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What changed in BIODESIX INC's 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of BIODESIX INC's 2022 and 2023 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 2023 report.

+592 added−676 removedSource: 10-K (2024-03-01) vs 10-K (2023-03-06)

Top changes in BIODESIX INC's 2023 10-K

592 paragraphs added · 676 removed · 474 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

214 edited+43 added−94 removed273 unchanged
Biggest changeFull Year Results for 2022 For the year ended December 31, 2022, compared to the prior year: • Total Revenue was $38.2 million, a decrease of 30% primarily driven by the expected decline in COVID-19 diagnostic testing; o Lung Diagnostic Revenue of $29.3 million, an increase of 57% o Services Revenue of $3.7 million, a decrease of 34% o COVID-19 Revenue of $5.2 million, a decrease of 83% • Gross Margin was $24.1 million resulting in a 63% overall gross margin percentage as compared to 44% in the prior year; • Operating Expenses, excluding Direct costs and expenses, were $74.6 million, an increase of 15% and including non-cash share-based compensation expense of $6.0 million as compared to $4.9 million in the prior year; • Net Loss was $65.4 million, an increase of 52%, which includes approximately $7.0 million of loss on debt extinguishment in 2022 as compared to a gain on debt modification of $2.3 million in the prior year; • Basic and Diluted Net Loss Per Common Share was $1.55; • Net Cash Used by Operating Activities was $45.0 million, compared to $28.2 million used in the prior year; and • Cash and Cash Equivalents was $43.1 million as of December 31, 2022.
Biggest changeFull Year Results for 2023 For the year ended December 31, 2023, compared to the prior year: • Total Revenue was $49.1 million, an increase of 28% primarily driven by: o Lung Diagnostic Revenue of $45.1 million, an increase of 54%; o Biopharma Services and other revenue of $3.9 million, an increase of 6%; o COVID-19 Revenue of $0.1 million, a decrease of 99%; • Gross Margin was $36.1 million, resulting in a 73% overall gross margin percentage as compared to 63% in the prior year; • Operating Expenses, excluding Direct costs and expenses, were $77.4 million, an increase of 4% and including non-cash share-based compensation expense of $5.4 million as compared to $6.0 million in the prior year; • Net Loss was $52.1 million and decreased 20%, due primarily to an overall decrease in total operating expenses and other expenses of $9.2 million and $4.1 million, respectively; • Basic and Diluted Net Loss Per Common Share was $0.64; 4 • Net Cash Used by Operating Activities was $22.9 million, compared to $45.0 million used in the prior year; and • Cash and Cash Equivalents was $26.3 million as of December 31, 2023.
Over the last two decades, the use of biomarker testing in clinical trials has increased, with 15% of oncology trials involving the use of biomarker testing in 2000 compared to 55% in 2018.
Over the last two decades, the use of biomarker testing in clinical trials has increased, with 15% of oncology trials involving the use of biomarker testing in 2000 compared to 55% in 2018.
Nodify CDT The Nodify CDT test is a blood-based proteomic test that helps identify patients who have a suspicious lung nodule that is likely malignant or at a higher risk of being cancerous.
Nodify CDT Test The Nodify CDT test is a blood-based proteomic test that helps identify patients who have a suspicious lung nodule that is likely malignant or at a higher risk of being cancerous.
Nodify XL2 The Nodify XL2 test is a blood-based proteomic test that helps identify patients who have a suspicious lung nodule that is likely benign or at a reduced risk of being cancerous.
Nodify XL2 Test The Nodify XL2 test is a blood-based proteomic test that helps identify patients who have a suspicious lung nodule that is likely benign or at a reduced risk of being cancerous.
Additionally, blood-based testing upfront can help save valuable tissue for diagnostic evaluation, PD-L1 testing and broad genomic profiling for rare mutations to enroll in clinical trials. VeriStrat The VeriStrat test is a blood-based proteomic test that provides a personalized view of each patient’s immune response to their lung cancer.
Additionally, blood-based testing upfront can help save valuable tissue for diagnostic evaluation, PD-L1 testing and broad genomic profiling for rare mutations to enroll in clinical trials. VeriStrat Test The VeriStrat test is a blood-based proteomic test that provides a personalized view of each patient’s immune response to their lung cancer.
Our Diagnostic Tests in Development With the goal of finding solutions for clinical unmet needs related to diagnosis, treatment and monitoring in lung disease, our diagnostic tests in development include the following: Early-Stage NSCLC—Risk of Recurrence (ROR) Currently, surgical resection of the tumor without systemic or radiation therapy is standard of care for stage I NSCLC patients.
Our Diagnostic Tests in Development With the goal of finding solutions for clinical unmet needs related to diagnosis, treatment and monitoring in lung disease, our diagnostic tests in development include the following: Early-Stage NSCLC—Risk of Recurrence (ROR) Currently, surgical resection of the tumor without systemic or radiation therapy is the standard of care for stage I NSCLC patients.
Reimbursement for laboratory tests in the United States is determined by various payers, including private third-party payers, managed care organizations, and state and federal health care programs, such as Medicare and Medicaid. In Medicare, coverage of an item or service depends on whether it is “reasonable and necessary” under the section 1862(a)(1)(A) of the Social Security Act (SSA).
Reimbursement for laboratory tests in the United States is determined by various payers, including private third-party payers, managed care organizations, and state and federal health care programs, such as Medicare and Medicaid. In Medicare, coverage of an item or service depends on whether it is “reasonable and necessary” under Section 1862(a)(1)(A) of the Social Security Act (SSA).
Some Class I devices also require premarket clearance by the FDA through the 510(k) premarket notification process described below. Most Class I products are exempt from the premarket notification requirements. Class II devices are subject to the General Controls as well as any special controls as deemed necessary by the FDA to ensure the safety and effectiveness of the device.
Some Class I devices also require premarket clearance by the FDA through the 510(k) premarket notification process described below. Most Class I products are exempt from the premarket notification requirements. Class II devices are subject to the General Controls as well as any special controls deemed necessary by the FDA to ensure the safety and effectiveness of the device.
This law, which took effect January 1, 2022, bars an out-of-network providers from billing patients in excess of the in-network cost sharing for services furnished with respect to a visit at certain in-network health care facilities. The law establishes an independent dispute resolution process between the provider and the payer to determine the appropriate payment rate to the provider.
This law, which took effect January 1, 2022, bars out-of-network providers from billing patients in excess of the in-network cost sharing for services furnished with respect to a visit at certain in-network health care facilities. The law establishes an independent dispute resolution process between the provider and the payer to determine the appropriate payment rate to the provider.
As an emerging growth company, we may take advantage of certain exemptions from various public company reporting requirements, including the requirement that our internal control over financial reporting be audited by our independent registered public accounting firm pursuant to Section 404 of the Sarbanes-Oxley Act of 2002, certain requirements related to the disclosure of executive compensation in our periodic reports and proxy statements, the requirement that we hold a nonbinding advisory vote on executive compensation and any golden parachute payments.
As an emerging growth company, we may take advantage of certain exemptions from various public company reporting requirements, including the requirement that our internal control over financial reporting be audited by our independent registered public accounting firm pursuant 31 to Section 404 of the Sarbanes-Oxley Act of 2002, certain requirements related to the disclosure of executive compensation in our periodic reports and proxy statements, the requirement that we hold a nonbinding advisory vote on executive compensation and any golden parachute payments.
Additionally, Veracyte currently markets a test that is used post-bronchoscopy that is not competitive with our pre-bronchoscopy nodule risk assessment tests. Prognosis, Treatment Guidance and Monitoring—NSCLC We are unaware of any other diagnostic test available, commercially or in development, that will compete with our VeriStrat immune profiling test. There is substantial interest and activity in tumor profiling through liquid biopsy.
Additionally, Veracyte currently markets a test that is used post-bronchoscopy that is not competitive with our pre-bronchoscopy nodule risk assessment tests. Treatment Guidance and Monitoring—NSCLC We are unaware of any other diagnostic test available, commercially or in development, that will compete with our VeriStrat immune profiling test. There is substantial interest and activity in tumor profiling through liquid biopsy.
For more information regarding risks relating to intellectual property, please see “Risk Factors—Risks Related to Our Intellectual Property.” We have invested heavily in the protection of our key assets, namely the VeriStrat® and GeneStrat® tests, and we acquired a patent portfolio relating to the Nodify XL2® and Nodify CDT® tests in our acquisitions of Indi in June 2018, and of Oncimmune USA in October 2019 from Oncimmune Limited (Oncimmune).
For more information regarding risks relating to intellectual property, please see “Risk Factors—Risks Related to Our Intellectual Property.” 19 We have invested heavily in the protection of our key assets, namely the VeriStrat® and GeneStrat® tests, and we acquired a patent portfolio relating to the Nodify XL2® and Nodify CDT® tests in our acquisitions of Indi in June 2018, and of Oncimmune USA in October 2019 from Oncimmune Limited (Oncimmune).
With an average turnaround time of three business days, we are able to quickly provide critical diagnostic information to physicians to facilitate personalized treatment decisions for their patients. • Monitoring : We believe longitudinally monitoring advanced NSCLC patients for the dynamic evolution of their tumor and immune profile while on treatment can provide an earlier indication of treatment resistance and/or disease progression.
With an established average turnaround time of three business days, we are able to quickly provide critical diagnostic information to physicians to facilitate personalized treatment decisions for their patients. • Monitoring : We believe longitudinally monitoring advanced NSCLC patients for the dynamic evolution of their tumor and immune profile while on treatment can provide an earlier indication of treatment resistance and/or disease progression.
Additionally, the Company annually celebrates our top sales performers through our President’s Club and other top company performers as nominated by fellow team members through our four (4) Performance Excellence Awards that recognize creativity and innovation, an entrepreneurial spirit, a strategic impact on the success of the Company and lastly, embodying the Biodesix cultural beliefs and goes “above and beyond” daily.
Additionally, the Company annually celebrates our top sales performers through our President’s Club and other top company performers as nominated by fellow team members through our four (4) Performance Excellence Awards that recognize 32 creativity and innovation, an entrepreneurial spirit, a strategic impact on the success of the Company and lastly, embodying the Biodesix cultural beliefs and goes “above and beyond” daily.
Our scientific diagnostic expertise, technologies, and existing commercial infrastructure enabled us to rapidly commercialize two United States Food and Drug Administration (FDA) Emergency Use Authorization (EUA)-authorized tests, a part of our customizable WorkSafe program. Both diagnostic tests are owned and were developed by Bio-Rad and Bio-Rad has granted us permission to utilize both tests for commercial diagnostic services.
Our scientific diagnostic expertise, technologies, and existing commercial infrastructure enabled us to rapidly commercialize two United States Food and Drug Administration (FDA) Emergency Use Authorization (EUA)-authorized tests, a part of our customizable WorkSafe program. Both diagnostic tests are owned and were developed by Bio-Rad and Bio-Rad granted us permission to utilize both tests for commercial diagnostic services.
From market research with pulmonologists, thoracic surgeons, and medical oncologists, we identified a significant clinical unmet need for a blood-based test to help identify stage I NSCLC patients who are at a higher risk of recurrence and may benefit from a more aggressive surgical procedure, or from neoadjuvant or adjuvant systemic treatment.
From market research with 15 pulmonologists, thoracic surgeons, and medical oncologists, we identified a significant clinical unmet need for a blood-based test to help identify stage I NSCLC patients who are at a higher risk of recurrence and may benefit from a more aggressive surgical procedure, or from neoadjuvant or adjuvant systemic treatment.
We will remain a smaller reporting company until the last day of the fiscal year in which (i) the market value of our common stock held by non-affiliates exceeds $250 million as of the end of that year’s second fiscal quarter, or (ii) our annual revenues exceeded $100 million during such completed fiscal year and the market value of our common stock held by non-affiliates exceeds $700 million 35 as of the end of that year’s second fiscal quarter.
We will remain a smaller reporting company until the last day of the fiscal year in which (i) the market value of our common stock held by non-affiliates exceeds $250 million as of the end of that year’s second fiscal quarter, or (ii) our annual revenues exceeded $100 million during such completed fiscal year and the market value of our common stock held by non-affiliates exceeds $700 million as of the end of that year’s second fiscal quarter.
In addition, we offer an employee stock purchase plan to all employees in which participants are eligible to purchase shares at a discount to market. We think like customers and act like owners. 36 Biodesix seeks fairness in total compensation. We benchmark with external comparisons, internal comparisons and look at the relationship between team member roles within the organization.
In addition, we offer an employee stock purchase plan to all employees in which participants are eligible to purchase shares at a discount to market. We think like customers and act like owners. Biodesix seeks fairness in total compensation. We benchmark with external comparisons, internal comparisons and look at the relationship between team member roles within the organization.
Additionally, the Biden administration has already indicated a shift in direction from Trump administration policies by issuing orders and other documents rolling back regulations and Executive Orders from the Trump administration, and as noted, indicating that it will pursue policies strengthening the ACA. 34 In December 2020, in its enactment of the Consolidated Appropriations Act, Congress enacted the No Surprises Act.
Additionally, the Biden administration has already indicated a shift in direction from Trump administration policies by issuing orders and other documents rolling back regulations and Executive Orders from the Trump administration, and as noted, indicating that it will pursue policies strengthening the ACA. In December 2020, in its enactment of the Consolidated Appropriations Act, Congress enacted the No Surprises Act.
A De Novo request includes a description of the device, a discussion of the general controls and any specific controls recommended to 28 provide reasonable assurance of the safety and effectiveness of the device, a description of the probable benefits of the device when compared to the probable risks when the device is used as intended, non-clinical data including bench performance and animal testing, technical information about the device, and clinical data (if applicable).
A De Novo request includes a description of the device, a discussion of the general controls and any specific controls recommended to provide reasonable assurance of the safety and effectiveness of the device, a description of the probable benefits of the device when compared to the probable risks when the device is used as intended, non-clinical data including bench performance and animal testing, technical information about the device, and clinical data (if applicable).
The FDA finalized this draft guidance in April 2020 in “Developing and Labeling In 29 vitro Companion Diagnostic Devices for a Specific Group of Oncology Therapeutic Products.” The guidance is meant to guide the development of CDx products, which are defined as IVDs that provide information that is essential for the safe and effective use of the therapeutic product.
The FDA finalized this draft guidance in April 2020 in “Developing and Labeling In vitro Companion Diagnostic Devices for a Specific Group of Oncology Therapeutic Products.” The guidance is meant to guide the development of CDx products, which are defined as IVDs that provide information that is essential for the safe and effective use of the therapeutic product.
Our De Soto, Kansas laboratory is under the jurisdiction of Wisconsin Physicians Service Insurance Corporation (WPS), which participates in the MolDX program (administered by another MAC, Palmetto GBA) to set coverage policy for molecular diagnostic tests. Medicare pays for clinical diagnostic laboratory tests (CDLTs), on the Clinical Laboratory Fee Schedule (CLFS).
Our De Soto, Kansas laboratory is under the jurisdiction of Wisconsin 17 Physicians Service Insurance Corporation (WPS), which participates in the MolDX program (administered by another MAC, Palmetto GBA) to set coverage policy for molecular diagnostic tests. Medicare pays for clinical diagnostic laboratory tests (CDLTs), on the Clinical Laboratory Fee Schedule (CLFS).
We believe the field of biomarker discovery and 6 companion diagnostic development for biopharmaceutical therapeutics is set to continue growing as biopharmaceutical companies seek to de-risk their product development efforts and increase chances of drug development success. However, we believe as the market continues to advance, inherent limitations of both biomarker discovery and companion diagnostic development have become more apparent.
We believe the field of biomarker discovery and companion diagnostic development for biopharmaceutical therapeutics is set to continue growing as biopharmaceutical companies seek to de-risk their product development efforts and increase chances of drug development success. However, we believe as the market continues to advance, inherent limitations of both biomarker discovery and companion diagnostic development have become more apparent.
Training and Development We invest in our team members career growth and provide team members with a wide range of development opportunities, including face-to-face, virtual, and self-directed learning, mentoring, coaching, and external development. Health, Safety and Wellness The physical health, financial stability, life balance and mental health of each of our team members is vital to our success.
Training and Development We invest in our team members' career growth and provide team members with a wide range of development opportunities, including face-to-face, virtual, and self-directed learning, mentoring, coaching, and external development. Health, Safety and Wellness The physical health, financial stability, life balance and mental health of each of our team members is vital to our success.
We believe that rapid, blood-based tumor profiling with the GeneStrat ddPCR and GeneStrat NGS tests can be complementary to both targeted tissue-based testing (including PD-L1) and tissue-based broad genomic sequencing. Testing with GeneStrat ddPCR and GeneStrat NGS tests at diagnosis can help quickly identify patients who are eligible for targeted therapies.
We believe that rapid, blood-based tumor profiling with the GeneStrat ddPCR and GeneStrat NGS tests can be complementary to both targeted tissue-based testing (including PD-L1) and tissue-based broad genomic sequencing. Testing with GeneStrat ddPCR and 11 GeneStrat NGS tests at diagnosis can help quickly identify patients who are eligible for targeted therapies.
Primarily focusing on pulmonology and oncology, the commercial team, consisting of specialty sales representatives, medical affairs, marketing and customer care representatives, works to educate and inform the entire patient care group consisting of physicians, nurses, office staff, laboratory personnel, and administration as to the appropriate use and value provided by our testing.
Primarily focusing on pulmonology, the commercial team, consisting of specialty sales representatives, medical affairs, marketing and customer care representatives, works to educate and inform the entire patient care group consisting of physicians, nurses, office staff, laboratory personnel, and administration as to the appropriate use and value provided by our testing.
CLIA requires that a laboratory hold a certificate applicable to the type of laboratory examinations it performs and that it complies with, among other things, standards covering operations, personnel, facilities administration, quality systems and proficiency testing, which are intended to ensure, among other things, that clinical laboratory testing services are accurate, reliable and timely.
CLIA requires that a laboratory hold a certificate applicable to the type of laboratory examinations it performs and that it complies with, among other things, 22 standards covering operations, personnel, facilities administration, quality systems and proficiency testing, which are intended to ensure, among other things, that clinical laboratory testing services are accurate, reliable and timely.
In addition, a PMA generally requires the performance of one or more clinical trials. Despite the time, effort and cost, a device may not be approved or cleared by the FDA. Any delay or failure to obtain necessary regulatory clearances or approvals could harm our business.
In addition, a PMA generally requires the performance of one or more clinical trials. Despite the time, effort and cost, a device may not be 26 approved or cleared by the FDA. Any delay or failure to obtain necessary regulatory clearances or approvals could harm our business.
Requirements around transfers to the United States and other jurisdictions have increased since a July 2020 decision by the Court of Justice of the European Union invalidated the Privacy Shield as a basis to 32 transfer personal data from Europe to the United States, and added requirements for reliance on Standard Contractual Clauses.
Requirements around transfers to the United States and other jurisdictions have increased since a July 2020 decision by the Court of Justice of the European Union invalidated the Privacy Shield as a basis to transfer personal data from Europe to the United States, and added requirements for reliance on Standard Contractual Clauses.
Nodify Lung consists of the Nodify CDT and Nodify XL2 proteomic tests, which can be ordered separately or together from a single blood draw to help reclassify risk of cancer to aid physicians in stratifying patients into distinct nodule management pathways: intervention or surveillance.
Nodify Lung testing consists of the Nodify CDT and Nodify XL2 proteomic tests, which can be ordered separately or together from a single blood draw to help reclassify risk of cancer to aid physicians in stratifying patients into distinct nodule management pathways: intervention or surveillance.
Patients who test as VeriStrat 13 Poor, on average, have an overall survival that is less than half of those who test as VeriStrat Good, independent of treatment type, demonstrating that the test is strongly prognostic. Conversely, patients with a VeriStrat Good test result typically respond better to standard of care treatments than those patients that test as VeriStrat Poor.
Patients who test as VeriStrat Poor, on average, have an overall survival that is less than half of those who test as VeriStrat Good, independent of treatment type, demonstrating that the test is strongly prognostic. Conversely, patients with a VeriStrat Good test result typically respond better to standard of care treatments than those patients that test as VeriStrat Poor.
The term of a patent that covers a biological product may also be eligible for patent term extension when FDA approval is granted for a portion of the term effectively lost as a result of the FDA regulatory review period, subject to certain limitations and provided statutory and regulatory requirements are met.
The term of a patent that covers a biological product may also be eligible for patent term extension when FDA approval is granted for a portion of the term effectively lost as a result of the FDA regulatory review period, subject to certain limitations and provided statutory and regulatory 20 requirements are met.
The Nodify CDT test is used to help identify lung nodules that are likely malignant and the Nodify XL2 test helps identify lung nodules that are likely benign. Nodify Lung is available for patients 40 years or older, with nodules between 8 and 30mm, and less than 65% pre-test risk of lung cancer.
The Nodify CDT test is used to help identify lung nodules that are likely malignant and the Nodify XL2 test helps identify lung nodules that are likely benign. Nodify Lung testing is available for patients 40 years or older, with nodules between 8 and 30mm, and less than 65% pre-test risk of lung cancer.
We have used our ddPCR assay to monitor EGFR sensitizing and resistance mutations in clinical trial samples from seven different clinical trials for Tagrisso. 15 • Genentech: We partnered with Genentech to discover a novel proteomic classifier for advanced NSCLC patients treated with atezolizumab.
We have used our ddPCR assay to monitor EGFR sensitizing and resistance mutations in clinical trial samples from seven different clinical trials for Tagrisso. • Genentech: We partnered with Genentech to discover a novel proteomic classifier for advanced NSCLC patients treated with atezolizumab.
We believe our commitment to commercial excellence helps us to leverage insights, operational excellence and proven approaches to deliver revenue growth and enhance the brand of our company and products. We are able to deploy rapid clinical testing turnaround 16 times and develop commercial tests at scale.
We believe our commitment to commercial excellence helps us to leverage insights, operational excellence and proven approaches to deliver revenue growth and enhance the brand of our company and products. We are able to deploy rapid clinical testing turnaround times and develop commercial tests at scale.
Based on this unmet diagnostic need, we discovered the Risk of Recurrence (ROR) test, which is a pre-surgery blood-based proteomic test, designed with the Diagnostic Cortex to predict whether a stage I NSCLC patient has a higher risk of recurrence post-surgical resection.
Based on this unmet diagnostic need, we discovered the Risk of Recurrence (ROR) test, which is a pre-surgery blood-based proteomic test, designed with the Diagnostic Cortex platform to predict whether a stage I NSCLC patient has a higher risk of recurrence post-surgical resection.
To be “substantially equivalent,” the proposed device must have the same intended use as the predicate device, and either have the same technological characteristics as the predicate device or have different technological characteristics and not raise different questions of safety or effectiveness than the predicate device. Premarket notifications typically include bench, analytical, and preclinical data.
To be “substantially equivalent,” the proposed device must have the same intended use as the predicate device, and either have the same technological characteristics as the predicate device or have different technological characteristics and not raise 25 different questions of safety or effectiveness than the predicate device. Premarket notifications typically include bench, analytical, and preclinical data.
We have now included the ELISA technologies for research and development both internally and externally with our biopharmaceutical customers and academic partners. Droplet Digital Polymerase Chain Reaction Technology (ddPCR) We use the ddPCR technology for multiplexed, semi-automated nucleic acid detection.
We have now included the ELISA technologies for research and development both internally and externally with our biopharmaceutical customers and academic partners. 7 Droplet Digital Polymerase Chain Reaction Technology (ddPCR) We use the ddPCR technology for multiplexed, semi-automated nucleic acid detection.
For medium and high-risk devices as well as low risk devices that are placed on the market in sterile condition, have a measuring function, or are reusable surgical instruments, the manufacturer must obtain a CE Certificate from a notified body.
For medium and high-risk devices as well as low risk devices that are placed on the market in sterile condition, have a measuring function, or are 24 reusable surgical instruments, the manufacturer must obtain a CE Certificate from a notified body.
We therefore believe that there is a clear clinical need for blood-based diagnostic testing to help improve the initial risk assessment of pulmonary nodules, helping direct patients to the relevant treatment pathway, and ultimately improving patient outcomes and saving costs to the system. • Treatment Guidance – Early Stage : We estimate that there are over 700,000 testing opportunities annually in the United States in early-stage lung cancer to assess a patient’s risk of recurrence following curative-intent surgery, and to detect potential target mutations for therapeutics.
We therefore believe that there is a clear clinical need for blood-based diagnostic testing to help improve the initial risk assessment of pulmonary nodules, helping direct patients to the relevant treatment pathway, and ultimately improving patient outcomes and saving costs to the system. • Treatment Guidance – Early Stage : We estimate that there are over 700 thousand testing opportunities annually in the United States in early-stage lung cancer to assess a patient’s risk of recurrence following curative-intent surgery, and to detect potential target mutations for therapeutics.
However, 20 to 40% of patients with stage I disease do still recur within five years following surgery, representing a sub-group of patients who may have benefited from more intensive treatment protocol.
However, 20 to 40% of patients with stage I disease do still recur within five years following surgery, representing a sub-group of patients who may have 5 benefited from more intensive treatment protocol.
Our blood-based nodule management offering, Nodify Lung Nodule Risk Assessment assists physicians in reclassifying a patient’s risk of lung cancer by incorporating their protein biomarker results with radiographic imaging and clinical characteristics.
Our blood-based nodule management offering, Nodify Lung Nodule Risk Assessment, assists 8 physicians in reclassifying a patient’s risk of lung cancer by incorporating their protein biomarker results with radiographic imaging and clinical characteristics.
We estimate that in the United States, the lung cancer continuum of care currently represents over 10 million annual testing opportunities and is over a $27 billion market annually for testing alone.
We estimate that in the United States, the lung cancer continuum of care represents over 10 million annual testing opportunities and is over a $27 billion market annually for testing alone.
While Congress did not pass comprehensive legislation that would repeal all or part of the ACA, two bills affecting the implementation of certain taxes under the ACA have been signed into law.
While Congress did not pass comprehensive legislation that would repeal all or part of the ACA, two bills affecting the implementation of certain taxes under the 30 ACA have been signed into law.
The privacy rule also sets forth individual rights, such as the right to 31 access or amend certain records containing such individual’s PHI, or to request restrictions on the use or disclosure of such individual’s PHI.
The privacy rule also sets forth individual rights, such as the right to access or amend certain records containing such individual’s PHI, or to request restrictions on the use or disclosure of such individual’s PHI.
To achieve this, we intend to: • Drive increased awareness, adoption, and reimbursement coverage of our diagnostic tests by: o continuously educating physicians, key opinion leaders, hospital systems, advocacy groups, patients, payers, academic research organizations, and technology assessment and guideline organizations on the clinical data and benefits of our tests; o utilizing our pulmonology- and oncology-focused sales force and commercial reach with targeted awareness campaigns to employ highly targeted sales and marketing tactics in pulmonology clinics specializing in the management of lung nodules and the diagnosis of lung cancer; o continuing to invest in the expansion of our sales force and commercial support team; o incorporating our testing services into diagnostic pathways and protocols via a top-down strategy that introduces our diagnostic tests to the largest United States health systems; and o leveraging our clinical data to gain broad coverage from public and private payers for our tests. • Deepen our relationships with current biopharmaceutical customers and establish new customer opportunities by: o selling our complete offering of tests and services to biopharmaceutical companies in the United States and internationally; o leveraging existing projects and relationships to expand sales with our current biopharmaceutical customers; and o targeting companies developing novel companion diagnostic strategies and drug development projects best suited to our platform for new test discovery, development and commercialization. • Further demonstrate the clinical utility and health economic benefits of our diagnostic tests by: o investing in commercial clinical testing, research studies and clinical trials to further demonstrate the clinical utility of our tests; o providing rapid, actionable, and holistic diagnostic information to help inform physicians on the next steps in a patient’s care plan; and o providing timely and actionable clinical information to help improve overall patient outcomes and lower the overall healthcare cost. • Introduce new diagnostic tests in lung disease by: o engaging with our customers, key opinion leaders, and scientific experts to stay ahead of the rapidly evolving diagnostic and therapeutic landscape and to identify additional clinical unmet needs; o entering strategic partnerships with biopharmaceutical companies, academic research organizations, technology providers, and other diagnostic companies; and o developing companion diagnostic tests to support the therapeutics’ regulatory approval and adoption process for our biopharmaceutical customers. • Enhance our proprietary AI platform and expand our technology portfolio by: o continuing to invest in R&D capabilities to foster innovation in test discovery and development; o identifying, acquiring technologies and integrating new data types into our proprietary AI platform; o entering strategic partnerships across our commercial product portfolio and product development efforts in order to further our development capabilities, accelerate launch of commercial products, or expand our service offering; and o achieving “Explainable AI” by developing and incorporating computational tools that determine how the Diagnostic Cortex makes decisions for patient classification and outcome prediction. 17 • Continue to expand and leverage our biobank by: o expanding and enhancing the robustness of our samples and the data set, including through our collaborations and partnerships; o pursuing commercial opportunities with companies and researchers who are interested in utilizing our biobank for their own discovery and development efforts; and o monetizing these commercial opportunities.
To achieve this, we intend to: • Drive increased awareness, adoption, and reimbursement coverage of our diagnostic tests by: o continuously educating physicians, key opinion leaders, hospital systems, advocacy groups, patients, payers, academic research organizations, and technology assessment and guideline organizations on the clinical data and benefits of our tests; o utilizing our pulmonology focused sales force and commercial reach with targeted awareness campaigns to employ highly targeted sales and marketing tactics in pulmonology clinics specializing in the management of lung nodules and the diagnosis of lung cancer; 14 o continuing to invest in the expansion of our sales force and commercial support team; o incorporating our testing services into diagnostic pathways and protocols via a top-down strategy that introduces our diagnostic tests to the largest United States health systems; and o leveraging our clinical data to gain broad coverage from public and private payers for our tests. • Deepen our relationships with current biopharmaceutical customers and establish new customer opportunities by: o selling our complete offering of tests and services to biopharmaceutical companies in the United States and internationally; o leveraging existing projects and relationships to expand sales with our current biopharmaceutical customers; and o targeting companies developing novel CDx strategies and drug development projects best suited to our platform for new test discovery, development and commercialization. • Further demonstrate the clinical utility and health economic benefits of our diagnostic tests by: o investing in commercial clinical testing, research studies and clinical trials to further demonstrate the clinical utility of our tests; o providing rapid, actionable, and holistic diagnostic information to help inform physicians on the next steps in a patient’s care plan; and o providing timely and actionable clinical information to help improve overall patient outcomes and lower the overall healthcare cost. • Introduce new diagnostic tests in lung disease by: o engaging with our customers, key opinion leaders, leading academic centers, and scientific experts to stay ahead of the rapidly evolving diagnostic and therapeutic landscape and to identify additional clinical unmet needs; o entering strategic partnerships with biopharmaceutical companies, academic research organizations, technology providers, and other diagnostic companies; and o developing CDx tests to support the therapeutics’ regulatory approval and adoption process for our biopharmaceutical customers. • Enhance our proprietary AI platform and expand our technology portfolio by: o continuing to invest in research and development capabilities to foster innovation in test discovery and development; o identifying, acquiring technologies, and integrating new data types into our proprietary AI platform; o entering strategic partnerships across our commercial product portfolio and product development efforts in order to further our development capabilities, accelerate launch of commercial products, or expand our service offering; and o achieving “Explainable AI” by developing and incorporating computational tools that determine how the Diagnostic Cortex platform makes decisions for patient classification and outcome prediction. • Continue to expand and leverage our biobank by: o expanding and enhancing the robustness of our samples and the data set, including through our collaborations and partnerships; o pursuing commercial opportunities with companies and researchers who are interested in utilizing our biobank for their own discovery and development efforts; and o monetizing these commercial opportunities.
For over 10 years, we have been discovering and developing proteomic-based diagnostic tests and have a deep understanding of how to incorporate technologies that can be applied to blood samples in order to extract important protein-based biological information in the form of diagnostic tests, which can aid clinicians and scientists in understanding the dynamic biology of their system of interest, such as a patient with cancer.
For over 15 years, we have been discovering and developing proteomic-based diagnostic tests and have a deep understanding of how to incorporate technologies that can be applied to blood samples in order to extract important protein-based biological information in the form of diagnostic tests, which can aid clinicians and scientists in understanding the dynamic biology of their system of interest, such as a patient with cancer.
The study rationale is to guide the adoption of VeriStrat and inform medical decision making, including treatment choice, and enable the validation of additional mass spectrometry-based proteomic tests.
The study rationale is to guide the adoption of the VeriStrat test and inform medical decision making, including treatment choice, and enable the validation of additional mass spectrometry-based proteomic tests.
CLIA regulations establish standards for proficiency testing; facility administration; general laboratory systems; pre-analytic, analytic systems, post- analytic systems; personnel qualifications and responsibilities; quality control, quality assessment; and specific provisions for laboratories performing moderate to high complexity tests. Our Boulder, Colorado clinical laboratory is inspected biennially as part of its ongoing certification under CLIA certificate of accreditation by CAP.
CLIA regulations establish standards for proficiency testing; facility administration; general laboratory systems; pre-analytic, analytic systems, post- analytic systems; personnel qualifications and responsibilities; quality control, quality assessment; and specific provisions for laboratories performing moderate to high complexity tests. Our Boulder, Colorado clinical laboratory was inspected biennially as part of its ongoing certification under CLIA certificate of accreditation by CAP.
We will remain an emerging growth company until the earliest to occur of (i) the last day of the fiscal year in which we have more than $1.24 billion in annual revenue; (ii) the date we qualify as a “large accelerated filer,” with at least $700 million of equity securities held by non-affiliates; (iii) the date on which we have issued, in any three-year period, more than $1.0 billion in non-convertible debt securities; and (iv) the last day of the fiscal year ending after the fifth anniversary of the completion of our initial public offering (IPO).
We will remain an emerging growth company until the earliest to occur of (i) the last day of the fiscal year in which we have more than $1.24 billion in annual revenue; (ii) the date we qualify as a “large accelerated filer,” with at least $700 million of equity securities held by non-affiliates; (iii) the date on which we have issued, in any three-year period, more than $1.0 billion in non-convertible debt securities; and (iv) until December 31, 2025 (the last day of the fiscal year ending after the fifth anniversary of the completion of our initial public offering (IPO)).
The study is titled “A Multicenter, Randomized Controlled Trial, Prospectively Evaluating the Clinical Utility of the Nodify XL2 Proteomic Test in Incidentally Discovered Low to Moderate Risk Lung Nodules”. We received central investigational review board (IRB) approval in December 2019 and have an enrollment goal of 2,000 patients.
The study is titled “A Multicenter, Randomized Controlled Trial, Prospectively Evaluating the Clinical Utility of the Nodify XL2 Proteomic Test in Incidentally Discovered Low to Moderate Risk Lung Nodules”. We received central institutional review board (IRB) approval in December 2019 and have an enrollment goal of 2,000 patients.
We are continuously expanding our knowledge and biological understanding of multiple diseases and the rapidly evolving treatment landscape, while our Diagnostic Cortex continues to be powered through these biomarker analyses. Additionally, our sample and data biobank continue to grow and can be further leveraged for internal test development and external partnering.
We are continuously expanding our knowledge and biological understanding of multiple diseases and the rapidly evolving treatment landscape, while our Diagnostic Cortex® platform continues to be powered through these biomarker analyses. Additionally, our anonymized sample and data biobank continue to grow and can be further leveraged for internal test development and external partnering.
The laboratory is College of American Pathology (CAP) accredited, New York State Department of Health (NYSDOH)—permitted and licensed, ISO 13485:2016 Quality Management Systems—Requirements for Regulatory Purposes for Medical Devices certified, along with all other states that require licensing: California, Maryland, Pennsylvania, and Rhode Island.
The laboratory was College of American Pathology (CAP) accredited, New York State Department of Health (NYSDOH)—permitted and licensed, ISO 13485:2016 Quality Management Systems—Requirements for Regulatory Purposes for Medical Devices certified, along with all other states that require licensing: California, Maryland, Pennsylvania, and Rhode Island.
Phase 2 of the adaptive study design will include an open-label arm for Nodify CDT, which is aligned with our commercial testing algorithm. INSIGHT Observational Study (NCT03289780) The INSIGHT observational study is designed to evaluate the real-world clinical utility and performance of the IQLung (GeneStrat ddPCR, GeneStrat NGS and VeriStrat) testing strategy.
Phase 2 of the adaptive study design will include an open-label arm for the Nodify CDT test, which is aligned with our commercial testing algorithm. INSIGHT Observational Study (NCT03289780) The INSIGHT observational study is designed to evaluate the real-world clinical utility and performance of the IQLung (GeneStrat ddPCR, GeneStrat NGS and VeriStrat tests) testing strategy.
Because our Boulder, Colorado clinical laboratory is located in the State of Colorado, we do not need a specific State of Colorado laboratory license, however, we maintain licenses to conduct testing in other states where nonresident laboratories are required to obtain state laboratory licenses. We maintain licenses for our Boulder, Colorado and De Soto, Kansas laboratories with the NYSDOH.
Because our Louisville, Colorado clinical laboratory is located in the State of Colorado, we do not need a specific State of Colorado laboratory license, however, we maintain licenses to conduct testing in other states where nonresident laboratories are required to obtain state laboratory licenses. We maintain licenses for our Louisville, Colorado and De Soto, Kansas laboratories with the NYSDOH.
Our Boulder, Colorado and De Soto, Kansas laboratories are certified and adhere to the NYS CLEP, based on New York State Public Health Law, Article 5 Title 5. NYS CLEP is exempt from CLIA and establishes their own method of laboratory certification and test validation approval.
Our Louisville, Colorado and De Soto, Kansas laboratories are certified and adhere to the NYS CLEP, based on New York State Public Health Law, Article 5 Title 5. NYS CLEP is exempt from CLIA and establishes their own method of laboratory certification and test validation approval.
Clinical Trials We are dedicated to continuously publishing and presenting new data on the clinical validation and utility of our diagnostic tests. We have participated in 27 clinical studies, four of which are ongoing, and have published over 300 peer-reviewed publications and presentations. The following are our ongoing clinical studies for our diagnostic testing solutions.
Clinical Trials We are dedicated to continuously publishing and presenting new data on the clinical validation and utility of our diagnostic tests. We have participated in 27 clinical studies, three of which are ongoing, and have published over 300 peer-reviewed publications and presentations. The following are our ongoing clinical studies for our diagnostic testing solutions.
We believe there is therefore an emerging need for testing designed specifically for mutation detection in early-stage disease. • Treatment Guidance – Advanced Stage: We estimate that there are over three million diagnostic testing opportunities annually in the United States to guide advanced stage lung cancer treatment decisions.
We believe there is therefore an emerging need for testing designed specifically for mutation detection in early-stage disease. • Treatment Guidance – Advanced Stage: We estimate that there are over 3 million diagnostic testing opportunities annually in the United States to guide advanced stage lung cancer treatment decisions.
The trial has an adaptive study design with a blinded standard of care arm and 2:1 randomization for open-label results for Nodify XL2. The study launched in December of 2020. Phase 1 of the study with only Nodify XL2 is expected to enroll 500 patients.
The trial has an adaptive study design with a 16 blinded standard of care arm and 2:1 randomization for open-label results for the Nodify XL2 test. The study launched in December of 2020. Phase 1 of the study with only the Nodify XL2 test is expected to enroll 500 patients.
Under HIPAA and HITECH, the HHS issues regulations that establish uniform standards governing the conduct of certain electronic healthcare transactions and requirements for protecting the privacy and security of PHI, used or disclosed by covered entities (CEs) and their authorized business associates (BAs).
Under HIPAA and HITECH, the HHS issues regulations that establish uniform standards governing the conduct of certain electronic healthcare transactions and requirements for protecting the privacy and security of PHI, used or disclosed by CEs and their authorized business associates (BAs).
With nearly 50 FDA-approved systemic treatment regimens listed in national treatment guidelines for non-small cell lung cancer (NSCLC), there is an elevated need for personalized biomarkers to help physicians identify the right patient for the right treatment.
With nearly 60 FDA-approved systemic treatment regimens listed in national treatment guidelines for non-small cell lung cancer (NSCLC), there is an elevated need for personalized biomarkers to help physicians identify the right patient for the right treatment.
Together, the tests typically have an average turnaround time of three business days, providing physicians with timely results to facilitate treatment decisions. GeneStrat ddPCR The GeneStrat test is a blood-based tumor profiling test that detects the guideline recommended, actionable mutations in lung cancer: EGFR, KRAS, BRAF, EML4-ALK, ROS-1, and RET.
Together, the tests have an established average turnaround time of three business days, providing physicians with timely results to facilitate treatment decisions. 10 GeneStrat ddPCR Test The GeneStrat test is a blood-based tumor profiling test that detects the guideline recommended, actionable mutations in lung cancer: EGFR, KRAS, BRAF, EML4-ALK, ROS-1, and RET.
Federal and State Laboratory Licensing Requirements The Biodesix Boulder, Colorado clinical laboratory is a CAP-accredited clinical laboratory regulated by CMS pursuant to CLIA. CMS has granted CAP deeming authority under CLIA, which allows CAP to inspect laboratories in lieu of CMS.
Federal and State Laboratory Licensing Requirements The Biodesix Boulder, Colorado clinical laboratory was a CAP-accredited clinical laboratory regulated by CMS pursuant to CLIA. CMS has granted CAP deeming authority under CLIA, which allows CAP to inspect laboratories in lieu of CMS.
We regularly engage our customers, key opinion leaders, and scientific experts to stay ahead of the rapidly evolving diagnostic and therapeutic landscape and learn about biological discoveries that are clinically meaningful. Additionally, we incorporate clinical and molecular profiling data aggregated through our commercial clinical testing, research studies, clinical trials, and biopharmaceutical customers or academic partnerships, into our platform.
We regularly engage our customers, key opinion leaders, and scientific experts to stay ahead of the rapidly evolving diagnostic and therapeutic landscape and learn about biological discoveries that are clinically meaningful. Additionally, we incorporate clinical and molecular profiling data aggregated through our commercial clinical testing, research studies, clinical trials, and biopharmaceutical customers or other collaborative partnerships, into our platform.
Physicians can order one or any combination of the gene tests, whichever they 12 deem medically necessary for the individual patient. The presence of a mutation in one of the genes could indicate the patient is a candidate for the associated guideline-recommended targeted therapy. The GeneStrat test performance and potential clinical utility have been published in three peer reviewed studies.
Physicians can order one or any combination of the gene tests, whichever they deem medically necessary for the individual patient. The presence of a mutation in one of the genes could indicate the patient is a candidate for the associated guideline-recommended targeted therapy. The GeneStrat test performance and potential clinical utility have been published in multiple peer reviewed studies.
The agreement initially focuses on the further development of an ELISA as a companion diagnostic in future registrational trials for Imprime PGG programs. Our Competitive Advantages We believe the following are our key competitive advantages: • Our proprietary extensively validated deep learning platform, which is tailored to discover diagnostic tests that address clinical unmet needs.
The agreement initially focuses on the further development of an ELISA as a CDx in future registrational trials for Imprime PGG programs. 13 Our Competitive Advantages We believe the following are our key competitive advantages: • Our proprietary extensively validated deep learning platform, which is tailored to discover diagnostic tests that address clinical unmet needs.
The native proteins from 11 which the peptides are derived have been associated with an inflammatory response to cancer. The clinical factors are patient age and smoking status, and radiological factors are nodule size, location, and edge characteristics.
The native proteins from which the peptides are derived have been associated with an inflammatory response to lung cancer. The clinical factors are patient age and smoking status, and radiological factors are nodule size, location, and edge characteristics.
For single-source laboratory tests, this determination is typically made by the Medicare Administrative Contractor (MAC) with jurisdiction over the laboratory where the test is performed. Our Boulder, Colorado laboratory is currently under the jurisdiction of Novitas Solutions, Inc.
For single-source laboratory tests, this determination is typically made by the Medicare Administrative Contractor (MAC) with jurisdiction over the laboratory where the test is performed. Our Louisville, Colorado laboratory is currently under the jurisdiction of Novitas Solutions, Inc.
The patent related to the blood collection device is scheduled to expire in 2039. Should our current patent applications in prosecution in the United States issue, the resulting patents would be scheduled to have expiration dates between 2036 and 2040 (excluding any patent term extension(s) granted by the USPTO). We currently have one pending Patent Cooperation Treaty (PCT) application.
The patent related to the blood collection device is scheduled to expire in 2039. Should our current patent applications in prosecution in the United States issue, the resulting patents would be scheduled to have expiration dates between 2036 and 2040 (excluding any patent term extension(s) granted by the USPTO). We currently have three pending Patent Cooperation Treaty (PCT) applications.
Diagnosis • Nodify XL2® and Nodify CDT ® tests, together marketed as part of our Nodify Lung ® Nodule Risk Assessment testing strategy, assess a suspicious lung nodule's risk of lung cancer to help identify the most appropriate treatment pathway.
Diagnosis • Nodify CDT ® and XL2® tests, together marketed as our Nodify Lung ® Nodule Risk Assessment testing, assess a suspicious lung nodule's risk of lung cancer to help identify the most appropriate treatment pathway.
Importantly, we look to supplement our product development efforts with companion diagnostics as they are developed. To date, we have over 60 biopharmaceutical customers and academic partners who have utilized our diagnostic tests and services.
Importantly, we look to supplement our product development efforts with companion diagnostics as they are developed. To date, we have over 65 biopharmaceutical customers and academic partners who have utilized our diagnostic tests and services.
Results for the Nodify CDT test alone are typically available within one day. If both tests are ordered for the patient and Nodify CDT returns a result of NSLAD, then both test results are typically available within four to five business days. All results are available through secure communication methods, including a portal, fax, hard copy, or mobile device.
If both tests are ordered for the patient and Nodify CDT returns a result of NSLAD, then both test results are typically available within four to five business days. All results are available through secure communication methods, including a portal, fax, hard copy, or mobile device.
Treatment Guidance and Monitoring Profiling the tumor through blood-based testing can help identify mutations in genes that may be driving growth of the tumor and may be targets for therapeutics. However, tumors also suppress intrinsic mechanisms that prevent the patient’s immune system from identifying and eliminating the cancer cells.
Treatment Guidance and Monitoring Profiling the tumor through blood-based genomic testing can help identify mutations in genes that may be driving growth of the tumor and may be targets for therapeutics. However, tumors also have intrinsic mechanisms that prevent the patient’s immune system from identifying and eliminating the cancer cells.
With regard to our product development efforts, new applications have been filed around developments relating to ARDS and COVID diagnostics, new analytic methodologies using Shapley values and semi-quantitative spectra analysis in MALDI, and national stage applications are now in active prosecution to protect our pipeline ROR and PIR tests.
With regard to our product development efforts, new applications have been filed around developments relating to COVID/micro-organisms diagnostics, new analytic methodologies using Shapley values and semi-quantitative spectra analysis in MALDI, and national stage applications are now in active prosecution to protect our pipeline ROR and PIR tests.
Moreover, data security incidents or data breaches, as well as attacks on our IT systems, could result in operational disruptions or data loss or corruption that could adversely impact our business and operations, resulting in substantial investment of resources to investigate, recover and remediate and subject us to heightened regulatory scrutiny.
Moreover, data security incidents or data breaches, as well as attacks on our IT systems, could result in operational disruptions or data loss or corruption that could adversely impact our business and operations, resulting in substantial investment of resources to investigate, recover and remediate and subject us to heightened regulatory scrutiny. See Item 1C.
We offer the blood-based Nodify Lung Nodule Risk Assessment testing strategy to aid physicians in stratifying patients into distinct nodule management treatment pathways: diagnostic procedure or imaging surveillance.
We offer blood-based Nodify Lung Nodule Risk Assessment testing to aid physicians in stratifying patients into distinct nodule management treatment pathways: diagnostic procedure or imaging surveillance.
The path to co-develop a successful companion diagnostic with a corresponding drug has several challenges, including: • Traditional companion diagnostic agreements may fail to realize the full value of a testing opportunity, leading to difficulty in funding appropriate commercialization. • Drug development is a lengthy, complex and costly process.
The path to co-develop a successful CDx with a corresponding drug has several challenges, including: • Traditional CDx agreements may fail to realize the full value of a testing opportunity, leading to difficulty in funding appropriate commercialization; • Drug development is a lengthy, complex and costly process.
The Nodify Lung testing strategy is represented graphically in the image below starting with the patient’s pre-test risk of malignancy and ending with the guideline-recommended diagnostic procedure for each risk category. 10 We launched the Nodify Lung combined offering of the Nodify CDT and Nodify XL2 tests in March 2020.
Nodify Lung Risk Assessment testing is represented graphically in the image below starting with the patient’s pre-test risk of malignancy and ending with the guideline-recommended diagnostic procedure for each risk category. We launched the Nodify Lung combined offering of the Nodify CDT and Nodify XL2 tests in March 2020.
Results allow physicians to identify patients who may be better candidates for timely invasive diagnostic procedures such as bronchoscopy, transthoracic needle biopsy, or surgical resection, with the hope of catching cancer earlier. The Nodify CDT test enhances lung nodule risk assessment to facilitate compliance with clinical treatment guidelines such as those of the American College of Chest Physicians (ACCP).
Results allow physicians to identify patients who may be better candidates for timely invasive diagnostic procedures such as bronchoscopy, transthoracic needle biopsy, or surgical resection, with the goal of diagnosing cancer earlier. The Nodify CDT test enhances lung nodule risk assessment to facilitate compliance with clinical treatment guidelines such as those of the American College of Chest Physicians (ACCP).
We believe there is a clear clinical need for blood-based diagnostic testing prior to surgery to identify stage I patients who may benefit from a more intensive treatment protocol and we also believe there is the need for identifying stage II and IIIA patients where low risk patients may benefit from a less intensive treatment protocol.
We believe there is a clear clinical need for blood-based diagnostic testing prior to surgery to identify stage I patients who may benefit from a more intensive treatment protocol and we also believe there is the need for identifying stage II and IIIA patients who may benefit from a less intensive treatment protocol.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeAs a result, we or our collaborators might obtain marketing approval for a product or service in a particular country, but then may experience delays in the reimbursement approval or be subject to price regulations that would delay the commercial launch of our product or service, possibly for lengthy time periods, which could negatively impact the revenues we are able to generate from the sale of that product or service in that particular country. 52 Moreover, increasing efforts by governmental and third-party payers, in the United States and abroad, to cap or reduce healthcare costs may cause such organizations to limit both coverage and level of reimbursement for newly cleared, authorized, certified or approved devices and medicines and, as a result, they may not cover or provide adequate payment for our clinical diagnostics to be sold by us or our collaborators.
Biggest changeMoreover, increasing efforts by governmental and third-party payers, in the United States and abroad, to cap or reduce healthcare costs may cause such organizations to limit both coverage and level of reimbursement for newly cleared, authorized, certified or approved devices and medicines and, as a result, they may not cover or provide adequate payment for our clinical diagnostics to be sold by us or our collaborators.
We will need to raise additional capital in the form of equity or debt to increase our liquidity but there is no assurance that we will be able to secure any such funding in a sufficient amount or on terms that are acceptable to us.
We will need to raise additional capital in the form of debt or equity to increase our liquidity but there is no assurance that we will be able to secure any such funding in a sufficient amount or on terms that are acceptable to us.
We renamed the test and relaunched the test on February 28, 2020 as the Nodify CDT test and the De Soto, Kansas lab is the sole United States provider of the Nodify CDT test.
We renamed and relaunched the test on February 28, 2020 as the Nodify CDT test and the De Soto, Kansas lab is the sole United States provider of the Nodify CDT test.
In general, under Sections 382 and 383 of the Internal Revenue Code of 1986, as amended (the Code) a corporation that undergoes an ownership change, generally defined as a greater than 50% change by value in its equity ownership by certain shareholders over a three-year period, is subject to limitations on its ability to utilize its pre-change net operating losses (NOLs) and its research and development 50 credit carryforwards to offset future taxable income.
In general, under Sections 382 and 383 of the Internal Revenue Code of 1986, as amended (the Code) a corporation that undergoes an ownership change, generally defined as a greater than 50% change by value in its equity ownership by certain shareholders over a three-year period, is subject to limitations on its ability to utilize its pre-change net operating losses (NOLs) and its research and development credit carryforwards to offset future taxable income.
The Perceptive Term Loan Facility contains certain covenants limiting our ability to, among other things, engage in certain corporate changes, make certain restricted payments, repay other certain indebtedness or enter into, amend or terminate any other agreements that have the impact of restricting the our ability to make loan repayments.
The Perceptive Term Loan Facility contains certain covenants limiting our ability to, among other things, engage in certain corporate changes, make certain restricted payments, repay other certain indebtedness or enter into, amend or terminate any other agreements that have the impact of restricting our ability to make loan repayments.
In the United States, many significant decisions about reimbursement for new diagnostics and medicines are typically made by the CMS, an agency within the HHS. CMS decides whether and to what extent a new diagnostic or medicine will be covered and reimbursed under Medicare, although it frequently delegates this authority to local Medicare Administrative Contractors (MACs).
In the United States, many significant decisions about reimbursement for new diagnostics and medicines are typically made by the CMS, an agency within HHS. CMS decides whether and to what extent a new diagnostic or medicine will be covered and reimbursed under Medicare, although it frequently delegates this authority to local Medicare Administrative Contractors (MACs).
Success in pre-clinical studies and early clinical trials does not ensure that later clinical trials will be successful, and we cannot be sure that the later trials will replicate the results of prior trials and pre-clinical studies.
Success in pre-clinical studies and early clinical trials does not ensure that later clinical trials will be successful, and we cannot be sure that the later trials will replicate the results of prior trials and pre-clinical studies.
Disruptions or potential disruptions due to the orders and restrictions have included, and in the future may continue to include, the inability of our suppliers to manufacture components and parts and to deliver these to us on a timely basis, or at all; disruptions in our production schedule and ability to assemble diagnostic tests; inventory shortages or obsolescence; delays in actions of regulatory bodies; diversion of or limitations on employee resources that would otherwise be focused on the operations of our business; delays in growing or reductions in our sales organization, including through delays in hiring, lay-offs, furloughs or other losses of sales representatives; business adjustments or disruptions of certain third parties, including suppliers, medical institutions and clinical investigators with whom we conduct business; and additional government requirements or other incremental mitigation efforts that may further impact our or our suppliers’ capacity to manufacture our diagnostic tests.
Disruptions or potential disruptions due to the orders and restrictions have included, and in the future may continue to include, the inability of our suppliers to manufacture components and parts and to deliver these to us on a timely basis, or at all; disruptions in our production schedule and ability to assemble diagnostic tests; inventory shortages or obsolescence; delays in actions 39 of regulatory bodies; diversion of or limitations on employee resources that would otherwise be focused on the operations of our business; delays in growing or reductions in our sales organization, including through delays in hiring, lay-offs, furloughs or other losses of sales representatives; business adjustments or disruptions of certain third parties, including suppliers, medical institutions and clinical investigators with whom we conduct business; and additional government requirements or other incremental mitigation efforts that may further impact our or our suppliers’ capacity to manufacture our diagnostic tests.
Restrictions under applicable United States federal and state healthcare laws and regulations include the following: • the federal Anti-Kickback Statute, a criminal law, prohibits, among other things, persons and entities from knowingly and willfully offering, paying, soliciting or receiving any remuneration, directly or indirectly, in cash or in kind, to induce or reward purchasing, leasing, ordering, or arranging for, referring, or recommending the purchase, lease, order of any good or service for which payment may be made, in whole or in part, under federal healthcare programs such as Medicare and Medicaid; 54 • the Eliminating Kickbacks in Recovery Act, which prohibits knowingly and willfully soliciting, receiving, offering or paying remuneration, directly or indirectly, in return for the referral of a patient to, or in exchange for an individual using the services of certain entities, including laboratories, if the services are covered by a health care benefit program; • the Beneficiary Inducement Statute, which prohibits any person, organization, or entity from giving anything of value to a federal health care program beneficiary that is likely to induce or influence the beneficiary’s choice of provider, practitioner, or supplier for covered services; • the federal civil False Claims Act, which may be enforced through civil whistleblower or qui tam actions and is often used to enforce the federal Anti-Kickback Statute and other healthcare laws and regulations, imposes civil penalties and potential exclusion from federal healthcare programs, against individuals or entities for, among other things, knowingly presenting, or causing to be presented, to the federal government, claims for payment that are false or fraudulent or for making a false record or statement material to an obligation to pay the federal government or for knowingly and improperly avoiding, decreasing or concealing an obligation to pay money to the federal government; • federal criminal statutes created by HIPAA impose criminal liability for, among other things, knowingly and willfully executing or attempting to execute a scheme to defraud any healthcare benefit program, including private insurance plans, or, in any matter involving a healthcare benefit program, for knowingly and willfully making materially false, fictitious, or fraudulent statements in connection with the delivery of or payment for health care benefits; and • analogous state and foreign laws and regulations, such as state anti-kickback and false claims laws, may apply to sales or marketing arrangements and claims involving healthcare items or services reimbursed by non-governmental third-party payers, including private insurers.
Restrictions under applicable United States federal and state healthcare laws and regulations include the following: • the federal Anti-Kickback Statute, a criminal law, prohibits, among other things, persons and entities from knowingly and willfully offering, paying, soliciting or receiving any remuneration, directly or indirectly, in cash or in kind, to induce or reward purchasing, leasing, ordering, or arranging for, referring, or recommending the purchase, lease, order of any good or service for which payment may be made, in whole or in part, under federal healthcare programs such as Medicare and Medicaid; • the Eliminating Kickbacks in Recovery Act, which prohibits knowingly and willfully soliciting, receiving, offering or paying remuneration, directly or indirectly, in return for the referral of a patient to, or in exchange for an individual using the services of certain entities, including laboratories, if the services are covered by a health care benefit program; • the Beneficiary Inducement Statute, which prohibits any person, organization, or entity from giving anything of value to a federal health care program beneficiary that is likely to induce or influence the beneficiary’s choice of provider, practitioner, or supplier for covered services; • the federal civil False Claims Act, which may be enforced through civil whistleblower or qui tam actions and is often used to enforce the federal Anti-Kickback Statute and other healthcare laws and regulations, imposes civil penalties and potential exclusion from federal healthcare programs, against individuals or entities for, among other things, knowingly presenting, or causing to be presented, to the federal government, claims for payment that are false or fraudulent or for making a false record or statement material to an obligation to pay the federal government or for knowingly and improperly avoiding, decreasing or concealing an obligation to pay money to the federal government; • federal criminal statutes created by HIPAA impose criminal liability for, among other things, knowingly and willfully executing or attempting to execute a scheme to defraud any healthcare benefit program, including private insurance plans, or, in any matter involving a healthcare benefit program, for knowingly and willfully making materially false, fictitious, or fraudulent statements in connection with the delivery of or payment for health care benefits; and 51 • analogous state and foreign laws and regulations, such as state anti-kickback and false claims laws, may apply to sales or marketing arrangements and claims involving healthcare items or services reimbursed by non-governmental third-party payers, including private insurers.
Our present and future funding requirements will depend on many factors, including: • our ability to achieve revenue growth; • our rate of progress in establishing payer coverage and reimbursement arrangements with domestic and international commercial third-party payers and government payers; • 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 and reimbursement for our diagnostic tests; 51 • our rate of progress in, and cost of research and development activities associated with, diagnostic tests in research and early development; • the effect of competing technological 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 diagnostic tests.
Our present and future funding requirements will depend on many factors, including: • our ability to achieve revenue growth; • our rate of progress in establishing payer coverage and reimbursement arrangements with domestic and international commercial third-party payers and government payers; • 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 and reimbursement for our diagnostic tests; • our rate of progress in, and cost of research and development activities associated with, diagnostic tests in research and early development; • the effect of competing technological 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 diagnostic tests.
Regardless of the merits or eventual outcome, liability claims may result in: • decreased demand for our diagnostic tests and services; • harm to our reputation; • initiation of investigations by regulators; • costs to defend the related litigation; • a diversion of management’s time and our resources; • substantial monetary awards to trial participants or patients; • product recalls, withdrawals, or labeling, marketing, or promotional restrictions; • loss of revenue; • adverse impact on the market price of our common stock; and 46 • exhaustion of any available insurance and our capital resources.
Regardless of the merits or eventual outcome, liability claims may result in: • decreased demand for our diagnostic tests and services; • harm to our reputation; • initiation of investigations by regulators; • costs to defend the related litigation; • a diversion of management’s time and our resources; • substantial monetary awards to trial participants or patients; • product recalls, withdrawals, or labeling, marketing, or promotional restrictions; • loss of revenue; • adverse impact on the market price of our common stock; and • exhaustion of any available insurance and our capital resources.
Tests without 56 FDA clearance, approval, or authorization would not be considered covered countermeasures under the Public Readiness and Emergency Preparedness Act (PREP Act), which authorizes HHS to provide limited liability immunity protection to certain individuals and entities against a claim of loss under federal and state law “caused by, arising out of, relating to, or resulting from” the manufacture, distribution, administration, or use of a covered medical countermeasure, except for claims involving willful misconduct.
Tests without FDA clearance, approval, or authorization would not be considered covered countermeasures under the Public Readiness and Emergency Preparedness Act (PREP Act), which authorizes HHS to provide limited liability immunity protection to certain individuals and entities against a claim of loss under federal and state law “caused by, arising out of, relating to, or resulting from” the manufacture, distribution, administration, or use of a covered medical countermeasure, except for claims involving willful misconduct.
In addition, the United States government has the right 74 to require us to grant exclusive, partially exclusive, or non-exclusive licenses to any of these inventions to a third party if it determines that: (i) adequate steps have not been taken to commercialize the invention; government action is necessary to meet public health or safety needs; or (iii) government action is necessary to meet requirements for public use under federal regulations (also referred to as “march-in rights”).
In addition, the United States government has the right to require us to grant exclusive, partially exclusive, or non-exclusive licenses to any of these inventions to a third party if it determines that: (i) adequate steps have not been taken to commercialize the invention; government action is necessary to meet public health or safety needs; or (iii) government action is necessary to meet requirements for public use under federal regulations (also referred to as “march-in rights”).
Any termination of this relationship, or 42 delays in entering into new strategic partnership agreements with Bio-Rad, could delay our sales and marketing efforts, which would harm our business prospects, financial condition and results of operations. We may not be able to sufficiently reduce costs in the performance, manufacturing and production of our diagnostic tests to achieve sustainable gross margins.
Any termination of this relationship, or delays in entering into new strategic partnership agreements with Bio-Rad, could delay our sales and marketing efforts, which would harm our business prospects, financial condition and results of operations. We may not be able to sufficiently reduce costs in the performance, manufacturing and production of our diagnostic tests to achieve sustainable gross margins.
We may be required to expend significant resources in the response, containment, mitigation of cybersecurity incidents as well as in defense against claims that our information security was unreasonable or otherwise violated applicable laws or contractual obligations. 64 Our employees, collaborators, independent contractors and consultants may engage in misconduct or other improper activities, including noncompliance with regulatory standards and requirements.
We may be required to expend significant resources in the response, containment, mitigation of cybersecurity incidents as well as in defense against claims that our information security was unreasonable or otherwise violated applicable laws or contractual obligations. Our employees, collaborators, independent contractors and consultants may engage in misconduct or other improper activities, including noncompliance with regulatory standards and requirements.
If we, or any of our vendors that support our IT or have access to our data, including any third-party vendors that collect, process and store personal data on our behalf, fail to comply with laws requiring the protection of personal information, or fail to safeguard and defend personal information or other critical data assets or IT systems, we may be subject to regulatory enforcement and fines as well as private civil actions.
If we, or any of our vendors that support our IT or have access to our data, including any third-party vendors that collect, process and store personal data on our behalf, fail to comply with laws requiring the protection of personal information, or fail to safeguard and defend personal information or other critical data assets or IT systems, we may be subject to regulatory enforcement and 60 fines as well as private civil actions.
If we are unable to prevent or mitigate the impact of such security breaches, our ability to attract and retain new customers, patients and other partners could be harmed as they may be reluctant to entrust their data to us, and we could be exposed to litigation and governmental investigations, which could lead to a potential disruption to our business or other adverse consequences.
If we are unable to prevent or mitigate the impact of such security breaches, our ability to attract and retain new customers, patients and other partners could be harmed as they may be 41 reluctant to entrust their data to us, and we could be exposed to litigation and governmental investigations, which could lead to a potential disruption to our business or other adverse consequences.
Accordingly, the members of such groups may choose to purchase alternative diagnostic tests due to the price or quality offered by other companies, which could result in a decline in our revenue. Pricing and reimbursement of medical devices is not harmonized at European level, but is the exclusive competence of the EU Member States.
Accordingly, the members of such groups may choose to purchase alternative diagnostic tests due to the price or quality offered by other companies, which could result in a decline in our revenue. 44 Pricing and reimbursement of medical devices is not harmonized at the European level, but is the exclusive competence of the EU Member States.
As explained by the FDA in its update to this safety communication, the FDA sent notices to several firms marketing such pharmacogenetic tests where the FDA believes the relationship between genetic variations and the 55 medication’s effects has not been established, including a warning letter sent to a laboratory, in part, for failing to obtain premarket review of its test.
As explained by the FDA in its update to this safety communication, the FDA sent notices to several firms marketing such pharmacogenetic tests where the FDA believes the relationship between genetic variations and the medication’s effects has not been established, including a warning letter sent to a laboratory, in part, for failing to obtain premarket review of its test.
As a result, the United States government may have certain rights to intellectual property embodied in our diagnostic tests, products and services pursuant to the Bayh-Dole Act of 1980 (Bayh-Dole Act). These United States government rights in certain inventions developed under a government-funded program include a non-exclusive, non-transferable, irrevocable worldwide license to use inventions for any governmental purpose.
As a result, the United States government may have certain rights to intellectual property embodied in our diagnostic tests, products and services pursuant to the Bayh-Dole Act of 1980 (Bayh-Dole Act). These United 70 States government rights in certain inventions developed under a government-funded program include a non-exclusive, non-transferable, irrevocable worldwide license to use inventions for any governmental purpose.
The FDA can delay, limit, or deny clearance or approval of a device for many reasons, including: • our inability to demonstrate to the satisfaction of the FDA or the applicable regulatory entity or conformity assessment body that the diagnostic tests are safe or effective for their proposed intended uses; • the disagreement of the FDA with the design or implementation of our clinical trials or the interpretation of data from clinical trials; • serious and unexpected adverse device effects experienced by participants in our clinical trials; • the data from our clinical trials may be insufficient to support clearance or approval, where required; • our inability to demonstrate that the clinical and other benefits of the device outweigh the risks; • the manufacturing process or facilities we use may not meet applicable requirements; and • the potential for approval policies or regulations of the FDA or applicable foreign regulatory bodies to change significantly in a manner rendering our clinical data or regulatory filings insufficient for clearance or approval. 58 The FDA and state authorities have broad enforcement powers.
The FDA can delay, limit, or deny clearance or approval of a device for many reasons, including: • our inability to demonstrate to the satisfaction of the FDA or the applicable regulatory entity or conformity assessment body that the diagnostic tests are safe or effective for their proposed intended uses; • the disagreement of the FDA with the design or implementation of our clinical trials or the interpretation of data from clinical trials; • serious and unexpected adverse device effects experienced by participants in our clinical trials; • the data from our clinical trials may be insufficient to support clearance or approval, where required; • our inability to demonstrate that the clinical and other benefits of the device outweigh the risks; • the manufacturing process or facilities we use may not meet applicable requirements; and • the potential for approval policies or regulations of the FDA or applicable foreign regulatory bodies to change significantly in a manner rendering our clinical data or regulatory filings insufficient for clearance or approval. 54 The FDA and state authorities have broad enforcement powers.
If the actual number of patients who would benefit from our diagnostic tests, the price at which we can sell them or the annual total addressable market for them is smaller than we have estimated, it may impair our sales growth and negatively affect our business, financial condition and results of operations.
If the actual number of patients who would benefit from our diagnostic tests, the price at which we can sell them 40 or the annual total addressable market for them is smaller than we have estimated, it may impair our sales growth and negatively affect our business, financial condition and results of operations.
As a result of uncertainties with respect to financial institutions and the global credit markets and other macroeconomic challenges such as inflationary pressures currently or potentially affecting the economy of the United States and other parts of the world, customers and distributors may experience serious cash flow problems and other financial difficulties, 48 decreasing demand for our products.
As a result of uncertainties with respect to financial institutions and the global credit markets and other macroeconomic challenges such as inflationary pressures currently or potentially affecting the economy of the United States and other parts of the world, customers and distributors may experience serious cash flow problems and other financial difficulties, decreasing demand for our products.
If we or any of our current or future licensors are forced to grant a license to third parties with respect to any 75 patents relevant to our business, our competitive position may be impaired, and our business, financial condition and results of operations may be adversely affected. Intellectual property rights do not necessarily address all potential threats.
If we or any of our current or future licensors are forced to grant a license to third parties with respect to any patents relevant to our business, our competitive position may be impaired, and our business, financial condition and results of operations may be adversely affected. Intellectual property rights do not necessarily address all potential threats.
It is possible that interpretation, industry practice and guidance may evolve over time. If our assumptions change or if actual circumstances differ from our assumptions, our operating results may be adversely affected and could fall below the expectations of securities analysts and investors, resulting in a decline in the market price of our common stock.
It is possible that interpretation, industry practice and guidance may evolve over time. If our 73 assumptions change or if actual circumstances differ from our assumptions, our operating results may be adversely affected and could fall below the expectations of securities analysts and investors, resulting in a decline in the market price of our common stock.
Any failure to prevent or mitigate security breaches or improper access to, use, disclosure or other misappropriation of our data or consumers’ personal data 44 could result in significant liability under state, (e.g., state breach notification and privacy laws such as the CCPA) federal (e.g., HIPAA), and the HITECH Act and laws in other jurisdictions (e.g., the GDPR).
Any failure to prevent or mitigate security breaches or improper access to, use, disclosure or other misappropriation of our data or consumers’ personal data could result in significant liability under state, (e.g., state breach notification and privacy laws such as the CCPA) federal (e.g., HIPAA), and the HITECH Act and laws in other jurisdictions (e.g., the GDPR).
In such an event, our competitors may be able to enter the market without infringing our patents and this circumstance would have a material adverse effect on our business. 72 Issued patents covering our diagnostic tests and any other or future diagnostic tests, products or services could be found invalid or unenforceable if challenged.
In such an event, our competitors may be able to enter the market without infringing our patents and this circumstance would have a material adverse effect on our business. Issued patents covering our diagnostic tests and any other or future diagnostic tests, products or services could be found invalid or unenforceable if challenged.
As a result, increasingly high barriers are being erected to the entry of new diagnostic tests. Measures to reduce healthcare costs may hurt our business. The majority of our customers are healthcare providers who depend upon reimbursement by government and commercial insurance payers for lung cancer diagnostic solutions services.
As a result, increasingly high barriers are being erected to the entry of new diagnostic tests. 49 Measures to reduce healthcare costs may hurt our business. The majority of our customers are healthcare providers who depend upon reimbursement by government and commercial insurance payers for lung cancer diagnostic solutions services.
If we or any third-party contractor fails to comply with applicable GCPs, the clinical data generated in clinical trials may be deemed unreliable and the 65 FDA or comparable foreign regulatory authorities or conformity assessment bodies may require us to perform additional clinical trials before clearing or approving our marketing applications.
If we or any third-party contractor fails to comply with applicable GCPs, the clinical data generated in clinical trials may be deemed unreliable and the FDA or comparable foreign regulatory authorities or conformity assessment bodies may require us to perform additional clinical trials before clearing or approving our marketing applications.
We and our third-party contractors are required to comply with good clinical practices (GCPs) which are regulations and guidelines enforced by the FDA, and comparable regulations enforced by foreign regulatory authorities for products in clinical development. Regulatory authorities enforce these GCPs through periodic inspections of trial sponsors, principal investigators and trial sites.
We 61 and our third-party contractors are required to comply with good clinical practices (GCPs) which are regulations and guidelines enforced by the FDA, and comparable regulations enforced by foreign regulatory authorities for products in clinical development. Regulatory authorities enforce these GCPs through periodic inspections of trial sponsors, principal investigators and trial sites.
In addition, CMS may assign unique level II Healthcare Common Procedure Coding System codes to tests that are not already described by a unique CPT code. VeriStrat, Nodify XL2, and Nodify CDT have test specific CPT codes, but the GeneStrat NGS test does not at this time.
In addition, CMS may assign unique level II Healthcare Common Procedure 62 Coding System codes to tests that are not already described by a unique CPT code. The VeriStrat, Nodify XL2, and Nodify CDT tests have test specific CPT codes, but the GeneStrat NGS test does not at this time.
In addition, we may need the cooperation of any such co-owners of our patents in 67 order to enforce such patents against third parties, and such cooperation may not be provided to us. Any of the foregoing could have a material adverse effect on our competitive position, business, financial condition, results of operations, and prospects.
In addition, we may need the cooperation of any such co-owners of our patents in order to enforce such patents against third parties, and such cooperation may not be provided to us. Any of the foregoing could have a material adverse effect on our competitive position, business, financial condition, results of operations, and prospects.
We have designed our disclosure controls and procedures to provide reasonable assurance that information we must disclose in reports we file or submit under the Exchange Act is accumulated and 78 communicated to management, and recorded, processed, summarized and reported within the time periods specified in the rules and forms of the SEC.
We have designed our disclosure controls and procedures to provide reasonable assurance that information we must disclose in reports we file or submit under the Exchange Act is accumulated and communicated to management, and recorded, processed, summarized and reported within the time periods specified in the rules and forms of the SEC.
Should a carrier encounter delivery performance issues such as loss, damage or destruction of any systems, it would be costly to replace such systems in 47 a timely manner and such occurrences may damage our reputation and lead to decreased demand for our diagnostic tests and increased cost and expense to our business.
Should a carrier encounter delivery performance issues such as loss, damage or destruction of any systems, it would be costly to replace such systems in a timely manner and such occurrences may damage our reputation and lead to decreased demand for our diagnostic tests and increased cost and expense to our business.
In the instance where a code used does not describe a specific test, the insurance claim must be examined to determine what test was provided, whether the test was appropriate and medically necessary, and whether payment should be rendered, which may require a 66 letter of medical necessity from the ordering physician.
In the instance where a code used does not describe a specific test, the insurance claim must be examined to determine what test was provided, whether the test was appropriate and medically necessary, and whether payment should be rendered, which may require a letter of medical necessity from the ordering physician.
If our license agreements terminate, or we experience a reduction or elimination of licensed rights under these agreements, we may have to negotiate new or reinstated licenses with less 73 favorable terms or we may not have sufficient intellectual property rights to operate our business. The occurrence of such events could materially harm our business.
If our license agreements terminate, or we experience a reduction or elimination of licensed rights under these agreements, we may have to negotiate new or reinstated licenses with less favorable terms or we may not have sufficient intellectual property rights to operate our business. The occurrence of such events could materially harm our business.
Conversely, if we underestimate customer demand for our diagnostic tests, our supply chain, manufacturing partners and/or internal manufacturing 45 team may not be able to deliver components and diagnostic tests to meet our requirements, and this could result in damage to our reputation, sales growth and customer relationships.
Conversely, if we underestimate customer demand for our diagnostic tests, our supply chain partners and/or internal manufacturing team may not be able to deliver components and diagnostic tests to meet our requirements, and this could result in damage to our reputation, sales growth and customer relationships.
We face an inherent risk of product liability as a result of the marketing and sale of our diagnostic tests and services. For example, we may be sued if our diagnostic tests or services cause or are perceived to cause injury or are found to be otherwise unsuitable during manufacturing, marketing or sale.
We face an inherent risk of product liability as a result of the marketing and sale of our diagnostic tests and services. For example, we may be sued if our diagnostic tests or services cause or are perceived to cause injury or are found to be otherwise unsuitable during 42 manufacturing, marketing or sale.
Later discovery of previously unknown problems with our diagnostic tests, including unanticipated adverse events or adverse events of 60 unanticipated severity or frequency, manufacturing problems, or failure to comply with regulatory requirements such as QSR, may result in changes to labeling, restrictions on such diagnostic tests or manufacturing processes, withdrawal of the diagnostic tests from the market, voluntary or mandatory recalls, a requirement to repair, replace or refund the cost of any medical device we manufacture or distribute, fines, suspension of regulatory approvals, product seizures, injunctions or the imposition of civil or criminal penalties which would adversely affect our business, operating results and prospects.
Later discovery of previously unknown problems with our diagnostic tests, including unanticipated adverse events or adverse events of 56 unanticipated severity or frequency, manufacturing problems, or failure to comply with regulatory requirements such as QSR, may result in changes to labeling, restrictions on such diagnostic tests or manufacturing processes, withdrawal of the diagnostic tests from the market, voluntary or mandatory recalls, a requirement to repair, replace or refund the cost of any medical device we manufacture or distribute, fines, suspension of regulatory approvals, product seizures, injunctions or the imposition of civil or criminal penalties which would adversely affect our business, operating results and prospects.
If we fail to comply with these obligations or other obligations in our license agreements, our licensors may have the right to terminate these agreements, in which event we may not be able to develop and market any product or use any technology that is covered by these agreements.
If we fail to comply with these obligations or other obligations in our license agreements, our licensors may have the right to terminate these agreements, in which event we may not be able to develop 69 and market any product or use any technology that is covered by these agreements.
In addition, despite considerable time and expense invested in our clinical trials, the FDA may not consider our data 61 adequate to demonstrate safety and efficacy. Such increased costs and delays or failures could adversely affect our business, operating results and prospects.
In addition, despite considerable time and expense invested in our clinical trials, the FDA may not consider our data adequate to demonstrate safety and efficacy. Such increased costs and delays or failures could adversely affect our business, operating results and prospects.
The Leahy-Smith Act and its implementation could increase the 69 uncertainties and costs surrounding the prosecution of our patent applications and the enforcement or defense of our issued patents, all of which could have a material adverse effect on our business, financial condition and results of operations.
The Leahy-Smith Act and its implementation could increase the uncertainties and costs surrounding the prosecution of our patent applications and the enforcement or defense of our issued patents, all of which could have a material adverse effect on our business, financial condition and results of operations.
Furthermore, we expect these trade secrets, know-how and proprietary information to over time be disseminated within the industry through independent development, the publication of journal articles describing the methodology and the movement of personnel from academic to industry scientific positions.
Furthermore, we expect these trade secrets, know-how and proprietary information to over time be disseminated within the industry through independent 64 development, the publication of journal articles describing the methodology and the movement of personnel from academic to industry scientific positions.
As this burden is a 71 high one requiring us to present clear and convincing evidence as to the invalidity of any such United States patent claim, there is no assurance that a court of competent jurisdiction would invalidate the claims of any such United States patent.
As this burden is a high one requiring us to present clear and convincing evidence as to the invalidity of any such United States patent claim, there is no assurance that a court of competent jurisdiction would invalidate the claims of any such United States patent.
A pandemic, epidemic or outbreak of an infectious disease in the United States or worldwide, including the outbreak of the novel strain of coronavirus disease, COVID-19, and its variants could adversely affect our business. If a pandemic, epidemic or outbreak of an infectious disease occurs in the United States or worldwide, our business may be adversely affected.
A pandemic, epidemic or outbreak of an infectious disease in the United States or worldwide, including a future outbreak of the novel strain of coronavirus disease, COVID-19, and its variants could adversely affect our business. If a pandemic, epidemic or outbreak of an infectious disease occurs in the United States or worldwide, our business may be adversely affected.
Broad market and industry factors may significantly affect the market price of our common stock, regardless of our actual operating performance, and you may not realize any return on your investment in us and may lose some or all of your investment.
Broad market and industry factors may significantly affect the market 72 price of our common stock, regardless of our actual operating performance, and you may not realize any return on your investment in us and may lose some or all of your investment.
Our diagnostic tests may contain errors or defects, and 41 while we have made efforts to test them extensively, we cannot assure that our current diagnostic tests, or those developed in the future, will not have performance problems.
Our diagnostic tests may contain errors or defects, and while we have made efforts to test them extensively, we cannot assure that our current diagnostic tests, or those developed in the future, will not have performance problems.
The USPTO recently developed new regulations and procedures to govern administration of the Leahy-Smith Act, and many of the substantive changes to patent law associated with the Leahy-Smith Act, and in particular, the first to file provisions, only became effective in 2013.
The USPTO recently developed new regulations 65 and procedures to govern administration of the Leahy-Smith Act, and many of the substantive changes to patent law associated with the Leahy-Smith Act, and in particular, the first to file provisions, only became effective in 2013.
Such law provides that a corporation may indemnify such person if such person acted in good faith and in a manner such person reasonably believed to be in or not opposed to our best interests and, with respect to any criminal proceeding, had no reasonable cause to believe such person’s conduct was unlawful; • we may, in our discretion, indemnify employees and agents in those circumstances where indemnification is permitted by applicable law; • we are required to advance expenses, as incurred, to our directors and officers in connection with defending a proceeding, except that such directors or officers shall undertake to repay such advances if it is ultimately determined that such person is not entitled to indemnification; • the rights conferred in our amended and restated articles of incorporation are not exclusive, and we are authorized to enter into indemnification agreements with our directors, officers, employees and agents and to obtain insurance to indemnify such persons; and 79 • we may not retroactively amend our amended and restated articles of incorporation provisions to reduce our indemnification obligations to directors, officers, employees and agents. 80 1B.
Such law provides that a corporation may indemnify such person if such person acted in good faith and in a manner such person reasonably believed to be in or not opposed to our best interests and, with respect to any criminal proceeding, had no reasonable cause to believe such person’s conduct was unlawful; • we may, in our discretion, indemnify employees and agents in those circumstances where indemnification is permitted by applicable law; • we are required to advance expenses, as incurred, to our directors and officers in connection with defending a proceeding, except that such directors or officers shall undertake to repay such advances if it is ultimately determined that such person is not entitled to indemnification; • the rights conferred in our amended and restated articles of incorporation are not exclusive, and we are authorized to enter into indemnification agreements with our directors, officers, employees and agents and to obtain insurance to indemnify such persons; and • we may not retroactively amend our amended and restated articles of incorporation provisions to reduce our indemnification obligations to directors, officers, employees and agents. 75 1B.
Delays in patient enrollment or failure of patients to continue to participate in a clinical trial may cause an increase in costs and delays in the approval and attempted commercialization of our diagnostic tests or result in the failure of the clinical trial.
Delays in patient enrollment or failure of patients to continue to participate in a clinical trial may cause 57 an increase in costs and delays in the approval and attempted commercialization of our diagnostic tests or result in the failure of the clinical trial.
Our commercial success depends, in part, on the acceptance of our diagnostic tests and services as being safe and relatively simple for medical personnel to learn and use, clinically flexible, operationally versatile and, with respect to providers and payers, cost effective. 38 We cannot predict how quickly, if at all, payers, providers, clinics and patients will accept future diagnostic tests and services or, if accepted, how frequently they will be used.
Our commercial success depends, in part, on the acceptance of our diagnostic tests and services as being safe and relatively simple for medical personnel to learn and use, clinically flexible, operationally versatile and, with respect to providers and payers, cost effective. 35 We cannot predict how quickly, if at all, payers, providers, clinics and patients will accept future diagnostic tests and services or, if accepted, how frequently they will be used.
We are also subject to requirements under the United States Treasury Department’s Office of Foreign Assets Control, United States domestic bribery laws and other anti-corruption, anti-bribery and anti-money laundering laws.
We are also subject to requirements under the United States Treasury Department’s Office of Foreign 50 Assets Control, United States domestic bribery laws and other anti-corruption, anti-bribery and anti-money laundering laws.
However, there are situations in which non-compliance can result in abandonment or lapse of the patent or patent application, resulting in partial or complete loss of patent rights in the relevant jurisdiction.
However, there are situations in which non-compliance can result in abandonment or lapse of the patent or patent application, resulting in partial or complete 68 loss of patent rights in the relevant jurisdiction.
Even if we were able to bring our laboratory back into compliance, we could incur significant expenses and potentially lose revenue in doing so. Our Boulder, Colorado and De Soto, Kansas laboratories are both CAP-accredited clinical laboratories regulated by CMS pursuant to CLIA. We also have a current CLIA certificate for each facility.
Even if we were able to bring our laboratory back into compliance, we could incur significant expenses and potentially lose revenue in doing so. Our Louisville, Colorado and De Soto, Kansas laboratories are both CAP-accredited clinical laboratories regulated by CMS pursuant to CLIA. We also have a current CLIA certificate for each facility.
In order to successfully challenge the validity of any such United States patent in federal court, we would need to overcome a presumption of validity.
In order to successfully challenge 67 the validity of any such United States patent in federal court, we would need to overcome a presumption of validity.
We depend on our suppliers and contract manufacturers to provide us and our customers with materials in a timely manner that meet our and their quality, quantity and cost requirements. These suppliers and contract manufacturers may encounter problems during manufacturing for a variety of reasons, any of which could delay or impede their ability to meet our demand.
We depend on our suppliers and to provide us and our customers with materials in a timely manner that meet our and their quality, quantity and cost requirements. These suppliers may encounter problems during manufacturing for a variety of reasons, any of which could delay or impede their ability to meet our demand.
Failure to receive clearance or approval for our new diagnostic tests would have an adverse effect on our ability to expand our business. 59 Modifications to our marketed tests may require new 510(k) clearances, De Novo authorizations, or PMA approvals, or may require us to cease marketing or recall the modified tests until clearances or approvals are obtained.
Failure to receive clearance or approval for our new diagnostic tests would have an adverse effect on our ability to expand our business. 55 Modifications to our marketed tests may require new 510(k) clearances, De Novo authorizations, or PMA approvals, or may require us to cease marketing or recall the modified tests until clearances or approvals are obtained.
As a result of becoming a public company, we are required, under Section 404 of the Sarbanes-Oxley Act to furnish a report by management on, among other things, the effectiveness of our internal control over financial reporting. This assessment includes disclosure of any material weaknesses identified by our management in our internal control over financial reporting.
As a result of being a public company, we are required, under Section 404 of the Sarbanes-Oxley Act to furnish a report by management on, among other things, the effectiveness of our internal control over financial reporting. This assessment includes disclosure of any material weaknesses identified by our management in our internal control over financial reporting.
Performance issues with our diagnostic tests will increase our costs in the near-term and accordingly adversely affect our business, financial condition and results of operations. We depend upon third-party suppliers, including contract manufacturers and single source suppliers, making us vulnerable to supply problems and price fluctuations.
Performance issues with our diagnostic tests will increase our costs in the near-term and accordingly adversely affect our business, financial condition and results of operations. We depend upon third-party suppliers, including single source suppliers, making us vulnerable to supply problems and price fluctuations.
As a result, it may be more difficult for us to attract and retain qualified persons to serve on our Board of Directors or as executive officers. Accordingly, increases in costs incurred as a result of becoming a publicly traded company may adversely affect our business, financial condition and results of operations.
As a result, it may be more difficult for us to attract and retain qualified persons to serve on our Board of Directors or as executive officers. Accordingly, increases in costs incurred as a result of being a publicly traded company may adversely affect our business, financial condition and results of operations.
For example: • others may be able to make diagnostic tests or products that are similar to our Nodify XL2, Nodify CDT, GeneStrat or VeriStrat tests or the COVID-19 tests that we use in our COVID-19 testing program or utilize similar technology that is not covered by the claims of our patents or that incorporates certain technology in our Nodify XL2, Nodify CDT, GeneStrat or VeriStrat tests or such COVID-19 tests that is in the public domain; • we, or our current or future licensors or collaborators, might not have been the first to make the inventions covered by the applicable issued patent or pending patent application that we own or license now or may own or license in the future; • we, or our current or future licensors or collaborators, might not have been the first to file patent applications covering certain of our or their inventions; • others may independently develop similar or alternative technologies or duplicate any of our technologies without infringing our intellectual property rights; • it is possible that our current or future pending patent applications will not lead to issued patents; • issued patents that we hold rights to may be held invalid or unenforceable, including as a result of legal challenges by our competitors or other third parties; • our competitors or other third parties might conduct research and development activities in countries where we do not have patent rights and then use the information learned from such activities to develop competitive diagnostic tests, products and services for sale in our major commercial markets; • we may not develop additional proprietary technologies that are patentable; • the patents of others may harm our business; and • we may choose not to file a patent in order to maintain certain trade secrets or know-how, and a third party may subsequently file a patent covering such intellectual property rights.
For example: • others may be able to make diagnostic tests or products that are similar to our Nodify XL2, Nodify CDT, GeneStrat or VeriStrat tests or utilize similar technology that is not covered by the claims of our patents or that incorporates certain technology in our Nodify XL2, Nodify CDT, GeneStrat or VeriStrat tests; • we, or our current or future licensors or collaborators, might not have been the first to make the inventions covered by the applicable issued patent or pending patent application that we own or license now or may own or license in the future; • we, or our current or future licensors or collaborators, might not have been the first to file patent applications covering certain of our or their inventions; • others may independently develop similar or alternative technologies or duplicate any of our technologies without infringing our intellectual property rights; • it is possible that our current or future pending patent applications will not lead to issued patents; • issued patents that we hold rights to may be held invalid or unenforceable, including as a result of legal challenges by our competitors or other third parties; • our competitors or other third parties might conduct research and development activities in countries where we do not have patent rights and then use the information learned from such activities to develop competitive diagnostic tests, products and services for sale in our major commercial markets; • we may not develop additional proprietary technologies that are patentable; • the patents of others may harm our business; and • we may choose not to file a patent in order to maintain certain trade secrets or know-how, and a third party may subsequently file a patent covering such intellectual property rights.
As part of the Collaboration Agreement, unless we or AVEO exercise our right to opt-out of co-development, we equally share in any income received from licensing rights to ficlatuzumab to any third parties. In September 2020, we exercised our opt-out right for the payment of half of the development and regulatory costs for ficlatuzumab.
As part of the Collaboration Agreement, unless we or AVEO exercised our right to opt-out of co-development, we would equally share in any income received from licensing rights to ficlatuzumab to any third parties. In September 2020, we exercised our opt-out right for the payment of half of the development and regulatory costs for ficlatuzumab.
The COVID-19 pandemic also has negatively affected our non-COVID-19 testing-related revenue and our clinical studies. For example, cancer patients have had more limited access to hospitals, healthcare providers and medical resources as they took steps to control the spread of COVID-19.
The COVID-19 pandemic also negatively affected our non-COVID-19 testing-related revenue and our clinical studies. For example, cancer patients had more limited access to hospitals, healthcare providers and medical resources as they took steps to control the spread of COVID-19.
We may not be able to attract or retain qualified scientists and technicians in the future due to the competition for qualified personnel among life science businesses, particularly near our headquarters in Boulder, Colorado and our laboratory facility in De Soto, Kansas.
We may not be able to attract or retain qualified scientists and technicians in the future due to the competition for qualified personnel among life science businesses, particularly near our headquarters in Louisville, Colorado and our laboratory facility in De Soto, Kansas.
In these countries, the patent owner may have limited remedies, which could materially diminish the value of such patent.
In these countries, the patent owner may have limited remedies, which could materially diminish 71 the value of such patent.
In addition to reducing our revenue, the loss of one or more of these relationships may reduce our exposure to research and clinical trials that facilitate the collection and incorporation of new information into our biobank and proprietary AI platform. We engage in conversations with biopharmaceutical companies regarding potential commercial opportunities on an ongoing basis.
In addition to reducing our revenue, the loss of one or more of these relationships may reduce our exposure to research and clinical trials that facilitate the collection and incorporation of new information into our biobank. We engage in conversations with biopharmaceutical companies regarding potential commercial opportunities on an ongoing basis.
We partner with contract manufacturers in the development and production of supplies for our diagnostic tests. While we are undertaking a number of initiatives designed to reduce the cost of performing our diagnostic tests, including reducing the costs of supplies, there is no guarantee that we will be able to achieve planned cost reductions from our various cost savings initiatives.
We partner with suppliers in the development and production of supplies for our diagnostic tests. While we are undertaking a number of initiatives designed to reduce the cost of performing our diagnostic tests, including reducing the costs of supplies, there is no guarantee that we will be able to achieve planned cost reductions from our various cost savings initiatives.
However, these means may afford only limited protection and may not: • prevent our competitors from duplicating our diagnostic tests and products, including our COVID-19 testing program and Nodify XL2, Nodify CDT, GeneStrat and VeriStrat tests; • prevent our competitors from gaining access to our proprietary information and technology, including the Diagnostic Cortex platform, tech platforms such as the DeepMALDI analysis and intellectual property covering technologies that allow us to develop “test algorithms”; or • allow us to gain or maintain a competitive advantage.
However, these means may afford only limited protection and may not: • prevent our competitors from duplicating our diagnostic tests and products, including our Nodify XL2, Nodify CDT, GeneStrat and VeriStrat tests; • prevent our competitors from gaining access to our proprietary information and technology, including the Diagnostic Cortex platform, tech platforms such as the DeepMALDI analysis and intellectual property covering technologies that allow us to develop “test algorithms”; or • allow us to gain or maintain a competitive advantage.
Our quarterly and annual operating results may fluctuate as a result of a variety of factors, many of which are outside 40 our control and, as a result, may not fully reflect the underlying performance of our business.
Our quarterly and annual operating results may fluctuate as a result of a variety of factors, many of which are outside 37 our control and, as a result, may not fully reflect the underlying performance of our business.
The preparation of financial statements in conformity with generally accepted accounting principals (GAAP) requires management to make estimates and assumptions that affect the amounts reported in our financial statements and accompanying notes.
The preparation of financial statements in conformity with generally accepted accounting principles (GAAP) requires management to make estimates and assumptions that affect the amounts reported in our financial statements and accompanying notes.
Those changes may materially affect our patents or patent applications and our ability to obtain additional patent protection in the future. If our trademarks and tradenames are not adequately protected, then we may not be able to build name recognition in our markets and our business may be adversely affected.
Those changes may materially affect our patents or patent applications and our ability to obtain additional patent protection in the future. If our trademarks and trade names are not adequately protected, then we may not be able to build name recognition in our markets and our business may be adversely affected.
A significant portion of our employee base, operating facilities and infrastructure are centralized in Boulder, Colorado and we operate a laboratory facility in De Soto, Kansas.
A significant portion of our employee base, operating facilities and infrastructure are centralized in Louisville, Colorado and we operate a laboratory facility in De Soto, Kansas.
Blood samples are typically received within days from the United States and outside the United States for analysis at our Boulder, Colorado and De Soto, Kansas facilities.
Blood samples are typically received within days from the United States and outside the United States for analysis at our Louisville, Colorado and De Soto, Kansas facilities.
Many of our suppliers and contract manufacturers are not obligated to perform services or supply diagnostic testing materials for any specific period, in any specific quantity or at any specific price, except as may be provided in a particular purchase order.
Many of our suppliers are not obligated to perform services or supply diagnostic testing materials for any specific period, in any specific quantity or at any specific price, except as may be provided in a particular purchase order.
These fluctuations may occur due to a variety of factors, including, but not limited to: • the level of demand for our diagnostic tests, which may vary significantly; • the timing and cost of manufacturing our diagnostic tests, which may vary depending on the quantity of production and the terms of our agreements with third-party suppliers and manufacturers; • expenditures that we may incur to acquire, develop, or commercialize additional tests and technologies; • unanticipated pricing pressures; • the rate at which we grow our sales force and the speed at which newly hired salespeople become effective, and the cost and level of investment therein; • the degree of competition in our industry and any change in the competitive landscape of our industry, including consolidation among our competitors or future partners; • coverage and reimbursement policies with respect to lung cancer treatment equipment, and potential future diagnostic tests that compete with our diagnostic tests; • the timing and success or failure of clinical trials for our diagnostic tests or any enhancements to such tests we develop or competing diagnostic tests; • positive or negative coverage, or public perception, of our diagnostic tests or those of our competitors or broader industry trends; • the impact, if any, of the spread of COVID-19 and any newly discovered variants, and the resulting effects on the number of patients treated or the demand for our non-COVID-19 tests; • the timing and cost of, and level of investment in, research, development, licenses, regulatory approval, conformity certification, commercialization activities, acquisitions and other strategic transactions, or other significant events relating to our diagnostic tests, which may change from time to time; • the timing and cost of obtaining regulatory approvals, conformity certifications or clearances for planned or future improvements or enhancements to our diagnostic tests; • changes in regulatory requirements or in the status of regulatory approvals or applications or conformity certifications; • pricing, discounts, and incentives for our diagnostic tests; • future accounting pronouncements or changes in our accounting policies; and • general market conditions.
These fluctuations may occur due to a variety of factors, including, but not limited to: • the level of demand for our diagnostic tests, which may vary significantly; • the timing and cost of manufacturing our diagnostic tests, which may vary depending on the quantity of production and the terms of our agreements with third-party suppliers and manufacturers; • expenditures that we may incur to acquire, develop, or commercialize additional tests and technologies; • unanticipated pricing pressures; • the rate at which we grow our sales force and the speed at which newly hired salespeople become effective, and the cost and level of investment therein; • the degree of competition in our industry and any change in the competitive landscape of our industry, including consolidation among our competitors or future partners; • coverage and reimbursement policies with respect to lung cancer treatment equipment, and potential future diagnostic tests that compete with our diagnostic tests; • the timing and success or failure of clinical trials for our diagnostic tests or any enhancements to such tests we develop or competing diagnostic tests; • positive or negative coverage, or public perception, of our diagnostic tests or those of our competitors or broader industry trends; • the timing and cost of, and level of investment in, research, development, licenses, regulatory approval, conformity certification, commercialization activities, acquisitions and other strategic transactions, or other significant events relating to our diagnostic tests, which may change from time to time; • the timing and cost of obtaining regulatory approvals, conformity certifications or clearances for planned or future improvements or enhancements to our diagnostic tests; • changes in regulatory requirements or in the status of regulatory approvals or applications or conformity certifications; • pricing, discounts, and incentives for our diagnostic tests; • future accounting pronouncements or changes in our accounting policies; and • general market conditions.
An inability to incorporate technologies or features that are important or essential to our diagnostic tests or products could have a material adverse effect on our business, financial condition and results of operations, and may prevent us from selling our rights to our COVID-19 testing program, either of the Nodify XL2 and Nodify CDT tests, or the VeriStrat and GeneStrat tests.
An inability to incorporate technologies or features that are important or essential to our diagnostic tests or products could have a material adverse effect on our business, financial condition and results of operations, and may prevent us from selling our rights to either of the Nodify XL2 and Nodify CDT tests, or the VeriStrat and GeneStrat tests.
We agreed to a revenue share payment of 8% of recognized revenue for non-screening tests up to an annual minimum volume and 5% thereafter, with an escalating minimum through the first four years of sales. Royalty expenses were $0.9 million and $0.7 million for the years ended December 31, 2022 and 2021, respectively.
We agreed to a revenue share payment of 8% of recognized revenue for non-screening tests up to an annual minimum volume and 5% thereafter, with an escalating minimum through the first four years of sales. Royalty expenses were $1.0 million and $0.9 million for the years ended December 31, 2023 and 2022, respectively.
There may also be unforeseen occurrences that increase our costs, such as increased prices of the components of our diagnostic tests, changes to labor costs or less favorable terms with third-party suppliers or contract manufacturing partners.
There may also be unforeseen occurrences that increase our costs, such as increased prices of the components of our diagnostic tests, changes to labor costs or less favorable terms with third-party suppliers.
To the extent the COVID-19 pandemic adversely affects our business and financial results, it may also have the effect of heightening many of the other risks described in this “Risk Factors” section. 43 Natural or man-made disasters and other similar events may significantly disrupt our business, and negatively impact our business, financial condition and results of operations.
To the extent a pandemic adversely affects our business and financial results, it may also have the effect of heightening many of the other risks described in this “Risk Factors” section. Natural or man-made disasters and other similar events may significantly disrupt our business, and negatively impact our business, financial condition and results of operations.
Following an executive order on trans-Atlantic data flows issued by President Biden in October 2022, the European Commission in December 2022 announced that it had initiated the process of drafting a new adequacy decision based on a modified data transfer framework that would replace the Privacy Shield.
Following an executive order on trans-Atlantic data flows issued by President Biden in October 2022, the European Commission in December 2022 announced that it had initiated the process of drafting a new adequacy decision based on a modified data transfer framework that would replace the Privacy Shield, which it completed in July 2023.

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Item 2. Properties

Properties — owned and leased real estate

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Biggest changeWe also lease office and laboratory space located in De Soto, Kansas, under an operating lease agreement that expires in October 2023, however, we are currently in discussions to extend this lease agreement. A portion of our employees are located outside of Colorado and Kansas, and others work from home.
Biggest changeThe purpose 76 of the CVP Lease was to replace the Company’s leased premises in Boulder, Colorado. The Company relocated its corporate headquarters to Louisville, Colorado in December 2023. We also lease office and laboratory space located in De Soto, Kansas, under an operating lease agreement that expires in October 2026.
Item 2. Pro perties. Our headquarters is located in Boulder, Colorado, where we lease office and laboratory space, under an operating lease agreement that expires in January 2024.
Item 2. Pro perties. Throughout fiscal year 2023 our headquarters were located in Boulder, Colorado, where we leased office and laboratory space, under an operating lease agreement that expired in January 2024.
Location Use Square Feet Expiration Louisville, Colorado Office and laboratory 79,980 March 31, 2035 Boulder, Colorado Office and laboratory 29,722 January 14, 2024 De Soto, Kansas Office and laboratory 9,066 October 31, 2023
A portion of our employees are located outside of Colorado and Kansas, and others work from home. Our properties are suitable for our current business operations. Location Use Square Feet Expiration Louisville, Colorado Office and laboratory 79,980 March 31, 2035 De Soto, Kansas Office and laboratory 9,066 October 31, 2026
Removed
The purpose of the CVP Lease is to replace the Company’s current leased premises in Boulder, Colorado. The Company intends to move its corporate headquarters to Louisville, Colorado (the Leased Premises) by mid-2023.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeWe are not presently a party to any legal proceedings that, if determined adversely to us, would individually or taken together have a material adverse effect on our business, results of operations, financial condition, or cash flows. Item 4. Mine Saf ety Disclosures. None. 81 PART II
Biggest changeWe are not presently a party to any legal proceedings that, if determined adversely to us, would individually or taken together have a material adverse effect on our business, results of operations, financial condition, or cash flows. Item 4. Mine Saf ety Disclosures. None. 77 PART II

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeThe Company used the proceeds to, among other things, fund the partial repayment of the 2021 Term Loan and for general corporate purposes (see – Part II - Item 8, Financial Statements and Supplementary Data). There were no sales of unregistered securities for the year ended December 31, 2021.
Biggest changeThe Company used the proceeds to, among other things, fund the partial repayment of the 2021 Term Loan and for general corporate purposes (see – Item 8. "Financial Statements and Supplementary Data"). Item 6. [ Reserved] 78
The remaining 2,877,092 shares were acquired by others pursuant to the form of a April 2022 Subscription Agreements whereby we agreed to file, subject to certain exceptions, a shelf registration statement with respect to resales of such shares with the SEC no later than 60 days from April 7, 2022, which the Company filed on June 6, 2022.
The remaining 2,877,092 shares were acquired by others pursuant to the form of the April 2022 Subscription Agreements whereby we agreed to file, subject to certain exceptions, a shelf registration statement with respect to resales of such shares with the SEC no later than 60 days from April 7, 2022, which the Company filed on June 6, 2022.
The Company used the proceeds to, among other things and in conjunction with a public offering, fund the repayment of the promissory note with Streeterville Capital, LLC (Streeterville), the Loan and Security Agreement with Silicon Valley Bank (SVB), and for general corporate purposes (see – Part II - Item 8, Financial Statements and Supplementary Data).
The Company used the proceeds to, among other things and in conjunction with a public offering, fund the repayment of the promissory note with Streeterville Capital, LLC (Streeterville), the Loan and Security Agreement with Silicon Valley Bank (SVB), and for general corporate purposes (see – Item 8. "Financial Statements and Supplementary Data").
Recent Sales of Unregistered Securities and Use of Proceeds On November 21, 2022, the Company entered into subscription agreements (the November 2022 Subscription Agreements) with certain members of management, including the Company’s Chief Executive Officer and Chief Financial Officer, for the issuance and sale by the Company of an aggregate of 235,056 shares of the Company’s common stock at a purchase price (determined in accordance with NASDAQ rules relating to the “Minimum Value” of the Company’s common stock) of $1.15 per share for an aggregate purchase price of approximately $270,000.
On November 21, 2022, the Company entered into subscription agreements (the November 2022 Subscription Agreements) with certain members of management, including the Company’s Chief Executive Officer and Chief Financial Officer, for the issuance and sale by the Company of an aggregate of 235,056 shares of the Company’s common stock at a purchase price (determined in accordance with NASDAQ rules relating to the “Minimum Value” of the Company’s common stock) of $1.15 per share for an aggregate purchase price of approximately $270,000.
The high and low closing prices for our common stock on The NASDAQ Global Market from January 1, 2022 to December 31, 2022 were $5.81 and $0.98, respectively. Holders of our Common Stock As of March 2, 2023, there were approximately 241 holders of our common stock.
The high and low closing prices for our common stock on The NASDAQ Global Market from January 1, 2023 to December 31, 2023 were $2.50 and $1.04, respectively. Holders of our Common Stock As of February 23, 2024, there were approximately 239 holders of our common stock.
Removed
From January 1, 2020 through December 31, 2020, we granted stock options under our 2016 and 2006 Stock Plans to purchase 0.8 million shares of our common stock at exercise prices ranging from $0.77 to $6.83 per share, and issued an aggregate of 0.4 million shares of common stock pursuant to the exercise of stock options with aggregate proceeds of approximately $1.3 million.
Added
Recent Sales of Unregistered Securities and Use of Proceeds On August 3, 2023, the Company entered into subscription agreements (the August 2023 Subscription Agreements) with all of the members of our Board of Directors, all Section 16 officers, and additional members of the Biodesix leadership team (together, the Investors) for the issuance and sale by the Company of an aggregate of 16,975,298 shares of the Company’s common stock at a purchase price (determined in accordance with NASDAQ rules relating to the “Minimum Value” of the Company’s common stock) of $1.62 per share for an aggregate purchase price of approximately $27.5 million.
Removed
These issuances were undertaken in reliance upon an exemption from registration under Rule 701 of the Securities Act of 1933. Item 6. [ Reserved] 82
Added
The Subscription Agreements did not include any registration rights. The Company used the proceeds for the commercial expansion of sales, research and development, and for general corporate purposes (see – Item 8. "Financial Statements and Supplementary Data").

Item 7. Management's Discussion & Analysis

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

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Biggest changeFourth Quarter and Full Year 2022 Financial and Operational Highlights The following were significant developments affecting our business, capital structure and liquidity during the year ended December 31, 2022 as compared to the same period in 2021 unless otherwise noted: • Total revenue of $9.6 million and $38.2 million for the fourth quarter and fiscal 2022, respectively, an increase of 33% and decrease of 30%, respectively, with continued growth in core lung diagnostic sales, offset by the expected year-over-year decline in COVID-19 revenue due to the decrease in testing across the year; • Core lung diagnostic revenue of $8.2 million and $29.3 million for the fourth quarter and fiscal 2022, respectively, an increase of 51% and 57% driven by the increased adoption of Nodify Lung nodule management tests and the highest total tests delivered in Company history; • Biopharmaceutical Services revenue of $1.4 million and $3.7 million for the fourth quarter and fiscal year 2022 respectively, a decrease of 1% and 34%; • COVID-19 testing revenue declined to an immaterial amount and $5.2 million for the fourth quarter and fiscal year 2022, respectively, a decrease of 96% and 83% commensurate with the increase in COVID-19 vaccination rates across the U.S. and the adoption and availability of at-home testing, including the expiration of our most significant testing contracts; • Gross margin was $6.3 million or 66% and $24.1 million or 63% for the fourth quarter and fiscal 2022, respectively, as a percentage of revenue compared to 65% and 44% primarily driven by the mix shift of sales to higher-margin core lung diagnostics and away from lower-margin COVID-19 testing; • Operating expenses (excluding direct costs and expenses) of $20.2 million and $74.6 million for the fourth quarter and fiscal year 2022, an increase of 23% and 15% primarily from year-over-year growth in core lung diagnostic revenue; • Net loss of $20.3 million and $65.4 million for the fourth quarter and fiscal year 2022, respectively, an increase of 53% and 52%; • Cash and cash equivalents of $43.1 million, inclusive of $65.7 million of net proceeds during the fourth quarter 2022 through debt and equity offerings and the utilization of $23.9 million to extinguish outstanding debt.
Biggest changeFourth Quarter and Full Year 2023 Financial and Operational Highlights The following were significant developments affecting our business, capital structure and liquidity during the year ended December 31, 2023 as compared to the same period in 2022 unless otherwise noted: • Total revenue of $14.7 million and $49.1 million for the fourth quarter and fiscal 2023, respectively, an increase of 52% and 49% over the respective prior year comparable periods excluding COVID testing revenues, and an increase of 53% and 28% over the respective prior year comparable periods including COVID testing revenues; o Lung Diagnostic revenue of $12.8 million and $45.1 million for the fourth quarter and fiscal 2023, respectively, an increase of 55% and 54% over the respective prior year comparable periods, primarily driven by the continued adoption of Nodify Lung® Nodule Risk Assessment tests; 82 o Biopharma Services and other revenue of $1.9 million and $3.9 million for the fourth quarter and fiscal 2023, respectively, an increase of 38% and 6% over the respective prior year comparable periods, a result of both delivering against our expanding book of business and securing new agreements; • Gross profit was $11.3 million or 77% and $36.1 million or 73% for the fourth quarter and fiscal 2023, respectively, as a percentage of revenue compared to 66% and 63% in the prior year comparable periods, primarily driven by growth in Lung Diagnostic testing and optimization of testing workflows that resulted in improvements in costs per test, the ongoing recovery of our Biopharma Services business, and the commercial discontinuation of lower-margin COVID-19 testing; • Operating expenses (excluding direct costs and expenses) of $18.2 million and $77.4 million for the fourth quarter and fiscal 2023, a decrease of 10% and increase of 4% over the respective prior year comparable periods; o Decrease in fourth quarter 2023 is primarily attributable to a decrease in research and development costs, partially offset by increased sales and marketing costs to support Lung Diagnostic sales growth, enhance product awareness and drive adoption, while the full year increase in operating expenses was driven by an increase in sales and marketing costs, partially offset by a reduction in research and development costs; o Includes non-cash stock compensation expense of $1.1 million and $5.4 million during fourth quarter and fiscal 2023, respectively, a decrease of 48% and 10% over the respective prior year comparable periods; • Net loss of $9.1 million and $52.1 million for the fourth quarter and fiscal 2023, respectively, an improvement of 55% and 20% over the respective prior year comparable periods; o Fourth quarter and fiscal 2023 included a gain of $0.1 million and loss of $1.3 million, respectively, from the change in fair value of warrant liabilities associated with our term loan facility with Perceptive Advisors (Perceptive); o Fourth quarter and fiscal 2022 included loss on debt extinguishment and modification of $4.0 million and $7.0 million, respectively; • Cash and cash equivalents of $26.3 million as of December 31, 2023; o The Company successfully drew down the second tranche of $10 million from its $50 million term loan facility with Perceptive in the fourth quarter of 2023; o Cash balance includes the remaining $12.2 million of the $27.5 million private placement announced in August 2023.
Our revenue, business opportunities and growth depend in part on our ability to attract new biopharmaceutical customers and to maintain and expand relationships with existing biopharmaceutical customers. We expect to increase our sales and marketing expenses in furtherance of this as we continue to develop these relationships, we and expect to support a growing number of investigations and clinical trials.
Our revenue, business opportunities and growth depend in part on our ability to attract new biopharmaceutical customers and to maintain and expand relationships with existing biopharmaceutical customers. We expect to increase our sales and marketing expenses in furtherance of this as we continue to develop these relationships, and we expect to support a growing number of investigations and clinical trials.
Services Services revenue is generated from the delivery of our on-market tests, pipeline tests, custom diagnostic testing, and other scientific services for a purpose as defined by any individual customer. At times we collaborate with large biopharmaceutical companies in an attempt to discover biomarkers that would be helpful in their drug development or marketing.
Biopharma Services and other Services revenue is generated from the delivery of our on-market tests, pipeline tests, custom diagnostic testing, and other scientific services for a purpose as defined by any individual customer. At times we collaborate with large biopharmaceutical companies in an attempt to discover biomarkers that would be helpful in their drug development or marketing.
To protect the health and well-being of our workforce, partners, vendors and customers, we provide voluntary COVID-19 testing for employees working on-site, 86 implemented social distance and building entry policies at work, restricted travel and facility visits, and followed the States of Colorado and Kansas’ public health orders and the guidance from the Centers for Disease Control and Prevention (CDC).
To protect the health and well-being of our workforce, partners, vendors and customers, we provide voluntary COVID-19 testing for employees working on-site, implemented social distance and building entry policies at work, restricted travel and facility visits, and followed the States of Colorado and Kansas’ public health orders and the guidance from the Centers for Disease Control and Prevention (CDC).
The 52-gene panel includes guideline recommended mutations to help physicians treating advanced-stage lung cancer patients identify all four major mutation classes and genes, such as EGFR, ALK, KRAS, MET, NTRK, ERBB2, and others, and delivers them in an expedited timeframe so patient treatment can begin sooner.
The 52-gene panel includes 79 guideline recommended mutations to help physicians treating advanced-stage lung cancer patients identify all four major mutation classes and genes, such as EGFR, ALK, KRAS, MET, NTRK, ERBB2, and others, and delivers them in an expedited timeframe so patient treatment can begin sooner.
As consideration for Lincoln Park's irrevocable commitment to purchase our common stock upon the terms of and subject to satisfaction of the conditions set forth in the purchase agreement, on the Effective Date, we issued 184,275 shares of common stock to Lincoln Park as a commitment fee valued at $600,000 for which no consideration was received.
As consideration for Lincoln Park's irrevocable commitment to purchase our common stock upon the terms of and subject to satisfaction of the conditions set forth in the Purchase Agreement, on the LPC Effective Date, we issued 184,275 shares of common stock to Lincoln Park as a commitment fee valued at $600,000 for which no consideration was received.
In determining the amount to accrue for a delivered test, the Company considers factors such as payment history, payer coverage, whether there is a reimbursement contract between the payer and the Company, payment as a percentage of agreed upon rate (if applicable), amount paid per test and any current developments or changes that could impact reimbursement.
In determining the amount to accrue for a delivered test, the Company considers factors such as test type, payment history, payer coverage, whether there is a reimbursement contract between the payer and the Company, payment as a percentage of agreed upon rate (if applicable), amount paid per test and any current developments or changes that could impact reimbursement.
Further we also expect to increase our research and development expenses to fund further innovation and develop new clinically relevant tests. • Ability to attract new biopharmaceutical customers and maintain and expand relationships with existing customers. Our business development team promotes the broad utility of our products for biopharmaceutical companies in the United States and internationally.
Further we also expect to increase our research and development expenses to fund further innovation and develop new clinically relevant tests. • Ability to attract new biopharmaceutical customers and maintain and expand relationships with existing customers. Our business development team promotes the broad utility of our products for biopharmaceutical companies in the United 81 States and internationally.
The performance obligations and related revenue for these sales is defined by a written agreement between us and our customer. These services are generally completed upon the delivery of testing results, or other contractually defined milestone(s), to the customer, which is considered the performance obligation.
The performance obligations and related revenue for these sales is defined by a written agreement between us and our customer. These services are generally completed upon 83 the delivery of testing results, or other contractually defined milestone(s), to the customer, which is considered the performance obligation.
Such sales of common stock by us, if any, will be subject to certain limitations, and may occur from time to time, at our sole discretion, over the 36-month period commencing on the Effective Date.
Such sales of common stock by us, if any, will be subject to certain limitations, and may occur from time to time, at our sole discretion, over the 36-month period commencing on the LPC Effective Date.
Costs associated with performing our tests are recorded as the tests are processed regardless of whether revenue was recognized with respect to the tests. Infrastructure expenses include depreciation of laboratory equipment, rent costs, amortization of leasehold improvements and information technology costs.
Costs associated with performing our tests are recorded as the tests are processed regardless of whether revenue was recognized with respect to the tests. Infrastructure expenses include allocated depreciation of laboratory equipment, rent costs, amortization of leasehold improvements and information technology costs.
Department of Veterans Affairs (the VA), the largest integrated health care system in the United States, has awarded a Federal Supply Schedule Contract for the Company’s entire portfolio of lung cancer diagnostic tests.
Department of Veterans Affairs (the VA), the largest integrated health care system in the United States, awarded a Federal Supply Schedule Contract for the Company’s entire portfolio of lung cancer diagnostic tests.
The VA provides care at 1,298 health care facilities, including 171 VA Medical Centers and 85 1,113 outpatient sites of care of varying complexity to over 9 million veterans enrolled in the VA health care program.
The VA provides care at 1,298 health care facilities, including 171 VA Medical Centers and 1,113 outpatient sites of care of varying complexity to over 9 million veterans enrolled in the VA health care program.
All five Biodesix blood-based lung diagnostic tests within the Nodify Lung Nodule Risk Assessment testing strategy and IQLung strategy for lung cancer patients are now covered by Medicare.
All five Biodesix blood-based lung diagnostic 80 tests within the Nodify Lung Nodule Risk Assessment testing strategy and IQLung strategy for lung cancer patients are now covered by Medicare.
Biodesix, Inc. is referred to throughout this Annual Report on Form 10-K for the period ended December 31, 2022 (Form 10-K) as “we”, “us”, “our” or the “Company.” The following discussion of our financial condition and results of operations should be read together with our audited financial statements and related notes and other financial information included elsewhere in this Annual Report on Form 10-K.
Biodesix, Inc. is referred to throughout this Annual Report on Form 10-K for the period ended December 31, 2023 (Form 10-K) as “we”, “us”, “our” or the “Company.” The following discussion of our financial condition and results of operations should be read together with our audited financial statements and related notes and other financial information included elsewhere in this Annual Report on Form 10-K.
Our current operating plan, which is in part determined based on our most recent historical actual results and trends, along with the items noted above, raises substantial doubt about the Company’s ability to continue as a going concern for a period beyond one year from when the December 31, 2022 financial statements are issued.
Our current operating plan, which is in part determined based on our most recent historical actual results and trends, along with the items noted above, raises substantial doubt about the Company’s ability to continue as a going concern for a period beyond one year from when the December 31, 2023 financial statements are issued.
The Company further amended the Indi APA agreement in April 2022 in which all parties agreed to restructure the Milestone Payments whereby the Company will make five quarterly installments of $2.0 million each beginning in April 2022, three quarterly installments of $3.0 million beginning in July 2023, one installment of $5.0 million in April 2024, and one installment of approximately $8.4 million in July 2024.
The Company amended the Indi APA agreement in April 2022 in which all parties agreed to restructure the Milestone Payments whereby the Company will make five quarterly installments of $2.0 million each beginning in April 2022, three quarterly installments of $3.0 million beginning in July 2023, one installment of $5.0 million in April 2024, and one installment of approximately $8.4 million in July 87 2024.
As an emerging growth company, we may take advantage of certain exemptions from various public company reporting requirements, including the requirement that our internal control over financial reporting be audited by our independent registered public accounting firm pursuant to Section 404 of the Sarbanes-Oxley Act of 2002 (the “Sarbanes-Oxley Act”), certain requirements related to the disclosure of executive compensation in our periodic reports and proxy statements, the requirement that we hold a nonbinding advisory vote on executive 96 compensation and any golden parachute payments.
As an emerging growth company, we may take advantage of certain exemptions from various public company reporting requirements, including the requirement that our internal control over financial reporting be audited by our independent registered public accounting firm pursuant to Section 404 of the Sarbanes-Oxley Act of 2002 (the Sarbanes-Oxley Act), certain requirements related to the disclosure of executive compensation in our periodic reports and proxy statements, the requirement that we hold a nonbinding advisory vote on executive compensation and any golden parachute payments.
Liquidity and Capital Resources We are an emerging growth company and, as such, have yet to generate positive cash flows from operations. We have funded our operations to date principally from net proceeds from the sale of our common stock, the sale of convertible preferred stock, revenue from diagnostic testing and services, and the incurrence of indebtedness.
Liquidity and Capital Resources We are an emerging growth company and, as such, have yet to generate positive cash flows from operations. We have funded our operations to date principally from net proceeds from the sale of our common stock, the sale of convertible preferred stock, revenue from diagnostic testing and services, and the incurrence of indebtedness as described below.
Customers for these services are typically large pharmaceutical companies where collectability is reasonably assured and therefore revenue is accrued upon completion of the performance obligations. Revenue derived from services is often unpredictable and can cause dramatic swings in our overall net revenue line from quarter to quarter.
Customers for these services are typically large pharmaceutical companies where collectability is reasonably assured and therefore revenue is accrued upon completion of the performance obligations. Revenue derived from services is often unpredictable and can cause significant swings in our overall net revenue line from quarter to quarter.
We evaluate both the volume of our commercial tests, or the number of tests that we perform for patients on behalf of clinicians, as well as tests for biopharmaceutical companies. Our performance depends on our ability to retain and broaden adoption with existing customers, as well as attract new customers.
We evaluate both the volume of our commercial tests, or the number of tests that we perform for patients on behalf of clinicians, as well as tests for biopharmaceutical companies. Our performance depends on our ability to retain and increase adoption with existing customers, as well as attract new customers.
By combining a technology multi-omic approach with a holistic view of the patient’s disease state, we believe our solutions provide physicians with greater insights to help personalize their patient’s care and meaningfully improve disease detection, evaluation, and treatment.
By combining a multi-omic approach with a holistic view of the patient’s disease state, we believe our testing solutions provide physicians with greater insights to help personalize their patient’s care and meaningfully improve disease detection, evaluation, and treatment.
The test is the first surrogate neutralizing antibody test with FDA EUA and uses ELISA technology to qualitatively detect circulating neutralizing antibodies to the RBD in the spike protein of SARS-CoV-2 that are produced in response to a previous SARS-CoV-2 infection.
The test was the first surrogate neutralizing antibody test with FDA EUA and uses ELISA technology to qualitatively detect circulating neutralizing antibodies to the RBD in the spike protein of SARS-CoV-2 that are produced in response to a previous SARS-CoV-2 infection.
Research and development costs are expensed as incurred. Payments made prior to the receipt of goods or services to be used in research and development are deferred and recognized as expense in the period in which the related goods are received or services are rendered. Costs to develop our technology capabilities are recorded as research and development.
Payments made prior to the receipt of goods or services to be used in research and development are deferred and recognized as expense in the period in which the related goods are received or services are rendered. Costs to develop our technology capabilities are recorded as research and development.
Additionally, we incorporate clinical and molecular profiling data from our commercial clinical testing, research studies, clinical trials, and biopharmaceutical customers or academic partnerships, to continue to advance our platform. We have a variety of samples with associated data in our biobank, including tumor profiles and immune profiles, which are used for both internal and external research and development initiatives.
Additionally, we incorporate clinical and molecular profiling data from our commercial clinical testing, research studies, clinical trials, and biopharmaceutical customers or other collaborative partnerships, to continue to advance our platform. We have a variety of samples with associated data in our biobank, including tumor profiles and immune profiles, which are used for both internal and external research and development initiatives.
We have commercialized five diagnostic tests for our core lung diagnostic business, each of which have Medicare coverage, which are currently available for use by physicians. Our Nodify XL2 and Nodify CDT tests, marketed as part of the Nodify Lung Nodule Risk Assessment testing strategy, assess the risk of lung cancer to help identify the most appropriate treatment pathway.
We have commercialized five diagnostic tests for our lung diagnostic business, each of which have Medicare coverage, which are currently available for use by physicians. Our Nodify XL2 and Nodify CDT tests, marketed as Nodify Lung Nodule Risk Assessment testing, assess the risk of lung cancer to help identify the most appropriate treatment pathway.
All of our diagnostic and services testing is performed at one of our two accredited, high-complexity clinical laboratories in Boulder, Colorado and De Soto, Kansas. Since our inception, we have performed over 550,000 clinical diagnostic tests, and continue to generate a large and growing body of clinical evidence consisting of over 300 clinical and scientific peer-reviewed publications, presentations, and abstracts.
All of our diagnostic and services testing is performed at one of our two accredited, high-complexity clinical laboratories in Louisville, Colorado and De Soto, Kansas. Since our inception, we have performed over 600,000 clinical diagnostic tests, and continue to generate a large and growing body of clinical evidence consisting of over 300 clinical and scientific peer-reviewed publications, presentations, and abstracts.
The following Management’s Discussion and Analysis of Financial Condition and Results of Operations (MD&A), is provided to supplement the audited financial statements and the related notes in Part II - Item 8 of this Annual Report on Form10-K.
The following Management’s Discussion and Analysis of Financial Condition and Results of Operations (MD&A), is provided to supplement the audited financial statements and the related notes in Part II - Item 8 of this Annual Report on Form 10-K.
Components of Operating Results Revenues We derive our revenue from two primary sources: (i) providing diagnostic testing in the clinical setting (Diagnostic Tests); and (ii) providing biopharmaceutical companies with services that include diagnostic research, clinical research, clinical trial testing, development and testing services generally provided outside the clinical setting and governed by individual contracts with third parties as well as development and commercialization of companion diagnostics (Services). 87 Diagnostic Tests Diagnostic test revenue is generated from delivery of results from our diagnostic tests.
Components of Operating Results Revenues We derive our revenue from two primary sources: (i) providing diagnostic testing in the clinical setting (Diagnostic Tests); and (ii) providing biopharmaceutical companies with services that include diagnostic research, clinical research, clinical trial testing, development and testing services generally provided outside the clinical setting and governed by individual contracts with third parties as well as development and commercialization of companion diagnostics.
As of December 31, 2022, the Company had remaining available capacity for share issuances of approximately $29.5 million under the ATM facility and up to $46.9 million under the LPC facility, each subject to the restrictions and limitations of the underlying facilities, as well as volume limitations under applicable SEC rules and regulations that limit their availability as sources of funding.
As of December 31, 2023, the Company had remaining available capacity for share issuances of approximately $28.9 million under the ATM facility and up to $46.9 million under the LPC Facility, each subject to the restrictions and limitations of the underlying facilities, as well as volume limitations under applicable SEC rules and regulations that limit their availability as sources of funding.
We have taken steps to improve our liquidity through the actions noted above and have also undertaken several proactive measures including, among other things, the reduction of planned capital expenditures and certain operating expenses but we do not expect that these actions alone will be sufficient to maintain our financial covenants.
We have taken steps to improve our liquidity through raising debt and equity capital and have also undertaken several proactive measures including, among other things, the reduction of planned capital expenditures and certain operating expenses but we do not expect that these actions alone will be sufficient to maintain our financial covenants.
In addition to the Initial Warrants and to the extent the Company exercises its right to borrow the remaining availability under the Perceptive Term Loan, additional warrants will become exercisable into 1,000,000 shares of common stock concurrently with the borrowing of the Tranche B Loan, and additional warrants will become exercisable into 1,000,000 shares of common stock concurrently with the borrowing of the Tranche C Loan (together, the Additional Warrants).
In addition to the Initial Warrants and to the extent the Company has the ability to exercise its right to borrow the remaining availability under the Perceptive Term Loan, additional warrants will become exercisable into 1,000,000 shares of common stock concurrently with the borrowing of the Tranche B Loan (the Tranche B Warrants), and additional warrants will become exercisable into 1,000,000 shares of common stock concurrently with the borrowing of the Tranche C Loan (the Tranche C Warrants).
We have incurred significant losses since inception and, as a result, we have funded our operations to date primarily through the sale of common stock, the sale of convertible preferred stock, the issuance of notes payable, and from our two primary revenue sources: (i) diagnostic testing, which includes lung diagnostic testing and COVID-19 testing, and (ii) providing biopharmaceutical companies with development and testing services.
We have incurred significant losses since inception and, as a result, we have funded our 88 operations to date primarily through the sale of common stock, the sale of convertible preferred stock, the issuance of notes payable, and from our two primary revenue sources: (i) diagnostic testing, which includes lung diagnostic testing and, prior to May 11, 2023, COVID-19 testing, and (ii) providing biopharmaceutical companies with development and testing services and licensing our technologies.
Net cash used in investing activities during the year ended December 31, 2022 totaled $3.5 million, an increase of $1.0 million compared to the same period in 2021. The increase in net cash used in investing activities was primarily due to increases in purchases of property and equipment and capital expenditures for leasehold improvements related to the CVP Lease.
Net cash used in investing activities during the year ended December 31, 2023 totaled $23.1 million, an increase of $19.5 million compared to the same period in 2022. The increase in net cash used in investing activities was primarily due to increases in purchases of property and equipment and capital expenditures for leasehold improvements related to the CVP Lease.
Our GeneStrat ddPCR, GeneStrat NGS, and VeriStrat tests, marketed as the IQLung testing strategy, are used following diagnosis of lung cancer to measure the presence of mutations in the tumor and the state of the patient’s immune system to establish the patient’s prognosis and help guide treatment decisions.
Our GeneStrat ddPCR, GeneStrat NGS, and VeriStrat tests, marketed as part of our IQLung testing strategy, are used following diagnosis of lung cancer to detect the presence of mutations in the tumor and the state of the patient’s immune system to help guide treatment decisions.
The Company generates revenues from (i) diagnostic tests and (ii) assay development and testing services (services revenue). The Company recognizes revenues related to blood-based lung diagnostic billings based on estimates of the amounts ultimately expected to be collected from customers on a portfolio approach.
The Company generates 90 revenues from (i) diagnostic tests and (ii) assay development, testing services, and licensing our technologies (Biopharma Services and other revenue). The Company recognizes revenues related to blood-based lung diagnostic billings based on estimates of the amounts ultimately expected to be collected from customers on a portfolio approach.
In addition to the eight diagnostic tests currently on the market, we perform over 30 assays for research use as part of our laboratory services that have been used by over 60 biopharmaceutical companies and academic partners.
In addition to the five diagnostic tests currently on the market, we perform more than 30 assays for research use as part of our laboratory services that have been used by over 65 biopharmaceutical companies and academic partners.
In evaluating the Company’s ability to continue as a going concern, management projected its cash flow sources, including the debt and equity funding and amendments to the Indi APA, and evaluated the conditions and events that could raise substantial doubt about the Company’s ability to continue as a going concern within one year after the date that these financial statements were issued.
In evaluating the Company’s ability to continue as a going concern, management projected its cash flow sources and evaluated the conditions and events that could raise substantial doubt about the Company’s ability to continue as a going concern within one year after the date that these financial statements were issued.
Based on our current operating plan, unless we continue to raise additional capital (debt or equity) or obtain waiver from complying with such financial covenants, we expect that we will be unable to maintain our financial covenants under our existing loan agreement during the next twelve months, which could result in an Event of Default, as defined, causing an acceleration of the outstanding balances.
Based on our current operating plan, unless we continue to raise additional capital (debt or equity), we expect that we will be unable to maintain our financial covenants under our existing loan agreement during the next twelve months, which could result in an Event of Default, as defined in the Perceptive Term Loan Facility, causing an acceleration of the outstanding balances.
External expenses are recognized based on an evaluation of the progress to completion of specific tasks using information provided to us by our service providers or our estimate of the level of service that has been performed at each reporting date.
External expenses are recognized based on an evaluation of the progress to completion of specific tasks using information provided to us by our service providers or our estimate of the level of service that has been performed at each reporting date. We track external costs by the stage of program, clinical or preclinical.
Non-Operating Expenses Interest Expense and Interest Income For the year ended December 31, 2022, interest expense consists of cash and non-cash interest from the secured promissory note (Promissory Note One) with Streeterville, the 2021 Term Loan with SVB, changes in the value of our contingent consideration associated with the passage of time subsequent to the achievement of the gross margin target in the second quarter 2021, and the Perceptive Term Loan.
Non-Operating Expenses Interest Expense and Interest Income For the year ended December 31, 2023, interest expense consists of cash and non-cash interest from the Perceptive Term Loan Facility and changes in the value of our contingent consideration associated with the passage of time subsequent to the achievement of the gross margin target in the second quarter 2021.
On November 21, 2022, the Company funded and/or closed various financing transactions, including: (i) a term loan facility for up to $50.0 million, with funding of $30.0 million and the issuance of warrants exercisable into 3,000,000 shares of the Company’s common stock occurring on November 21, 2022, and two additional contingently issuable tranches of $10.0 million each subject to certain terms and conditions, including revenue milestones, (ii) a follow-on equity offering of common stock and (iii) a subscription agreement for the issuance of common stock to certain members of the Company’s management team.
On November 21, 2022, the Company funded and/or closed various financing transactions, including: (i) a term loan facility with Perceptive Advisors, LLC (Perceptive) for up to $50.0 million, with funding of $30.0 million on November 21, 2022, and two additional contingently issuable tranches of $10.0 million each subject to certain terms and conditions, including revenue milestones, (ii) a follow-on equity offering of common stock for $40.4 million in gross proceeds and (iii) a subscription agreement for the issuance of common stock to certain members of the Company’s management team for $0.3 million.
We market our tests and services to biopharmaceutical companies globally through our targeted business development team, which promotes the broad utility of our tests and testing capabilities throughout drug development and commercialization which is of value to pharmaceutical companies and their drug-development process. The Company continues to address our liquidity needs through improvements to our capital structure.
We market our tests and services to biopharmaceutical companies globally through our targeted business development team, which promotes the broad utility of our tests and testing capabilities throughout drug development and commercialization which is of value to pharmaceutical companies and their drug-development process.
In addition to our diagnostic tests, we provide biopharmaceutical companies with services that include diagnostic research, clinical trial testing, and the discovery, development, and commercialization of companion diagnostics. Our core belief is that no single technology will answer all clinical questions that we encounter.
In addition to our diagnostic tests, we provide biopharmaceutical companies with services that include diagnostic research, clinical trial testing, and the discovery, development, and commercialization of companion diagnostics. We also recognize revenue from other services, including amounts derived from licensing our technologies. Our core belief is that no single technology will answer all clinical questions that we encounter.
We track external costs by the stage of program, clinical or preclinical. 88 Internal expenses include employee-related costs, including salaries, share-based compensation and related benefits for employees engaged in research and development functions. We do not track internal costs by product candidate because these costs are deployed across multiple programs and, as such, are not separately classified.
Internal expenses include employee-related costs, including salaries, share-based compensation and related benefits for employees engaged in research and development functions. We do not track internal costs by product candidate because these costs are deployed across multiple programs and, as such, are not separately classified. Research and development costs are expensed as incurred.
In total these new private pay contracts add approximately 4.5 million covered lives, and are in geographic regions of the country where the incidence of lung cancer is high. • Investment in clinical studies and product innovation to support growth.
In total these new private pay contracts add approximately 4.5 million covered lives, and are in geographic regions of the country where the incidence of lung cancer is high.
We regularly engage with our customers, key opinion leaders, and scientific experts to stay ahead of the rapidly evolving diagnostic treatment landscape to identify additional clinical unmet needs where a diagnostic test could help improve patient care.
We continuously incorporate new market insights and patient data to enhance our platform through a data-driven learning loop. We regularly engage with our customers, key opinion leaders, and scientific experts to stay ahead of the rapidly evolving diagnostic treatment landscape to identify additional clinical unmet needs where a diagnostic test could help improve patient care.
These leasehold improvements are tenant improvements and have been reimbursed from the Landlord, as described above in net cash used in operating activities. Net cash provided by financing activities during the year ended December 31, 2022 totaled $58.9 million, an increase of $57.6 million compared to the same period in 2021.
These leasehold improvements are tenant improvements and have been reimbursed from the Landlord, as described above in net cash used in operating activities. Net cash provided by financing activities during the year ended December 31, 2023 totaled $29.1 million, a decrease of $29.8 million compared to the same period in 2022.
As of December 31, 2022, we maintained cash and cash equivalents of $43.1 million and we have $30.0 million in outstanding aggregate principal amount on our Perceptive Term Loan.
As of December 31, 2023, we maintained cash and cash equivalents of $26.3 million and we have $40.0 million in outstanding aggregate principal amount on our Perceptive Term Loan.
Cash Flows The following summarizes our cash flows for the periods indicated (in thousands): Year Ended December 31, 2022 2021 Net cash flows provided by (used in): Operating activities $ (44,972 ) $ (28,223 ) Investing activities (3,534 ) (2,547 ) Financing activities 58,882 1,262 Net increase (decrease) in cash and cash equivalents and restricted cash $ 10,376 $ (29,508 ) 94 Our cash flows resulted in a net increase in cash and cash equivalents and restricted cash of $10.4 million during the year ended December 31, 2022 as compared to the net decrease in cash of $29.5 million for the year ended December 31, 2021.
Cash Flows The following summarizes our cash flows for the periods indicated (in thousands): Year Ended December 31, 2023 2022 Net cash flows (used in) provided by: Operating activities $ (22,870 ) $ (44,972 ) Investing activities (23,062 ) (3,534 ) Financing activities 29,129 58,882 Net (decrease) increase in cash and cash equivalents and restricted cash $ (16,803 ) $ 10,376 89 Our cash flows resulted in a net decrease in cash and cash equivalents and restricted cash of $16.8 million during the year ended December 31, 2023 as compared to the net increase in cash of $10.4 million for the year ended December 31, 2022.
Our ability to meet our obligations as they come due may be impacted by our ability to remain compliant with financial covenants in our loan agreement or to obtain waivers or amendments that impact the related covenants. As of December 31, 2022, the Company was in compliance with all restrictive and financial covenants associated with its borrowing.
Our ability to meet our obligations as they come due may be impacted by our ability to remain compliant with financial covenants in our loan agreement or to obtain waivers or amendments that impact the related covenants.
During the year ended December 31, 2022, the Company raised approximately $7.3 million ($6.8 million after deducting underwriting discounts and 93 commissions and offering expenses payable), in gross proceeds from the sale of 3,886,893 common shares at a weighted average price per share of $1.87 under these programs.
During the year ended December 31, 2023, the Company raised approximately $0.6 million ($0.6 million after deducting underwriting discounts and commissions and offering expenses payable), in gross proceeds from the sale of 376,456 common shares at a weighted average price per share of $1.66 under the ATM facility.
Non-Operating Expenses Interest expense Interest expense increased $3.6 million or 79% for the year ended December 31, 2022 compared to the year ended December 31, 2021.
Non-Operating Expenses Interest expense Interest expense increased $1.5 million or 18% for the year ended December 31, 2023 compared to the year ended December 31, 2022.
The Nodify Lung Risk Assessment testing strategy has resulted in a change in the calculated risk of malignancy in 80-85% of the cases. We believe we are the only company to offer two commercial blood-based tests to help physicians reclassify risk of malignancy in patients with suspicious lung nodules.
We believe we are the only company to offer two commercial blood-based tests to help physicians reclassify risk of malignancy in patients with suspicious lung nodules.
On May 9, 2022, the Company entered into a securities purchase agreement with Streeterville (the Lender), pursuant to which, among other things, the Lender: (i) purchased Promissory Note One in the aggregate principal amount totaling $16.0 million in exchange for $15.0 million less certain expenses and (ii) agreed to purchase another secured promissory note at the Company’s election (Promissory Note Two and, together with Promissory Note One, the Promissory Notes), subject to certain conditions precedent in aggregate principal amount totaling $10.3 million in exchange for $10.0 million in cash proceeds.
On May 9, 2022, the Company entered into a securities purchase agreement with Streeterville, pursuant to which, among other things, Streeterville: (i) purchased Promissory Note One in the aggregate principal amount totaling $16.0 million in exchange for $15.0 million less certain expenses.
On January 30, 2023, the White House issued a Statement of Administration Policy announcing the President’s intention to allow the Public Health Emergency declaration under Section 319 to expire on May 11, 2023.
On January 30, 2023, the White House issued a Statement of Administration Policy announcing the President’s intention to allow the Public Health Emergency declaration under Section 319 to expire on May 11, 2023. In connection with the expiration of the Public Health Emergency declaration under Section 319, the Company no longer provides commercial COVID-19 diagnostic testing services.
This increase was driven primarily by increases in employee compensation and benefits associated with an increase in sales team headcount and variable compensation during 2022 as compared to 2021.
This increase was driven primarily by increases in employee compensation and benefits associated with an increase in sales team headcount and variable compensation as well as increases in non-employee costs associated with increased spending on various sales meetings, training, and campaigns during 2023 as compared to 2022.
(2) Includes the Perceptive Term Loan payments of principal and interest. Interest amounts associated with the Perceptive Term Loan are variable and estimated based on the interest rate in effect at December 31, 2022.
(2) Includes the Perceptive Term Loan payments of principal and interest. Interest amounts associated with the Perceptive Term Loan are variable and estimated based on the interest rate in effect at December 31, 2023. Off-Balance Sheet Arrangements As of December 31, 2023, we have not entered into any off-balance sheet arrangements.
Employees who can perform their duties remotely have the option to work from home. Our sales, marketing and business development efforts may be constrained by our operational response to future COVID-19 variant outbreaks.
Employees who can perform their duties remotely have the option to work from home. Our sales, marketing and business development efforts may be constrained by our operational response to future COVID-19 variant outbreaks. We will continue to adjust our operational norms, as needed, including complying with government directives and guidelines as they are modified and supplemented.
Data for the years ended December 31, 2022 and 2021 has been derived from our audited financial statements included in this Annual Report on Form 10-K.
Data for the years ended December 31, 2023 and 2022 has been derived from our audited financial statements included in this Annual Report on Form 10-K. Overview We are a leading diagnostic solutions company with a focus in lung disease.
GAAP which resulted in the extinguishment of the original instrument due to the substantially different terms. As a result, during the three months ended June 30, 2022, we recorded a loss on the extinguishment of $2.9 million.
As a result, during the three months ended June 30, 2022, we recorded a loss on the extinguishment of $2.9 million.
The following table summarizes our external and internal costs for the years ended December 31, 2022 and 2021 (in thousands, except percentages): Year Ended December 31, Change 2022 2021 $ % External expenses: Clinical trials and associated costs $ 2,551 $ 2,061 $ 490 24 % Other external costs 3,625 3,810 (185 ) (5 )% Total external costs 6,176 5,871 305 5 % Internal expenses 6,926 6,918 8 0 % Total research and development expenses $ 13,102 $ 12,789 $ 313 2 % Sales, marketing, general and administrative Sales, marketing, general and administrative expenses increased $10.9 million or 22% for the year ended December 31, 2022 compared to the year ended December 31, 2021.
The following table summarizes our external and internal costs for the years ended December 31, 2023 and 2022 (in thousands, except percentages): Year Ended December 31, Change 2023 2022 $ % External expenses: Clinical trials and associated costs $ 1,663 $ 2,551 $ (888 ) (35 )% Other external costs 2,822 3,625 (803 ) (22 )% Total external costs 4,485 6,176 (1,691 ) (27 )% Internal expenses 5,503 6,926 (1,423 ) (21 )% Total research and development expenses $ 9,988 $ 13,102 $ (3,114 ) (24 )% Sales, marketing, general and administrative Sales, marketing, general and administrative expenses increased $5.9 million or 10% for the year ended December 31, 2023 compared to the year ended December 31, 2022.
The second test is the Platelia SARS-CoV-2 Total Ab test, which is an antibody test intended for detecting a B-cell immune response to SARS-CoV-2, indicating recent or prior infection. The Platelia SARS-CoV-2 Total Ab test was FDA EUA authorized on April 29, 2020.
The Bio-Rad SARS-CoV-2 ddPCR test was FDA EUA authorized on May 1, 2020, authorizing performance of the test in laboratories certified under CLIA to perform high complexity tests. The second test is the Platelia SARS-CoV-2 Total Ab test, which is an antibody test intended for detecting a B-cell immune response to SARS-CoV-2, indicating recent or prior infection.
Our studies focus primarily on the clinical utility of our tests including the ongoing INSIGHT study which seeks to enroll up to 5,000 patients to continue our clinical understanding of the predictive and prognostic value of the VeriStrat test.
Our studies focus primarily on the clinical utility of our tests including the ongoing INSIGHT study to continue our clinical understanding of the predictive and prognostic value of the VeriStrat test. On June 27, 2023, we completed and closed enrollment of 5,000 patients in the INSIGHT study with non-small cell lung cancer.
Contractual Obligations and Commitments The following table summarizes our non-cancelable contractual obligations and commitments as of December 31, 2022 (in thousands): Payments due by period (1) Total Less than 1 year 1 to 3 years 4 to 5 years More than 5 years Borrowings and interest (2) $ 50,981 $ 4,295 $ 8,566 $ 38,120 $ — Contingent consideration (3) 34,675 11,272 23,403 — — Operating lease obligations (4) 48,922 2,289 6,329 8,041 32,263 Total $ 134,578 $ 17,856 $ 38,298 $ 46,161 $ 32,263 (1) Royalty payments that we may owe are not included as the amount and timing of such payments is uncertain.
Contractual Obligations and Commitments The following table summarizes our non-cancelable contractual obligations and commitments as of December 31, 2023 (in thousands): Payments due by period (1) Total Less than 1 year 1 to 3 years 4 to 5 years More than 5 years Borrowings and interest (2) $ 62,903 $ 5,897 $ 11,677 $ 45,329 $ — Contingent consideration 23,403 23,403 — — — Operating lease obligations 46,909 2,406 8,176 8,214 28,113 Finance lease obligations 769 356 413 — — Total $ 133,984 $ 32,062 $ 20,266 $ 53,543 $ 28,113 (1) Royalty payments that we may owe are not included as the amount and timing of such payments is uncertain.
These tests under the Biodesix WorkSafe testing program are utilized by healthcare providers, including hospitals and nursing homes, and are also offered to businesses and educational systems.
In response to the COVID-19 pandemic, through our partnership with Bio-Rad, we commercialized the Biodesix WorkSafe testing program, which included three commercialized tests. These tests under the Biodesix WorkSafe testing program were utilized by healthcare providers, including hospitals and nursing homes, and were also offered to businesses and educational systems.
The fees for such services are billed either to a third party such as Medicare, medical facilities, commercial insurance payers, or to the patient. We determine the transaction price related to our contracts by considering the nature of the payer, the historical amount of time until payment by a payer and historical price concessions granted to groups of customers.
We determine the transaction price related to our contracts by considering the nature of the payer, test type, the historical amount of time until payment by a payer, and historical price concessions granted to groups of customers.
On April 7, 2022, the Company entered into Amendment No. 3 to the Indi APA in which all parties agreed to restructure the milestone payments. During the three months ended June 30, 2022, the Company evaluated Amendment No. 3 to the Indi APA in accordance with applicable accounting standards under U.S.
During the three months ended June 30, 2022, the Company evaluated Amendment No. 3 to the Indi APA in accordance with applicable accounting standards under U.S. GAAP which resulted in the extinguishment of the original instrument due to the substantially different terms.
These representatives of the company must cover expansive geographic regions which limits their time for interaction and education of our products in the clinical setting. We plan to continue investing in the field sales force, increasing the total number of sales representatives to drive continued growth, and thereby reduce the geographic footprint each representative must cover.
These representatives of the Company must cover expansive geographic regions which limits their time for interaction and education of our products in the clinical setting. We plan to continue investing in the field sales force through select expansion and provide them with tools that maximize their education and selling efforts in order to achieve greater returns.
For the year ended December 31, 2021, interest expense primarily consists of cash and non-cash interest from our 2021 Term 89 Loan, the 2018 Innovatus Term Loan, Paycheck Protection Program loan, and changes in the value of our contingent consideration associated with the passage of time subsequent to the achievement of the contingency in the second quarter 2021.
For the year ended December 31, 2022, interest expense primarily consists of cash and non-cash interest from the secured promissory note with Streeterville, the 2021 Term Loan, the Perceptive Term Loan, and changes in the value of our contingent consideration.
The Company determined the initial fair value of the Additional Warrants to be $0.1 million and during the year ended December 31, 2022, the Company recorded $0.1 million as a change in fair value through the statement of operations due to changes in unobservable inputs.
The Company initially accounted for the Tranche B and C Warrants as liabilities as the Tranche B and C Warrants did not meet the criteria for equity classification. During the year ended December 31, 2023, the Company recorded a $1.3 million net loss as a change in fair value through the statement of operations due to changes in unobservable inputs.
Our critical accounting policies are described in greater detail below and in Note 2 to our financial statements in Item 8 of this Annual Report on Form 10-K. 95 Revenue Recognition We recognize revenue when our customers obtain control of promised goods or services, in an amount that reflects the consideration which we expect to receive in exchange for our goods or services.
Revenue Recognition We recognize revenue when our customers obtain control of promised goods or services, in an amount that reflects the consideration which we expect to receive in exchange for our goods or services.
Diagnostic test revenue decreased $14.4 million or 29% for the year ended December 31, 2022 compared to the year ended December 31, 2021.
Diagnostic test revenue increased $10.7 million or 31% for the year ended December 31, 2023 compared to the same period in 2022.
We plan to raise additional funding through the issuance of equity or debt securities and any such financing activities are subject to market conditions.
To maintain an adequate amount of available liquidity and execute our current operating plan, we will need to continue to raise additional funds from external sources, such as through the issuance of equity or debt securities and any such financing activities are subject to market conditions.
While each of these areas present significant opportunities for us, they also pose significant risks and challenges that we must address. See Part I, Item 1A. “Risk Factors” for more information. COVID-19 Pandemic The COVID-19 pandemic has disrupted, and may continue to disrupt, our lung diagnostic testing operations.
Additionally, we plan to invest in the marketing and customer support teams to continue to provide the field sales force with the resources to be successful. While each of these areas present significant opportunities for us, they also pose significant risks and challenges that we must address. See Part I, Item 1A. “Risk Factors” for more information.
Sales, marketing, general and administrative Our sales and marketing expenses are expensed as incurred and include costs associated with our sales organization, including our direct sales force and sales management, client services, marketing and reimbursement, as well as business development personnel who are focused on our biopharmaceutical customers.
This expense, though expected to increase in dollars, is expected to decrease as a percentage of revenue in the long term, though it may fluctuate as a percentage of our revenues from period to period due to the timing and extent of these expenses. 84 Sales, marketing, general and administrative Our sales and marketing expenses are expensed as incurred and include costs associated with our sales organization, including our direct sales force and sales management, client services, marketing and reimbursement, as well as business development personnel who are focused on our biopharmaceutical customers.
We secured independent reference specimens run with EUA tests to validate these tests as fit for diagnostic use in our laboratories. Beginning in second quarter 2021, we began partnering with GenScript Biotech Corporation to commercialize the blood-based cPass SARS-CoV-2 Neutralizing Antibody testing as a service.
The Platelia SARS-CoV-2 Total Ab test was FDA EUA authorized on April 29, 2020. Beginning in second quarter 2021, we began partnering with GenScript Biotech Corporation to commercialize the blood-based cPass SARS-CoV-2 Neutralizing Antibody testing as a service.
The Company’s sales efforts continued to be impacted by the COVID-19 pandemic due to surges associated with variants, which have negatively affected the growth rate of our core lung diagnostic testing-related revenue and our clinical studies.
The COVID-19 pandemic and the surge associated with multiple variants have negatively affected our lung diagnostic testing-related revenue and our clinical studies.
Certain of these estimates significantly influence the portrayal of our financial condition and results of operations and require us to make difficult, subjective or complex judgments.
Certain of these estimates significantly influence the portrayal of our financial condition and results of operations and require us to make difficult, subjective or complex judgments. Our critical accounting policies are described in greater detail below and in Note 2 to our financial statements in Item 8 of this Annual Report on Form 10-K.
SVB agreed to apply the full amount of funds previously established within the restricted cash collateral account to partially prepay the $20 million in outstanding principal, thereby eliminating the restricted cash collateral account. 92 On March 7, 2022 (the Effective Date), we entered into a purchase agreement with Lincoln Park, pursuant to which Lincoln Park has committed to purchase up to $50.0 million of our common stock (the Purchase Agreement).
On March 7, 2022 (the LPC Effective Date), we entered into a purchase agreement with Lincoln Park Capital Fund, LLC (the Purchase Agreement), pursuant to which Lincoln Park has committed to purchase up to $50.0 million of our common stock (the LPC Facility).

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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 changeHistorically, we have not entered into derivative agreements such as interest rate caps and swaps to manage our floating interest rate exposure. Periodically throughout the year, we have maintained balances in various operating accounts in excess of federally insured limits. Our cash and cash equivalents are funds held in checking and bank savings accounts, primarily at two U.S. financial institutions.
Biggest changeHistorically, we have not entered into derivative agreements such as interest rate caps and swaps to manage our floating interest rate exposure. 91 Periodically throughout the year, we have maintained balances in various operating accounts in excess of federally insured limits.
As of December 31, 2022, a hypothetical 100 basis point increase in interest rates would have an estimated $0.3 million impact per year on our financial position and results of operations, based on the current Perceptive Term Loan principal remaining outstanding through maturity. Item 8. Financial Statement s and Supplementary Data.
As of December 31, 2023, a hypothetical 100 basis point increase in interest rates would have an estimated $0.4 million impact per year on our financial position and results of operations, based on the current Perceptive Term Loan principal remaining outstanding through maturity. Item 8. Financial Statement s and Supplementary Data.
As of December 31, 2022, we had $30 million outstanding on the Perceptive Term Loan Facility which has an annual rate equal to the greater of (a) forward-looking one-month term SOFR as posted by CME Group Inc. and (b) 3.0% per annum, plus an applicable margin of 9.0%.
As of December 31, 2023, we had $40.0 million outstanding on the Perceptive Term Loan Facility which has an annual rate equal to the greater of (a) forward-looking one-month term SOFR as posted by CME Group Inc. and (b) 3.0% per annum, plus an applicable margin of 9.0%.
We consider all highly liquid instruments purchased with an original maturity of three months or less to be cash equivalents. We continually monitor our positions with, and the credit quality of, the financial institutions with which we invest.
Our cash and cash equivalents are funds held in checking and bank savings accounts, primarily at one U.S. financial institutions. We consider all highly liquid instruments purchased with an original maturity of three months or less to be cash equivalents. We continually monitor our positions with, and the credit quality of, the financial institutions with which we invest.

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