10q10k10q10k.net

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

vs

Paragraph-level year-over-year comparison of EXAGEN 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.

+523 added−546 removedSource: 10-K (2024-03-18) vs 10-K (2023-03-20)

Top changes in EXAGEN INC.'s 2023 10-K

523 paragraphs added · 546 removed · 414 edited across 6 sections

Item 1. Business

Business — how the company describes what it does

180 edited+50 added−57 removed228 unchanged
Biggest changeIn July 2021, a real-world retrospective analysis of patients tested with the AVISE ® Lupus test was published in the journal Lupus Science & Medicine, titled "A multianalyte assay panel with cell-bound complement activation products demonstrates clinical utility in systemic lupus erythematosus clinical utility study summary." A cohort of 161 AVISE ® Lupus tested patients from 12 rheumatology centers across the United States provided clinical outcome data on diagnosis and treatment decisions following AVISE ® Lupus testing.
Biggest changeFinally, in the group of patients randomized to the AVISE ® Lupus group, a positive test result associated with an increase in patient-reported outcomes measuring health-related quality of life using five-level EQ-5D (EQ5D-5L index score) from enrollment to visit 2 (p=0.028), and greater improvements were detectable when compared to the group of patients positive for AVISE ® Lupus and randomized to the SDLT arm (p=0.049). 13 In July 2021, a real-world retrospective analysis of patients tested with the AVISE ® Lupus test was published in the journal Lupus Science & Medicine, titled "A multianalyte assay panel with cell-bound complement activation products demonstrates clinical utility in systemic lupus erythematosus clinical utility study summary." A cohort of 161 AVISE ® Lupus tested patients from 12 rheumatology centers across the United States provided clinical outcome data on diagnosis and treatment decisions following AVISE ® Lupus testing.
These antibodies are called autoantibodies and their detection through blood tests can help diagnose, prognose and monitor the course of autoimmune diseases. However, knowing when and which autoantibody to test for is challenging due to the vagueness of symptoms, the unexplained flaring and remission of symptoms, and the many conditions which can mimic autoimmune disease.
These antibodies are called autoantibodies and their detection through blood tests can help diagnose, prognose and monitor the course of autoimmune diseases. However, knowing when to test and which autoantibody to test for is challenging due to the vagueness of symptoms, the unexplained flaring and remission of symptoms, and the many conditions which can mimic autoimmune disease.
Other potential competitors include companies that might develop diagnostic or disease or drug monitoring products, such as Progentec Diagnostics Inc., Scipher Medicine Corporation, Genalyte Inc., Oncimmune plc, DxTerity Diagnostics Inc., AMPEL BioSolutions, and Immunovia AB. In the future, we may also face competition from companies developing new products or technologies.
Other potential competitors include companies that might develop diagnostic, disease or drug monitoring products, such as Progentec Diagnostics Inc., Scipher Medicine Corporation, Genalyte Inc., Oncimmune plc, DxTerity Diagnostics Inc., AMPEL BioSolutions, and Immunovia AB. In the future, we may also face competition from companies developing new products or technologies.
Exclusive License Agreement and Master Research Collaboration Agreement with Allegheny Health Network Research Institute In May 2021, we entered into an exclusive license agreement with Allegheny Health Network Research Institute (AHN), under which we obtained an exclusive, worldwide license to AHN's patent rights in certain inventions (the AHN Patent Rights) related to diagnostics for autoimmune rheumatic diseases.
Exclusive License Agreement and Master Research Collaboration Agreement with Allegheny Health Network Research Institute In May 2021, we entered into an exclusive license agreement with AHN, under which we obtained an exclusive, worldwide license to AHN's patent rights in certain inventions (the AHN Patent Rights) related to diagnostics for autoimmune rheumatic diseases.
Class II devices may also be subject to special controls such as performance standards, post-market surveillance, FDA guidelines, or particularized labeling. Most Class I devices are exempt from 510(k) premarket notification requirements, but like Class II and III devices, are subject to general controls, such as registration and listing, quality system, labeling, and reporting requirements.
Class II devices may also be subject to special controls such as performance standards, post-market surveillance, FDA guidelines, or particularized labeling. Most Class I devices are exempt from 510(k) premarket notification requirements, but like Class II and Class III devices, are subject to general controls, such as registration and listing, quality system, labeling, and reporting requirements.
A person or entity does not need to have actual knowledge of the statute or specific intent to violate it in order to have committed a violation. Courts have broadly interpreted of the scope of the Anti-Kickback Statute and generally have held that the statute may be violated if merely one purpose of a payment arrangement is to induce referrals.
A person or entity does not need to have actual knowledge of the statute or specific intent to violate it in order to have committed a violation. Courts have broadly interpreted the scope of the Anti-Kickback Statute and generally have held that the statute may be violated if merely one purpose of a payment arrangement is to induce referrals.
Additionally, a person who knowingly obtains or discloses PHI in violation of HIPAA may face a criminal penalties (including fines and imprisonment), which increase if the wrongful conduct involves false pretenses or the intent to sell, transfer or use PHI for commercial advantage, personal gain or malicious harm.
Additionally, a person who knowingly obtains or discloses PHI in violation of HIPAA may face criminal penalties (including fines and imprisonment), which increase if the wrongful conduct involves false pretenses or the intent to sell, transfer or use PHI for commercial advantage, personal gain or malicious harm.
Any of these penalties or sanctions could have a material adverse effect on our results of operations or cash flows. Healthcare Reform In March 2010, the Affordable Care Act (ACA) was enacted in the United States. The ACA made a number of substantial changes to the way healthcare is financed both by governmental and private payors.
Any of these penalties or sanctions could have a material adverse effect on our results of operations or cash flows. Healthcare Reform In March 2010, the Affordable Care Act (ACA) was enacted in the United States and made a number of substantial changes to the way healthcare is financed both by governmental and private payors.
Beginning in the second quarter of 2024, we are required to pay AHN an increased low single-digit royalty or a flat annual minimum royalty amount, which royalty obligations continue for each licensed product on a country-by-country basis until the expiration of the last licensed patent covering the applicable licensed product in such country, pending approvals and 18 commercialization, or the earlier termination of the agreement (excluding payment obligations accruing prior to such termination).
Beginning in the second quarter of 2024, we are required to pay AHN an increased low single-digit royalty or a flat annual minimum royalty amount, which royalty obligations continue for each licensed product on a country-by-country basis until the expiration of the last licensed patent covering the applicable licensed product in such country, pending approvals and commercialization, or the earlier termination of the agreement (excluding payment obligations accruing prior to such termination).
Federal criminal statutes prohibit, among other actions, knowingly and willfully executing, or attempting to execute, a scheme to defraud any healthcare benefit program, including those administered by commercial payors, and 24 knowingly and willfully falsifying, concealing or covering up a material fact or making any materially false, fictitious or fraudulent statement in connection with the delivery of or payment for healthcare benefits, items or services.
Federal criminal statutes prohibit, among other actions, knowingly and willfully executing, or attempting to execute, a scheme to defraud any healthcare benefit program, including those administered by commercial payors, and knowingly and willfully falsifying, concealing or covering up a material fact or making any materially false, fictitious or fraudulent statement in connection with the delivery of or payment for healthcare benefits, items or services.
AVISE ® Anti-CarP, which measures anti-carbamylated protein antibody (anti-CarP), was developed by the Leiden University Medical Center, and we introduced it as a biomarker-driven RA prognostic test through a distribution agreement with Werfen USA, LLC with the goal of identifying patients prone to more severe disease. We market our AVISE ® testing products using our specialized sales force.
AVISE ® Anti-CarP was developed by the Leiden University Medical Center and measures anti-carbamylated protein antibody (anti-CarP). We introduced it as a biomarker-driven RA prognostic test, through a distribution agreement with Werfen USA, LLC, with the goal of identifying patients prone to more severe disease. We market our AVISE ® testing products using our specialized sales force.
In January 2019, we changed our name to Exagen Inc. Our principal executive offices are located at 1261 Liberty Way, Vista, California 92081. Our telephone number is (760) 560-1501. Our website address is www.exagen.com. The information contained in, or accessible through, our website is not part of, and is not incorporated by reference into, this Annual Report.
In January 2019, we changed our name to Exagen Inc. Our principal executive offices are located at 1261 Liberty Way, Vista, California 92081. Our telephone number is (760) 560-1501. Our website address is www.exagen.com. The information 31 contained in, or accessible through, our website is not part of, and is not incorporated by reference into, this Annual Report.
When a 510(k) premarket notification submission is required, the manufacturer must submit to the FDA a premarket notification submission demonstrating that the device is "substantially equivalent" to: (i) a device that was legally marketed prior to May 28, 1976, for which PMA approval is not required, (ii) a legally marketed device that has been reclassified from Class III to Class II or Class I, or (iii) another legally marketed, similar device that has been cleared through the 510(k) clearance process.
When a 510(k) premarket notification submission is required, the manufacturer must submit to the FDA a premarket notification submission demonstrating that the device is "substantially equivalent" to a predicate device, which is: (i) a device that was legally marketed prior to May 28, 1976, for which PMA approval is not required, (ii) a legally marketed device that has been reclassified from Class III to Class II or Class I, or (iii) another legally marketed, similar device that has been cleared through the 510(k) clearance process.
With the recent increase in publicity regarding data breaches resulting in improper dissemination of consumer information, all 50 states have passed laws regulating the actions that a business must take if it experiences a data breach, as defined by state law, including prompt disclosure within a specified amount of time to affected individuals.
With the recent increase in publicity regarding data breaches resulting in improper dissemination of consumer information, all 50 states have passed laws regulating the actions that a business must take if it experiences a data breach, as defined by state law, including prompt disclosure within a specified amount 26 of time to affected individuals.
We also rely on continuing technological 15 innovation and in-licensing opportunities to develop, strengthen, and maintain our proprietary position in the fields targeted by our testing products and services. We are the owner or licensee of a portfolio of patents and patent applications and possess substantial know-how and trade secrets which protect various aspects of our business.
We also rely on continuing technological innovation and in-licensing opportunities to develop, strengthen, and maintain our proprietary position in the fields targeted by our testing products and services. We are the owner or licensee of a portfolio of patents and patent applications and possess substantial know-how and trade secrets which protect various aspects of our business.
An arrangement must fully comply with each element of an applicable safe harbor in order to qualify for protection. Failure to meet the requirements of an exception or the safe harbor does not render an arrangement illegal. Rather, the government may evaluate such arrangements on a case-by-case basis, taking into account all facts and circumstances.
An arrangement must fully comply with each element of an applicable safe harbor in order to qualify for protection. 22 Failure to meet the requirements of an exception or a safe harbor does not render an arrangement illegal. Rather, the government may evaluate such arrangements on a case-by-case basis, taking into account all facts and circumstances.
When studies with such evidence are published in peer-reviewed journals, the authors of clinical guidelines may assess the level of evidence and determine whether modifying existing guidelines to include new technology is warranted. ▪ Execute an internal managed care policy and claims adjudication function as part of our core business operations.
When studies with such evidence are published in peer-reviewed journals, the authors of clinical guidelines may assess the level of evidence and determine whether modifying existing guidelines to include new technology is warranted. 12 ▪ Execute an internal managed care policy and claims adjudication function as part of our core business operations.
Under PAMA, laboratories that receive the majority of their Medicare revenue from payments made under the CLFS or the Physician Fee Schedule (PFS) are required to report to CMS, beginning in 2017 and every three years thereafter (or annually for "advanced diagnostic laboratory tests"), private payor payment rates and volumes for their tests.
Under PAMA, laboratories that receive the majority of their Medicare revenue from payments made under the CLFS or the Physician Fee Schedule (PFS) are required to report to CMS, beginning in 2017 and every three years thereafter (or annually for "advanced diagnostic laboratory tests" (ADLTs)), private payor payment rates and volumes for their tests.
The federal civil monetary penalties law (the CMP Law) prohibits, among other things, (1) the offering or transfer of remuneration (including a waiver of copayments and deductible amounts) to a Medicare or Medicaid beneficiary if the person knows or should know it is likely to influence the beneficiary’s selection of a particular provider, practitioner, or supplier of services reimbursable by Medicare or a state healthcare program, unless an exception applies; (2) employing or contracting with an individual or entity that the provider knows or should know is excluded from participation in a federal healthcare program; (3) billing for services requested by an unlicensed physician or an excluded provider; (4) billing for medically unnecessary services; and (5) presenting or causing to be presented a claim to a federal health program that the person knows or should know is for an item or service that was not provided as claimed or is false or fraudulent.
The federal civil monetary penalties law (the CMP Law) prohibits, among other things, (1) the offering or transfer of remuneration (including a waiver of copayments and deductible amounts) to a Medicare or Medicaid beneficiary if the person knows or should know it is likely to influence the beneficiary’s selection of a particular provider, practitioner, or supplier of services reimbursable by Medicare or Medicaid, unless an exception applies; (2) employing or contracting with an individual or entity that the provider knows or should know is excluded from participation in a federal healthcare program; (3) billing for services requested by an unlicensed physician or an excluded provider; (4) billing for medically unnecessary services; and (5) presenting or causing to be presented a claim to a federal healthcare program that the person knows or should know is for an item or service that was not provided as claimed or is false or fraudulent.
AVISE ® MTX is based on our proprietary methotrexate polyglutamate (MTXPG) technology that measures blood levels of MTXPGs, the active metabolite of methotrexate linked to disease control in RA patients. Measuring MTXPGs allows rheumatologists to identify patients presenting with inadequate exposure to methotrexate enabling them to optimize dosing and achieve therapeutic levels commensurate with adequate disease control.
AVISE ® MTX is based on our methotrexate polyglutamate (MTXPG) technology that measures blood levels of MTXPGs, the active metabolite of methotrexate linked to disease control in RA patients. Measuring MTXPGs allows rheumatologists to identify patients presenting with inadequate exposure to methotrexate, enabling them to optimize dosing and achieve therapeutic levels commensurate with adequate disease control.
The Stark Law generally prohibits us from billing Medicare or Medicaid for certain designated health services, including clinical laboratory services, when the physician ordering the service, or any 22 member of such physician’s immediate family, has a financial relationship with us, unless the arrangement meets an exception to the prohibition.
The Stark Law generally prohibits us from billing Medicare or Medicaid for certain designated health services, including clinical laboratory services, when the physician ordering the service, or any member of such physician’s immediate family, has a financial relationship with us, unless the arrangement meets an exception to the prohibition.
The FTC expects a company’s data security measures to be reasonable and appropriate in light of the sensitivity and volume of consumer information it holds, the size and complexity of its business, and the cost of available tools to improve security and reduce vulnerabilities. Individually identifiable health information is 26 considered sensitive data that merits stronger safeguards.
The FTC expects a company’s data security measures to be reasonable and appropriate in light of the sensitivity and volume of consumer information it holds, the size and complexity of its business, and the cost of available tools to improve security and reduce vulnerabilities. Individually identifiable health information is considered sensitive data that merits stronger safeguards.
Patients suffering from RA develop joint damage that is associated with painful inflammation and often progresses to irreversible damage of cartilage and bone, leading to significant disability and a reduction in quality of life and the ability to work. Early diagnosis and effective treatment of RA is critically 4 important to prevent erosive bone or joint damage and disability.
Patients suffering from RA develop joint damage that is associated with painful inflammation and often progresses to irreversible damage of cartilage and bone, leading to significant disability and a reduction in quality of life and the ability to work. Early diagnosis and effective treatment of RA is critically important to prevent erosive bone or joint damage and disability.
It offers a unique combination of biomarkers that measure for EC4d, which has shown greater accuracy in tracking disease activity than C3 and C4, and PC4d, which is associated with thrombosis risk in SLE. AVISE ® SLE Monitor offers additional insight into a patient’s disease activity as well as possible adverse events.
It offers a unique combination of biomarkers that measure for EC4d, which has shown greater accuracy in tracking disease activity than C3 and C4, which is associated with thrombosis risk in SLE. AVISE ® SLE Monitor offers additional insight into a patient’s disease activity as well as possible adverse events.
We have established oversight for systems implementation and maintenance procedures, document control processes, supplier qualification, preventive or corrective actions and employee training processes that we believe achieves excellence in operations. We continuously monitor and improve our processes and procedures and believe this high-quality service leads to customer satisfaction and retention.
We have established oversight for systems implementation and maintenance procedures, document control processes, supplier qualification, 14 preventive or corrective actions and employee training processes that we believe achieves excellence in operations. We continuously monitor and improve our processes and procedures and believe this high-quality service leads to customer satisfaction and retention.
Environmental and Other Regulatory Requirements Our laboratory is subject on an ongoing basis to federal, state and local laws and regulations governing the use, storage, handling and disposal of regulated medical waste, hazardous waste and biohazardous waste, including chemicals, biological agents and compounds and blood and other tissue specimens.
Environmental and Other Regulatory Requirements Our laboratory is subject on an ongoing basis to federal, state and local laws and regulations governing the use, storage, handling and disposal of regulated medical waste, hazardous waste and biohazardous waste, including 29 chemicals, biological agents and compounds and blood and other tissue specimens.
QMUL retained the right to practice under the QMUL Patent Rights and to use such rights for teaching, research, education, public service, clinical and other research-related purposes. In consideration for the rights granted to us under the agreement, we paid an initial license fee to QMUL and payment of past patent expenses and ongoing patent expenses.
QMUL retained the right to practice under the QMUL Patent Rights and to use such rights for teaching, research, education, public service, clinical and other research-related purposes. 17 In consideration for the rights granted to us under the agreement, we paid an initial license fee to QMUL and payment of past patent expenses and ongoing patent expenses.
The Federal Food, Drug and Cosmetic Act (FDCA) defines a medical device as "an instrument, apparatus, implement, machine, contrivance, implant, in vitro reagent, or other similar or related article, including a component part, or accessory, which is, among other things: intended for use in the diagnosis of disease or other conditions, or in the cure, mitigation, treatment, or prevention of disease, in man or 20 other animals and which does not achieve its primary intended purposes through chemical action within or on the body of man or other animals and which is not dependent upon being metabolized for the achievement of any of its primary intended purposes." By this definition, in vitro reagents and diagnostic tests are considered medical devices.
The Federal Food, Drug and Cosmetic Act (FDCA) defines a medical device as "an instrument, apparatus, implement, machine, contrivance, implant, in vitro reagent, or other similar or related article, including a component part, or accessory, which is, among other things: intended for use in the 19 diagnosis of disease or other conditions, or in the cure, mitigation, treatment, or prevention of disease, in man or other animals and which does not achieve its primary intended purposes through chemical action within or on the body of man or other animals and which is not dependent upon being metabolized for the achievement of any of its primary intended purposes." By this definition, in vitro reagents and diagnostic tests are considered medical devices.
The final results of this study showed that AVISE ® Lupus demonstrated 86% specificity and 80% sensitivity in distinguishing SLE from other CTDs and fibromyalgia, was 33% more specific than ANA (53% specificity/89% sensitivity) and was 48% more sensitive than anti-dsDNA (32% sensitivity/97% specificity).
The final results of this study showed that AVISE ® Lupus demonstrated 86% specificity and 80% sensitivity in distinguishing SLE from other CTDs and fibromyalgia. Additionally, the results showed that AVISE ® Lupus was 33% more specific than ANA (53% specificity/89% sensitivity) and 48% more sensitive than anti-dsDNA (32% sensitivity/97% specificity).
We employ a team of in-house claims processing and reimbursement specialists who work with patients and payors to obtain maximum reimbursement. In parallel, a managed care team collaborates with our reimbursement specialists to ensure our payor outreach strategy reacts to and anticipates the changing 12 needs of our customer base.
We employ a team of in-house claims processing and reimbursement specialists who work with patients and payors to obtain maximum reimbursement. In parallel, a managed care team collaborates with our reimbursement specialists to ensure our payor outreach strategy reacts to and anticipates the changing needs of our customer base.
In situations involving physicians employed by state-funded institutions or national healthcare agencies, violation of the local anti-kickback law may also constitute a violation of the U.S. Foreign Corrupt Practices Act (FCPA), and/or other applicable anti-corruption laws.
In situations involving physicians employed by state-funded institutions or national healthcare agencies, violation of the local anti-kickback law may 24 also constitute a violation of the U.S. Foreign Corrupt Practices Act (FCPA), and/or other applicable anti-corruption laws.
Significant civil and criminal fines and other penalties may be imposed for violating HIPAA directly, and in connection with acts or omissions of any agents, including a downstream business associates, as determined according to the federal common law of agency.
Significant civil and criminal fines and other penalties may be imposed for violating HIPAA directly, and in connection with acts or omissions of any agents, including downstream business associates, as determined according to the federal common law of agency.
We perform our tests like AVISE ® CTD, AVISE ® SLE Prognostic and AVISE ® MTX assays in our Vista, California clinical laboratory, and they are primarily regulated under CLIA, as administered by CMS, as well as by applicable state laws, as described above.
We perform our tests like AVISE ® CTD, AVISE ® SLE Prognostic and AVISE ® MTX assays in our Vista, California clinical laboratory, and they are currently primarily regulated under CLIA, as administered by CMS, as well as by applicable state laws, as described above.
Laboratory testing for rheumatoid factor (RF), anti-cyclic citrullinated peptide (CCP) antibodies and testing for general, nonspecific inflammation with erythrocyte sedimentation rate (the ESR) and C-reactive protein tests are used to assist in the diagnosis.
Laboratory testing for rheumatoid factor (RF), anti-cyclic citrullinated peptide (CCP) antibodies and testing for 4 general, nonspecific inflammation with erythrocyte sedimentation rate (the ESR) and C-reactive protein tests are used to assist in the diagnosis.
Breaches must be reported as soon as reasonably practicable, but no later than sixty days following discovery of the breach. Reports must be made to affected individuals, the HHS Secretary, and depending on the size of the breach, the local and national media.
Breaches must be reported as soon as reasonably practicable, but no later than sixty days following discovery of the breach. Reports must be made to affected individuals, the Secretary, and depending on the size of the breach, the local and national media.
Test Reports We provide the results of our AVISE ® testing products in a comprehensive and easy-to-understand test report typically sent to rheumatologists within five business days following receipt of the blood specimen.
Test Reports 7 We provide the results of our AVISE ® testing products in a comprehensive and easy-to-understand test report, typically sent to rheumatologists within five business days following receipt of the blood specimen.
The study findings revealed a 7 to 15- 13 fold increased risk of Lupus diagnosis in AVISE ® Lupus Positive and anti-dsDNA negative patients relative to patients negative for both tests.
The study findings revealed a 7 to 15-fold increased risk of Lupus diagnosis in AVISE ® Lupus Positive and anti-dsDNA negative patients relative to patients negative for both tests.
Any new legislation or formal FDA regulations affecting LDTs may result in increased regulatory burdens on our ability to continue marketing our tests and to develop and introduce new tests in the future.
Any new legislation or FDA regulations affecting LDTs may result in increased regulatory burdens on our ability to continue marketing our tests and to develop and introduce new tests in the future.
Covered Entities like us are also subject to the HHS HIPAA audit program and may be investigated in connection with a privacy or data security complaint.
Covered Entities like us are also 25 subject to the HHS HIPAA audit program and may be investigated in connection with a privacy or data security complaint.
PAMA did not impact Medicare reimbursement for AVISE ® CTD in 2022 compared to levels experienced in 2021. Additionally, PAMA and changes to the PFS will not have a significant impact to Medicare reimbursement for AVISE ® CTD in 2023 compared to levels experienced in 2022.
PAMA did not impact Medicare reimbursement for AVISE ® CTD in 2022 compared to levels experienced in 2021. Additionally, PAMA and changes to the PFS will not have a significant impact to Medicare reimbursement for AVISE ® CTD in 2024 compared to levels experienced in 2023.
We are committed to providing a competitive and comprehensive benefits package to our employees. Our benefits package 30 provides a balance of protection along with the flexibility to meet the individual health and wellness needs of our employees.
We are committed to providing a competitive and comprehensive benefits package to our employees. Our benefits package provides a balance of protection along with the flexibility to meet the individual health and wellness needs of our employees.
Healthcare Economics In October 2020, a study in collaboration with leading health economic experts was published in the journal ACR Open Rheumatology, titled "Evaluation of the Economic Benefit of Earlier Systemic Lupus Erythematosus (SLE) Diagnosis using a Multivariate Assay Panel (MAP)." This was the first ever evaluation of the economics of diagnosing SLE with AVISE ® Lupus (MAP) compared to standard diagnostic laboratory tests in a hypothetical cohort of 1,000 suspected SLE patients.
Healthcare Economics In October 2020, a study in collaboration with leading health economic experts was published in the journal ACR Open Rheumatology, titled "Evaluation of the Economic Benefit of Earlier SLE Diagnosis using a Multivariate Assay Panel (MAP)." This was the first ever evaluation of the economics of diagnosing SLE with AVISE ® Lupus (MAP) compared to standard diagnostic laboratory tests in a hypothetical cohort of 1,000 suspected SLE patients.
Other countries, including the United Kingdom and other Organisation for Economic Co-Operation and Development Anti-Bribery Convention members, have similar anti-corruption regulations, such as the U.K.
Other countries, including the United Kingdom and other Organisation for Economic Co-Operation and Development Anti-Bribery Convention members, have similar anti-corruption regulations, such as the U.K. Bribery Act.
Although the law includes limited exceptions, including for PHI maintained by a Covered Entity or Business Associate under HIPAA and medical information maintained by healthcare providers under the CMIA, it may regulate or impact our processing of personal information depending on the context. Further, the California Privacy Rights Act (CPRA) went into effect January 1, 2023 amending the CCPA.
Although the law includes limited exceptions, including for PHI maintained by a Covered Entity or Business Associate under HIPAA and medical information maintained by healthcare providers under the CMIA, it may regulate or impact our processing of personal information depending on the context. Further, the California Privacy Rights Act (CPRA) went into effect January 1, 2023 strengthening the CCPA.
AVISE ® Lupus Nephritis Lupus nephritis (LN) is an autoimmune disease and a frequent complication in people who have SLE. It causes the immune system to produce proteins called autoantibodies that attack the body's own tissues and organs, including the kidneys. If left untreated, LN can lead to significant health problems, permanent kidney damage and even death.
Lupus Nephritis Biomarkers Lupus nephritis (LN) is an autoimmune disease and a frequent complication in people who have SLE. It causes the immune system to produce proteins called autoantibodies that attack the body's own tissues and organs, including the kidneys. If left untreated, LN can lead to significant health problems, permanent kidney damage and even death.
Under CLIA, we are required to hold a certificate applicable to the type of laboratory tests we perform and to comply with standards applicable to our operations, including test processes, personnel, facilities administration, equipment maintenance, recordkeeping, quality systems and proficiency testing. We must maintain CLIA certification to be eligible to bill for diagnostic services provided to Medicare beneficiaries.
Under CLIA, we are required to hold a certificate applicable to the categories of laboratory tests we perform and to comply with standards applicable to our operations, including test processes, personnel, facilities administration, equipment maintenance, recordkeeping, quality systems and proficiency testing. We must maintain CLIA certification to be eligible to bill for diagnostic services provided to Medicare beneficiaries.
Healthcare providers including laboratories will be subject to 27 civil monetary penalties for violations of the Information Blocking Rule once the penalty regulations are finalized.
Healthcare providers including laboratories will be subject to civil monetary penalties for violations of the Information Blocking Rule once the penalty regulations are finalized.
AVISE ® CTD provides rheumatologists and their patients with sensitive and specific results that allow for potentially faster and more accurate differential diagnosis of SLE as compared to other currently-marketed testing methods. Beyond SLE, AVISE ® CTD allows rheumatologists to accurately diagnose other overlapping autoimmune and autoimmune-related diseases, including RA, with the same blood sample.
AVISE ® Lupus provides rheumatologists and their patients with sensitive and specific results that allow for more accurate and potentially faster differential diagnosis of SLE, as compared to other currently-marketed testing methods. Beyond SLE, AVISE ® CTD also allows rheumatologists to accurately diagnose other overlapping autoimmune and autoimmune-related diseases (including RA), with the same blood sample.
We also seek to improve our per-test costs by focusing on profitable, core test offerings, reducing fixed costs and overhead, and focusing our laboratory resources on AVISE ® CTD optimization. Additionally, we employ a streamlined salesforce covering territories which are designed to achieve the most efficient and effective reach and frequency for the promotion of AVISE ® CTD.
We also seek to improve our per-test costs by focusing on profitable, core test offerings, minimizing fixed costs and overhead, and focusing our laboratory resources on AVISE ® CTD optimization. Additionally, we employ a streamlined salesforce covering territories which are designed to achieve the most efficient and effective reach and frequency for the promotion of AVISE ® CTD.
The standard of care for the treatment for RA involves the use of Disease Modifying Anti-Rheumatic Drugs (DMARDs) which have shown, in clinical studies, the ability to slow or stop disease progression. Methotrexate remains the most commonly used DMARD, due to its low cost, effectiveness, and the extensive clinical experience with its use.
The standard of care for the treatment of RA involves the use of Disease Modifying Anti-Rheumatic Drugs (DMARDs) which have shown, in clinical studies, the ability to slow or stop disease progression. Methotrexate remains the most commonly used DMARD, due to its low cost and effectiveness, as well as the extensive clinical experience with its use.
Standard laboratory tests for diagnosing SLE include measuring immunological biomarkers, such as antinuclear antibodies (ANA), anti-double stranded DNA (anti-dsDNA) and other autoantibody tests. ANA are a group of autoantibodies produced by a person’s immune system when it fails to adequately distinguish between self and non-self.
Standard laboratory tests for diagnosing SLE include measuring immunological biomarkers, such as ANA, anti-double stranded DNA (anti-dsDNA) and other autoantibody tests. ANA are a group of autoantibodies produced by a person’s immune system when it fails to adequately distinguish between self and non-self.
If a laboratory is out of compliance with New York's statutory or regulatory standards, the NYDOH, may suspend, limit, revoke or annul the laboratory’s New York license, censure the holder of the license or assess civil money penalties. Statutory or regulatory noncompliance may result in a laboratory’s operator being found guilty of a misdemeanor under New York law.
If a laboratory is out of compliance with New York's statutory or regulatory standards, the NYSDOH, may suspend, limit, revoke or annul the laboratory’s New York license, censure the holder of the license or assess civil money penalties. Statutory or regulatory noncompliance may result in a laboratory’s operator being found guilty of a misdemeanor under New York law.
Financial Information 31 We manage our operations and allocate resources as a single reporting segment. Financial information regarding our operations, assets and liabilities, including our net loss for the years ended December 31, 2022 and 2021 and our total assets as of December 31, 2022 and 2021, is included in our Financial Statements in Item 8 of this Annual Report.
Financial Information We manage our operations and allocate resources as a single reporting segment. Financial information regarding our operations, assets and liabilities, including our net loss for the years ended December 31, 2023 and 2022 and our total assets as of December 31, 2023 and 2022, is included in our Financial Statements in Item 8 of this Annual Report.
New York's law and regulations are more stringent than CLIA in certain respects. For example, NYDOH must approve a laboratory developed test (LDT) before it is offered in New York. We have received written approval from NYDOH to offer our products in New York.
New York's law and regulations are more stringent than CLIA in certain respects. For example, NYSDOH must approve a laboratory developed test (LDT) before it is offered in New York. We have received written approval from NYSDOH to offer our products in New York.
One of the exceptions to the prohibition under the CMP Law covers non-routine, unadvertised waivers of copayments or deductible amounts based on individualized determinations of financial need or exhaustion of reasonable collection efforts, and the Anti-Kickback Statute has a safe harbor. The U.S.
One of the exceptions to the prohibition under the CMP Law covers non-routine, unadvertised waivers of copayments or deductible amounts based on individualized determinations of financial need or exhaustion of reasonable collection efforts, and the Anti-Kickback Statute has a safe harbor.
Investors should not rely on any such information in deciding whether to purchase our common stock. Available Information We file Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and other information with the Securities and Exchange Commission (SEC).
Investors should not rely on any such information in deciding whether to purchase our common stock. Available Information We file Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, proxy and information statements and other information with the Securities and Exchange Commission (SEC).
The ESG Committee meets formally at least annually and plans to make recommendations to our President and Chief Executive Officer to be presented to the Audit Committee of our Board of Directors. For more information regarding our ESG initiatives, please refer to www.exagen.com/investors.
The ESG Committee meets formally at least annually and plans to make recommendations to our President and Chief Executive Officer to be presented to the audit committee of our board of directors (the Audit Committee) when warranted. For more information regarding our ESG initiatives, please refer to www.exagen.com/investors.
A sample of the full AVISE ® CTD report is shown below: 8 AVISE ® CTD Report 9 10 Our Pipeline and Growth Opportunities We regularly confer with national experts in the clinical management of rheumatic autoimmune diseases, including RA and lupus, to help guide the organization’s leadership team on the design and execution of research projects, as well as weigh-in on known and anticipated advances in technologies affecting clinical management of autoimmune diseases.
A sample of the full AVISE ® CTD report is shown below: 8 AVISE ® CTD Report 9 10 Our Pipeline and Growth Opportunities We regularly confer with national experts in the clinical management of rheumatic autoimmune diseases to help guide the organization’s leadership team on the design and execution of research projects, as well as weigh-in on known and anticipated advances in technologies affecting clinical management of autoimmune diseases.
In addition, studies involving human subjects often require significant time and cash resources to complete and are subject to a high degree of risk, including risks of experiencing delays, failing to complete the trial or obtaining unexpected or negative results.
In addition, trials involving human subjects often require significant time and cash resources to complete and are subject to a high degree of risk, including risks of experiencing delays, failing to complete the trial or obtaining unexpected or negative results.
Intellectual Property Overview We strive to protect and enhance the proprietary technologies that we believe are important to our business and seek to obtain and maintain patents for any patentable aspects of our testing products and services and any other inventions that are important to the development of our business.
Intellectual Property Overview We strive to protect and enhance the proprietary technologies that we believe are important to our business and seek to obtain and maintain patents for any patentable aspects of our testing products or other inventions that are important to the development of our business.
The research projects we support will be those that we believe will have a competitive advantage (such as using proprietary technology), a pathway for reimbursement and an established evidence development plan with sufficient market size.
The research projects we support are those that we believe will have a competitive advantage (such as using proprietary technology), a pathway for reimbursement and an established evidence development plan with sufficient market size.
Because we receive specimens from New York, our Vista facility is also required to be licensed by the NYDOH New York laws and regulations establish standards in a variety of operational areas, including: ▪ day-to-day operation of the laboratory, including training and skill levels required of laboratory personnel; ▪ physical requirements of a facility; ▪ equipment; and ▪ validation and quality control.
Because we receive specimens from New York, our Vista facility is also required to be licensed by the NYSDOH New York laws and regulations establish standards in a variety of operational areas, including: ▪ day-to-day operation of the laboratory, including training, supervision and skill levels required of laboratory personnel; ▪ physical requirements of a facility; ▪ equipment; and ▪ validation and quality control.
We estimate the total addressable market for our AVISE ® testing products to be approximately $9.0 billion, based on estimated patient populations, the current Medicare allowable reimbursement rate and testing frequencies.
We estimate the total addressable market for our AVISE ® testing products to be approximately $9.2 billion, based on estimated patient populations, the current Medicare allowable reimbursement rate and testing frequencies.
Bribery Act. 25 When marketing our testing products outside of the United States, we may be subject to foreign regulatory requirements governing human clinical testing, prohibitions on the import of tissue necessary for us to perform our testing products or restrictions on the export of tissue imposed by countries outside of the United States or the import of tissue into the United States, and marketing approval.
When marketing our testing products outside of the United States, we may be subject to foreign regulatory requirements governing human clinical testing, prohibitions on the import of tissue necessary for us to perform our testing products or restrictions on the export of tissue imposed by countries outside of the United States or the import of tissue into the United States, and marketing approval.
Exclusive License Agreement and Collaboration Agreement with Queen Mary University of London In November 2021, we entered into an exclusive license agreement with QMUL, under which we obtained an exclusive license to QMUL's patent-pending inventions (the QMUL Patent Rights), related to diagnosis and/or development of diagnostic or companion diagnostics for rheumatoid arthritis.
Exclusive License Agreement and Collaboration Agreement with Queen Mary University of London In November 2021, we entered into an exclusive license agreement with Queen Mary University of London (QMUL), under which we obtained an exclusive license to QMUL's patent-pending inventions (the QMUL Patent Rights), related to diagnosis and/or development of diagnostic or companion diagnostics for RA.
The National Institute of Environmental Health Sciences estimates that there are approximately 24 million patients in the United States with existing cases of autoimmune diseases.
The National Institute of Environmental Health Sciences estimates that there are approximately 41 million patients in the United States with existing cases of autoimmune diseases.
Supreme Court (the Supreme Court) upheld the ACA when it dismissed a legal challenge to the ACA’s constitutionality. Further legislative and regulatory 29 changes under the ACA remain possible, although the new Democrat-led presidential administration has been taking steps to strengthen the ACA.
Supreme Court (the Supreme Court) upheld the ACA when it dismissed a legal challenge to the ACA’s constitutionality. Further legislative and regulatory changes under the ACA remain possible, although the current Democrat-led presidential administration has been taking steps to strengthen the ACA.
This binding lasts for the life of the cell and represents a more stable and reliable indicator of complement activation than measuring C3 and C4 alone. In March 2011, the first new biologic targeting treatment of SLE in over 50 years, GSK’s Benlysta ® , was approved by the U.S.
This binding lasts for the life of the cell and represents a more stable and reliable indicator of complement activation than measuring C3 and C4 alone. In March 2011, the first new biologic targeting treatment of SLE in over 50 years, GSK’s Benlysta ® , was approved by the U.S. Food and Drug Administration (the FDA).
These symptoms overlap among numerous CTDs, including SLE, one of the most severe CTDs and historically difficult to rule out, as well as other autoimmune-related diseases and other disorders that mimic these diseases, such as fibromyalgia.
These symptoms overlap among numerous CTDs, including SLE, one of the most severe CTDs, which historically has been difficult to rule out, as well as other autoimmune-related diseases and other disorders that mimic these diseases, such as fibromyalgia.
Adoption and Growth through Quality Testing and Service Our focus on quality allows for a dedicated sales approach which entails a commitment to understanding the needs of both provider and patient. Through raising awareness of the benefits AVISE ® testing provides, our sales team is able to deliver quality testing and support services to providers, and ultimately, their patients.
Adoption and Growth through Quality Testing and Service Our focus on quality allows for a dedicated sales approach based on a commitment to understanding the needs of both provider and patient. By raising awareness of the benefits AVISE ® testing provides, our sales team is able to deliver quality testing and support services to providers, and ultimately, their patients.
Our filings with the SEC are available free of charge on the SEC’s website at www.sec.gov and on the "Investors" section of our website as soon as reasonably practicable after we electronically file such material with, or furnish it to, the SEC.
Our filings with the SEC are available free of charge on the SEC’s website and on the "Investors" section of our website as soon as reasonably practicable after we electronically file such material with, or furnish it to, the SEC.
Additionally, if and when the FDA begins to actively enforce its premarket submission regulations with respect to LDTs generally or our tests in particular, whether as a result of new legislative authority or following formal notice-and-comment rulemaking, we may be required to obtain premarket clearance for our tests under Section 510(k) of the FDCA or approval of a PMA.
Additionally, if and when the FDA begins to actively enforce its premarket submission regulations with respect to LDTs generally or our tests in particular, whether as a result of new legislative authority or culmination of the current notice-and-comment rulemaking process, we may be required to obtain premarket clearance for our tests under Section 510(k) of the FDCA or approval of a PMA.
We believe the insight emerging from these results has the potential to unlock value for pharmaceutical and biotechnology companies in the development and commercialization of therapeutics. We believe we also have the ability to further leverage our database to optimize patient selection in clinical trials for companies developing therapeutics for autoimmune and autoimmune-related diseases.
We believe the insights from these results have the potential to unlock value for pharmaceutical and biotechnology companies in the development and commercialization of therapeutics. We believe we also have the ability to further leverage our database to optimize patient selection in clinical trials for companies developing therapeutics for autoimmune and autoimmune-related diseases.
If the FDA finalizes its position on regulation of LDTs through formal notice-and-comment rulemaking, or the VALID Act or other federal legislation is passed reforming the government’s regulation of LDTs, or alternatively, if the FDA disagrees with our assessment that our tests fall within the definition of an LDT, we could be subject to enforcement of regulatory requirements such as registration and listing requirements, medical device reporting requirements and quality control requirements.
If the FDA finalizes its position on regulation of LDTs through the ongoing notice-and-comment rulemaking process, or the VALID Act or other federal legislation is passed reforming the government’s regulation of LDTs, or alternatively, if the FDA disagrees with our assessment that our tests fall within the definition of an LDT, we could, for the first time, be subject to enforcement of regulatory requirements such as registration and listing requirements, medical device reporting requirements and quality control requirements.
Any failure to comply with these reporting requirements could result in significant fines and penalties. Because we manufacture our own LDTs solely for use by or within our own laboratory, we believe that we are exempt from these reporting requirements.
Any failure to comply with these reporting requirements could result in significant fines and penalties. Because we manufacture our own in vitro diagnostic tests solely for use by or within our own laboratory, we believe that we are exempt from these reporting requirements.
Food and Drug Administration (the FDA), and in December 2020, the FDA approved this biologic drug for the treatment of adult patients with active lupus nephritis who are receiving standard therapy.
In December 2020, the FDA approved this biologic drug for the treatment of adult patients with active lupus nephritis who are receiving standard therapy.
AVISE ® Vasculitis AAV In September 2020, we launched AVISE ® Vasculitis AAV which utilizes a testing panel of individual analytes designed to provide physicians with rapid and reliable results in the assessment and monitoring of anti-neutrophil cytoplasmic antibody (ANCA) associated vasculitis (AAV). AAV is a group of autoimmune diseases characterized by vascular inflammation and damage.
AVISE ® Vasculitis AAV AVISE ® Vasculitis AAV utilizes a testing panel of individual analytes designed to provide physicians with rapid and reliable results in the assessment and monitoring of anti-neutrophil cytoplasmic antibody (ANCA) associated vasculitis (AAV). AAV is a group of autoimmune diseases characterized by vascular inflammation and damage.
In the fourth quarter of 2022, the number of ordering healthcare providers reached a record 2,419 compared to 2,126 in the same period in 2021. In addition, we continue to populate a growing proprietary database of de-identified patient test results from our clinical studies and our clinical laboratory.
In the fourth quarter of 2023, the number of ordering healthcare providers reached 2,383 compared to 2,419 in the same period in 2022. In addition, we continue to populate a growing proprietary database of de-identified patient test results from our clinical studies and our clinical laboratory.
The ANA test detects these autoantibodies in the blood and is a useful screening tool for SLE and other autoimmune and autoimmune-related diseases. The vast majority of SLE patients test positive for ANA. However, the high sensitivity of ANA for SLE is counterbalanced by somewhat poor specificity.
The ANA test detects these autoantibodies in the blood and is a useful screening tool for SLE and other autoimmune and autoimmune-related diseases. The vast majority of SLE patients test positive for ANA. However, the high sensitivity of ANA for SLE is counterbalanced by somewhat poor specificity. According to Dinse et al.
In 2022, we disposed of all hazardous and/or medical waste that we produced across our entire business through environmentally sound methods. Our operations are also subject to extensive requirements established by the U.S.
Since inception, we have disposed of all hazardous and/or medical waste that we produced across our entire business through environmentally sound methods. Our operations are also subject to extensive requirements established by the U.S.

… 207 more changes not shown on this page.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

150 edited+39 added−41 removed400 unchanged
Biggest changeAny failure of our internal control over financial reporting or disclosure controls and procedures could cause our investors to lose confidence in our publicly reported information, cause the market price of our stock to decline, expose us to sanctions or investigations by the SEC or other regulatory authorities, or impact our results of operations.
Biggest changeIf we are unable to conclude that our internal control over financial reporting is effective, or if our independent registered public accounting firm determines we have a material weakness or significant deficiency in our internal control over financial reporting once that firm begin its Section 404 reviews, investors may lose confidence in the accuracy and completeness of our financial reports, the market price of our common stock could decline, and we could be subject to sanctions or investigations by Nasdaq, the SEC or other regulatory authorities.
If our revenue or operating results fall below the expectations of analysts or investors or below any forecasts we may provide to the market, it could have a material adverse effect on our business, financial condition and results or operations.
If our revenue or operating results fall below the expectations of analysts or investors or below any forecasts we may provide to the market, it could have a material adverse effect on our business, financial condition and results of operations.
Any finding by the FDA or another regulatory authority that we have violated these laws and regulations, or a public announcement that we are being investigated for possible violations, could adversely affect our business, prospects, results of operations and financial condition.
Any finding by the FDA or another regulatory authority that we have violated these laws and regulations, or a public announcement that we are being investigated for possible violations, could adversely affect our business, prospects, results of operations or financial condition.
You should carefully consider these risk factors, together with the risk factors set forth in this Item 1A: • We have a history of losses, we expect to incur net losses in the future and we may not be able to generate sufficient revenue to achieve and maintain profitability; • If third-party payors do not provide coverage and adequate reimbursement for our testing products, or they breach, rescind or modify their contracts or reimbursement policies or delay payments for our testing products, or if we or our partners are unable to successfully negotiate payor contracts, our commercial success could be compromised; • In the near-term, we expect that our financial results will depend primarily on sales of our testing products, and we will need to generate sufficient revenue from these testing products to grow our business; • We may be unable to manage our growth effectively, which could make it difficult to execute our business strategy; • Our commercial success depends on attaining and maintaining significant market acceptance of our testing products among rheumatologists, patients, third-party payors and others in the medical community; • We rely on sole suppliers for some of the reagents, equipment and other materials used in our testing products, and we may not be able to fund replacements or transition to alternative suppliers; • If we are unable to support demand for our current testing products or any of our future testing products or solutions, our business could suffer; 32 • If we are unable to compete successfully, we may be unable to increase or sustain our revenue or achieve profitability; • Developing new testing products involves a lengthy and complex process, and we may not be able to commercialize on a timely basis, or at all, other testing products we are developing; • If our sole clinical laboratory facility becomes damaged or inoperable, we are required to vacate our existing facility or we are unable to expand our existing facility as needed, we will be unable to perform our testing services and our business will be harmed; • We may require substantial additional capital to finance our planned operations, which may not be available to us on acceptable terms or at all.
You should carefully consider these risk factors, together with the risk factors set forth in this Item 1A: • We have a history of losses, we expect to incur net losses in the future and we may not be able to generate sufficient revenue to achieve and maintain profitability; • If third-party payors do not provide coverage and adequate reimbursement for our testing products, or they breach, rescind or modify their contracts or reimbursement policies or delay payments for our testing products, or if we or our partners are unable to successfully negotiate payor contracts, our commercial success could be materially compromised; • In the near-term, we expect that our financial results will depend primarily on sales of our testing products, and we will need to generate sufficient revenue from these testing products to grow our business; • We may be unable to manage our growth effectively, which could make it difficult to execute our business strategy; • Our commercial success depends on attaining and maintaining significant market acceptance of our testing products among rheumatologists, patients, third-party payors and others in the medical community; • We rely on sole suppliers for some of the reagents, equipment and other materials used in our testing products, and we may not be able to fund replacements or transition to alternative suppliers; • If we are unable to support demand for our current testing products or any of our future testing products or solutions, our business could suffer; • If we are unable to compete successfully, we may be unable to increase or sustain our revenue or achieve profitability; • Developing new testing products involves a lengthy and complex process, and we may not be able to commercialize on a timely basis, or at all, other testing products we are developing; • If our sole clinical laboratory facility becomes damaged or inoperable, we are required to vacate our existing facility or we are unable to expand our existing facility as needed, we will be unable to perform our testing services and our business will be harmed; 32 • We may require substantial additional capital to finance our planned operations, which may not be available to us on acceptable terms or at all.
The provisions in our charter documents include the following: • a classified board of directors with three-year staggered terms, which may delay the ability of stockholders to change the membership of a majority of our board of directors; • no cumulative voting in the election of directors, which limits the ability of minority stockholders to elect director candidates; 64 • the exclusive right of our board of directors, unless the board of directors grants such right to the stockholders, to elect a director to fill a vacancy created by the expansion of the board of directors or the resignation, death or removal of a director, which prevents stockholders from being able to fill vacancies on our board of directors; • the required approval of at least 66-2/3% of the shares entitled to vote to remove a director for cause, and the prohibition on removal of directors without cause; • the ability of our board of directors to authorize the issuance of shares of preferred stock and to determine the price and other terms of those shares, including preferences and voting rights, without stockholder approval, which could be used to significantly dilute the ownership of a hostile acquiror; • the ability of our board of directors to alter our amended and restated bylaws without obtaining stockholder approval; • the required approval of at least 66-2/3% of the shares entitled to vote to adopt, amend or repeal our amended and restated bylaws or repeal the provisions of our amended and restated certificate of incorporation regarding the election and removal of directors; • a prohibition on stockholder action by written consent, which forces stockholder action to be taken at an annual or special meeting of our stockholders; • an exclusive forum provision providing that the Court of Chancery of the State of Delaware will be the exclusive forum for certain actions and proceedings; • the requirement that a special meeting of stockholders may be called only by the board of directors, which may delay the ability of our stockholders to force consideration of a proposal or to take action, including the removal of directors; and • advance notice procedures that stockholders must comply with in order to nominate candidates to our board of directors or to propose matters to be acted upon at a stockholders’ meeting, which may discourage or deter a potential acquiror from conducting a solicitation of proxies to elect the acquiror’s own slate of directors or otherwise attempting to obtain control of us.
The provisions in our charter documents include the following: • a classified board of directors with three-year staggered terms, which may delay the ability of stockholders to change the membership of a majority of our board of directors; • no cumulative voting in the election of directors, which limits the ability of minority stockholders to elect director candidates; • the exclusive right of our board of directors, unless the board of directors grants such right to the stockholders, to elect a director to fill a vacancy created by the expansion of the board of directors or the resignation, death or removal of a director, which prevents stockholders from being able to fill vacancies on our board of directors; • the required approval of at least 66-2/3% of the shares entitled to vote to remove a director for cause, and the prohibition on removal of directors without cause; • the ability of our board of directors to authorize the issuance of shares of preferred stock and to determine the price and other terms of those shares, including preferences and voting rights, without stockholder approval, which could be used to significantly dilute the ownership of a hostile acquiror; • the ability of our board of directors to alter our amended and restated bylaws without obtaining stockholder approval; • the required approval of at least 66-2/3% of the shares entitled to vote to adopt, amend or repeal our amended and restated bylaws or repeal the provisions of our amended and restated certificate of incorporation regarding the election and removal of directors; • a prohibition on stockholder action by written consent, which forces stockholder action to be taken at an annual or special meeting of our stockholders; • an exclusive forum provision providing that the Court of Chancery of the State of Delaware will be the exclusive forum for certain actions and proceedings; • the requirement that a special meeting of stockholders may be called only by the board of directors, which may delay the ability of our stockholders to force consideration of a proposal or to take action, including the removal of directors; and • advance notice procedures that stockholders must comply with in order to nominate candidates to our board of directors or to propose matters to be acted upon at a stockholders’ meeting, which may discourage or deter a potential acquiror from conducting a solicitation of proxies to elect the acquiror’s own slate of directors or otherwise attempting to obtain control of us.
These laws and regulations currently include, among others: • CLIA’s and CAP’s regulation of our laboratory activities; • FDA laws and regulations, including but not limited to requirements for offering LDTs; • federal and state laws and standards affecting reimbursement by government payors, including certain coding requirements to obtain reimbursement and certain payment mechanisms for clinical laboratory services resulting from PAMA; • HIPAA and HITECH, which establish comprehensive federal standards with respect to the privacy and security of PHI, and requirements for the use of certain standardized electronic transactions with respect to transmission of such information, as well as similar laws protecting other types of personal information; • state laws governing the maintenance of personally identifiable information of state residents, including medical information, and which impose varying breach notification requirements, some of which allow private rights of action by individuals for violations and also impose penalties for such violations; • the federal Anti-Kickback Statute, which generally prohibits knowingly and willfully offering, paying, soliciting or receiving remuneration, directly or indirectly, in return for or to induce a person to refer to an individual any good, facility, item or service that is reimbursable under a federal healthcare program; • the federal Stark Law, which generally prohibits a physician from making a referral for certain designated health services covered by Medicare or Medicaid, including laboratory and pathology services, if the physician or an immediate family member has a financial relationship with the entity providing the designated health services; • the federal False Claims Act, which imposes civil penalties, and provides for civil whistleblower or qui tam actions, against individuals or entities for knowingly presenting, or causing to be presented, to the federal government, claims for payment that are false or fraudulent or making a false statement to avoid, decrease or conceal an obligation to pay money to the federal government; • the federal Civil Monetary Penalties Law, which generally prohibits, among other things, the offering or transfer of remuneration to a Medicare or Medicaid beneficiary if it is likely to influence the beneficiary’s selection of a particular provider, practitioner or supplier of services reimbursable by Medicare or Medicaid; • EKRA, which imposes criminal penalties for knowing and willful payment or offer, or solicitation or receipt, of any remuneration, whether directly or indirectly, overtly or covertly, in cash or in kind, in exchange for the referral or inducement of laboratory testing (among other healthcare services) covered by healthcare benefit programs (including commercial insurers) unless a specific exception applies; • the ACA, which, among other things, establishes a requirement for providers and suppliers to report and return any overpayments received from the Medicare and Medicaid programs; • other federal and state fraud and abuse laws, such as anti-kickback laws, prohibitions on self-referral, fee-splitting restrictions, insurance fraud laws, anti-markup laws, prohibitions on the provision of tests at no or 51 discounted cost to induce physician or patient adoption and false claims acts, some of which may extend to services reimbursable by any third-party payor, including private payors; • the prohibition on reassignment of Medicare claims and other Medicare and Medicaid billing and coverage requirements; • state laws that prohibit other specified healthcare practices, such as billing physicians for tests that they order, waiving coinsurance, copayments, deductibles and other amounts owed by patients, business corporations practicing medicine or employing or engaging physicians to practice medicine and billing a state Medicaid program at a price that is higher than what is charged to one or more other payors; • the FCPA, and applicable foreign anti-bribery laws; • federal, state and local regulations relating to the handling and disposal of regulated medical waste, hazardous waste and biohazardous waste and workplace safety for healthcare employees; • laws and regulations relating to health and safety, labor and employment, public reporting, taxation and other areas applicable to businesses generally, all of which are subject to change, including, for example, the significant changes to the taxation of business entities were enacted in December 2017; and • similar foreign laws and regulations that apply to us in the countries in which we operate or may operate in the future.
These laws and regulations currently include, among others: • CLIA’s and CAP’s regulation of our laboratory activities; • FDA laws and regulations, including but not limited to requirements for offering LDTs; • federal and state laws and standards affecting reimbursement by government payors, including certain coding requirements to obtain reimbursement and certain payment mechanisms for clinical laboratory services resulting from PAMA; • HIPAA and HITECH, which establish comprehensive federal standards with respect to the privacy and security of PHI, and requirements for the use of certain standardized electronic transactions with respect to transmission of such information, as well as similar laws protecting other types of personal information; • state laws governing the maintenance of personally identifiable information of state residents, including medical information, and which impose varying breach notification requirements, some of which allow private rights of action by individuals for violations and also impose penalties for such violations; • the federal Anti-Kickback Statute, which generally prohibits knowingly and willfully offering, paying, soliciting or receiving remuneration, directly or indirectly, in return for or to induce a person to refer to an individual any good, facility, item or service that is reimbursable under a federal healthcare program; • the federal Stark Law, which generally prohibits a physician from making a referral for certain designated health services covered by Medicare or Medicaid, including laboratory and pathology services, if the physician or an immediate family member has a financial relationship with the entity providing the designated health services; • the federal False Claims Act, which imposes civil penalties, and provides for civil whistleblower or qui tam actions, against individuals or entities for knowingly presenting, or causing to be presented, to the federal government, claims for payment that are false or fraudulent or making a false statement to avoid, decrease or conceal an obligation to pay money to the federal government; • the federal Civil Monetary Penalties Law, which generally prohibits, among other things, the offering or transfer of remuneration to a Medicare or Medicaid beneficiary if it is likely to influence the beneficiary’s selection of a particular provider, practitioner or supplier of services reimbursable by Medicare or Medicaid; • EKRA, which imposes criminal penalties for knowing and willful payment or offer, or solicitation or receipt, of any remuneration, whether directly or indirectly, overtly or covertly, in cash or in kind, in exchange for the referral or inducement of laboratory testing (among other healthcare services) covered by healthcare benefit programs (including commercial insurers) unless a specific exception applies; • the ACA, which, among other things, establishes a requirement for providers and suppliers to report and return any overpayments received from the Medicare and Medicaid programs; • other federal and state fraud and abuse laws, such as anti-kickback laws, prohibitions on self-referral, fee-splitting restrictions, insurance fraud laws, anti-markup laws, prohibitions on the provision of tests at no or discounted cost to induce physician or patient adoption and false claims acts, some of which may extend to services reimbursable by any third-party payor, including private payors; • the prohibition on reassignment of Medicare claims and other Medicare and Medicaid billing and coverage requirements; • state laws that prohibit other specified healthcare practices, such as billing physicians for tests that they order, waiving coinsurance, copayments, deductibles and other amounts owed by patients, business corporations practicing medicine or employing or engaging physicians to practice medicine and billing a state Medicaid program at a price that is higher than what is charged to one or more other payors; • the FCPA, and applicable foreign anti-bribery laws; • federal, state and local regulations relating to the handling and disposal of regulated medical waste, hazardous waste and biohazardous waste and workplace safety for healthcare employees; 52 • laws and regulations relating to health and safety, labor and employment, public reporting, taxation and other areas applicable to businesses generally, all of which are subject to change, including, for example, the significant changes to the taxation of business entities were enacted in December 2017; and • similar foreign laws and regulations that apply to us in the countries in which we operate or may operate in the future.
If we or our operations, or any of the rheumatologists or entities with whom we do business are found to be in violation of any of the laws described above or any other governmental regulations that apply to us, we may be subject to significant penalties, including administrative, civil and/or criminal penalties, damages, fines, disgorgement, individual imprisonment, exclusion 52 from participation in U.S. federal or state healthcare programs, such as Medicare and Medicaid, and similar programs outside the United States, a corporate integrity agreement or other agreement to resolve allegations of non-compliance with these laws, and the curtailment or restructuring of our operations, any of which could materially adversely affect our ability to operate our business and our financial results.
If we or our operations, or any of the rheumatologists or entities with whom we do business are found to be in violation of any of the laws described above or any other governmental regulations that apply to us, we may be subject to significant penalties, including administrative, civil and/or criminal penalties, damages, fines, disgorgement, individual imprisonment, exclusion from participation in U.S. federal or state healthcare programs, such as Medicare and Medicaid, and similar programs outside the United States, a corporate integrity agreement or other agreement to resolve allegations of non-compliance with these laws, and the curtailment or restructuring of our operations, any of which could materially adversely affect our ability to operate our business and our financial results.
As a result, for sales following the date of this Annual Report and until we again have a public float with a value in excess of $75.0 million, if ever, we will be unable to use our shelf registration statement on Form S-3 or the Sales Agreement to raise additional funds to the extent the aggregate market value of securities sold by us or on our behalf pursuant to Instruction I.B.6. of Form S-3 during the 12 calendar months immediately prior to, and including, any intended sale does not exceed one-third of the aggregate market value of our public float, calculated in accordance with the instructions to Form S-3.
As a result, for sales following the date of this Annual Report and until we again have a public float with a value in excess of $75.0 million, if ever, we will be unable to use our shelf registration statement on Form S-3 or the Amended Sales Agreement to raise additional funds to the extent the aggregate market value of securities sold by us or on our behalf pursuant to Instruction I.B.6. of Form S-3 during the 12 calendar months immediately prior to, and including, any intended sale does not exceed one-third of the aggregate market value of our public float, calculated in accordance with the instructions to Form S-3.
The FDCA defines a medical device as “an instrument, apparatus, implement, machine, contrivance, implant, in vitro reagent, or other similar or related article, including a component part, or accessory which is , among other things: intended for use in the diagnosis of disease or other conditions, or in the cure, mitigation, treatment, or prevention of disease, in man or other animals and which does not achieve its primary intended purposes through chemical action within or on the body of man or other animals and which is not dependent upon being metabolized for the achievement of any of its primary intended purposes.” By this definition, in vitro reagents and diagnostic tests are considered medical devices.
The FDCA defines a medical device as “an instrument, apparatus, implement, machine, contrivance, implant, in vitro reagent, or other similar or related article, including a component part, or accessory which is , among other things: intended for use in the diagnosis of disease or other conditions, or in the cure, mitigation, 54 treatment, or prevention of disease, in man or other animals and which does not achieve its primary intended purposes through chemical action within or on the body of man or other animals and which is not dependent upon being metabolized for the achievement of any of its primary intended purposes.” By this definition, in vitro reagents and diagnostic tests are considered medical devices.
If a third party that owns such a patent asserts it successfully against one of our current or future AVISE ® testing products, we may be unable to market our product, which could materially harm our business and because patent applications can take many years to issue and may be confidential for 18 months or more after filing, there may be currently pending third-party patent applications which may later result in issued patents that our AVISE ® testing products or our technologies may infringe, or which such third parties claim are infringed by the use of our technologies.
If a third party that owns such a patent asserts it successfully against one of our current or future AVISE ® testing products, we may be unable to market our product, which could materially harm our business and because patent applications can take many years to issue and may be confidential for 18 months or more after filing, there may be currently pending third-party 63 patent applications which may later result in issued patents that our AVISE ® testing products or our technologies may infringe, or which such third parties claim are infringed by the use of our technologies.
The ACA also introduced mechanisms to reduce the per capita rate of growth in Medicare spending if expenditures exceed certain targets. Any such reductions could affect reimbursement payments for our tests. 49 In April 2014, Congress passed PAMA, which included substantial changes to the way in which clinical laboratory services are paid under the CLFS.
The ACA also introduced mechanisms to reduce the per capita rate of growth in Medicare spending if expenditures exceed certain targets. Any such reductions could affect reimbursement payments for our tests. In April 2014, Congress passed PAMA, which included substantial changes to the way in which clinical laboratory services are paid under the CLFS.
The VALID Act would also create a new system for laboratories to use to submit their tests electronically to the FDA for approval, which is aimed at reducing the amount of time it would take for the agency to approve such tests, and establish a new program to expedite the development of diagnostic tests that can be used to address a current unmet need for patients.
The VALID Act would also create a new system for laboratories to use to submit their tests electronically to the FDA for 55 approval, which is aimed at reducing the amount of time it would take for the agency to approve such tests and establish a new program to expedite the development of diagnostic tests that can be used to address a current unmet need for patients.
If we are unsuccessful in this regard, it could negatively impact our revenue growth and potential profitability. 39 If we are unable to compete successfully, we may be unable to increase or sustain our revenue or achieve profitability. Our principal competition for our testing products is traditional methods used by healthcare providers to test patients with CTD-like symptoms.
If we are unsuccessful in this regard, it could negatively impact our revenue growth and potential profitability. If we are unable to compete successfully, we may be unable to increase or sustain our revenue or achieve profitability. Our principal competition for our testing products is traditional methods used by healthcare providers to test patients with CTD-like symptoms.
Additionally, increasing concerns about health information privacy have recently prompted the federal government to issue guidance taking a newly expansive view of the scope of the laws and regulations that they enforce. It is possible that these laws may be interpreted and applied in a manner that is inconsistent with 56 our existing practices.
Additionally, increasing concerns about health information privacy have recently prompted the federal government to issue guidance taking a newly expansive view of the scope of the laws and regulations that they enforce. It is possible that these laws may be interpreted and applied in a manner that is inconsistent with our existing practices.
Our competitors may independently develop competing diagnostic products and services that do not infringe our intellectual property. 58 Changes in U.S. patent law could diminish the value of patents in general, thereby impairing our ability to protect our AVISE ® testing products. Our success is heavily dependent on intellectual property, particularly on obtaining and enforcing patents.
Our competitors may independently develop competing diagnostic products and services that do not infringe our intellectual property. Changes in U.S. patent law could diminish the value of patents in general, thereby impairing our ability to protect our AVISE ® testing products. Our success is heavily dependent on intellectual property, particularly on obtaining and enforcing patents.
The licensing and acquisition of third-party proprietary rights is a competitive area, and companies, which may be more established, or have greater resources than we do, may also be pursuing strategies to license or acquire third-party proprietary rights that we may consider necessary or attractive in order to further develop our AVISE ® testing 61 products.
The licensing and acquisition of third-party proprietary rights is a competitive area, and companies, which may be more established, or have greater resources than we do, may also be pursuing strategies to license or acquire third-party proprietary rights that we may consider necessary or attractive in order to further develop our AVISE ® testing products.
Other potential competitors include companies that might develop diagnostic or disease or drug monitoring products, such as Progentec Diagnostics Inc., Scipher Medicine Corporation, Genalyte Inc., Oncimmune plc, DxTerity Diagnostics Inc., AMPEL BioSolutions, and Immunovia AB. In the future, we may also face competition from companies developing new products or technologies.
Other potential competitors include companies that might develop diagnostic or disease or drug monitoring products, such as AMPEL BioSolutions, LLC; DxTerity Diagnostics Inc.; Genalyte Inc.; Immunovia AB; Oncimmune plc; Progentec Diagnostics Inc.; and Scipher Medicine Corporation. In the future, we may also face competition from companies developing new products or technologies.
New York law also mandates proficiency testing for laboratories licensed under New York state law, regardless of whether or not such laboratories are located in New York. Moreover, several other states require that we hold licenses to test specimens from 50 patients in those states. Other states may have similar requirements or may adopt similar requirements in the future.
New York law also mandates proficiency testing for laboratories licensed under New York state law, regardless of whether or not such laboratories are located in New York. Moreover, several other states require that we hold licenses to test specimens from patients in those states. Other states may have similar requirements or may adopt similar requirements in the future.
If the payor makes an overpayment determination, there is a risk that we 38 may be required to return all or some portion of prior payments we have received. Additionally, providers and suppliers must report and return overpayments received from the Medicare and Medicaid programs within 60 days of identification.
If the payor makes an overpayment determination, there is a risk that we may be required to return all or some portion of prior payments we have received. Additionally, providers and suppliers must report and return overpayments received from the Medicare and Medicaid programs within 60 days of identification.
To counter infringement or unauthorized use, we 62 may be required to file infringement claims, which can be expensive and time-consuming. We may not be able to prevent, alone or with our licensors, misappropriation of our intellectual property rights, particularly in countries where the laws may not protect those rights as fully as in the United States.
To counter infringement or unauthorized use, we may be required to file infringement claims, which can be expensive and time-consuming. We may not be able to prevent, alone or with our licensors, misappropriation of our intellectual property rights, particularly in countries where the laws may not protect those rights as fully as in the United States.
In such cases, we may decide that the more prudent course of action is to simply monitor the situation or initiate or seek some other non-litigious action or solution. We may be subject to claims that our employees, consultants or independent contractors have wrongfully used or disclosed confidential information of third parties.
In such cases, we may decide that the more prudent course of action is to simply monitor the situation or initiate or seek some other non-litigious action or solution. 64 We may be subject to claims that our employees, consultants or independent contractors have wrongfully used or disclosed confidential information of third parties.
If we use hazardous materials in a manner that causes contamination or injury, we could be liable for resulting damages. We are subject to federal, state and local laws, rules and regulations governing the use, discharge, storage, handling and disposal of biological material, chemicals and waste.
If we use hazardous materials in a manner that causes contamination or injury, we could be liable for resulting damages. 53 We are subject to federal, state and local laws, rules and regulations governing the use, discharge, storage, handling and disposal of biological material, chemicals and waste.
If any new provider does not provide, or if Federal Express or United Parcel Service does not continue to provide, the required quality and reliability of transport services at the same or similar costs, it could adversely affect our business, reputation, results of operations and financial condition. Inflation could adversely affect our business and financial results.
If any new provider does not provide, or if Federal Express or United Parcel Service does not continue to provide, the required quality and reliability of transport services at the same or similar costs, it could materially and adversely affect our business, reputation, results of operations and financial condition. Inflation could adversely affect our business and financial results.
We face a number of risks related to our protection of, and our service providers’ protection of, this critical information, including loss of access, unauthorized disclosure and unauthorized access, as well as risks associated with our ability to identify and audit such events and risks associated with the need to reconstruct any lost or stolen data.
We face a number of risks related to our protection of, and our service providers’ protection of, this critical information, including loss of access, unauthorized disclosure and unauthorized access, as well as risks associated with our ability to identify and audit such events and risks associated with the need to 45 reconstruct any lost or stolen data.
Our outside counsel has systems in place to monitor deadlines to pay these fees and to remind us of these fees, and our outside counsel employs an outside firm to pay these fees due to the USPTO and to foreign patent agencies based on our instructions. In the aggregate, these fees can be cost prohibitive for an early-stage company.
Our outside counsel has systems in place to monitor deadlines to pay these fees and to remind us of 62 these fees, and our outside counsel employs an outside firm to pay these fees due to the USPTO and to foreign patent agencies based on our instructions. In the aggregate, these fees can be cost prohibitive for an early-stage company.
If we engage a Business 55 Associate to help us carry out healthcare activities and functions, we must have a written Business Associate contract or other arrangement with the Business Associate that establishes specifically what the Business Associate has been engaged to do and requires the Business Associate to comply with the requirements of HIPAA.
If we engage a Business Associate to help us carry out healthcare activities and functions, we must have a written Business Associate contract or other arrangement with the Business Associate that establishes specifically what the Business Associate has been engaged to do and requires the Business Associate to comply with the requirements of HIPAA.
In addition, our inability to obtain and maintain coverage and adequate reimbursement from third-party payors may limit adoption by rheumatologists, as well as third-party payors exerting pressure on rheumatologists and healthcare providers to order in-network testing products which could adversely affect our revenue.
In addition, our inability to obtain and maintain coverage and adequate reimbursement 36 from third-party payors may limit adoption by rheumatologists, as well as third-party payors exerting pressure on rheumatologists and healthcare providers to order in-network testing products which could adversely affect our revenue.
While we believe we have implemented appropriate controls and metrics in our laboratory to meet such requirements, we cannot provide any assurance that our instruments will not fall out of specification, in which case we would be required to re-calibrate them.
While we believe we have implemented appropriate controls and metrics in our laboratory to meet such requirements, we 44 cannot provide any assurance that our instruments will not fall out of specification, in which case we would be required to re-calibrate them.
If we are unable to increase sales of our testing products, expand reimbursement for our testing products, or successfully develop and commercialize additional testing products, our revenue and our ability to achieve and sustain profitability would be impaired, and the market price of our common stock could decline.
If we are unable to increase sales of our testing products, expand reimbursement for our testing products, or successfully develop and commercialize 34 additional testing products, our revenue and our ability to achieve and sustain profitability would be impaired, and the market price of our common stock could decline.
Additionally, our success depends on our ability to attract and retain qualified and highly-specialized salespeople. We may have difficulties locating, recruiting or retaining qualified salespeople, which could cause a delay or decline in the rate of adoption of our testing products.
Additionally, our success depends on our ability to attract and retain qualified and highly-specialized salespeople. We may have difficulties locating, recruiting or retaining qualified salespeople, which could cause a delay or decline in the rate of adoption of 43 our testing products.
These products may compete with our AVISE ® testing products and our patents or other intellectual property rights may not be effective or sufficient to prevent them from competing. 59 Many companies have encountered significant problems in protecting and defending intellectual property rights in foreign jurisdictions.
These products may compete with our AVISE ® testing products and our patents or other intellectual property rights may not be effective or sufficient to prevent them from competing. Many companies have encountered significant problems in protecting and defending intellectual property rights in foreign jurisdictions.
If we are unable to provide third-party payors with sufficient evidence of the clinical utility and validity of our test, they may not provide coverage, or may provide limited coverage, which will adversely affect our revenue and our ability to succeed.
If we are unable to provide third-party payors with sufficient evidence of the clinical utility and validity of our test, they may not provide coverage, or may provide limited coverage, which will adversely affect our revenue and our 33 ability to succeed.
We also face competition from commercial laboratories, such as Laboratory Corporation of America Holdings, Quest Diagnostics Incorporated, ARUP Laboratories, Inc. and the Mayo Clinic, all of which have existing infrastructures to support the commercialization of diagnostic services.
We 40 also face competition from commercial laboratories, such as ARUP Laboratories, Inc.; Laboratory Corporation of America Holdings; the Mayo Clinic; and Quest Diagnostics Incorporated, all of which have existing infrastructures to support the commercialization of diagnostic services.
However, trade secrets can be difficult to protect. While we use commercially reasonable efforts to protect our trade secrets, our licensors, employees, consultants, contractors and other advisors may unintentionally or willfully disclose such trade secret information to third parties and competitors.
However, trade secrets can be difficult to protect. While we use commercially reasonable efforts to protect our trade secrets, our licensors, 59 employees, consultants, contractors and other advisors may unintentionally or willfully disclose such trade secret information to third parties and competitors.
The public trading price for our common stock is affected by a number of factors, including: • actual or anticipated variations in our and our competitors’ financial condition and results of operations; • announcements by us or our competitors of new products, strategic partnerships or capital commitments; • changes in reimbursement by current or potential third-party payors; • issuance of new securities analysts’ reports or changed recommendations for our stock; 63 • actual or anticipated changes in regulatory oversight of our testing products; • developments or disputes concerning our intellectual property or other proprietary rights; • commencement of, or our involvement in, litigation; • announced or completed acquisitions of businesses or technologies by us or our competitors; • any major change in our management; • changes in accounting principles; • announcement or expectation of additional financing efforts; • future sales of our common stock by our executive officers, directors and other stockholders; and • general economic conditions and slow or negative growth of our markets, including as a result of the current conflict in Ukraine.
The public trading price for our common stock is affected by a number of factors, including: • actual or anticipated variations in our and our competitors’ financial condition and results of operations; • announcements by us or our competitors of new products, strategic partnerships or capital commitments; • changes in reimbursement by current or potential third-party payors; • issuance of new securities analysts’ reports or changed recommendations for our stock; • actual or anticipated changes in regulatory oversight of our testing products; • developments or disputes concerning our intellectual property or other proprietary rights; • commencement of, or our involvement in, litigation; • announced or completed acquisitions of businesses or technologies by us or our competitors; • any major change in our management; • changes in accounting principles; • announcement or expectation of additional financing efforts; • future sales of our common stock by our executive officers, directors and other stockholders; and • general economic conditions and slow or negative growth of our markets, including as a result of the current conflict in the Ukraine and the Middle East.
Additionally, future acquisitions or dispositions could result in potentially dilutive issuances of our equity securities, the incurrence of debt, contingent liabilities or amortization expenses or write-offs of goodwill, any of which could harm our financial condition.
Additionally, future acquisitions or dispositions could result in potentially dilutive issuances of our equity 42 securities, the incurrence of debt, contingent liabilities or amortization expenses or write-offs of goodwill, any of which could harm our financial condition.
If we fail to 57 protect our intellectual property, third parties may be able to compete more effectively against us and we may incur substantial litigation costs in our attempts to recover or restrict use of our intellectual property.
If we fail to protect our intellectual property, third parties may be able to compete more effectively against us and we may incur substantial litigation costs in our attempts to recover or restrict use of our intellectual property.
We cannot be certain that such activities by third parties have been or will be conducted in compliance with applicable laws and regulations or will result in valid and enforceable patents or other intellectual property rights.
We cannot be certain that such activities by third parties have been or will be conducted 61 in compliance with applicable laws and regulations or will result in valid and enforceable patents or other intellectual property rights.
We will also need to purchase additional equipment, some of which can take several months or more to procure, setup and validate, and increase our software and computing capacity to meet increased demand.
We will also need to purchase additional equipment, some of which can 38 take several months or more to procure, setup and validate, and increase our software and computing capacity to meet increased demand.
The U.S. government also has the right to take title to these inventions if the grant recipient fails to disclose the invention to the government or fails to file an application to register the intellectual property within specified time limits.
The U.S. government also has the right to take title to these inventions if the grant recipient fails to disclose the invention to the government or fails to file an 60 application to register the intellectual property within specified time limits.
If we face such litigation, it could result in substantial costs and a diversion of management’s attention and resources, which could harm our business. Item 1B. Unresolved Staff Comments. Not applicable. 69
If we face such litigation, it could result in substantial costs and a diversion of management’s attention and resources, which could harm our business. Item 1B. Unresolved Staff Comments. Not applicable.
As a result of the foregoing, if we earn net taxable income, our ability to use NOL carryforwards and other tax attributes to offset taxable income and taxes, as applicable, may be limited.
As a result of the foregoing, if we earn net taxable income, 47 our ability to use NOL carryforwards and other tax attributes to offset taxable income and taxes, as applicable, may be limited.
For so long as we remain an emerging growth company, we are permitted and intend to rely on exemptions from certain disclosure requirements that are applicable to other public companies that are not emerging growth companies.
For so long as we remain an emerging growth company, 49 we are permitted and intend to rely on exemptions from certain disclosure requirements that are applicable to other public companies that are not emerging growth companies.
We have been utilizing both United Parcel Service and Federal Express Corporation for reliable and secure point-to-point transport of patient specimens to our laboratory and enhanced tracking of these patient specimens.
We have been utilizing both United Parcel Service and Federal Express Corporation (Federal Express) for reliable and secure point-to-point transport of patient specimens 46 to our laboratory and enhanced tracking of these patient specimens.
Our operations could be subject to earthquakes, power shortages, telecommunications failures, water shortages, floods, hurricanes, typhoons, fires, extreme weather conditions, medical epidemics, political instability, acts of war, including the current conflict in Ukraine, and other natural or manmade disasters (which may be exacerbated due to climate change) or business interruptions, for which we are predominantly self-insured.
Our operations could be subject to earthquakes, power shortages, telecommunications failures, water shortages, floods, hurricanes, typhoons, fires, extreme weather conditions, medical epidemics, political instability, acts of war, including the current conflict in Ukraine and the Middle East, and other natural or manmade disasters (which may be exacerbated due to climate change) or business interruptions, for which we are predominantly self-insured.
Complying with the numerous statutes and regulations pertaining to our business is expensive and time-consuming, and any failure by us, our consultants or commercial partners to comply could result in substantial penalties; • We may be required to modify our business practices, pay fines, incur significant expenses or experience losses due to litigation or governmental investigations; • The FDA may disagree with our assessment that our AVISE® test products and any other tests we may develop are LDTs and determine that such test products are medical devices subject to the FDCA and FDA regulations; • If we are unable to maintain intellectual property protection, our competitive position could be harmed; and • If we fail to comply with our obligations in the agreements under which we license intellectual property rights from third parties or otherwise experience disruptions to our business relationships with our licensors, we could lose license rights that are important to our business.
Complying with the numerous statutes and regulations pertaining to our business is expensive and time-consuming, and any failure by us, our consultants or commercial partners to comply could result in substantial penalties; • We have previously and may again in the future be required to modify our business practices, pay fines, incur significant expenses or experience losses due to litigation or governmental investigations; • The FDA may disagree with our assessment that our AVISE® test products and any other tests we may develop are LDTs and determine that such test products are medical devices subject to the FDCA and FDA regulations; • If we are unable to maintain intellectual property protection, our competitive position could be harmed; and • If we fail to comply with our obligations in the agreements under which we license intellectual property rights from third parties or otherwise experience disruptions to our business relationships with our licensors, we could lose license rights that are important to our business.
The Leahy-Smith America Invents Act introduced new procedures including inter partes review and post grant review. The implementation of these procedures bring the possibility of third-party challenges to our patents and the outcome of such challenges could result in a loss or narrowing of our patent rights.
The Leahy-Smith America Invents Act introduced new procedures including inter partes review and post grant review. The implementation of these procedures brings the possibility of third-party challenges to our patents and the outcome of such challenges could result in a loss or narrowing of our patent rights.
Inflation increased significantly during 2021 and continued to increase through 2022. The current inflationary environment has resulted in higher prices, which have impacted our costs incurred to generate revenue from our laboratory testing services, costs to attract and retain personnel, and other operating costs.
Inflation increased significantly during 2022 and continued to increase through 2023. The current inflationary environment has resulted in higher prices, which have impacted our costs incurred to generate revenue from our laboratory testing services, costs to attract and retain personnel, and other operating costs.
As a result, capital appreciation, if any, of our common stock will be the sole source of gain for the foreseeable future. An active, liquid trading market for our common stock may not be maintained. Prior to our IPO, there had been no public market for our common stock.
As a result, capital appreciation, if any, of our common stock will be the sole source of gain for the foreseeable future. An active, liquid trading market for our common stock may not be maintained. Prior to our initial public offering (IPO), there had been no public market for our common stock.
The privacy, security and breach notification rules promulgated under HIPAA, as amended by the HITECH Act, Standards for Privacy of Individually Identifiable Health Information (Privacy Standards) and the Security Standards for the Protection of Electronic Protected Health Information (Security Standards) under HIPAA establish a set of basic national privacy and security standards for the protection of individually identifiable health information by Covered Entities and the Business Associates.
The privacy, security and breach 56 notification rules promulgated under HIPAA, as amended by the HITECH Act, Standards for Privacy of Individually Identifiable Health Information (Privacy Standards) and the Security Standards for the Protection of Electronic Protected Health Information (Security Standards) under HIPAA establish a set of basic national privacy and security standards for the protection of individually identifiable health information by Covered Entities and their Business Associates.
We may be involved in proceedings to protect or enforce our patents or the patents of our licensors, which could be expensive, time-consuming and unsuccessful. Third parties may infringe, misappropriate or otherwise violate our existing patents, patents that may issue to us in the future, or the patents of our licensors that are licensed to us.
We may be involved in proceedings to protect or enforce our patents or the patents of our licensors, which could be expensive, time-consuming and unsuccessful. Third parties may infringe, misappropriate or otherwise violate our existing patents, patents that may be issued to us in the future, or the patents of our licensors that are licensed to us.
Our ability to utilize our net operating loss carryforwards and certain other tax attributes may be limited. 46 Under Sections 382 and 383 of the Internal Revenue Code of 1986, as amended (the Code), if a corporation undergoes an “ownership change” (generally defined as a greater than 50 percentage-point change (by value) in its equity ownership by “5-percent shareholders,” as defined in the Code, over a rolling three-year period), the corporation’s ability to use its pre-change net operating loss (NOL), carryforwards and other pre-change tax attributes to offset its post-change federal taxable income and taxes, as applicable, may be limited.
Under Sections 382 and 383 of the Internal Revenue Code of 1986, as amended (the Code), if a corporation undergoes an “ownership change” (generally defined as a greater than 50 percentage-point change (by value) in its equity ownership by “5-percent shareholders,” as defined in the Code, over a rolling three-year period), the corporation’s ability to use its pre-change net operating loss (NOL), carryforwards and other pre-change tax attributes to offset its post-change federal taxable income and taxes, as applicable, may be limited.
In 2022, Noridian posted the calendar year 2023 Medicare Physician Fee Schedule (MPFS), and CLFS, which establishes the reimbursement rates to be paid by Medicare for our jurisdiction for services performed on or after January 1, 2023.
In 2023, Noridian posted the calendar year 2024 Medicare Physician Fee Schedule (MPFS), and CLFS, which establishes the reimbursement rates to be paid by Medicare for our jurisdiction for services performed on or after January 1, 2024.
To date, other than our acquisition of the medical diagnostics division of Cypress in 2010, we have not acquired other companies or therapeutics and we have limited experience with respect to the formation of strategic alliances and joint ventures.
To date, other than our acquisition of the medical diagnostics division of Cypress Bioscience, Inc. in 2010, we have not acquired other companies or therapeutics and we have limited experience with respect to the formation of strategic alliances and joint ventures.
However, if we are unable to remedy future potential quality issues with unique reagent suppliers, or otherwise find a supplier for future biomarkers with issues, we may experience difficulties obtaining market acceptance for our products.
Additionally, if we are unable to remedy future potential quality issues with unique reagent suppliers, or otherwise find a supplier for future biomarkers with issues, we may experience difficulties obtaining market acceptance for our products.
On November 13, 2022, management and the audit committee of our board of directors determined that we made certain errors in revenue resulting from erroneous and duplicate billings related to changes in billing practices. The errors were due to the inadequate design and implementation and precision of internal controls and procedures to evaluate and monitor the accounting for revenue recognition.
On November 13, 2022, management and the Audit Committee determined that we made certain errors in revenue resulting from erroneous and duplicate billings related to changes in billing practices. The errors were due to the inadequate design, implementation and precision of internal controls and procedures to evaluate and monitor the accounting for revenue recognition.
Our amended and restated certificate of incorporation provide that the Court of Chancery of the State of Delaware will be the exclusive forum for substantially all disputes between us and our stockholders, which could limit our stockholders’ ability to obtain a favorable judicial forum for disputes with us or our directors, officers or employees.
Our amended and restated certificate of incorporation provides that the Court of Chancery of the State of Delaware will be the exclusive forum for substantially all disputes between us and our stockholders, which 66 could limit our stockholders’ ability to obtain a favorable judicial forum for disputes with us or our directors, officers or employees.
In September 2017, we entered into the loan and security agreement with Innovatus Life Sciences Lending Fund I, LP (Innovatus), which we subsequently amended in November 2019 and November 2021 (the Amended Loan Agreement). The Amended Loan Agreement is collateralized by substantially all of our personal property, including our intellectual property.
In September 2017, we entered into the loan and security agreement (the 2017 Term Loan) with Innovatus Life Sciences Lending Fund I, LP (Innovatus), which we subsequently amended in November 2019, November 2021 and April 2023 (the Amended Loan Agreement). The Amended Loan Agreement is collateralized by substantially all of our personal property, including our intellectual property.
However, the FDA has generally exercised its enforcement discretion and not enforced applicable regulations with respect to LDTs, which are IVDs that are designed, manufactured, and used within a single high-complexity CLIA-certified laboratory for use only in that laboratory. We believe that all of our AVISE ® test products are LDTs, as are our near-term pipeline candidate tests.
However, the FDA has generally exercised its enforcement discretion and not enforced applicable regulations with respect to LDTs, which are IVDs that are designed, manufactured, and used within a single high-complexity CLIA-certified laboratory. We believe that all of our AVISE ® test products are LDTs, as are our near-term pipeline candidate tests.
We are an emerging growth company, as defined in the Jumpstart Our Business Startups Act of 2012 (the JOBS Act) and may remain an emerging growth company until the last day of the fiscal year following the fifth anniversary of the completion of our initial public offering (IPO), or December 31, 2024.
We are an emerging growth company, as defined in the Jumpstart Our Business Startups Act of 2012 (the JOBS Act) and may remain an emerging growth company until the last day of the fiscal year following the fifth anniversary of the completion of our IPO, or December 31, 2024.
Failure to identify and return such overpayments exposes the provider or supplier to liability under the federal False Claims Act. Additionally, from time to time, third-party payors change processes that may affect timely payment. These changes may result in uneven cash flow or impact the timing of revenue recognized with these payors.
Failure to identify and return such overpayments exposes the provider or supplier to liability under the federal False Claims Act. 39 Additionally, from time to time, third-party payors change processes that may affect timely payment. These changes have in the past and may again result in uneven cash flow or impact the timing of revenue recognized with these payors.
Third-party payors and other entities also conduct technology assessments of new medical tests and devices and provide and/or sell the results of their assessments to other parties. These assessments may be used by third-party payors and healthcare providers as grounds to deny coverage for or refuse to use a test or procedure.
Third-party payors and other entities also conduct technology assessments of new medical tests and devices and provide and/or sell the results of their assessments to other parties. These assessments may be and have been used by third-party payors and healthcare providers as grounds to deny coverage for or refuse to use a test or procedure, including our tests.
The failure of financial institutions or transactional counterparties could adversely affect our current and projected business operations and our financial condition and results of operations. On March 10, 2023, Silicon Valley Bank (SVB) was closed by the California Department of Financial Protection and Innovation, which appointed the FDIC as receiver.
The failure of financial institutions or transactional counterparties could adversely affect our current and projected business operations and our financial condition and results of operations. On March 10, 2023, Silicon Valley Bank (SVB) was closed by the California Department of Financial Protection and Innovation, which appointed the Federal Deposit Insurance Corporation (FDIC) as receiver.
Revenue from the sale of our AVISE ® CTD testing products comprised 84% and 81% of our revenue for the years ended December 31, 2022 and 2021, respectively. We also rely on a third-party provider to provide revenue cycle management software systems for certain processing and collection functions.
Revenue from the sale of our AVISE ® CTD testing products comprised 88% and 84% of our revenue for the years ended December 31, 2023 and 2022, respectively. We also rely on a third-party provider to provide revenue cycle management software systems for certain processing and collection functions.
Any such access, disclosure or other loss of information could also result in legal claims or proceedings, and liability under laws that protect the privacy of personal information, such as HIPAA, as amended by the HITECH Act, and their implementing regulations including civil and criminal penalties.
Any such access, disclosure or other loss of information could also result in legal claims or proceedings, and liability under laws that protect the privacy of personal information, such as HIPAA, as amended by the HITECH Act, and their implementing regulations and similar state data privacy and security laws and regulations including civil and criminal penalties.
These fluctuations may occur due to a variety of factors, many of which are outside of our control, including, but not limited to: • our ability to successfully market and sell our AVISE ® testing products; • the extent to which our current testing and future testing products, if any, are eligible for coverage and reimbursement from third-party payors; 36 • public health crises such as the COVID-19 pandemic; • the timing and cost of, and level of investment in, research, development, regulatory approval and commercialization activities relating to our testing products, which may change from time to time, and our ability to successfully commercialize new testing products; • the cost of supplies, equipment and materials used for our testing products and laboratory operations, 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 testing products and technologies; • the level of demand for our testing products, which may vary significantly; • the receipt, timing and mix of revenue for our testing products; • future accounting pronouncements or changes in our accounting policies; • the rate and extent to which payors make an overpayment determination and require us to return all or some portion of payments which we received in a prior period; and • the timing and success or failure of competing products, or any other change in the competitive landscape of our industry, including consolidation among our competitors or partners.
These fluctuations may occur due to a variety of factors, many of which are outside of our control, including, but not limited to: • our ability to successfully market and sell our AVISE ® testing products; • the extent to which our current testing and future testing products, if any, are eligible for coverage and reimbursement from third-party payors; • the timing and cost of, and level of investment in, research, development, regulatory approval and commercialization activities relating to our testing products, which may change from time to time, and our ability to successfully commercialize new testing products; • the cost of supplies, equipment and materials used for our testing products and laboratory operations, 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 testing products and technologies; • the level of demand for our testing products, which may vary significantly; • the receipt, timing and mix of revenue for our testing products; • future accounting pronouncements or changes in our accounting policies; • our ability to collect timely reimbursement for our tests; 37 • the rate and extent to which payors make an overpayment determination and require us to return all or some portion of payments which we received in a prior period; and • the timing and success or failure of competing products, or any other change in the competitive landscape of our industry, including consolidation among our competitors or partners.
For example, in the fourth quarter of 2022, we were featured in nine scientific presentations at the 2022 ACR Annual Conference, ACR Convergence 2022. We will also need to generate demand for our testing products through one-on-one education by our sales force.
For example, in the fourth quarter of 2023, we were featured in five scientific presentations at the 2023 ACR Annual Conference, ACR Convergence 2023. We will also need to generate demand for our testing products through one-on-one education by our sales force.
As a result, revenue and accounts receivable were overstated and other liabilities was understated for the quarter and year to date periods ended June 30, 2022. We then determined that there were material errors in the financial statements requiring a restatement of the Form 10-Q for the three and six months ended June 30, 2022.
As a result, revenue and accounts receivable were overstated and other liabilities was understated for the quarter and year to date periods ended June 30, 2022. We concluded that these were material errors in the financial statements requiring a restatement of the Form 10-Q for the three and six months ended June 30, 2022.
The FDA may undertake rulemaking to regulate LDTs or Congress may reform the current legal requirements applicable to LDTs, in which case we may become subject to extensive regulatory requirements and may be required to conduct additional clinical trials prior to continuing to sell our existing tests or launching any other tests we may develop, which may increase the cost of conducting, or otherwise harm, our business.
The FDA may finalize its rulemaking to regulate LDTs or Congress may take action to reform the current legal requirements applicable to LDTs, and in either case, we may become subject to extensive regulatory requirements and may be required to conduct additional clinical trials prior to continuing to sell our existing tests or launching any other tests we may develop, which may increase the cost of conducting, or otherwise harm, our business.
The incurrence of additional indebtedness or the issuance of certain equity securities could result in increased fixed payment obligations and could also result in restrictive covenants, such as limitations on our ability to incur additional debt or issue additional equity, limitations on our ability to acquire or license intellectual property rights, and other operating restrictions that could adversely affect our ability to conduct our business.
The incurrence of additional indebtedness or the issuance of certain equity securities could result in increased fixed payment obligations and could also result in restrictive covenants (similar to our current obligations pursuant to the Amended Loan Agreement), such as limitations on our ability to incur additional debt or issue additional equity, limitations on our ability to acquire or license intellectual property rights, and other operating restrictions that could adversely affect our ability to conduct our business.
Additionally, these healthcare policy changes could be amended or additional healthcare initiatives could be implemented in the future. Further, the impact on our business of the expansion of the federal and state governments’ role in the U.S. healthcare industry generally, including the social, governmental and other pressures to reduce healthcare costs while expanding individual benefits, is uncertain.
Additionally, these healthcare laws, regulations and policies could be amended or additional healthcare initiatives could be implemented in the future. 50 Further, the impact on our business of the expansion of the federal and state governments’ role in the U.S. healthcare industry generally, including the social, governmental and other pressures to reduce healthcare costs while expanding individual benefits, is uncertain.
If any of the biomarkers in our AVISE ® CTD test were to encounter any issues, we may experience an impact in the overall 35 success of AVISE ® CTD as a whole, including a reduction in average selling price or overall revenue, until such time as it can be remedied.
If any of the biomarkers in our AVISE ® CTD test were to encounter any issues, we may experience an impact in the overall success of AVISE ® CTD as a whole, including a reduction in ASP or overall revenue, until such time as it can be remedied.
An inactive market may also impair our ability to raise capital by selling shares and may impair our ability to acquire other businesses or technologies using our shares as consideration, which, in turn, could materially adversely affect our business. During 2022, our average daily trading volume has been approximately 54,446 shares.
An inactive market may also impair our ability to raise capital by selling shares and may impair our ability to acquire other businesses or technologies using our shares as consideration, which, in turn, could materially adversely affect our business. During 2023, our average daily trading volume has been approximately 25,040 shares.
To obtain separate regulatory approval in many other countries, parties must comply with numerous and varying regulatory requirements regarding safety and efficacy and governing, among other things, clinical trials, commercial sales, pricing and distribution of our testing products.
To obtain separate regulatory approval in many other countries, we and our collaborators and service providers must comply with numerous and varying regulatory requirements regarding safety and efficacy and governing, among other things, clinical trials, commercial sales, pricing and distribution of our testing products.
Based on their most recent publicly filed beneficial ownership reports, our greater than 5% stockholders collectively own approximately 69% of our outstanding capital stock and our greater than 5% stockholders, directors and executive officers collectively own (without duplication) approximately 70% of our outstanding capital stock as of February 15, 2023.
Based on their most recent publicly filed beneficial ownership reports, our greater than 5% stockholders collectively own approximately 64% of our outstanding capital stock and our greater than 5% stockholders, directors and executive officers collectively own (without duplication) approximately 65% of our outstanding capital stock as of February 15, 2024.
Sales of a substantial number of shares of our common stock in the public market or the perception that these sales might occur could significantly reduce the trading price of our common stock and impair our ability to raise adequate capital through the sale of additional equity securities.
Future sales of shares by existing stockholders could cause our stock price to decline. 65 Sales of a substantial number of shares of our common stock in the public market or the perception that these sales might occur could significantly reduce the trading price of our common stock and impair our ability to raise adequate capital through the sale of additional equity securities.
If we obtain regulatory approval of our testing products and ultimately commercialize our testing products in foreign markets, we would be subject to additional risks and uncertainties, including: • different regulatory requirements for approval of IVDs in foreign countries; • reduced protection for intellectual property rights; • the existence of additional third-party patent rights of potential relevance to our business; • unexpected changes in tariffs, trade barriers and regulatory requirements; • economic weakness, including inflation, or political instability in particular foreign economies and markets; • compliance with tax, employment, immigration and labor laws for employees living or traveling abroad; • foreign currency fluctuations, which could result in increased operating expenses and reduced revenue and other obligations incident to doing business in another country; • foreign reimbursement, pricing and insurance regimes; • workforce uncertainty in countries where labor unrest is common; • production shortages resulting from any events affecting raw material supply or manufacturing capabilities abroad; and • business interruptions resulting from geopolitical actions, including war and terrorism such as the current conflict in Ukraine, or natural disasters which may be exacerbated due to climate change, including earthquakes, typhoons, floods and fires.
If we obtain regulatory approval of our testing products and ultimately commercialize our testing products in foreign markets, we would be subject to additional risks and uncertainties, including any or all of the following: • different regulatory requirements for approval of IVDs in foreign countries; • reduced protection for intellectual property rights; • the existence of additional third-party patent rights of potential relevance to our business; • unexpected changes in tariffs, trade barriers and regulatory requirements; • economic weakness, including inflation, or political instability in particular foreign economies and markets; • compliance with tax, employment, immigration and labor laws for employees living or traveling abroad; • foreign currency fluctuations, which could result in increased operating expenses and reduced revenue and other obligations incident to doing business in another country; 58 • inflationary pressures, such as those the global market is currently experiencing, which have and may increase costs for materials, supplies, and services; • foreign reimbursement, pricing and insurance regimes; • workforce uncertainty in countries where labor unrest is common; • production shortages resulting from any events affecting raw material supply or manufacturing capabilities abroad; and • business interruptions resulting from geopolitical actions, including war and terrorism, such as current conflicts in Ukraine and the Middle East; natural disasters which may be exacerbated due to climate change, including earthquakes, typhoons, floods and fires; outbreak of disease; boycotts; or other business restrictions.
Depending on decisions by the U.S. Congress, the federal courts and the USPTO, the laws and regulations governing patents could change in unpredictable ways that would weaken our ability to obtain new patents or to enforce our existing patents and patents that we might obtain in the future.
Congress, the federal courts and the USPTO, the laws and regulations governing patents could change in unpredictable ways that would weaken our ability to obtain new patents or to enforce our existing patents and patents that we might obtain in the future.
If there are changes in FDA regulations and legislative authorities such that the agency begins to exercise oversight over LDTs, we may become subject to extensive regulatory requirements and may be required to stop selling our existing tests or launching any other tests we may develop and to conduct additional clinical trials or take other actions prior to continuing to market our tests.
If there are changes in FDA regulations or legislative authorities such that the agency begins to exercise oversight over LDTs, or if the FDA disagrees that our marketed tests are within the scope of its criteria used for defining LDTs, we may become subject to extensive regulatory requirements and may be required to stop selling our existing tests or launching any other tests we may develop and to conduct additional clinical trials or take other actions prior to continuing to market our tests.
In the event that we are subject to or affected by HIPAA, the CCPA, the CPRA or other domestic privacy and data protection laws (for example Virginia's Consumer Data Protection Act and other similar laws that recently went into effect in Utah, Colorado and Connecticut), any liability from failure to comply with the requirements of these laws could adversely affect our financial condition.
In the event that we are subject to or affected by HIPAA, the CCPA, the CPRA or other domestic privacy and data protection laws (for example Virginia's Consumer Data Protection Act and other similar laws that recently went into effect in in other states, such as Utah, Colorado, Connecticut, Delaware, Florida, Indiana, Iowa, Montana, Oregon, Tennessee, and Texas), any liability from failure to comply with the requirements of these laws could adversely affect our financial condition.

… 150 more changes not shown on this page.

Item 2. Properties

Properties — owned and leased real estate

1 edited+0 added−1 removed1 unchanged
Biggest changeWe also lease an additional approximately 28,000 square feet office space in Carlsbad, California, under a sublease that is co-terminus with our other leases expiring in 2027. We believe that our current facilities are adequate for our current needs and that suitable additional alternative spaces will be available in the future on commercially reasonable terms, if required.
Biggest changeWe also lease approximately 28,000 square feet of additional office space in Carlsbad, California, under a sublease that is co-terminus with our other lease expiring in 2027. We believe that our current facilities are adequate for our current needs and that suitable additional or alternative spaces will be available in the future on commercially reasonable terms, if required.
Removed
We lease an additional approximately 19,500 square feet office space in Vista, California, under a lease that is co-terminus with our other lease expiring in 2027, with an option to extend the lease for an additional five-year period.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

2 edited+3 added−0 removed0 unchanged
Biggest changeItem 3. Legal Proceedings. We are currently not a party to any material legal proceedings. From time to time, we may be involved in legal proceedings or subject to claims incident to the ordinary course of business.
Biggest changeItem 3. Legal Proceedings. From time to time, we may be involved in legal proceedings or subject to claims incident to the ordinary course of business.
Regardless of the outcome, such proceedings or claims can have an adverse impact on us because of defense and settlement costs, diversion of resources and other factors, and there can be no assurances that favorable outcomes will be obtained. Items 4. Mine Safety Disclosures. Not applicable. 70 Part II
Regardless of the outcome, such proceedings or claims can have an adverse impact on us because of defense and settlement costs, diversion of resources and other factors, and there can be no assurances that favorable outcomes will be obtained. In October 2023, we resolved an investigation with the U.S.
Added
Attorney’s Office for the District of Massachusetts that was initiated by a qui tam lawsuit. Pursuant to a Settlement Agreement, we made a single lump-sum remittance to the government in the amount of $0.7 million plus interest in connection with specimen processing arrangements that we historically had with physicians. The U.S.
Added
Attorney’s Office dismissed this “covered conduct” in the qui tam with prejudice, while non-covered conduct was dismissed without prejudice. In November 2023, the complaint was unsealed and served on us. We filed a motion to dismiss the complaint. In February 2024, the relator filed a motion for leave to amend the complaint.
Added
We opposed this motion, and all motions are still pending. The Company intends to vigorously defend against the claims being asserted in the complaint. Items 4. Mine Safety Disclosures. Not applicable. 71 Part II

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

2 edited+0 added−5 removed4 unchanged
Biggest changeSecurities Authorized for Issuance under Equity Compensation Plans See Part III, Item 12 of this Annual Report under the section titled "Security Ownership of Certain Beneficial Owners and Management" for information about our equity compensation plans which is incorporated by reference herein. Performance Graph Not applicable. Recent Sales of Unregistered Securities None.
Biggest changeSecurities Authorized for Issuance under Equity Compensation Plans See Part III, Item 12 of this Annual Report under the section titled "Security Ownership of Certain Beneficial Owners and Management" for information about our equity compensation plans, which is incorporated by reference herein. Performance Graph Not applicable. Recent Sales of Unregistered Securities None. Purchases of Equity Securities by the Issuer None.
Holders of Record As of March 16, 2023, there were approximately 36 stockholders of record of our common stock. This number was derived from our shareholder records and does not include beneficial owners of our common stock whose shares are held in "street" name with various dealers, clearing agencies, banks, brokers and other fiduciaries.
Holders of Record As of March 14, 2024, there were approximately 31 stockholders of record of our common stock. This number was derived from our shareholder records and does not include beneficial owners of our common stock whose shares are held in "street" name with various dealers, clearing agencies, banks, brokers and other fiduciaries.
Removed
Use of Proceeds On September 18, 2019, the SEC declared effective our registration statement on Form S-1 (File No. 333-233446), as amended, filed in connection with our IPO.
Removed
At the closing of the offering on September 23, 2019, we issued and sold 4,140,00 shares of our common stock at the initial public offering price to the public of $14.00 per share, which included the exercise in full of the underwriters’ option to purchase additional shares.
Removed
We received gross proceeds from the IPO of $58.0 million, before deducting underwriting discounts, commissions and other offering expenses, which resulted in net proceeds of approximately $50.4 million and offering-related transaction costs of approximately $7.5 million. Cowen and Company, LLC, Cantor Fitzgerald & Co. and William Blair & Company, L.L.C. acted as joint book-running managers for the offering.
Removed
No offering expenses were paid or are payable, directly or indirectly, to our directors or officers, to persons owning 10% or more of any class of our equity securities or to any of our affiliates. As of December 31, 2022, we have used all of the proceeds from our IPO primarily related to selling and marketing activities.
Removed
Purchases of Equity Securities by the Issuer None. Item 6. [Reserved.] 71

Item 7. Management's Discussion & Analysis

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

79 edited+17 added−28 removed26 unchanged
Biggest changeGoodwill Impairment As part of our annual goodwill impairment assessment in the fourth quarter of 2022, we determined that the sustained decrease in our market capitalization constituted an indicator of impairment and as a result, a quantitative goodwill impairment test was completed as of December 31, 2022. This analysis identified an impairment of $5.5 million related to our goodwill.
Biggest changeThis decrease was primarily due to decreases of $2.7 million of personnel costs, including salaries, benefits and stock-based compensation, as a result of lower headcount, decreases related to lab supplies expenses of $1.0 million, collaboration expenses of $0.5 million, clinical study expenses of $0.3 million, and professional service fees of $0.2 million, in addition to a long-lived assets impairment charge of $0.4 million for the year ended December 31, 2022. 77 Goodwill Impairment As part of our annual goodwill impairment assessment in the fourth quarter of 2022, we determined that the sustained decrease in our market capitalization constituted an indicator of impairment and as a result, a quantitative goodwill impairment test was completed as of December 31, 2022.
In the quarter ended March 31, 2022, CMS agreed, effective April 1, 2022, to recognize a new PLA code for our protein-based test, AVISE ® Lupus. Noridian, our MAC, priced this PLA code at $1,085 per test. To determine pricing 74 beyond 2022, CMS recommended crosswalking AVISE ® Lupus (0312U) to Vectra (81490) at a rate of $840.65 per test.
In the quarter ended March 31, 2022, CMS agreed, effective April 1, 2022, to recognize a new PLA code for our protein-based test, AVISE ® Lupus. Noridian, our MAC, priced this PLA code at $1,085 per test. To determine pricing beyond 2022, CMS recommended crosswalking AVISE ® Lupus (0312U) to Vectra (81490) at a rate of $840.65 per test.
Actual results may differ from these estimates under different assumptions or conditions and any such differences may be material. We believe the following accounting policies are the most critical to us, in that they require our most difficult, subjective or complex judgments in the preparation of our financial statements.
Actual results may differ from these estimates under different assumptions or conditions and any such differences may be material. We believe the following accounting estimates are the most critical to us, in that they require our most difficult, subjective or complex judgments in the preparation of our financial statements.
Payment from third-party payors differs depending on whether we have entered into a contract with the payors as a "participating provider" or do not have a contract and are considered a "non-participating provider." Payors will often reimburse non-participating providers, if at all, at a lower amount than participating providers.
Payment from third-party payors differs depending on whether we are considered a "participating provider" (have entered into a contract with the payors as a participating provider) or a "non-participating provider" (do not have a contract and are considered a "non-participating provider"). Payors will often 73 reimburse non-participating providers at a lower amount than participating providers, if at all.
Our estimates are based on our historical experience and on various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources.
Our estimates are based on our historical experience and on various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily 80 apparent from other sources.
We have elected to use this extended transition period under the JOBS Act until the earlier of the date we (i) are no longer an emerging growth company or (ii) affirmatively and irrevocably opt out of the extended transition period provided in the JOBS Act.
We have elected to use this extended transition period under the JOBS Act until the earlier of the date we (i) are no longer an emerging growth company or (ii) affirmatively and irrevocably opt out of the extended transition period provided in 81 the JOBS Act.
The preparation of these audited financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the audited financial statements, as well as the reported revenue 79 generated and expenses incurred during the reporting periods.
The preparation of these audited financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the audited financial statements, as well as the reported revenue generated and expenses incurred during the reporting periods.
The Amended Loan Agreement contains customary conditions to borrowing, events of default, and covenants, including covenants requiring us to maintain minimum liquidity of $2.0 million, covenants to achieve certain minimum amounts of revenue (the performance covenant), and covenants limiting our ability to dispose of assets, undergo a change in control, merge with or acquire other entities, incur debt, incur liens, pay dividends or other distributions to holders of our capital stock, repurchase stock and make investments, in each case subject to certain exceptions.
The Amended Loan Agreement contains customary conditions to borrowing, events of default, and covenants, including covenants requiring us to maintain minimum liquidity of $2.0 million, covenants to achieve certain minimum amounts of revenue, and covenants limiting our ability to dispose of assets, undergo a change in control, merge with or acquire other entities, incur debt, incur liens, pay dividends or other distributions to holders of our capital stock, repurchase stock and make investments, in each case subject to certain exceptions.
The rheumatologists who order our testing products and to whom results are reported are generally not responsible for payment for these products. The parties that pay for these services (payors) consist of commercial payors (e.g. insurance companies, health maintenance organizations, etc.), government payors (primarily Medicare and Medicaid), client payors (e.g. hospitals, other laboratories, etc.), and patient self-pay.
The rheumatologists who order our testing products, and to whom results are reported, are generally not responsible for payment for these products. The parties that pay for these services (payors) consist of commercial payors (insurance companies, health maintenance organizations, etc.), government payors (primarily Medicare and Medicaid), client payors (hospitals, other laboratories, etc.), and patient self-pay.
The healthcare professionals who order our services and to whom test results are reported are generally not responsible for payment for these services. The parties that pay for these services consist of commercial payors, government payors (primarily Medicare and Medicaid), client payors (e.g. hospitals, other laboratories, etc.) and patient self-pays. Payors are billed at our list price.
The healthcare professionals who order our services and to whom test results are reported are generally not responsible for payment for these services. The parties that pay for these services consist of commercial payors, government payors (primarily Medicare and Medicaid), client payors (hospitals, other laboratories, etc.) and patient self-pays. Payors are billed at our list price.
These costs consist of personnel costs, including stock-based compensation expense, materials, laboratory supplies, consulting costs, costs associated with setting up and conducting clinical studies and allocated overhead including rent and utilities. We expense all research and development costs in the periods in which they are incurred.
These costs consist of personnel-related expenses (including stock-based compensation expense), materials, laboratory supplies, consulting costs, costs associated with setting up and conducting clinical studies and allocated overhead (including rent and utilities). We expense all research and development costs in the periods in which they are incurred.
The transaction price is estimated using an expected value method on a portfolio basis. Our portfolios are grouped per payor (e.g. each individual third-party insurance, Medicare, Medicaid, client payors, patient self-pay, etc.) and per test basis.
The transaction price is estimated using an expected value method on a portfolio basis. Our portfolios are grouped per payor (each individual third-party insurance, Medicare, Medicaid, client payors, patient self-pay, etc.) and per test basis.
To the extent that we raise additional capital through the sale of equity or convertible debt securities, the ownership interest of our stockholders may be diluted, and the terms of these 78 securities may include liquidation or other preferences that adversely affect the rights of our common stockholders.
To the extent that we raise additional capital through the sale of equity or convertible debt securities, the ownership interest of our stockholders may be diluted, and the terms of these 79 securities may include liquidation or other preferences that adversely affect the rights of our common stockholders.
We expect that our near- and longer-term liquidity requirements will continue to consist of working capital and general corporate expenses associated with the growth of our business, including payments we may be required to make upon the achievement of previously negotiated milestones associated with intellectual property we have licensed, payments related to non-cancelable purchase obligations with one supplier for reagents, payments related to our principal and interest under our long term borrowing arrangements, payments for operating leases related to our office and laboratory space in Vista, California and our office space in Carlsbad, California, and payments for finance leases related to our laboratory equipment (see Note 4 and Note 5 to our audited financial statements included in this Annual Report on Form 10-K).
We expect that our near- and longer-term liquidity requirements will continue to consist of working capital and general corporate expenses associated with the growth of our business, including payments we may be required to make upon the achievement of previously negotiated milestones associated with intellectual property we have licensed, payments related to non-cancelable purchase obligations with one supplier for reagents, payments related to our principal and interest under our long term borrowing arrangements, payments for operating leases related to our office and laboratory space in Vista, California and our office space in Carlsbad, California, and payments for finance leases related to our laboratory equipment (see Note 4, Borrowings, and Note 6, Commitments and Contingencies, to our audited financial statements included in this Annual Report on Form 10-K).
However, if certain events occur prior to the end of this five-year period, including if we become a "large accelerated filer" as defined in Rule 12b-2 under the Exchange Act, our annual gross revenues exceed $1.07 billion or we issue more than $1.0 billion of non-convertible debt in any three-year period, we will cease to be an emerging growth company prior to this anniversary. 81 Item 7A.
However, if certain events occur prior to the end of this five-year period, including if we become a "large accelerated filer" as defined in Rule 12b-2 under the Exchange Act, our annual gross revenues exceed $1.235 billion or we issue more than $1.0 billion of non-convertible debt in any three-year period, we will cease to be an emerging growth company prior to this anniversary. 82 Item 7A.
JOBS Act Accounting Election The JOBS Act contains provisions that, among other things, reduce certain reporting requirements for an "emerging growth company." The JOBS Act permits an "emerging growth company" such as us to take advantage of an extended transition period to comply with new or revised accounting standards applicable to public companies.
JOBS Act Accounting Election The JOBS Act contains provisions that, among other things, reduce certain reporting requirements for an "emerging growth company." The JOBS Act permits an "emerging growth company" like us to take advantage of an extended transition period to comply with new or revised accounting standards applicable to public companies.
If a substantial number of clinical samples are obtained in a given quarter or if a high-cost experiment is conducted in one quarter versus the next, the timing of these expenses will affect our financial results.
If a substantial number of clinical samples are obtained in a given quarter or if a high-cost experiment is conducted in one quarter versus the next, the timing of these expenses will affect our financial results. ▪ How We Recognize Revenue .
Included in revenues for the years ended December 31, 2022 and 2021 was a net revenue decrease of $2.4 million and a net revenue increase of $0.7 million, respectively, associated with changes in estimated variable consideration related to performance obligations satisfied in previous periods.
Included in revenues for the years ended December 31, 2023 and 2022 was a net revenue increase of $3.4 million and a net revenue decrease of $2.4 million, respectively, associated with changes in estimated variable consideration related to performance obligations satisfied in previous periods.
Cash Flows from Investing Activities Net cash used in investing activities for the year ended December 31, 2022 and 2021 was $4.3 million and $2.4 million, respectively, and was primarily due to net purchases of property and equipment.
Cash Flows from Investing Activities Net cash used in investing activities for the year ended December 31, 2023 and 2022 was $0.8 million and $4.3 million, respectively, and was primarily due to net purchases of property and equipment.
See Note 2 and Note 8 to our audited financial statements in this Annual Report on Form 10-K for information concerning certain of the specific assumptions we used in applying the Black-Scholes option pricing model to determine the estimated fair value of our stock options granted and purchases under our ESPP rights in the years ended December 31, 2022 and 2021.
See Note 2, Summary of Significant Accounting Policies, and Note 9, Stock Option Plan, to our audited financial statements in this Annual Report on Form 10-K for information concerning certain of the specific assumptions we used in applying the Black-Scholes option pricing model to determine the estimated fair value of our stock options granted and purchases under our ESPP rights in the years ended December 31, 2023 and 2022.
In addition to the challenges described under the heading "Financial Overview" below, historically, we have experienced situations where commercial payors proactively reduced the amounts they were willing to reimburse for our tests, and in other situations, commercial payors have determined that the amounts they previously paid were too high and have sought to recover those perceived excess payments by deducting such amounts from payments otherwise being made.
Historically, we have experienced situations where commercial payors proactively reduced the amounts they were willing to reimburse for our tests, and in other situations, commercial payors have determined that the amounts they previously paid were too high and have sought to recover those perceived excess payments by deducting such amounts from payments otherwise being made.
Our estimate of the period of time through which our financial resources will be adequate to support our operations is a forward-looking statement and involves risks and uncertainties, and actual results could vary as a result of a number of factors, including: • our ability to achieve sufficient market acceptance, coverage and adequate reimbursement from third-party payors and adequate market share and revenue for our testing products; • our ability to maintain and grow sales of our AVISE ® testing products, as well as the costs associated with conducting clinical studies to demonstrate the utility of our products and support reimbursement efforts; ▪ fluctuations in working capital; ▪ the costs of developing our product pipeline, including the costs associated with conducting our ongoing and future validation, utility and outcome studies as well as the success of our development efforts; and ▪ the extent to which we establish additional partnerships or in-license, acquire or invest in complementary businesses or products as well as the success of our existing partnerships and/or in-licenses.
Actual results could vary as a result of a number of factors, including: • our ability to achieve sufficient market acceptance, coverage and adequate reimbursement from third-party payors and adequate market share and revenue for our testing products; • our ability to maintain and grow sales of our AVISE ® testing products, as well as the costs associated with conducting clinical studies to demonstrate the utility of our products and support reimbursement efforts; ▪ fluctuations in working capital; ▪ the costs of developing our product pipeline, including the costs associated with conducting our ongoing and future validation, utility and outcome studies as well as the success of our development efforts; and ▪ the extent to which we establish additional partnerships or in-license, acquire or invest in complementary businesses or products as well as the success of our existing partnerships and/or in-licenses.
Net cash used in operating activities for the year ended December 31, 2021 was $20.3 million and primarily resulted from (i) our net loss of $26.9 million adjusted for non-cash charges of $6.6 million related to stock-based compensation, depreciation, amortization, non-cash interest and deferred income taxes and (ii) changes in our net operating assets of $0.1 million primarily related to net increases in accounts receivable and net decreases in accounts payable, partially offset by net decreases in prepaid expenses and other current assets and net increases in accrued liabilities and other current liabilities.
Net cash used in operating activities for the year ended December 31, 2022 was $32.1 million and primarily resulted from (i) our net loss of $47.4 million adjusted for non-cash charges of $13.6 million related to stock-based compensation, depreciation, amortization, non-cash interest and deferred income taxes and (ii) changes in our net operating assets of $1.7 million primarily related to net increases in accounts receivable and net decreases in accounts payable, partially offset by net decreases in prepaid expenses and other current assets and net increases in accrued liabilities and other current liabilities.
These assessments require significant judgment by management. To date, we have derived nearly all of our revenue from the sale of our testing products, most of which is attributable to our AVISE ® CTD test. We primarily market our testing products to rheumatologists in the United States.
To date, we have derived nearly all of our revenue from the sale of our testing products, most of which is attributable to our AVISE ® CTD test. We primarily market our testing products to rheumatologists in the United States.
Recent Accounting Pronouncements See "Notes to the Financial Statements-Note 2-Recent Accounting Pronouncements" of our annual financial statements.
Recent Accounting Pronouncements See Note 2, Recent Accounting Pronouncements, of our annual financial statements.
We record revenue on an accrual basis, using an estimate of the amount we will ultimately realize, as determined based on a historical analysis of amounts collected by test and by payor, among other factors.
We record revenue on an accrual basis, using an estimate of the amount we will ultimately receive, as determined based on a historical analysis of amounts collected by test and by payor, among other factors. These assessments require significant judgment by management.
The number of AVISE ® CTD tests delivered increased to 135,210 in the year ended December 31, 2022 compared to 128,246 tests delivered in the same 2021 period. The AVISE ® CTD test accounted for 84% and 81% of revenue for the years ended December 31, 2022 and 2021, respectively.
The number of AVISE ® CTD tests delivered increased to 137,650 in the year ended December 31, 2023 compared to 135,210 tests delivered in the same 2022 period. The AVISE ® CTD test accounted for 88% and 84% of revenue for the years ended December 31, 2023 and 2022, respectively.
There is an unmet need for rheumatologists to add clarity in their CTD clinical evaluation, and we believe there is a significant opportunity for our tests that enable the differential diagnosis of these diseases, particularly for potentially life-threatening diseases such as SLE.
There is an unmet need for rheumatologists to add clarity in their CTD clinical evaluation, and we believe there is a significant opportunity for our tests in this market, particularly for potentially life-threatening diseases such as SLE.
We perform all of our AVISE ® tests in our approximately 13,000 square foot laboratory, which is certified by CLIA and accredited by CAP, and located in Vista, California. Our laboratory is certified for performance of high-complexity testing by CMS in accordance with CLIA and is licensed by all states requiring out-of-state licensure.
Reimbursement rates vary by product and payor. All of our AVISE ® tests are performed in our approximately 13,000 square foot laboratory located in Vista, California, which is certified under the CLIA and accredited by CAP. Our laboratory is certified for performance of high-complexity testing by CMS in accordance with CLIA and is licensed by all states requiring out-of-state licensure.
We expect interest expense to remain consistent in 2023 as compared to 2022. Interest Income Interest income consists of interest income earned on our cash and cash equivalents. 75 Income Tax (Expense) Benefit Income taxes include federal and state income taxes in the United States.
We expect interest expense to remain relatively consistent in the year ending December 31, 2024 as compared to the year ended December 31, 2023. Interest Income Interest income consists of interest income earned on our cash and cash equivalents. Income Tax (Expense) Benefit Income taxes include federal and state income taxes in the United States.
Our lead testing product, AVISE ® CTD, enables differential diagnosis for patients presenting with symptoms indicative of a wide variety of CTDs and other related diseases with overlapping symptoms. We commercially launched AVISE ® CTD in 2012 and revenue from this product comprised 84% and 81% of our revenue for the years ended December 31, 2022 and 2021, respectively.
AVISE ® CTD enables differential diagnosis for patients presenting with symptoms indicative of a wide variety of CTDs and other related diseases with overlapping symptoms. Revenue from this product comprised 88% and 84% of our revenue for the years ended December 31, 2023 and 2022, respectively.
Ultimately receiving a favorable LCD is uncertain and may be time-consuming, resource intensive and require multiple quarterly or annual periods to complete. In the meantime, we will continue to submit Medicare claims for AVISE ® Lupus, appeal denials and respond to requests for additional information. We face challenges relating to commercial payor claim processing and revenue.
Ultimately receiving a favorable LCD is uncertain and may be time-consuming, resource intensive and require multiple quarterly or annual periods to complete. In the meantime, we have continued to submit Medicare claims for AVISE ® Lupus, appeal denials and respond to requests for additional information.
Our success in developing new testing products will be important in our efforts to grow our business by expanding the potential market for our testing products and diversifying our sources of revenue. ▪ Maintain Meaningful Margin .
We expect to continue to invest in research and development in order to develop additional testing products. Our success in developing new testing products will be important in our efforts to grow our business by expanding the potential market for our products and diversifying our sources of revenue. ▪ Maintain Meaningful Margin .
At December 31, 2022, we were in compliance with all covenants of the Amended Loan Agreement.
As of December 31, 2023, we were in compliance with all covenants of the Amended Loan Agreement with Innovatus.
The number of ordering healthcare providers increased to 2,419 for the three months ended December 31, 2022 compared to 2,126 in the same 2021 period. Costs of Revenue Costs of revenue increased $3.6 million, or 17.6%, for the year ended December 31, 2022 compared to the year ended December 31, 2021.
The number of ordering healthcare providers decreased to 2,383 for the three months ended December 31, 2023 compared to 2,419 in the same 2022 period. Costs of Revenue Costs of revenue decreased $1.1 million, or 4.6%, for the year ended December 31, 2023 compared to the year ended December 31, 2022.
Interest Income Interest income increased $0.8 million for the year ended December 31, 2022 compared to the year ended December 31, 2021 due to higher money market interest rates in 2022 compared to 2021.
Interest Income Interest income increased $0.7 million for the year ended December 31, 2023 compared to the year ended December 31, 2022 due to higher money market and certificate of deposit interest rates in 2023 compared to 2022.
Cash Flows from Financing Activities Net cash used in financing activities for the year ended December 31, 2022 was $0.5 million, primarily consisting of principal payments on finance lease obligations and payment of taxes on vested restricted stock units, partially offset by the proceeds from the Exagen Inc. 2019 Employee Stock Purchase Plan (the ESPP) purchases.
Cash Flows from Financing Activities Net cash used in financing activities for the year ended December 31, 2023 was $10.6 million, primarily consisting of principal payments on the Amended Loan Agreement, finance lease obligations and notes payable, partially offset by the proceeds from the Exagen Inc. 2019 Employee Stock Purchase Plan (the ESPP) purchases.
Funding Requirements Our primary use of cash is to fund our operations as we continue to grow our business. We expect to continue to incur operating losses in the near term. In the short-term, we expect costs of revenue to increase as test volume increases.
Funding Requirements Our primary use of cash is to fund our operations as we continue to grow our business. We expect to continue to incur operating losses in the near term. In the short-term, we expect costs of revenue and selling, general and administrative expenses to remain relatively consistent.
We expect that our research and development expenses will decrease in the near-term as a result of cost saving initiatives which began in the fourth quarter of 2022. Interest Expense Interest expense consists of cash and non-cash interest expense associated with our financing arrangements, including the borrowings under our amended loan and security agreement with Innovatus.
We expect that our research and development expenses will increase year-over-year in the near-term as a result of ongoing clinical studies. Interest Expense Interest expense consists of cash and non-cash interest expense associated with our financing arrangements, including the borrowings under our Amended Loan Agreement with Innovatus.
Cash Flows The following table summarizes our cash flows for the periods indicated: Years Ended December 31, 2022 2021 (in thousands) Net cash provided by (used in): Operating activities $ (32,144) $ (20,269) Investing activities (4,318) (2,420) Financing activities (489) 64,683 Net change in cash, cash equivalents and restricted cash $ (36,951) $ 41,994 Cash Flows from Operating Activities Net cash used in operating activities for the year ended December 31, 2022 was $32.1 million and primarily resulted from (i) our net loss of $47.4 million adjusted for non-cash charges of $13.5 million primarily related to impairment of our goodwill, stock-based compensation, depreciation, amortization, non-cash lease expenses, non-cash interest and deferred income taxes and (ii) changes in our net operating assets of $1.7 million primarily related to net increases in accounts receivable and net decreases in accounts payable, partially offset by net decreases in prepaid expenses and other current assets and net increases in accrued liabilities and other current liabilities.
Cash Flows The following table summarizes our cash flows for the periods indicated: Year Ended December 31, 2023 2022 (in thousands) Net cash provided by (used in): Operating activities $ (14,462) $ (32,144) Investing activities (804) (4,318) Financing activities (10,632) (489) Net change in cash, cash equivalents and restricted cash $ (25,898) $ (36,951) Cash Flows from Operating Activities Net cash used in operating activities for the year ended December 31, 2023 was $14.5 million and primarily resulted from (i) our net loss of $23.7 million adjusted for non-cash charges of $8.9 million primarily related to stock-based compensation, depreciation, amortization, loss on disposal of assets primarily related to the assignment of a lease, non-cash lease expenses and non-cash interest and (ii) changes in our net operating assets of $0.3 million primarily related to net increases in prepaid expenses and other current assets and accounts receivable, and net decreases in operating lease liabilities, partially offset by net increases in accrued and other current liabilities.
Our clinical laboratory typically reports all AVISE ® testing product results within five business days. We market our AVISE ® testing products using our specialized sales force covering 40 territories in the United States.
Our clinical laboratory typically reports all AVISE ® testing product results within five business days. We market our AVISE ® testing products using our specialized sales force covering 40 territories in the United States. Many diagnostic sales forces are trained only to understand the comparative benefits of the tests they promote.
Unlike many diagnostic sales forces that are trained only to understand the comparative benefits of their tests, the specialized backgrounds of our sales force coupled with our comprehensive training enables our sales representatives to interpret results from our de-identified patient test reports and provide unique insights in a highly tailored discussion with rheumatologists.
In contrast, the specialized backgrounds of our sales personnel, coupled with our comprehensive training, enables our sales representatives to interpret results from our de-identified patient test reports and provide unique insights in a highly tailored discussion with rheumatologists.
We plan to increase focus on long-term reimbursement and ASP growth and seek to improve our per test costs by focusing on profitable, core test offerings and reducing fixed costs and overhead. ▪ Timing of Our Research and Development Expenses . Our spending on experiments and clinical studies may vary substantially from quarter to quarter.
We plan to center our efforts around long-term reimbursement and ASP growth and seek to improve our per test costs by focusing on profitable, core test offerings and limiting fixed costs and overhead. ▪ Timing of Our Research and Development Expenses .
Selling, General and Administrative Expenses Selling, general and administrative expenses consist of personnel costs, including stock-based compensation expense, direct marketing expenses, accounting and legal expenses, consulting costs, and allocated overhead including rent, information technology, depreciation and utilities.
We expect that our costs of revenue will remain relatively consistent year-over-year in the near-term. Selling, General and Administrative Expenses Selling, general and administrative expenses consist of personnel costs (including stock-based compensation expense), direct marketing expenses, accounting and legal expenses, consulting costs, and allocated overhead (including rent, information technology, depreciation and utilities).
Now that we are billing under our PLA code, we are experiencing an increase in denials due to unfavorable medical policy with certain plans, and we expect this situation to persist. Operating Expenses Costs of Revenue Costs of revenue represents the expenses associated with obtaining and testing patient specimens.
Now that we are billing under our PLA code, we are experiencing denials due to unfavorable medical policy with certain plans, and we expect this situation to persist.
Research and Development Expenses Research and development expenses include costs incurred to develop our technology, test products and product candidates, in addition to costs incurred to collect clinical specimens and conduct clinical studies to develop and support those products and product candidates.
We expect that our selling, general and administrative expenses will remain relatively consistent year-over-year in the near-term. Research and Development Expenses Research and development expenses include costs incurred to develop our technology, test products and product candidates, in addition to costs incurred to collect clinical specimens and conduct clinical studies to develop and support those products and product candidates.
The components of our costs of revenue include materials costs, direct labor, equipment and infrastructure expenses associated with testing specimens, shipping charges to transport specimens, blood specimen collections fees, royalties, depreciation and allocated overhead, including rent and utilities. Each payor, whether commercial, government, or individual, reimburses us at different amounts. These differences can be significant.
Operating Expenses 75 Costs of Revenue Costs of revenue represents the expenses associated with obtaining and testing patient specimens. The components of our costs of revenue include materials costs, direct labor, equipment, infrastructure expenses, shipping charges to transport specimens, blood specimen collections fees, royalties, depreciation and allocated overhead (including rent and utilities).
For stock options and purchase rights granted under the ESPP, we 80 estimate the grant date fair value using the Black-Scholes option-pricing valuation model. For RSUs, we use the closing price of our common stock on the date of grant to determine the fair value.
For RSUs, we use the closing price of our common stock on the date of grant to determine the fair value. The Black-Scholes option pricing model requires the use of assumptions, which determine the fair value of stock-based awards.
Changes to such estimates may increase or decrease revenue recognized in future periods. 73 While each of these areas present significant opportunities for us, they also pose significant risks and challenges that we must address.
While each of these areas present significant opportunities for us, they also pose significant risks and challenges that we must address.
The Black-Scholes option pricing model requires the use of highly subjective and complex assumptions, which determine the fair value of stock-based awards. If we had made different assumptions, our stock-based compensation expense, net loss and net loss per share attributable to common stockholders could have been significantly different.
If we had made different assumptions, our stock-based compensation expense, net loss and net loss per share attributable to common stockholders could have been significantly different.
The consequences of failing to achieve the performance covenant will be cured if, within sixty days of failing to achieve the performance covenant, we issue additional equity securities or subordinated debt with net proceeds sufficient to fund any cash flow deficiency generated from operations, as defined in the Amended Loan Agreement.
The consequences of failing to achieve the performance covenants, when applicable, will be cured if (i) within thirty days of failing to achieve the performance covenant, we submit a new Board approved financial plan to Innovatus under which we are expected to break even on a cash flow basis prior to the maturity date, and (ii) within thirty days of the submission of such financial plan, we issue additional equity securities or subordinated debt with net proceeds sufficient to fund any cash flow deficiency generated from operations, as defined in the Amended Loan Agreement.
Some of these factors include the year-end holiday period and other major holidays, vacation patterns of both patients and healthcare providers (including medical conferences), climate and weather conditions in our markets (for example, excess sun exposure can cause flares in SLE), seasonal conditions that may affect medical practices and provider activity (for example influenza outbreaks that may reduce the percentage of patients that can be seen) and other factors relating to the timing of patient benefit changes, as well as patient deductibles and co-insurance limits.
We discuss many of these risks, uncertainties and other factors in the section entitled "Risk Factors." Seasonality Based on our experience to date, we expect some seasonal variations in our financial results due to a variety of factors, such as: the year-end holiday period and other major holidays, vacation patterns of both patients and healthcare providers (including medical conferences), climate and weather conditions in our markets (for example, excess sun exposure can cause flares in SLE), seasonal conditions that may affect medical practices and provider activity (for example, influenza outbreaks that may reduce the percentage of patients that can be seen) and other factors relating to the timing of patient benefit changes, as well as patient deductibles and co-insurance limits. 74 Inflationary Environment The current inflationary environment has resulted in higher prices, which have impacted our costs incurred to generate revenue from our laboratory testing services, costs to attract and retain personnel, and other operating costs.
We conduct clinical studies to validate our new testing products, as well as ongoing clinical and outcome studies to further expand the published evidence to support our commercialized AVISE ® testing products.
We conduct clinical studies to validate our new testing products, as well as ongoing clinical and outcome studies to further expand the published evidence that supports our commercialized AVISE ® testing products. We also expend funds to secure clinical samples that can be used in discovery, product development, clinical validation, utility and outcome studies.
The Company is not obligated to sell any shares of Company common stock in the offering and, as of December 31, 2022, the Company had not sold any shares of its common stock pursuant to the Sales Agreement. As of December 31, 2022, we had $62.4 million of cash and cash equivalents.
The Sales Agreement was amended in November 2023 in connection with the filing of the Form S-3 discussed above. The Company is not obligated to sell any shares of Company common stock in the offering and, as of December 31, 2023, the Company had not sold any shares of its common stock pursuant to the Sales Agreement.
Cash used to fund operating expenses is impacted by the timing of when we pay expenses, as reflected in the change in our outstanding accounts payable and accrued expenses.
We expect research and development expenses to increase in the short-term as a result of ongoing clinical studies. We believe we have sufficient laboratory capacity to support increased test volume. Cash used to fund operating expenses is impacted by the timing of when we pay expenses, as reflected in the change in our outstanding accounts payable and accrued expenses.
Financial Overview Revenue We recognize revenue in accordance with the provisions of ASC Topic 606, Revenue from Contracts with Customers. We record revenue on an accrual basis, using an estimate of the amount we will ultimately receive, as determined based on a historical analysis of amounts collected by test and by payor, among other factors.
We record revenue on an accrual basis, using an estimate of the amount that we will ultimately realize, as determined based on a historical analysis of amounts collected by test and by payor, among other factors. Changes to such estimates may increase or decrease revenue recognized in future periods.
Selling, General and Administrative Expenses Selling, general and administrative expenses increased $7.5 million, or 16.8%, for the year ended December 31, 2022 compared to the year ended December 31, 2021.
Research and Development Expenses Research and development expenses decreased $5.0 million, or 50.7%, for the year ended December 31, 2023 compared to the year ended December 31, 2022.
This increase was primarily due to an increase of $4.5 million of personnel costs, including salaries, benefits, other reimbursable employee expenses and severance expenses, in addition to increases related to marketing expenses of $1.3 million, facilities and allocated overhead of $0.7 million, legal expenses of $0.6 million, professional service fees of $0.6 million, public company expenses of $0.2 million and third-party billing expenses of $0.2 million.
This decrease was primarily due to decreases of $6.1 million of personnel costs, including salaries, benefits, stock-based compensation, severance expenses and other reimbursable employee expenses, as a result of lower headcount, in addition to decreases of $1.5 million in marketing expenses related to advertising expenses, speaker programs and trade show expenses, $0.3 million in insurance expenses, $0.2 million in third-party billing expenses and $0.1 million in legal expenses.
We rely on sales of our AVISE ® CTD test to generate the significant majority of our revenue. We expect to continue to invest in research and development in order to develop additional testing products.
Revenue growth for our testing products will depend, in part, on our ability to continue to expand our base of ordering healthcare providers and increase our penetration with existing healthcare providers. ▪ Development of Additional Testing Products. We rely on sales of our AVISE ® CTD test to generate the significant majority of our revenue.
Cash in excess of immediate requirements is invested in accordance with our investment policy, primarily with a view to liquidity and capital preservation. Currently, our funds are held in cash, money market funds and certificates of deposit. In September 2017, we entered into the loan and security agreement with Innovatus under which we immediately drew down $20.0 million.
As of December 31, 2023, we had an accumulated deficit of $279.2 million and cash and cash equivalents of $36.5 million. Cash in excess of immediate requirements is invested in accordance with our investment policy, primarily with a view to liquidity and capital preservation. Currently, our funds are held in cash, money market funds and certificates of deposit.
Net proceeds from the offering were approximately $64.7 million. On September 15, 2022, the Company entered into a sales agreement (the Sales Agreement) with Cowen and Company, LLC, as sales agent, pursuant to which the Company may offer and sell, from time to time, shares of Company common stock having an aggregate offering price of up to $50.0 million.
On November 17, 2023, we filed a registration statement on Form S-3 (Shelf Registration Statement) covering the offering, from time to time, of up to $150.0 million of common stock, preferred stock, debt securities, warrants and units, all of which remain available for sale at December 31, 2023. 78 On September 15, 2022, the Company entered into a sales agreement (the Sales Agreement) with TD Cowen as sales agent, pursuant to which the Company may offer and sell, from time to time, shares of Company common stock having an aggregate offering price of up to $50.0 million.
Gross margin as a percentage of revenue decreased to 46.9% for the year ended December 31, 2022, compared to 57.4% for the year ended December 31, 2021. This was primarily attributable to decreases in revenue and increased costs, as described above.
Gross margin as a percentage of revenue increased to 56.1% for the year ended December 31, 2023 compared to 46.9% for the year ended December 31, 2022. Selling, General and Administrative Expenses Selling, general and administrative expenses decreased $4.6 million, or 8.8%, for the year ended December 31, 2023 compared to the year ended December 31, 2022.
To date, we have generated only limited revenue, and we may never achieve revenue sufficient to offset our expenses. Since becoming public, our primary sources of capital have been cash inflows from product sales, sales of our common stock and, to a lesser extent, borrowings under our 2017 Term Loan.
Since becoming a public company, our primary sources of capital have been cash inflows from product sales, sales of our common stock and, to a lesser extent, borrowings under our 2017 Term Loan. In April 2023, we further amended the 2017 Term Loan, pursuant to which we prepaid $10.0 million of principal and amended additional terms of the agreement.
Liquidity and Capital Resources We have incurred net losses since our inception. For the years ended December 31, 2022 and 2021, we incurred a net loss of $47.4 million and $26.9 million, respectively, and we expect to incur additional losses and increased operating expenses in future periods. As of December 31, 2022, we had an accumulated deficit of $255.5 million.
For the years ended December 31, 2023 and 2022, we incurred a net loss of $23.7 million and $47.4 million, respectively, and we expect to incur additional losses in future periods. To date, we have generated only limited revenue, and we may never achieve revenue sufficient to offset our expenses.
Stock-Based Compensation We recorded stock-based compensation expense of approximately $4.7 million for each of the years ended December 31, 2022 and 2021, respectively. We expect to continue to grant stock options, restricted stock units and other equity-based awards in the future and to the extent that we do, our stock-based compensation expense recognized in future periods will likely increase.
We expect to continue to grant stock options, restricted stock units (RSUs) and other equity-based awards in the future and to the extent that we do, our stock-based compensation expense recognized in future periods will likely increase. For stock options and purchase rights granted under the ESPP, we estimate the grant date fair value using the Black-Scholes option-pricing valuation model.
We incurred net losses of $47.4 million and $26.9 million for the years ended December 31, 2022 and 2021, respectively and we expect to continue to incur operating losses in the near term. We completed our initial public offering (IPO) in September 2019, raising net proceeds from the offering of approximately $50.4 million.
For the years ended December 31, 2023 and 2022, we incurred net losses of $23.7 million and $47.4 million, respectively, and we expect to continue to incur operating losses in the near term. Our operations have been funded primarily through equity financings, debt financings and revenue from product sales.
Results of Operations Comparison of the Years Ended December 31, 2022 and 2021: Years Ended December 31, Change 2022 2021 (in thousands) Revenue $ 45,563 $ 48,299 $ (2,736) Operating expenses: Costs of revenue 24,214 20,588 3,626 Selling, general and administrative expenses 52,018 44,541 7,477 Research and development expenses 9,876 7,237 2,639 Goodwill impairment 5,506 — 5,506 Total operating expenses 91,614 72,366 19,248 Loss from operations (46,051) (24,067) (21,984) Interest expense (2,448) (2,625) 177 Interest income 830 16 814 Loss before income taxes (47,669) (26,676) (20,993) Income tax expense 282 (175) 457 Net loss $ (47,387) $ (26,851) $ (20,536) Revenue Revenue decreased $2.7 million, or 5.7%, for the year ended December 31, 2022 compared to the year ended December 31, 2021, primarily due to the $1.2 million reduction of revenue from the Janssen Agreement and a decrease in ASP, partially offset by increases in volume.
Results of Operations 76 Comparison of the Years Ended December 31, 2023 and 2022: Year Ended December 31, Change 2023 2022 (in thousands) Revenue $ 52,548 $ 45,563 $ 6,985 Operating expenses: Costs of revenue 23,092 24,214 (1,122) Selling, general and administrative expenses 47,428 52,018 (4,590) Research and development expenses 4,865 9,876 (5,011) Goodwill impairment — 5,506 (5,506) Total operating expenses 75,385 91,614 (16,229) Loss from operations (22,837) (46,051) 23,214 Interest expense (2,335) (2,448) 113 Interest income 1,516 830 686 Loss before income taxes (23,656) (47,669) 24,013 Income tax (expense) benefit (33) 282 (315) Net loss $ (23,689) $ (47,387) $ 23,698 Revenue Revenue increased $7.0 million, or 15.3%, for the year ended December 31, 2023 compared to the year ended December 31, 2022, primarily due to improved commercial payor ASP, increased AVISE ® CTD year-over-year volume and cash collections from tests performed in prior periods, partially offset by decreased Medicare ASP.
For the year ended December 31, 2022, 135,210 AVISE ® CTD tests were delivered, representing approximately 5% growth over the same period in 2021. The number of ordering healthcare providers in the fourth quarter of 2022 was a record 2,419, representing an approximate 14% increase over the same period in 2021.
The number of ordering healthcare providers in the quarter ended December 31, 2023 was 2,383, representing an approximate 2% decrease over the same period in 2022.
Interest Expense Interest expense decreased $0.2 million for the year ended December 31, 2022 compared to the year ended December 31, 2021 due to lower interest rates on the company's 2017 Term Loan.
This analysis identified an impairment of $5.5 million related to our goodwill. Interest Expense Interest expense decreased $0.1 million for the year ended December 31, 2023 compared to the year ended December 31, 2022 due to a lower principal balance on the company's Amended Loan Agreement.
We are continuing the process of evaluating our operations, test offerings, research and development pursuits and facilities footprint, among other aspects of our business strategy. 72 Factors Affecting Our Performance We believe there are several important factors that have impacted, and that we expect will impact, our operating performance and results of operations, including: ▪ Reimbursement for Our Testing Products .
Factors Affecting Our Performance We believe there are several important factors that have impacted, and that we expect will impact, our operating performance and results of operations, including: ▪ Reimbursement for Our Testing Products . Our revenue depends on achieving broad coverage and reimbursement for our tests from third-party payors, including both commercial payors and government payors.
As a result, our costs of revenue as a percentage of revenue may vary significantly from period to period due to the composition of payors for each period's billings. We expect that our costs of revenue will increase in the near-term as test volume increases.
Each payor, whether commercial, government, or individual, reimburses us at different amounts. These differences can be significant. As a result, our costs of revenue as a percentage of revenue may vary significantly from period to period due to the composition of payors for each period's billings.
Inflationary Environment The current inflationary environment has resulted in higher prices, which have impacted our costs incurred to generate revenue from our laboratory testing services, costs to attract and retain personnel, and other operating costs. The severity and duration of the current inflationary environment remains uncertain and may continue to impact our financial condition and results of operations.
The severity and duration of the current inflationary environment remains uncertain and may continue to impact our financial condition and results of operations. Financial Overview Revenue We recognize revenue in accordance with the provisions of ASC Topic 606, Revenue from Contracts with Customers.
Reimbursement for our testing services comes from several sources, including commercial payors, such as insurance companies and health maintenance organizations, government payors, such as Medicare and Medicaid, and patients. Reimbursement rates vary by product and payor. Since inception we have devoted substantially all of our efforts developing and marketing products for the diagnosis, prognosis and monitoring of autoimmune diseases.
We have never been profitable and, as of December 31, 2023, we had $36.5 million of cash and cash equivalents and an accumulated deficit of $279.2 million. Reimbursement for our testing services comes from several sources, including commercial payors (such as insurance companies and health maintenance organizations), government payors (such as Medicare and Medicaid), and patients.
These increases were partially offset by decreases in expenses related to clinical studies of $0.6 million, collaboration expenses of $0.3 million and employee bonuses of $0.2 million.
These decreases were partially offset by the recognition of a $1.5 million loss on the disposal of assets primarily related to an assignment of a lease, in addition to an increases in expenses related to bonuses of $1.3 million, facilities and allocated overhead expenses of $0.5 million and commissions of 0.3 million.
Additionally, retrospective reimbursement adjustments can negatively impact our revenue and cause our financial results to fluctuate. ▪ Continued Growth of Our Testing Products. Since the launch of AVISE ® CTD in 2012 and through December 31, 2022, we have delivered approximately 750,000 of these tests.
Since the launch of AVISE ® CTD in 2012 and through December 31, 2023, we have delivered approximately 887,000 of these tests. 137,650 AVISE ® CTD tests were delivered in the year ended December 31, 2023, representing approximately 2% growth over the same period in 2022.
Spending on research and development for both experiments and studies may vary significantly by quarter depending on the timing of these various expenses. ▪ How We Recognize Revenue .
Our spending on experiments and clinical studies may vary substantially from quarter to quarter, and the timing of these research and development activities is difficult to predict.
The prepayment premium was 2% as of December 31, 2022 and decreases by 1% on each of November 1, 2023 and November 1, 2024. Our obligations under the Amended Loan Agreement are secured by a security interest in substantially all of our assets, including our intellectual property.
See Note 4, Borrowings, to our audited financial statements included in this Annual Report on Form 10-K for additional information. Our obligations under the Amended Loan Agreement are secured by a security interest in substantially all of our assets, including our intellectual property.
Overview We are dedicated to transforming the care continuum for patients suffering from debilitating and chronic autoimmune diseases by enabling timely differential diagnosis and optimizing therapeutic intervention. We have developed and are commercializing a portfolio of innovative testing products under our AVISE ® brand, several of which incorporate CB-CAPs technology.
Overview We exist to provide clarity in autoimmune disease decision making with the goal of improving patients' clinical outcomes. We have developed and are commercializing a portfolio of innovative testing products under our AVISE ® brand, which allow for the differential diagnosis, prognosis and monitoring of complex autoimmune and autoimmune-related diseases.
Income Tax (Expense) Benefit Income tax expense increased $0.5 million for the year ended December 31, 2022 compared to the year ended December 31, 2021 due to a change from a deferred tax liability position to a deferred tax asset position related to indefinite-lived intangibles resulting from our goodwill.
Income Tax (Expense) Benefit Income tax benefit increased $0.3 million for the year ended December 31, 2023 compared to the year ended December 31, 2022, primarily due to the release of a valuation allowance. Liquidity and Capital Resources We have incurred net losses since our inception.
Removed
Our goal is to enable healthcare providers to improve care for patients through the differential diagnosis, prognosis and monitoring of complex autoimmune and autoimmune-related diseases, including SLE and RA. We market our testing products under our AVISE ® brand that allow for the differential diagnosis, prognosis and monitoring of complex autoimmune and autoimmune-related diseases.

… 44 more changes not shown on this page.

Other XGN 10-K year-over-year comparisons