” included in this Annual Report. Item 4. Mine Safety Disclosures None. 54 Table of Co ntents Part II

Item 4. Mine Safety Disclosures

Mine Safety Disclosures — required of mining issuers

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Biggest changeItem 4. Mine Safety Disclosures 57 PART II Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities 58 Item 6. Reserved 58 Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations 59 Item 7A. Quantitative and Qualitative Disclosures About Market Risk 70 Item 8.
Biggest changeItem 4. Mine Safety Disclosures 54 PART II Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities 55 Item 6. Reserved 55 Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations 56 Item 7A. Quantitative and Qualitative Disclosures About Market Risk 65 Item 8.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeItem 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Market Information Since January 10, 2023, our Class A common stock and public warrants have been trading on the Nasdaq Global Select Market under the symbols “WGS” and “WGSWW,” respectively.
Biggest changeItem 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Market Information Our Class A common stock and public warrants are listed on the Nasdaq Global Select Market under the symbols “WGS” and “WGSWW,” respectively.
We anticipate that we will retain earnings, if any, to support operations and to finance the growth and development of our business. In addition, the terms of our credit agreement with Perceptive Credit Holdings IV, LP restrict us from paying cash dividends. Therefore, we do not expect to pay cash dividends for the foreseeable future. Sale of Unregistered Securities None.
We anticipate that we will retain earnings, if any, to support operations and to finance the growth and development of our business. In addition, the terms of our credit agreement with Perceptive restrict us from paying cash dividends. Therefore, we do not expect to pay cash dividends for the foreseeable future. Sale of Unregistered Securities None.
Holders As of February 20, 2024, there were 45 record holders of our Class A common stock and 5 record holders of our public warrants, based upon information received from our transfer agent. However, this number does not reflect beneficial owners whose shares were held of record by nominees or broker dealers.
Holders As of February 14, 2025, there were 37 record holders of our Class A common stock and 5 record holders of our public warrants, based upon information received from our transfer agent. However, these numbers do not reflect beneficial owners whose shares were held of record by nominees or broker dealers.
Removed
From July 23, 2021 to January 9, 2023, our Class A common stock and public warrants traded on the Nasdaq Global Select Market under the symbols “SMFR” and “SMFRW”, respectively.
Removed
Prior to the Business Combination, CMLS’s Class A common stock, CMLS’s public warrants, and CMLS’s public units were listed on the Nasdaq Capital Market under the symbols “CMLF”, “CMFLW”, and “CMLFU” respectively.

Item 7. Management's Discussion & Analysis

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

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Biggest changeWe expect these expenses to decrease as a percentage of revenue in the long term as revenue increases, although the percentage may fluctuate from period to period due to fluctuations in our compensation-related charges. 62 Table of Contents Comparison of the Years Ended December 31, 2023 and 2022 The following table sets forth our results of operations for the periods presented (in thousands): Year Ended December 31, 2023 2022 $ Change % Change Revenue Diagnostic test revenue $ 195,654 $ 227,334 $ (31,680) (14) % Other revenue 6,912 7,360 (448) (6) % Total revenue 202,566 234,694 (32,128) (14) % Cost of services 112,560 261,444 (148,884) (57) % Gross profit (loss) 90,006 (26,750) 116,756 (436) % Research and development 58,266 86,203 (27,937) (32) % Selling and marketing 60,956 122,075 (61,119) (50) % General and administrative 133,755 216,167 (82,412) (38) % Impairment loss 10,402 210,145 (199,743) (95) % Other operating expenses, net 7,223 6,312 911 14 % Loss from operations (180,596) (667,652) 487,056 (73) % Non-operating income (expenses), net Change in fair market value of warrant and earn-out contingent liabilities 1,170 70,229 (69,059) (98) % Interest income (expense), net 1,114 (666) 1,780 (267) % Other income, net 1,619 57 1,562 2740 % Total non-operating income, net 3,903 69,620 (65,717) (94) % Loss before income taxes (176,693) (598,032) 421,339 (70) % Income tax benefit 926 49,052 (48,126) (98) % Net loss $ (175,767) $ (548,980) $ 373,213 (68) % Revenue Total revenue decreased by $32.1 million, or 14%, to $203 million for the year ended December 31, 2023, from $234.7 million for the year ended December 31, 2022.
Biggest changeWe expect these expenses to decrease as a percentage of revenue in the long term as revenue increases, although the percentage may fluctuate from period to period due to fluctuations in our compensation-related charges. 58 Table of Contents Results of Operations Comparison of the Years Ended December 31, 2024 and 2023 The following table sets forth our results of operations for the periods presented (in thousands): Year Ended December 31, 2024 2023 $ Change % Change Revenue Diagnostic test revenue $ 302,157 $ 195,654 $ 106,503 54 % Other revenue 3,293 6,912 (3,619) (52) % Total revenue 305,450 202,566 102,884 51 % Cost of services 111,053 112,560 (1,507) (1) % Gross profit 194,397 90,006 104,391 116 % Research and development 45,722 58,266 (12,544) (22) % Selling and marketing 67,371 60,956 6,415 11 % General and administrative 101,110 133,755 (32,645) (24) % Impairment loss — 10,402 (10,402) (100) % Other operating expenses, net 3,407 7,223 (3,816) (53) % Loss from operations (23,213) (180,596) 157,383 (87) % Non-operating (expenses) income, net Change in fair value of warrants and contingent liabilities (13,370) 1,170 (14,540) NM Interest (expense) income, net (3,032) 1,114 (4,146) NM Other (expense) income, net (13,014) 1,619 (14,633) NM Total non-operating (expense) income, net (29,416) 3,903 (33,319) NM Loss before income taxes (52,629) (176,693) 124,064 (70) % Income tax benefit 343 926 (583) (63) % Net loss $ (52,286) $ (175,767) $ 123,481 (70) % NM – Not Meaningful Revenue Total revenue increased by $102.9 million, or 51%, to $305.5 million for the year ended December 31, 2024, from $202.6 million for the year ended December 31, 2023.
If actual results in the future vary from our estimates, we will adjust these estimates, which could affect revenue and earnings in the period such variances become known. 68 Table of Contents Other revenue We also recognize revenue from collaboration service agreements with biopharma companies and other third parties pursuant to which we health information and patient identification support services.
If actual results in the future vary from our estimates, we will adjust these estimates, which could affect revenue and earnings in the period such variances become known. 64 Table of Contents Other Revenue We also recognize revenue from collaboration service agreements with biopharma companies and other third parties pursuant to which we health information and patient identification support services.
Financing Activities Net cash provided by financing activities during the year ended December 31, 2023 was $186.2 million which was primarily driven by the $143.0 million net proceeds from the underwritten public offering and concurrent registered direct offering, net of issuance costs, and $48.5 million from the Perceptive Term Loan Facility, which was offset partially by the DECD loan payment of $2.0 million and $3.6 million of finance lease payments.
Net cash provided by financing activities during the year ended December 31, 2023 was $186.2 million, which was primarily driven by the $143.0 million net proceeds from the underwritten public offering and concurrent registered direct offering, net of issuance costs, and $48.5 million from the term loan facility with Perceptive (the “Perceptive Term Loan Facility”), which was offset partially by the DECD loan payment of $2.0 million and $3.6 million of finance lease payments.
Investors are encouraged to review the related GAAP financial measures 64 Table of Contents and the reconciliation of these non-GAAP financial measures to their most directly comparable GAAP financial measures, and not to rely on any single financial measure to evaluate our business.
Investors are encouraged to 60 Table of Contents review the related GAAP financial measures and the reconciliation of these non-GAAP financial measures to their most directly comparable GAAP financial measures, and not to rely on any single financial measure to evaluate our business.
We believe the number of resulted tests in any period is important and useful to our investors because it directly correlates with long-term patient relationships and the size of our genomic database.
We believe the number of resulted exome and genome tests in any period is important and useful to our investors because it directly correlates with long-term patient relationships and the size of our genomic database.
As a result, we may be required to refund payments already received, and our revenues may be subject to retroactive adjustment as a result of these factors among others. We expect to continue to focus our resources on increasing the adoption of, and expanding coverage and reimbursement for, our current and any future tests we may develop or acquire.
As a result, we may be required to refund payments already received, and our revenues may be subject to retroactive adjustment as a result of these factors among others. We expect to continue to focus our resources on increasing the adoption of, and expanding coverage and reimbursement for exome and genome, and any future tests we may develop or acquire.
The timing of these future payments, by year, can be found in our consolidated financial statements in Note 11, “ Purchase Commitments and Contingencies ”, included within this Annual Report.
The timing of these future payments, by year, can be found in our consolidated financial statements in Note 10, “ Purchase Commitments and Contingencies ”, included within this Annual Report.
The amount of revenue recognized for diagnostic testing services depends on a number of factors, such as contracted rates with our customers and third-party insurance providers, insurance reimbursement policies, payor mix, historical collection experience, price concessions and other business and economic conditions and trends.
The amount of revenue recognized for diagnostic testing services depends on a number of factors, such as resulted test volumes, contracted rates with our customers and third-party insurance providers, insurance reimbursement policies, payor mix, historical collection experience, price concessions and other business and economic conditions and trends.
The commercial success of our current and future products, if approved, will depend on the extent to which our customers receive coverage and adequate reimbursement from third-party payors.
The commercial success of our current and future products, if approved, will depend on the extent to which our customers receive coverage and adequate reimbursement from third-party payors including commercial and Medicaid.
If we fail to expand and maintain broad adoption of, and coverage and reimbursement for, our tests, our ability to generate revenue and our future business prospects may be adversely affected. Ability to lower the costs associated with performing our tests Reducing the costs associated with performing our diagnostic tests is both our focus and a strategic objective.
If we fail to expand and maintain broad adoption of, and coverage and reimbursement for, our tests, our ability to generate revenue and our future business prospects may be adversely affected. 56 Table of Contents Ability to Lower the Costs Associated with Performing our Tests Reducing the costs associated with performing our diagnostic tests is both our focus and a strategic objective.
Allocated costs include depreciation of laboratory equipment, facility occupancy, and information technology costs. The cost of services are recorded as the services are performed. We expect the cost of services to generally increase in line with the anticipated growth in diagnostic testing volume and services we provide under our collaboration service agreements.
Allocated costs include depreciation of laboratory equipment, facility occupancy, and information technology costs. The cost of services are recorded as the services are performed. We expect the cost of services to generally increase in absolute dollars with the anticipated growth in diagnostic testing volume and services we provide under our collaboration service agreements.
Research and development costs are generally expensed as incurred and certain non-refundable advanced payments provided to our research partners are expensed as the related activities are performed. We generally expect our research and development expenses to continue to increase as we innovate and expand the application of our platforms.
Research and development costs are generally expensed as incurred and certain non-refundable advanced payments provided to our research partners are expensed as the related activities are performed. We generally expect our research and development expenses to continue to increase in absolute dollars as we innovate and expand the application of our platforms.
We generally expect our general and administrative expenses to continue to increase in absolute dollars as we increase headcount and incur costs associated with operating as a public company, including expenses related to legal, accounting, and regulatory matters, maintaining compliance with requirements of Nasdaq and of the SEC, director and officer insurance premiums.
We generally expect our general and administrative expenses to continue to increase in absolute dollars as we increase headcount and incur costs associated with operating as a public company, including expenses related to legal, accounting, and regulatory matters, and maintaining compliance with requirements of Nasdaq and of the SEC.
These costs primarily consist of personnel-related expenses (comprising salaries and benefits), stock-based compensation for employees performing research and development, innovation and product development activities, costs of reagents and laboratory supplies, costs of consultants and third-party services, equipment and related depreciation expenses, non-capitalizable software development costs, research funding to our research partners as part of research and development agreements and allocated facility and information technology costs associated with genomics medical research.
These costs primarily consist of compensation expenses for employees performing research and development, innovation and product development activities, costs of reagents and laboratory supplies, costs of consultants and third-party services, equipment and related depreciation expenses, non-capitalizable software development costs, research funding to our research partners as part of research and development agreements and allocated facility and information technology costs associated with genomics medical research.
Management believes that our cash and cash equivalents and available-for-sale marketable securities provide us with sufficient liquidity for at least twelve months from the filing date of this Annual Report.
We believe that our cash and cash equivalents and available-for-sale marketable securities provide us with sufficient liquidity for at least twelve months from the filing date of this Annual Report.
Number of resulted tests A test is resulted once the appropriate workflow is completed and details are provided to the ordered patients or healthcare professional for reviews, which corresponds to the timing of our revenue recognition.
Once the appropriate workflow is completed, the test is resulted and details are provided to ordered patients or healthcare professionals for reviews, which corresponds to the timing of our revenue recognition.
General and Administrative Expenses General and administrative expenses primarily consist of personnel-related expenses (comprising salaries, billing and benefits) and stock-based compensation for employees in executive leadership, legal, finance and accounting, human resources, information technology, and other administrative functions. In addition, these expenses include office occupancy and information technology costs. General and administrative costs are expensed as incurred.
General and Administrative Expenses General and administrative expenses primarily consist of compensation expenses for employees in executive leadership, legal, finance and accounting, human resources, information technology, and other administrative functions. In addition, these expenses include office occupancy and information technology costs. General and administrative costs are expensed as incurred.
In cases where we or our partners have established reimbursement rates with third-party payors, we face additional challenges in complying with their procedural requirements for reimbursement. These requirements often vary from payor to payor and are reassessed by third-party payors regularly.
In cases where we or our partners have established reimbursement rates with third-party payors, we face additional challenges in complying with their procedural requirements for reimbursement. These requirements often vary from payor to payor and are reassessed by third-party payors regularly. As a result, in the past we have needed additional time and resources to comply with the requirements.
Cost of Services The cost of services reflect the aggregate costs incurred in performing services, which include expenses for reagents and laboratory supplies, personnel-related expenses (comprising salaries and benefits) and stock-based compensation for employees directly involved in revenue generating activities, shipping and handling fees, costs of third-party reference lab testing and phlebotomy services, if any, and allocated genetic counseling, facility and IT costs associated with delivery 61 Table of Contents services.
Cost of Services The cost of services reflect the aggregate costs incurred in performing services, which include expenses for reagents and laboratory supplies, compensation expenses for employees directly involved in revenue generating activities, shipping and handling fees, costs of third-party reference lab testing and phlebotomy services, if any, and allocated genetic counseling, facility 57 Table of Contents and information technology costs associated with delivery services.
Other Operating Expenses, Net Other operating expenses, net were $7.2 million for the year ended December 31, 2023 and included related party expenses of $6.0 million and non-cash charges of $3.6 million to reserve for obsolete Legacy Sema4 inventory, partially offset by a current year gain of $1.7 million recognized on the sale of certain assets sold as a result of an auction.
Other operating expenses, net were $7.2 million for the year ended December 31, 2023 and included related party expenses of $5.3 million and a non-cash charge of $3.6 million to reserve for obsolete Legacy Sema4 inventory, partially offset by a gain of $1.7 million to recognize the sale of certain assets of Legacy Sema4.
Cash Flows Year Ended December 31, (in thousands) 2023 2022 Net cash used in operating activities $ (180,147) $ (319,155) Net cash used in investing activities (43,726) (141,326) Net cash provided by financing activities 186,238 197,315 Operating Activities Net cash used in operating activities during the year ended December 31, 2023 was $180.1 million which was primarily attributable to a net loss of $175.8 million and unfavorable working capital associated with the wind down of the Legacy Sema4 accounts payable, primarily during the second half of 2023, which was partially offset by the release of a third party payor reserve.
Net cash used in operating activities during the year ended December 31, 2023 was $180.1 million, which was primarily attributable to a net loss of $175.8 million and unfavorable working capital associated with the wind down of the Legacy Sema4 accounts payable, primarily during the second half of 2023, which was partially offset by the release of a third-party payor reserve.
We have an effective shelf registration statement that we filed with the SEC in August of 2022, registering $300 million shares of our Class A common stock and other securities.
We have an effective shelf registration statement that we filed with the SEC in August of 2022, registering $300 million of shares of our Class A common stock and other securities. As of December 31, 2024, approximately $102 million of securities remained available under this registration statement.
Our ability to increase our diagnostic test revenue will depend on our ability to increase our market penetration, obtain contracted reimbursement coverage from third-party payors, enter into contracts with institutions, and increase our reimbursement rate for tests performed.
To date, the majority of our diagnostic test revenue has been earned from orders received for patients with third-party insurance coverage. Our ability to increase our diagnostic test revenue will depend on our ability to increase our market penetration, obtain contracted reimbursement coverage from third-party payors, enter into contracts with institutions, and increase our reimbursement rate for tests performed.
Investing Activities Net cash used in investing activities during the year ended December 31, 2023 was $43.7 million which primarily included net purchases of marketable securities of $47.7 million, $12.1 million in consideration held in escrow paid for the Legacy GeneDx Acquisition and $5.3 million in purchases of property and equipment, which was offset partially by $17.8 million in proceeds from maturities of marketable securities and $4.0 million in proceeds from the sale of assets. 67 Table of Contents Net cash used in investing activities during the year ended December 31, 2022 was $141.3 million, which was primarily attributable to the $127 million net of cash spent for the Acquisition of Legacy GeneDx, $7.2 million in purchases of property and equipment and $7.2 million related to spend on development of internal-use software assets.
Net cash used in investing activities during the year ended December 31, 2023 was $43.7 million, which included purchases of marketable securities of $47.7 million, $12.1 million in consideration held in escrow paid for the Acquisition and $5.3 million in purchases of property and equipment, which was offset partially by $17.8 million in proceeds from maturities of marketable securities and $4.0 million in proceeds from the sale of assets.
We believe Adjusted net loss is useful in evaluating our operating performance compared to that of other companies in our industry, as this metric generally eliminates the effects of certain factors that may vary from company to company for reasons unrelated to overall operating performance. 65 Table of Contents The following is a reconciliation of our net loss to Adjusted net loss for the years ended December 31, 2023 and 2022 (in thousands) : Year Ended December 31, 2023 2022 Net loss $ (175,767) $ (548,980) Depreciation and amortization 33,734 59,309 Stock-based compensation expense (326) 41,975 Impairment loss (1) 10,402 210,145 Transaction, acquisition and business integration costs (2) — 13,436 Restructuring costs (3) 6,532 25,810 Change in fair market value of financial liabilities (4) (1,170) (70,229) Gain on sale of assets (5) (1,677) — Provision for excess and obsolete inventory associated with Legacy Sema4 3,634 — Other income, net (1,619) (57) Adjusted net loss $ (126,257) $ (268,591) __________________ (1) For fiscal year 2023, represents the impairment of certain capital and right-of-use asset leases.
We believe adjusted net income (loss) is useful in evaluating our operating performance compared to that of other companies in our industry, as this metric generally eliminates the effects of certain factors that may vary from company to company for reasons unrelated to overall operating performance. 61 Table of Contents The following is a reconciliation of our net loss to adjusted net income (loss) for the years ended December 31, 2024 and 2023 (in thousands) : Year Ended December 31, 2024 2023 Net loss $ (52,286) $ (175,767) Depreciation and amortization 21,953 33,734 Stock-based compensation expense 9,138 (326) Impairment loss (1) — 10,402 Restructuring costs (2) 1,752 6,532 Change in fair value of warrants and contingent liabilities (3) 13,370 (1,170) Gain on sale of assets (4) — (1,677) Provision for excess and obsolete inventory associated with Legacy Sema4 — 3,634 Gain on debt forgiveness (5) — (2,750) Other (6) 12,789 1,131 Adjusted net income (loss) $ 6,716 $ (126,257) __________________ (1) Represents the impairment of certain capital and right-of-use asset leases.
We operate in a rapidly evolving and highly competitive industry. Our business faces changing technologies, shifting provider and patient needs, and frequent introductions of rival products and services. To compete successfully, we must accurately anticipate technology developments and deliver innovative, relevant, and useful products, services, and technologies on time.
Our business faces changing technologies, shifting provider and patient needs, and frequent introductions of rival products and services. To compete successfully, we must accurately anticipate technology developments and deliver innovative, relevant, and useful products, services, and technologies on time. As our business evolves, the competitive pressure to innovate will encompass a wider range of products and services.
Our success in retaining and gaining new customers is dependent on the market’s confidence in our services and the willingness of customers to continue to seek more comprehensive and integrated genomic and clinical data insights.
Our success in retaining and gaining new customers is dependent on the market’s confidence in our services and the willingness of customers to continue to seek more comprehensive and integrated genomic and clinical data insights. Investment in Platform Innovation to Support Commercial Growth We operate in a rapidly evolving and highly competitive industry.
For more information regarding this matter, see Note 4, “ Revenue Recognition ” included within this Annual Report. Our future contractual purchase commitments were $3.8 million as of December 31, 2023.
As of December 31, 2024, remaining payments due to the payor were $12.0 million. For more information regarding this matter, see Note 3, “ Revenue Recognition ” included within this Annual Report. Our future contractual purchase commitments were $37.6 million as of December 31, 2024.
See Note 9, “Long-Term Debt” to our consolidated financial statements for further information. Reconciliation of Non-GAAP Financial Measures In addition to our results determined in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP” or “GAAP”), we believe the following non-GAAP measures are useful in evaluating our operating performance.
Reconciliation of Non-GAAP Financial Measures In addition to our results determined in accordance with accounting principles generally accepted in the United States (“U.S. GAAP” or “GAAP”), we believe the following non-GAAP measures are useful in evaluating our operating performance. We use the following non-GAAP financial information to evaluate our ongoing operations and for internal planning and forecasting purposes.
As a result, in the past we have needed additional time and resources to comply with the requirements. 59 Table of Contents Third-party payors may decide to deny payment or seek to recoup payments for tests performed by us that they contend were improperly billed, not medically necessary or against their coverage determinations, or for which they believe they have otherwise overpaid.
Third-party payors may decide to deny payment or seek to recoup payments for tests performed by us that they contend were improperly billed, not medically necessary or against their coverage determinations, or for which they believe they have otherwise overpaid.
New potential services may fail at any stage of development and, if we determine that any of our current or future services are unlikely to succeed, we may abandon them without any return on our investment. If we are unsuccessful in developing additional services, our growth potential may be impaired.
We expect to incur significant expenses to advance these development efforts, but they may not be successful. New potential services may fail at any stage of development and, if we determine that any of our current or future services are unlikely to succeed, we may abandon them without any return on our investment.
Additional information on Legacy GeneDx and Legacy Sema4 can be found in the consolidated financial statements in Note 1, “ Organization and Description of Business ” included within this Annual Report. Factors Affecting Our Performance We believe several important factors have impacted, and will continue to impact, our performance and results of operations.
Overview See Note 1, “ Organization and Description of Business ” included within this Annual Report for further information. Factors Affecting Our Operating Performance We believe several important factors have impacted, and will continue to impact, our performance and results of operations.
The measure of progress is developed using our best estimate of the performance period and the anticipated costs to be incurred to perform such services, including any subcontracted service costs. Intangible Assets Amortizable intangible assets include trade names and trademarks, developed technology and customer relationships acquired as part of business combinations.
The measure of progress is developed using our best estimate of the performance period and the anticipated costs to be incurred to perform such services, including any subcontracted service costs.
While each of these areas presents significant opportunities for us, they also pose significant risks and challenges that we must address. See the section titled “ Item 1A. Risk Factors ” for more information.
While each of these areas presents significant opportunities for us, they also pose significant risks and challenges that we must address. See the section titled “ Item 1A. Risk Factors ” for more information. Test Volume The principal focus of our commercial operations is to offer our diagnostic tests through both our direct sales force and laboratory distribution partners.
We anticipate fulfilling such commitments with our existing cash and cash equivalents and available-for-sale marketable securities, which amounted to $130.1 million and $123.9 million as of December 31, 2023 and December 31, 2022, respectively, or through additional capital raised to finance our operations.
We anticipate fulfilling such commitments with our existing cash and cash equivalents and available-for-sale marketable securities or through additional capital raised to finance our operations. Our future minimum payments under non-cancellable operating lease and finance lease agreements were $62.3 million and $31.9 million, respectively as of December 31, 2024.
(3) Represents costs incurred for restructuring activities, which include severance for impacted employees and costs incurred in connection with these activities. (4) Represents the change in fair market value of the liabilities associated with our public warrants, private placement warrants, Perceptive warrants and the earn-out shares that were issuable under the terms of the merger agreement for our business combination.
(2) Represents costs incurred for restructuring activities, which include severance, and in the prior period, third-party consulting costs. (3) Represents the change in fair market value of the liabilities associated with our public warrants, private placement warrants, Perceptive warrants and the earn-out shares.
Nevertheless, we may also seek additional funding in the future through the sale of common or preferred equity or convertible debt securities, drawing on the additional $25.0 tranche of the term loan under the Perceptive Term Loan Facility, the entry into other credit facilities or another form of third-party funding or by seeking other debt financing.
Nevertheless, we may also seek additional funding in the future through the sale of common or preferred equity or convertible debt securities, by entering into other credit facilities or other forms of third-party funding, or other debt financing or by disposing of assets or businesses.
However, non-GAAP financial information is presented for supplemental informational purposes only and should not be considered in isolation or as a substitute for financial information presented in accordance with GAAP.
We believe that non-GAAP financial information, when taken collectively, may be helpful to investors because it provides consistency and comparability with past financial performance. However, non-GAAP financial information is presented for supplemental informational purposes only and should not be considered in isolation or as a substitute for financial information presented in accordance with GAAP.
Diagnostic test revenue decreased by $31.7 million, or 14%, to $195.7 million for the year ended December 31, 2023, from $227.3 million for the year ended December 31, 2022.
Diagnostic test revenue increased by $106.5 million, or 54%, to $302.2 million for the year ended December 31, 2024, from $195.7 million for the year ended December 31, 2023.
Following the underwritten and registered direct offerings described above, approximately $150 million of securities remained available under this registration statement. 66 Table of Contents Material Cash Requirements for Known Contractual Obligations and Commitments The following is a description of commitments for known and reasonably likely cash requirements as of December 31, 2023 and December 31, 2022.
As of December 31, 2024, approximately $26.8 million of capacity remained available under this ATM offering. Material Cash Requirements for Known Contractual Obligations and Commitments The following is a description of commitments for known and reasonably likely cash requirements as of December 31, 2024 and December 31, 2023.
These investments are critical to the enhancement of our current diagnostics and health information and data science technologies from which existing and new service offerings are derived. We expect to incur significant expenses to advance these development efforts, but they may not be successful.
We must continue to invest significant resources in research and development, including investments through acquisitions and partnerships. These investments are critical to the enhancement of our current diagnostics and health information and data science technologies from which existing and new service offerings are derived.
Selling and Marketing Expenses Selling and marketing expenses primarily consist of personnel-related expenses (comprising salaries and benefits) and stock-based compensation for employees performing commercial sales, account management, marketing, and allocation of genetic counseling services for us.
Selling and Marketing Expenses Selling and marketing expenses primarily consist of compensation expenses for employees performing commercial sales, account management, marketing, and certain genetic counseling services. Selling and marketing costs are expensed as incurred.
Our future minimum payments under non-cancellable operating lease and finance lease agreements were $66.8 million and $34.3 million, respectively as of December 31, 2023. The timing of these future payments, by year, can be found in our consolidated financial statements in Note 10, “ Leases ”, included within this Annual Report.
The timing of these future payments, by year, can be found in our consolidated financial statements in Note 9, “ Leases ”, included within this Annual Report.
As discussed above, the Legacy Sema4 business recently entered into a settlement agreement with one of its third-party payors in order to settle the claims related to coverage and billing matters allegedly resulting in the overpayments by the payor to the Legacy Sema4 business including those related to multi-gene tests, such as carrier screening services.
As discussed in the notes to our consolidated financial statements, in 2022, we entered into an agreement with one of our third-party payors to settle for $42.0 million claims related to coverage and billing matters allegedly resulting in overpayments by the 62 Table of Contents payor to Legacy Sema4.
(5) Represents a current year gain recognized on the sale of certain assets sold as a result of an auction.
(4) Represents a prior year gain recognized on the sale of certain assets sold as a result of an auction. (5) Represents principal loan forgiveness under the amendment to the DECD loan. (6) For the year ended December 31, 2024, represents a legal settlement for a certain litigation matter.
Impairment Loss The non-cash charge of $10.4 million for the year ended December 31, 2023 reflected the impairment of certain capital and right-of-use asset leases. See Note 6, “ Property and Equipment, net ” to our consolidated financial statements for further information.
See Note 5, “ Property and Equipment, net ” to our consolidated financial statements for further information. Other Operating Expenses, Net Other operating expenses, net were $3.4 million for the year ended December 31, 2024, reflecting related party expenses.
The following is a reconciliation of revenue to our Adjusted Gross Profit and Adjusted Gross Margin for the years ended December 31, 2023 and 2022 (in thousands) : Year Ended December 31, 2023 2022 Revenue $ 202,566 $ 234,694 Cost of services 112,560 261,444 Gross Profit (Loss) 90,006 (26,750) Gross Margin 44 % (11) % Add: Depreciation and amortization expense $ 4,350 $ 31,328 Stock-based compensation expense (1,217) 5,080 Restructuring expense (1) 139 1,926 Adjusted Gross Profit $ 93,278 $ 11,584 Adjusted Gross Margin 46 % 5 % __________________ (1) Represents costs incurred for restructuring activities, which include severance to impacted employees and costs incurred in connection with these activities.
The following is a reconciliation of revenue to our adjusted gross profit and adjusted gross margin for the years ended December 31, 2024 and 2023 (in thousands) : Year Ended December 31, 2024 2023 Revenue $ 305,450 $ 202,566 Cost of services 111,053 112,560 Gross profit 194,397 90,006 Gross margin 64 % 44 % Add: Depreciation and amortization expense $ 4,047 $ 4,350 Stock-based compensation expense 431 (1,217) Restructuring expense 54 139 Adjusted gross profit $ 198,929 $ 93,278 Adjusted gross margin 65 % 46 % Adjusted Net Income (Loss) Adjusted net income (loss) is a non-GAAP financial measure that we define as net income (loss) adjusted for depreciation and amortization, stock-based compensation expenses, impairment loss, restructuring and business exit related charges, change in fair market value of financial liabilities, transaction costs and other (income) expense, net.
The principal focus of our commercial operations is to offer our diagnostic tests through both our direct sales force and laboratory distribution partners. Test volume correlates with genomic database size and long-term patient relationships. Thus, test volumes drive database diversity and enable potential identification of variants of unknown significance and population-specific insights.
Test volume correlates with genomic database size and long-term patient relationships. Thus, test volume drives database diversity and enables potential identification of variants of unknown significance and population-specific insights. The number of exome and genome tests resulted and the mix of test results are key indicators that we use to assess the operational efficiency of our business.
Net cash provided by financing activities during the year ended December 31, 2022 was $197.3 million, which was primarily driven by the $197.7 million net proceeds from the Acquisition PIPE Investment. Additionally, $2.9 million relates to cash received from exercise of employee stock options, which was offset by $3.3 million of finance lease principal payments.
Financing Activities Net cash provided by financing activities during the year ended December 31, 2024 was $44.2 million, which included $46.5 million in proceeds from our ATM offering, net of issuance costs, partially offset by $2.7 million of finance lease payments and $0.5 million of principal payments on the DECD loan.
In addition, the prior year only reflected Legacy GeneDx’s research and development costs following the closing of the Acquisition in April 2022. Selling and Marketing Selling and marketing expenses decreased by $61.1 million, or 50%, to $61.0 million for the year ended December 31, 2023, from $122.1 million for the year ended December 31, 2022.
Selling and Marketing Selling and marketing expenses increased by $6.4 million, or 11%, to $67.4 million for the year ended December 31, 2024, from $61.0 million for the year ended December 31, 2023.
Non-Operating Income, Net Non-operating income, net, decreased by $65.7 million, due to the significant decline in fair value of our warrant and earn-out contingent liabilities taken in the prior year and $1.0 million of contract termination costs in the current year associated with the now discontinued Legacy Sema4 business.
Non-operating income, net of $3.9 million for the year ended December 31, 2023, primarily reflected non-cash benefits of $1.2 million to account for the decrease in fair value of our warrants and contingent liabilities and $2.8 million for a principal loan forgiveness under the amendment to the Connecticut Department of Economic and Community Development (“DECD”) loan, partially offset by $1.0 million in contract termination costs associated with the now discontinued Legacy Sema4 business.
During the year ended December 31, 2023, we resulted 222,934 tests, all of which were processed by the Legacy GeneDx laboratory compared to the period ended December 31, 2022, in which we resulted 528,876 tests in our Legacy GeneDx and Legacy Sema4 laboratories.
During the year ended December 31, 2024, we resulted 74,547 exome and genome tests, which represented 33% of all test results, compared to the year ended December 31, 2023, in which we resulted 49,439 exome and genome tests, which represented 22% of all test results.
The decrease was attributable to lower revenues from the now discontinued Legacy Sema4 business, partially offset by an increase in diagnostic test revenue from Legacy GeneDx driven by an increase in whole exome and genome sequencing test volumes. In addition, the prior period only reflected Legacy GeneDx’s revenue following the closing of the Acquisition.
The increase was attributable to a $109.2 million increase in exome and genome test revenue and an increase in other panel revenue of $5.0 million, which was partially offset by a $2.7 million decrease in hereditary cancer test revenue and a $5.0 million decrease in legacy Sema4 revenues.
Other revenue decreased by $0.4 million , or 6%, to $6.9 million for the year ended December 31, 2023, from $7.4 million for the year ended December 31, 2022 due to lower revenues from the now discontinued Legacy Sema4 business.
The fourth quarter benefit is composed of $5.8 million to exome genome revenues and $1.0 million to other test lines. Other revenue, representing revenue from biopharma and/or data partnership, decreased by $3.6 million, or 52%, to $3.3 million for the year ended December 31, 2024, from $6.9 million for the year ended December 31, 2023.
Other operating expenses, net were $6.3 million for the year ended December 31, 2022 primarily reflected related party expenses.
Net interest expense for the year ended December 31, 2024 was $3.0 million.
We recognize the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by taxing authorities, based on the technical merits of the position. Recent Accounting Pronouncements Information on recent accounting pronouncements can be found in Note 2, “ Summary of Significant Accounting Policies ”.
Recent Accounting Pronouncements Information on recent accounting pronouncements can be found in Note 2, “ Summary of Significant Accounting Policies ”.
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Overview We are a leading genomics company—one that sits at the intersection of diagnostics and data science, pairing decades of genomic expertise with an ability to interpret clinical data at scale. We are focused on delivering personalized and actionable health insights to inform diagnosis, direct treatment and improve drug discovery.
Added
If we are unsuccessful in developing additional services, our growth potential may be impaired.
Removed
We believe we are well-positioned to accelerate the use of genomics and leverage large-scale clinical data to enable precision medicine as the standard of care. Our initial focus is in pediatric and rare diseases, two areas in which we believe we have competitive advantage and can deliver on our vision today.
Added
The increase in exome and genome revenue was driven by a 51% increase in test volume coupled with higher reimbursement rates resulting from lower denial rates and improved collections. Full year and fourth quarter 2024 revenues includes $6.8 million of discrete benefit in connection with a multi-year appeal recovery from a single third-party payor.
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Corporate History Overview Mount Sinai Genomics, Inc. d/b/a as Sema4 (“Legacy Sema4”) was established out of the Mount Sinai Health System and commenced operations as a commercial entity on June 1, 2017. Legacy Sema4 derived the majority of its revenue from diagnostic testing services, which primarily related to reproductive and women’s health and somatic tumor testing.
Added
The decrease reflected lower revenue from a partnership program which ended in 2024.
Removed
In addition, between May 2020 through March 31, 2022, Legacy Sema4 provided COVID-19 diagnostic testing services. GeneDx, LLC (formerly, GeneDx, Inc.) (“Legacy GeneDx”), which derives its revenue primarily from diagnostic testing services, including revenue related to exome sequencing and whole genome sequencing, was acquired by us on April 29, 2022 (the “Acquisition”).
Added
Gross Profit Gross profit increased by $104.4 million for the year ended December 31, 2024, driven by a combination of a favorable shift in volume mix to higher margin whole exome and genome tests, an improvement in exome average reimbursement rates and continued cost per test leverage. 59 Table of Contents Research and Development Research and development expenses decreased by $12.5 million, or 22%, to $45.7 million for the year ended December 31, 2024, from $58.3 million for the year ended December 31, 2023.
Removed
The diagnostic testing services businesses of Legacy Sema4 were discontinued as of the end of the first quarter of 2023, and our continuing operations now include the combination of the Legacy GeneDx diagnostic testing services business with the data and information business of Legacy Sema4.
Added
The decrease was primarily attributable to costs incurred in the prior year from the now discontinued Legacy Sema4 business, which included restructuring costs associated with headcount reduction actions and accelerated amortization for capitalized software no longer in use.
Removed
Investment in platform innovation to support commercial growth We are seeking to leverage and deploy our platforms to develop a pipeline of future disease-specific research and diagnostic and therapeutic products and services. We have limited experience in the development or commercialization of clinical or research products in connection with our database and platform.
Added
The increase reflects our investment to support growth in our commercial team as well as incremental variable billing and selling cost General and Administrative General and administrative expenses decreased by $32.6 million, or 24%, to $101.1 million for the year ended December 31, 2024, from $133.8 million for the year ended December 31, 2023 .
Removed
As our business evolves, the competitive pressure to innovate will encompass a wider range of products and services. We must continue to invest significant resources in research and development, including investments through acquisitions and partnerships.
Added
The decrease was attributable to lower current period expenses related to professional services, software and information technology related costs, insurance costs, fixed asset depreciation and personnel-related costs from the now discontinued Legacy Sema4 business. Impairment Loss The non-cash charge of $10.4 million for the year ended December 31, 2023 reflected the impairment of certain capital and right-of-use asset leases.
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COVID-19 Impact During 2023, our test volumes improved to what would, at this time, be considered normalized market conditions. In March 2020, the Coronavirus Aid, Relief and Economic Security Act (“CARES Act”), was signed into law.
Added
Non-Operating (Expense) Income, Net Non-operating expense, net of $29.4 million for the year ended December 31, 2024 primarily reflected a legal settlement, net of insurance, of $12.8 million, a non-cash charge of $10.1 million associated with the exercise of the Perceptive warrant and a non-cash charge of $3.3 million to account for the increase in fair value of our warrant liabilities.
Removed
The CARES Act was a stimulus bill that, among other things, provided assistance to qualifying businesses and individuals and included funding for the healthcare system. We received $5.4 million in 2020 as part of the stimulus, comprised of $2.6 million received under the Provider Relief Fund (the “PRF”), and $2.8 million received under the Employee Retention Credit (the “ERC”).
Added
Net interest income for the year ended December 31, 2023 was $1.1 million. See Note 4, “ Fair Value Measurement ”, Note 8, “ Long-Term Debt ” and Note 10, “ Purchase Commitments and Contingencies ” to our consolidated financial statements for further information.
Removed
In 2021, we received an additional $5.6 million under the PRF.
Added
See Note 10, “ Purchase Commitments and Contingencies ” to our consolidated financial statements for further information. For the year ended December 31, 2023, represents contract termination costs associated with the now discontinued Legacy Sema4 business. Liquidity and Capital Resources As of December 31, 2024 , our existing cash and cash equivalents and available-for-sale marketable securities were $141.2 million.
Removed
Funds provided under the PRF to healthcare providers are not loans and will not be required to be repaid; however, as a condition to receiving these payments, providers must agree to certain terms and conditions and submit sufficient documentation demonstrating that the funds are being used for healthcare-related expenses or lost revenue attributable to the COVID-19 pandemic.
Added
Further, we have entered into a sales agreement (the “Sales Agreement”) with TD Securities (USA) LLC (“TD Cowen”) pursuant to which we may, but are not obligated to, offer and sell, from time to time, shares of our Class A common stock with an aggregate offering price up to $75.0 million through TD Cowen, as sales agent, subject to the terms and conditions described in the Sales Agreement and SEC rules and regulations (our “ATM offering”).
Removed
We have concluded it is probable that all terms and conditions associated with the funds received under the PRF distribution have been met. As a result, we recorded the funds received under the PRF in other expense (income), net in the statements of operations and comprehensive loss during the periods in which we received the funds.
Added
Cash Flows Year Ended December 31, (in thousands) 2024 2023 Net cash used in operating activities $ (28,496) $ (180,147) Net cash used in investing activities (30,132) (43,726) Net cash provided by financing activities 44,162 186,238 Operating Activities Net cash used in operating activities during the year ended December 31, 2024 was $28.5 million, driven by lower cash expenditures in the current year as compared with the prior year, which reflected improved gross margin profitability, as well as the realization of cost savings from the exited Legacy Sema4 business and previously executed cost reduction initiatives.

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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 changeA 100 basis point change in interest rates would not have a material effect on the fair market value of our cash, cash equivalents and restricted cash. Our Perceptive Term Loan Facility includes variable interest rate terms for the outstanding principal amount of $50 million at October 27, 2023.
Biggest changeA 100-basis-point change in interest rates would not have a material effect on the fair market value of our cash, cash equivalents and restricted cash. We are also exposed to interest rate risk on our variable rate debt associated with the Perceptive Term Loan Facility. Changes in interest rates can impact future interest payments we are obligated to pay.
Our cash, cash equivalents, available-for-sale marketable securities and restricted cash consists of bank deposits and money market funds, which totaled $131.1 million and $138.3 million at December 31, 2023 and 2022, respectively. Such interest-bearing instruments carry a degree of risk.
Our cash, cash equivalents, available-for-sale marketable securities and restricted cash consists of bank deposits and money market funds, which totaled $142.2 million and $131.1 million at December 31, 2024 and 2023, respectively. Such interest-bearing instruments carry a degree of risk.
Therefore, changes in interest rates can impact future interest payments we are obligated to pay. See Note 9, “Long-Term Debt” to our consolidated financial statements for further information.
See Note 8, “ Long-Term Debt ” to our consolidated financial statements for further information.

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