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What changed in Fulgent Genetics, Inc.'s 10-K — 2024 vs 2025

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Paragraph-level year-over-year comparison of Fulgent Genetics, Inc.'s 2024 and 2025 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2025 report.

+722 added−710 removedSource: 10-K (2026-02-27) vs 10-K (2025-02-28)

Top changes in Fulgent Genetics, Inc.'s 2025 10-K

722 paragraphs added · 710 removed · 585 edited across 8 sections

Item 1. Business

Business — how the company describes what it does

203 edited+39 added−46 removed243 unchanged
Biggest changeAffected stakeholders also continue to press for a comprehensive legislative solution to create a harmonized paradigm for oversight of LDTs by both the FDA and CMS, instead of implementation of the FDA’s final rule, which may be disruptive to the industry and to patient access to certain diagnostic tests.
Biggest changeHowever, uncertainty remains regarding the future of federal oversight in this area, as Congress could 7 enact new legislation establishing a statutory framework for regulating all IVDs, including LDTs. Affected stakeholders continue to press for a comprehensive legislative solution to create a harmonized paradigm for oversight of LDTs by both the FDA and CMS.
Historically, we have significantly relied on organic growth and word-of-mouth among our customers to generate interest in our tests, which we believe demonstrates the value of our offerings.
Historically, we have relied significantly on organic growth and word-of-mouth among our customers to generate interest in our tests, which we believe demonstrates the value of our offerings.
In recent years, we have invested significant time and capital to strengthen our sales and marketing efforts, including increasing the size and restructuring the organization of our internal team, re-focusing our initiatives and strategies, and increasing the overall scope of our marketing activities.
In recent years, we have invested significant time and capital to strengthen our sales and marketing efforts, including increasing the size of and restructuring the organization of our internal team, re-focusing our initiatives and strategies, and increasing the overall scope of our marketing activities.
Our laboratories located in California, Texas, Georgia, Massachusetts, and Arizona are CLIA-certified and are accredited by the College of American Pathologists, or CAP, and the Centers for Medicare & Medicaid Services, or CMS.
Our laboratories located in California, Texas, Georgia, Massachusetts, and Arizona are CLIA-certified by the Centers for Medicare & Medicaid Services, or CMS, and are accredited by the College of American Pathologists, or CAP.
Our Texas laboratory currently holds the out-of-state licenses from New York, California, Maryland, Pennsylvania, and Rhode Island to perform testing on specimens from these states, and our California laboratory holds the required out-of-state laboratory licenses from New York, Maryland, Pennsylvania, and Rhode Island in order to perform testing on specimens from these states.
Our Texas laboratory currently holds out-of-state licenses from New York, California, Maryland, Pennsylvania, and Rhode Island to perform testing on specimens from these states, and our California laboratory holds the required out-of-state laboratory licenses from New York, Maryland, Pennsylvania, and Rhode Island in order to perform testing on specimens from these states.
We do not believe that any of our tests meet the current definition of ADLT. We, therefore, must report private payor rates for our tests every three years. Laboratories that fail to report the required payment information may be subject to substantial civil monetary penalties.
We do not believe that any of our tests meet the current definition of ADLT. Therefore, we must report private payor rates for our tests every three years. Laboratories that fail to report the required payment information may be subject to substantial civil monetary penalties.
See “Contingencies” in Note 8, Debt, Commitments and Contingencies to the Consolidated Financial Statements, and the paragraphs under the heading entitled “Failure to comply with government laws and regulations related to submission of claims for our services could result in significant monetary damages and penalties and exclusion from the Medicare and Medicaid programs and corresponding foreign reimbursement programs.
See “Contingencies” in Note 8, Debt, Commitments and Contingencies to our consolidated financial statements, and the paragraphs under the heading entitled “Failure to comply with government laws and regulations related to submission of claims for our services could result in significant monetary damages and penalties and exclusion from the Medicare and Medicaid programs and corresponding foreign reimbursement programs.
Post-approval trials, sometimes referred to as “Phase 4” clinical trials, may be conducted after initial marketing approval. These trials are used to gain additional experience from the treatment of patients in the intended therapeutic indication. In certain instances, FDA may mandate the performance of “Phase 4” clinical trials as a condition of approval of an NDA.
Post-approval trials, sometimes referred to as “Phase 4” clinical trials, may be conducted after initial marketing approval. These trials are used to gain additional experience from the treatment of patients in the intended therapeutic indication. In certain instances, the FDA may mandate the performance of “Phase 4” clinical trials as a condition of approval of an NDA.
Information about certain clinical trials, including details of the protocol and eventually study results, also must be submitted within specific timeframes to the National Institutes of Health, or NIH, for public dissemination on the ClinicalTrials.gov data registry.
Information about certain clinical trials, including details of the protocol and eventually study results, must also be submitted within specific timeframes to the National Institutes of Health, or NIH, for public dissemination on the ClinicalTrials.gov data registry.
Under the goals and policies agreed to by the FDA under PDUFA, the FDA has 10 months from the filing date, to complete its review of a new molecular-entity, or NME, NDA and respond to the applicant, and six months from the filing date of an NME NDA designated for priority review.
Under the goals and policies agreed to by the FDA under PDUFA, the FDA has 10 months from the filing date, to complete its review of a new molecular-entity, or NME, NDA and respond to the applicant six months from the filing date of an NME NDA designated for priority review.
If the follow-on applicant does not challenge the innovator’s listed patents, FDA will not approve the ANDA or 505(b)(2) application until all the listed patents claiming the referenced product have expired. A certification that the new product will not infringe the already approved product’s listed patents, or that such patents are invalid, is called a Paragraph IV certification.
If the follow-on applicant does not challenge the innovator’s listed patents, the FDA will not approve the ANDA or 505(b)(2) application until all the listed patents claiming the referenced product have expired. A certification that the new product will not infringe the already approved product’s listed patents, or that such patents are invalid, is called a Paragraph IV certification.
CCPA/CPRA The California Consumer Privacy Act, or CCPA, and the California Privacy Rights Act, or CPRA, set forth a privacy framework for covered businesses by creating an expanded definition of personal information, establishing data privacy rights for California consumers and employees, imposing special rules on the collection of consumer data from minors, and creating a new and potentially severe statutory damages framework for businesses that violate the CCPA and/or fail to implement reasonable security procedures and practices to prevent data breaches.
The California Consumer Privacy Act, or CCPA, and the California Privacy Rights Act, or CPRA, set forth a privacy framework for covered businesses by creating an expanded definition of personal information, establishing data privacy rights for California consumers and employees, imposing special rules on the collection of consumer data from minors, and creating a new and potentially severe statutory damages framework for businesses that violate the CCPA and/or fail to implement reasonable security procedures and practices to prevent data breaches.
We also provide an expansive benefit offering including medical, dental, and vision healthcare coverage; life and accidental death and dismemberment coverage; optional legal, pet insurance, hospitalization, critical illness and accident coverage; insurance and disability coverage; 401(k) investment plans with Company matching; tax-advantaged savings accounts; paid time off and leaves of absence; and wellness programs.
We also provide an expansive benefit offering including medical, dental, and vision healthcare coverage; life and accidental death and dismemberment coverage; optional legal, pet insurance, hospitalization, critical illness and accident coverage; insurance and disability coverage; 401(k) investment plans with Company matching; tax-advantaged savings accounts, paid time off, leaves of absence and wellness programs.
On September 30, 2016, Fulgent Therapeutics LLC became our wholly owned subsidiary in a transaction we refer to as the Reorganization, in which the holders of all equity interests in Fulgent Therapeutics LLC immediately prior to the Reorganization became all of our stockholders immediately following the Reorganization. Our headquarters are located at 4399 Santa Anita Avenue, El Monte, California 91731.
On September 30, 2016, Fulgent Therapeutics LLC became our wholly owned subsidiary in a transaction we refer to as the Reorganization, in which the holders of all equity interests in Fulgent Therapeutics LLC immediately prior to the Reorganization became our stockholders immediately following the Reorganization. Our headquarters are located at 4399 Santa Anita Avenue, El Monte, California 91731.
The steps required before a therapeutic product may be marketed in the United States are numerous and include, but are not limited to, the following: • completion of non-clinical laboratory tests, animal studies, chemical process development, and formulation studies according to GLP and other applicable regulations and guidance; • the submission to the FDA of an investigational new drug application, or IND, which must become effective before clinical trials may commence; • performance of adequate and well-controlled clinical trials according to good clinical practices, or GCPs, to establish the safety and efficacy of the drug candidate for its intended use(s); 11 • the submission of a New Drug Application, or NDA, to the FDA; • satisfactory completion of an FDA inspection of the manufacturing facility or facilities at which the drug candidate is produced to assess readiness for commercial manufacturing and conformance to the manufacturing-related elements of the application, to conduct a data integrity audit, and to assess compliance with current Good Manufacturing Practices, or cGMPs, to assure that the facilities, methods, and controls are adequate; and • the FDA's review and approval of the NDA.
The steps required before a therapeutic product may be marketed in the United States are numerous and include, but are not limited to, the following: • completion of non-clinical laboratory tests, animal studies, chemical process development, and formulation studies according to GLP and other applicable regulations and guidance; • the submission to the FDA of an investigational new drug application, or IND, which must become effective before clinical trials may commence; • performance of adequate and well-controlled clinical trials according to good clinical practices, or GCPs, to establish the safety and efficacy of the product candidate for its intended use(s); • the submission of a New Drug Application, or NDA, to the FDA; • satisfactory completion of an FDA inspection of the manufacturing facility or facilities at which the product candidate is produced to assess readiness for commercial manufacturing and conformance to the manufacturing-related elements of the application, to conduct a data integrity audit, and to assess compliance with current Good Manufacturing Practices, or cGMPs, to assure that the facilities, methods, and controls are adequate; and • the FDA’s review and approval of the NDA.
Other potential consequences of regulatory non-compliance include, among other things: • Restrictions on the marketing or manufacturing of the product, complete withdrawal of the product from the market or product recalls; • fines, warning letters or other enforcement-related letters or clinical holds on post-approval clinical trials; • refusal of the FDA to approve pending NDAs or supplements to approved NDAs; • product seizure or detention, or refusal to permit the import or export of products; injunctions or the imposition of civil or criminal penalties; • consent decrees, corporate integrity agreements, debarment, or exclusion from federal health care programs; and/or • mandated modification of promotional materials and labeling and the issuance of corrective information.
Other potential consequences of regulatory non-compliance include, among other things: • Restrictions on the marketing or manufacturing of the product, complete withdrawal of the product from the market or product recalls; • fines, warning letters or other enforcement-related letters or clinical holds on post-approval clinical trials; • refusal of the FDA to approve pending NDAs or supplements to approved NDAs; • product seizure or detention, or refusal to permit the import or export of products; injunctions or the imposition of civil or criminal penalties; 14 • consent decrees, corporate integrity agreements, debarment, or exclusion from federal health care programs; and/or • mandated modification of promotional materials and labeling and the issuance of corrective information.
Clinical trials are typically conducted in three sequential phases that may overlap or be combined: • Phase 1: Initial safety study in appropriate human subjects or patients where the candidate therapy is tested for safety, dosage tolerance, absorption, distribution, metabolism, and excretion. • Phase 2: Studies in a limited patient population designed to identify possible adverse effects and safety risks, to determine the efficacy of the product for specific targeted diseases, and to determine tolerance and optimal dosage. • Phase 3: Studies in an expanded patient population to further evaluate clinical efficacy and to further test for safety.
Clinical trials are typically conducted in three sequential phases that may overlap or be combined: • Phase 1: Initial safety study in appropriate human subjects or patients where the candidate therapy is tested for safety, dosage tolerance, absorption, distribution, metabolism, and excretion. 11 • Phase 2: Studies in a limited patient population designed to identify possible adverse effects and safety risks, to determine the efficacy of the product for specific targeted diseases, and to determine tolerance and optimal dosage. • Phase 3: Studies in an expanded patient population to further evaluate clinical efficacy and to further test for safety.
Physician Referral Prohibitions Laws and Regulations We are also subject to the U.S. federal law directed at “self-referrals,” commonly known as the “Stark Law,” which prohibits a physician from making referrals for certain designated health services, including laboratory services, that are covered by the Medicare program, to an entity with which the physician or an immediate family member has a direct or indirect financial relationship, unless an exception applies.
Physician Referral Prohibitions Laws and Regulations We are also subject to the U.S. federal law directed at “self-referrals,” commonly known as the “Stark Law,” which prohibits a physician from making referrals for certain designated health services, including clinical laboratory services, that are covered by the Medicare program, to an entity with which the physician or an immediate family member has a direct or indirect financial relationship, unless an exception applies.
Many of the instruments, reagents, kits, or other consumable products used within our laboratories are regulated as medical devices and therefore must comply with FDA quality system regulations and certain other device requirements. We have policies and procedures in place to ensure that we source such materials from suppliers that are in compliance with any applicable medical device regulatory requirements.
Many of the instruments, reagents, kits, and other consumable products used within our laboratories are regulated as medical devices and therefore must comply with FDA quality system regulations and certain other device requirements. We have policies and procedures in place to ensure that we source such materials from suppliers that are in compliance with any applicable medical device regulatory requirements.
Among other things, the Information Blocking 21 Rule requires us to provide patients with on-demand access to laboratory test results. These requirements can be inconsistent with our obligations under state law and/or medical or ethical standards. It is currently unclear how the ONC will approach delays in providing patient access in these situations.
Among other things, the Information Blocking Rule requires us to provide patients with on-demand access to laboratory test results. These requirements can be inconsistent with our obligations under state law and/or medical or ethical standards. It is currently unclear how the ONC will approach delays in providing patient access in these situations.
Healthcare Fraud and Abuse Laws Applicable to our Business In the United States, we must comply with various fraud and abuse laws, and we are subject to regulation by various federal, state, and local authorities, including CMS, other divisions of HHS (such as the Office of Inspector General of the Department of Health and Human Services, or OIG), the DOJ, individual U.S.
Healthcare Fraud and Abuse Laws Applicable to our Business In the United States, we must comply with various fraud and abuse laws, and we are subject to regulation by various federal, state, and local authorities, including CMS, other divisions of HHS (such as the Office of Inspector General for the Department of Health and Human Services, or OIG), the DOJ, individual U.S.
If our clinical laboratories are out of compliance with the applicable state regulations, state agencies may suspend, restrict, or revoke our license to operate our clinical laboratories, assess substantial civil money penalties, or impose specific corrective action plans. Any such actions could materially affect our business. Currently, we maintain good standing with all state authorities.
If our clinical laboratories are out of compliance with the applicable state regulations, state agencies may suspend, restrict, or revoke our license to operate our clinical laboratories, assess substantial civil money penalties, or impose specific 6 corrective action plans. Any such actions could materially affect our business. Currently, we maintain good standing with all applicable state authorities.
All of these issues can cause delay in the reimbursement of the claim or our inability to get reimbursed. PAMA In April 2014, Congress passed the Protecting Access to Medicare Act of 2014, or PAMA, which included substantial changes to the way in which clinical laboratory services are priced and paid under Medicare’s Clinical Laboratory Fee Schedule, or CLFS.
All of these issues can cause delay in the reimbursement of the claim or our inability to get reimbursed. 9 PAMA In April 2014, Congress passed the Protecting Access to Medicare Act of 2014, or PAMA, which included substantial changes to the way in which clinical laboratory services are priced and paid under Medicare’s Clinical Laboratory Fee Schedule, or CLFS.
We have released preliminary data and completed enrollment for a Phase1/1b dose escalation/expansion clinical trial for evaluation of FID-007 in treating patients diagnosed with advanced solid tumors. This Phase 1/1b is being conducted at clinical trial sites in the United States and has enrolled 50 patients.
We have released preliminary data and completed enrollment for a Phase 1/1b dose escalation/expansion clinical trial for evaluation of FID-007 in treating patients diagnosed with advanced solid tumors. This Phase 1/1b is being conducted at clinical trial sites in the United States and has enrolled 50 patients.
Physicians and pharmacists consider a therapeutic equivalent generic drug to be fully substitutable for the RLD. In addition, by operation of certain state laws and numerous health insurance programs, the FDA’s designation of therapeutic equivalence often results in substitution of the generic drug without the knowledge or consent of either the prescribing physician or patient.
Physicians and pharmacists consider a therapeutic equivalent generic drug to be fully substitutable for the RLD. In addition, by operation of certain state laws and numerous health insurance programs, the FDA’s designation of therapeutic 16 equivalence often results in substitution of the generic drug without the knowledge or consent of either the prescribing physician or patient.
Furthermore, 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. Penalties for violations of the Anti-Kickback Statute are severe and include imprisonment, criminal fines, civil monetary penalties, and exclusion from participation in federal healthcare programs.
Furthermore, a person or entity does not need to have actual knowledge of the statute or specific intent to violate it to have committed a violation. Penalties for violations of the Anti-Kickback Statute are severe and include imprisonment, criminal fines, civil monetary penalties, and exclusion from participation in federal healthcare programs.
Unlike other nano drug delivery materials such as Human Serum Albumin, which is only soluble in water, our nano-drug delivery materials used for our drug candidates in development are soluble not only in water, but also in various organic solvents, as well as capable of hot melt mixing with active pharmaceutical ingredients, or APIs.
Unlike other nano drug delivery materials such as Human Serum Albumin, which is only soluble in water, our nano-drug delivery materials used for our product candidates in development are soluble not only in water, but also in various organic solvents, as well as capable of hot melt mixing with active pharmaceutical ingredients, or APIs.
We are also subject to governmental audits and investigations that could result in material refunds or settlement. Our business, prospects and financial condition may be adversely affected as the result of the current HRSA Audit and CIDs.” included in Item 1A “Risk Factors” of this Annual Report.
We are also subject to governmental audits and investigations that could result in material refunds or settlement. Our business, prospects and financial condition may be adversely affected as the result of the HRSA Audit and CIDs.” included in Item 1A “Risk Factors” of this Annual Report.
The FDA must make a decision on accepting an NDA for filing within 60 days of receipt and inform the sponsor by the 74th day after the FDA’s receipt of the submission whether an application is sufficiently complete to permit substantive review. Once the submission is accepted for filing, the FDA begins an in-depth review of the NDA.
The FDA must make a decision on accepting an NDA for filing within 60 days of receipt and inform the 12 sponsor by the 74th day after the FDA’s receipt of the submission whether an application is sufficiently complete to permit substantive review. Once the submission is accepted for filing, the FDA begins an in-depth review of the NDA.
The FDA is not bound by recommendations of an advisory committee, but it considers such recommendations when making final agency decisions on marketing approval. The FDA likely will reanalyze the clinical trial data, which could result in extensive discussions between the FDA and the applicant during the review process.
The FDA is not bound by recommendations of an advisory committee, but it considers such recommendations when making final decisions on marketing approval. The FDA likely will reanalyze the clinical trial data, which could result in extensive discussions between the FDA and the applicant during the review process.
As a condition of approval, the FDA may require that a sponsor of a drug receiving accelerated approval perform adequate and well-controlled post-marketing clinical trials to verify and describe the predicted effect on IMM or other clinical endpoint, and the product may be subject to expedited withdrawal procedures.
As a condition of approval, the FDA may require that a sponsor of a drug receiving accelerated approval perform adequate and well-controlled post-marketing clinical trials to verify and describe the predicted effect on IMM or other clinical 15 endpoint, and the product may be subject to expedited withdrawal procedures.
However, many of our competitors have longer operating histories; larger customer bases; more expansive brand recognition; established manufacturing capabilities and facilities; deeper market penetration; substantially greater financial, technological, research and development resources and selling and marketing capabilities; and considerably more experience dealing with insurance payors.
However, many of our competitors have longer operating histories; larger customer bases; greater brand recognition; established manufacturing capabilities and facilities; deeper market penetration; substantially greater financial, technological, research and development resources and selling and marketing capabilities and considerably more experience dealing with insurance payors.
We have also received a CID issued by the DOJ pursuant to the False Claims Act related to its investigation of allegations of medically unnecessary laboratory testing, improper billing for laboratory testing, and remuneration received or provided in violation of the Anti-Kickback Statute and the Stark Law.
We have received a CID issued by the DOJ pursuant to the False Claims Act related to its investigation of allegations of medically unnecessary laboratory testing, improper billing for laboratory testing, and remuneration received or provided in violation of the Anti-Kickback Statute and the Stark Law.
Laboratory Services Sales and Marketing Our sales and marketing force for our laboratory services business currently consists of internal teams of sales and marketing professionals, respectively, with deep experience in our industry, as well as a network of primarily U.S. field-based sales representatives who are knowledgeable about our tests and testing services.
Laboratory Services Sales and Marketing Our sales and marketing force for our laboratory services business currently consists of internal teams of sales and marketing professionals with deep experience in our industry, as well as a network of primarily U.S. field-based sales representatives who are knowledgeable about our tests and testing services.
Our Suppliers We rely on a limited number of suppliers for certain laboratory substances used in the chemical reactions incorporated into our tests and testing services, which we refer to as reagents, as well as for the sequencers and various other equipment and materials we use in our laboratory operations.
Our Suppliers We rely on a limited number of suppliers for certain laboratory substances used in the chemical reactions incorporated in our tests and testing services, which we refer to as reagents, as well as for the sequencers and various other equipment and materials we use in our laboratory operations.
Significantly, EKRA permits the DOJ to issue regulations clarifying EKRA’s exceptions or adding additional exceptions, but such regulations have not yet been issued. There are also U.S. federal laws related to healthcare fraud and false statements relating to healthcare matters.
Significantly, EKRA permits the DOJ to issue regulations clarifying EKRA’s exceptions or adding additional exceptions, but such regulations have not yet been issued. There are also U.S. federal laws related to criminal healthcare fraud and false statements relating to healthcare matters.
Our costs for complying with these laws and regulations cannot be estimated or predicted and depends on a number of factors, including the amount and nature of waste we produce, which depends in part on the number of tests we perform, and the terms we negotiate with our waste disposal vendors.
Our costs for complying with these laws and regulations cannot be estimated or predicted and depend on a number of factors, including the amount and nature of waste we produce, which depends, in part, on the number of tests we perform, and the terms we negotiate with our waste disposal vendors.
The advertising and promotion of medical devices is also subject to general principles set forth by EU directives, which establish that devices that are CE marked may only be marketed and advertised in 8 the EU in accordance with their intended purpose.
The advertising and promotion of medical devices is also subject to general principles set forth by EU directives which establish that devices that are CE marked may only be marketed and advertised in the EU in accordance with their intended purpose.
Information related to the investigational product, patient population, phase of investigation, study sites and investigators, and other aspects of the clinical trial is made public as part of the registration of 12 the clinical trial. Sponsors are also obligated to disclose the results of their clinical trials after completion.
Information related to the investigational product, patient population, phase of investigation, study sites and investigators, and other aspects of the clinical trial is made public as part of the registration of the clinical trial. Sponsors are also obligated to disclose the results of their clinical trials after completion.
Significant improvement may be illustrated by 15 evidence of increased effectiveness in the treatment of a condition, elimination or substantial reduction of a treatment-limiting drug reaction, documented enhancement of patient compliance that may lead to improvement in serious outcomes, or evidence of safety and effectiveness in a new subpopulation.
Significant improvement may be illustrated by evidence of increased effectiveness in the treatment of a condition, elimination or substantial reduction of a treatment-limiting drug reaction, documented enhancement of patient compliance that may lead to improvement in serious outcomes, or evidence of safety and effectiveness in a new subpopulation.
However, Part D prescription drug formularies must include drugs within each therapeutic category and class of covered Part D drugs, though not necessarily all the drugs in each category or class. Any formulary used by a Part D prescription drug plan must be developed and reviewed by a pharmacy and therapeutic committee.
However, Part D prescription drug formularies must include drugs within each therapeutic category and class of covered Part D drugs, though not necessarily all the drugs in each category or class. Any formulary used by a Part D prescription drug plan must be developed and reviewed by a pharmacy and therapeutic 18 committee.
Prior to performing a test, we may negotiate the reimbursement rate with the payor if the benefits investigation has determined the test to be medically necessary, and the payor has issued prior authorization. After we file the claim, we may also need to resubmit documentation or appeal a denial.
Prior to performing a test, we may negotiate the reimbursement rate with the payor if the benefits investigation has determined the test to be medically necessary, and the payor has issued prior authorization, if required. After we file the claim, we may also need to resubmit documentation or appeal a denial.
For the purposes of this provision, an NCE is a drug that contains no active moiety that has previously been approved by the FDA in any other NDA. An active moiety is the molecule or ion responsible for the physiological or pharmacological action of the drug 17 substance.
For the purposes of this provision, an NCE is a drug that contains no active moiety that has previously been approved by the FDA in any other NDA. An active moiety is the molecule or ion responsible for the physiological or pharmacological action of the drug substance.
Rules and Regulations Applicable to Our Pharmaceutical Research and Development Activities We engage in research and development activities, including pharmaceutical research and development activities through our wholly owned subsidiary, Fulgent Pharma. Development of therapeutic products is subject to extensive regulation by the FDA and other regulatory agencies.
Rules and Regulations Applicable to Our Pharmaceutical Research and Development Activities We engage in research and development activities, including pharmaceutical research and development activities through our wholly owned subsidiary, Fulgent Pharma. Development of therapeutic products is subject to extensive regulation by the FDA and 10 other regulatory agencies.
In particular, securing 14 FDA approval for new indications is similar to the process for approval of the original indication and requires, among other things, submitting data from adequate and well-controlled clinical trials to demonstrate the product’s safety and efficacy in the new indication.
In particular, securing FDA approval for new indications is similar to the process for approval of the original indication and requires, among other things, submitting data from adequate and well-controlled clinical trials to demonstrate the product’s safety and efficacy in the new indication.
In addition to data breach notification laws, some states have enacted statutes and rules requiring businesses to reasonably protect certain types of personal information they hold or to otherwise comply with certain specified data security requirements for personal information.
In addition to data breach notification laws, some states have enacted statutes and rules requiring 22 businesses to reasonably protect certain types of personal information they hold or to otherwise comply with certain specified data security requirements for personal information.
In addition, providers and suppliers must report and return any overpayments received from the 24 Medicare and Medicaid programs within 60 days of identification. Failure to identify and return such overpayments exposes the provider or supplier to False Claims Act liability.
In addition, providers and suppliers must report and return any overpayments received from the Medicare and Medicaid programs within 60 days of identification. Failure to identify and return such overpayments exposes the provider or supplier to False Claims Act liability.
Nonetheless, the manufacturers of such devices must comply with specific requirements in the IVDR according to the timelines established, but ultimately, such products, as with all new IVDs, will have to undergo the IVDR’s conformity assessment procedures.
Nonetheless, the manufacturers 8 of such devices must comply with specific requirements in the IVDR according to the timelines established, but ultimately, such products, as with all new IVDs, will have to undergo the IVDR’s conformity assessment procedures.
As a result, they may be able to respond more quickly to changes in customer requirements or preferences, develop faster and better advancements for their technologies, product candidates and tests, create and implement more successful strategies for the promotion and sale of their tests, obtain more favorable results from insurance payors regarding coverage and reimbursement for their offerings, adopt more aggressive pricing policies for their tests, secure supplies from vendors on more favorable terms, or devote substantially more resources to infrastructure and systems development.
As a result, they may be able to respond more quickly to changes in customer requirements or preferences, develop faster and better advancements for their technologies, product candidates and tests, create and implement more successful strategies for the promotion and sale of their tests, obtain more favorable results from insurance payors regarding coverage and reimbursement for their offerings, adopt more aggressive pricing policies for their tests, secure supplies from vendors on more favorable terms or devote substantially more resources to infrastructure and systems development than us.
Prohibitions on the Corporate Practice of Medicine Numerous states have enacted laws prohibiting business corporations, such as ours, from practicing medicine and employing or engaging physicians to practice medicine, generally referred to as the prohibition against the corporate practice of medicine.
Prohibitions on the Corporate Practice of Medicine Numerous states have enacted laws prohibiting business corporations, such as ours, from practicing medicine and directly employing or engaging physicians to practice medicine, generally referred to as the prohibition against the corporate practice of medicine.
The goal of our nano-drug delivery platform is to develop drug candidates to treat various diseases for which we believe the current standard of care is inadequate or may be improved.
The goal of our nano-drug delivery platform is to develop product candidates to treat various diseases for which we believe the current standard of care is inadequate or may be improved.
CMIA The HIPAA privacy, security, and breach notification regulations establish a uniform federal “floor” but do not supersede state laws that are more stringent or that provide individuals with greater rights with respect to the privacy or security of, and access to, their records containing PHI, or insofar as such state laws apply to personal information that is broader in scope than PHI, as defined under HIPAA.
State Health Information Privacy Laws The HIPAA privacy, security, and breach notification regulations establish a uniform federal “floor” but do not supersede state laws that are more stringent or that provide individuals with greater rights with respect to the privacy or security of, and access to, their records containing PHI, or insofar as such state laws apply to personal information that is broader in scope than PHI, as defined under HIPAA.
Our therapeutic development business is focused on developing drug candidates for treating a broad range of cancers using a novel nanoencapsulation and targeted therapy platform designed to improve the therapeutic window and pharmacokinetic profile, or PK profile, of new and existing cancer drugs. Mission and Vision Founded in 2011, Fulgent began with two simple ideas: flexibility and affordability.
Our therapeutic development business is focused on developing product candidates for treating a broad range of cancers using a novel nanoencapsulation and targeted therapy platform designed to improve the therapeutic window and pharmacokinetic profile, or PK profile, of new and existing cancer drugs. Mission and Vision Founded in 2011, Fulgent began with two simple ideas: flexibility and affordability.
Unlike the ANDA pathway, which does not allow applicants to submit new clinical data other than bioavailability or bioequivalence data, the 505(b)(2) regulatory pathway does not preclude the possibility that a follow-on applicant would need to conduct additional clinical trials or nonclinical studies to demonstrate safety or effectiveness of the proposed change(s) being made to a previously approved drug.
Unlike the ANDA pathway, which does not allow applicants to submit new clinical data other than bioavailability or bioequivalence data, the 505(b)(2) regulatory pathway does not preclude the possibility that a follow-on applicant would need to conduct additional clinical trials or non-clinical studies to demonstrate safety or effectiveness of the proposed change(s) being made to a previously approved drug.
The major goal of the IVDR was to standardize diagnostic procedures within the EU, increase reliability of diagnostic analysis and enhance patient safety. Under the IVDR as enacted by the European Commission, or EC, IVDs are subject to additional legal requirements. Among other things, the IVDR introduced a new risk-based classification system and requirements for conformity assessments.
The major goal of the IVDR is to standardize diagnostic procedures within the EU, increase reliability of diagnostic analysis and enhance patient safety. Under the IVDR as enacted by the European Commission, or EC, IVDs are subject to additional legal requirements. Among other things, the IVDR introduced a new risk-based classification system and requirements for conformity assessments.
The target markets for these drug candidates are large and well-established, as shown in the figures below: Note: U.S. opportunity shown Sources: Evaluate Pharma, Wall Street research, and management pricing expectations 1. Head & Neck, or H&N, market opportunity for both 2 nd line and 3 rd line therapy 2.
The target markets for these product candidates are large and well-established, as shown in the figures below: Note: U.S. opportunity shown Sources: Evaluate Pharma, Wall Street research, and management pricing expectations 1. Head & Neck, or H&N, market opportunity for both 2 nd line and 3 rd line therapy 2.
We believe these advantages will allow us to generate a much broader range of drug candidate formulations, particularly amorphous drug candidate formulations, which can be used for both intravenous, or IV, and oral formulations with a goal to improve the PK profile, as well as safety and efficacy, for encapsulated drugs and therapeutics.
We believe these advantages will allow us to generate a much broader range of product candidate formulations, particularly amorphous product candidate formulations, which can be used for both intravenous, or IV, and oral formulations with a goal to improve the PK profile, as well as safety and efficacy, for encapsulated drugs and therapeutics.
Principal competitors include companies such as Ambry Genetics Corporation, a subsidiary of Tempus AI, Inc.; Baylor Genetics Management, LLC; Caris Life Sciences, LLC; Exact Sciences Corporation; Foundation Medicine, Inc.; GeneDx Holdings Corp.; Guardant Health, Inc.; Laboratory Corporation of America Holdings; Myriad Genetics, Inc.; Natera, Inc.; NeoGenomics, Inc.; PerkinElmer, Inc.; Quest Diagnostics Incorporated; Tempus AI, Inc.; and other commercial and academic laboratories.
Principal competitors include companies such as Ambry Genetics Corporation, a subsidiary of Tempus AI, Inc.; Baylor Genetics Management, LLC; Caris Life Sciences, LLC; Exact Sciences Corporation; Foundation Medicine, Inc.; GeneDx Holdings Corp.; Laboratory Corporation of America Holdings; Myriad Genetics, Inc.; Natera, Inc.; NeoGenomics, Inc.; PerkinElmer, Inc.; Quest Diagnostics Incorporated; Tempus AI, Inc. and other commercial and academic laboratories.
Numerous other federal, state, and foreign laws, including consumer protection laws and regulations, govern the collection, dissemination, use, access to, confidentiality and security of patient health information. In addition, Congress and some states are 22 considering new laws and regulations that further and more broadly protect the privacy and security of medical records or health information.
Other Applicable Privacy Laws Numerous other federal, state, and foreign laws, including consumer protection laws and regulations, govern the collection, dissemination, use, access to, confidentiality, and security of patient health information. In addition, Congress and some states are considering new laws and regulations that further and more broadly protect the privacy and security of medical records or health information.
The REMS plan could include medication guides, physician communication plans, assessment plans and/or elements to assure safe use, such as restricted distribution methods, patient registries or other risk minimization tools. The FDA determines the requirement for a REMS, as well as the specific REMS provisions, on a case-by-case basis.
The REMS plan could include medication guides, physician communication plans, assessment plans and/or elements to assure safe use, such as restricted distribution methods, patient registries or other risk minimization tools. The FDA determines the requirement of a REMS, as well as the specific REMS provisions, on a case-by-case basis.
Congress also recently amended the law to give the FDA the option of using 16 expedited procedures to withdraw product approval if the sponsor’s confirmatory trial fails to verify the claimed clinical benefits of the product. All promotional materials for products approved for marketing under the accelerated approval program are subject to prior review by the FDA.
Congress also amended the law to give the FDA the option of using expedited procedures to withdraw product approval if the sponsor’s confirmatory trial fails to verify the claimed clinical benefits of the product. All promotional materials for products approved for marketing under the accelerated approval program are subject to prior review by the FDA.
The same series of laws modified the phase-in of payment reductions resulting from private payor rate implementation so that a zero percent reduction limit was applied for calendar years, or CYs, 2021 through 2024, as compared to the payment amounts for a test the preceding year.
The same series of laws modified the phase-in of payment reductions resulting from private payor rate implementation so that a zero percent reduction limit was applied for calendar years, or CYs, 2021 through 2025, as compared to the payment amounts for a test the preceding year.
IVD medical devices, other than devices for performance evaluation, must bear the CE mark of conformity when they are placed on the European market. The CE mark is a declaration by the manufacturer that the product meets all the appropriate provisions of the applicable legislation implementing the relevant European Directive.
IVD medical devices, other than devices for performance evaluation, must bear the CE mark, which stands for European Conformity, of conformity when they are placed on the European market. The CE mark is a declaration by the manufacturer that the product meets all the appropriate provisions of the applicable legislation implementing the relevant European Directive.
Failure to comply with any applicable FDA requirements could trigger a range of enforcement actions by the FDA, including warning letters, civil monetary penalties, fines, injunctions, criminal prosecution, consent decrees, repairs, replacements, refunds, recalls or seizures of products, operating restrictions, partial suspension or total shutdown of operations and denial of or challenges to applications for clearance or approval, as well as significant adverse publicity.
Failure to comply with any applicable FDA requirements for medical devices and IVDs could trigger a range of enforcement actions by the FDA, including warning letters, civil monetary penalties, fines, injunctions, criminal prosecution, consent decrees, repairs, replacements, refunds, recalls or seizures of products, operating restrictions, partial suspension or total shutdown of operations and denial of or challenges to applications for clearance or approval, as well as significant adverse publicity.
Picture tests help individuals identify important health markers to empower their personal health journey. 1 Our Laboratory Services Technology Platform Our proprietary technology platform for our laboratory services business includes proprietary gene probes, data suppression and comparison algorithms, adaptive learning software, and proprietary laboratory information management systems.
Picture tests help individuals identify important health markers to empower their personal health journey. 1 Our Laboratory Services Technology Platform Our proprietary technology platform for our laboratory services business includes proprietary gene probes, data suppression and comparison algorithms, AI learning software, and proprietary laboratory information management systems.
Further, we seek to obtain and maintain patent rights intended to cover the technologies incorporated into, or used to produce, our drug candidates, the compositions of matter of our drug candidates and their methods of use and manufacture, as well as other inventions that are important to our business.
Further, we seek to obtain and maintain patent rights intended to cover the technologies incorporated into, or used to produce, our product candidates, the compositions of matter of our product candidates and their methods of use and manufacture, as well as other inventions that are important to our business.
Similarly, an IRB can suspend or terminate approval of a clinical trial at its institution if the clinical trial is not being conducted in accordance with the IRB’s requirements, or if the drug candidate has been associated with unexpected serious harm to patients.
Similarly, an IRB can suspend or terminate approval of a clinical trial at its institution if the clinical trial is not being conducted in accordance with the IRB’s requirements, or if the product candidate has been associated with unexpected serious harm to patients.
The compliance requirements of these laws, including additional breach reporting requirements, and the penalties for violation vary widely, and new privacy and security laws in this area are evolving. For example, several states, such as California, have implemented comprehensive privacy laws and regulations.
The compliance requirements of these laws, including additional breach reporting requirements, and the penalties for violation vary widely, and new privacy and security laws in this area are evolving. For example, several states, such as California and Washington, have implemented comprehensive health privacy laws and regulations.
Moreover, the clinical diagnostic testing field continues to undergo significant consolidation, permitting larger clinical laboratory service providers to increase cost efficiencies and service levels and potentially resulting in more intense competition. The development and commercialization of new drug candidates is highly competitive. Our competitors include drug delivery platform companies and 505(b)(2) drug developers in the cancer therapeutics area.
Moreover, the clinical diagnostic testing field continues to undergo significant consolidation, permitting larger clinical laboratory service providers to increase cost efficiencies and service levels and potentially resulting in more intense competition for us. The development and commercialization of new product candidates is highly competitive. Our competitors include drug delivery platform companies and 505(b)(2) drug developers in the cancer therapeutics area.
The following persons currently serve as the directors and executive officers of Fulgent: Directors and Executive Officers Position Ming Hsieh Chairman of the Board of Directors and Chief Executive Officer Paul Kim Chief Financial Officer Hanlin (Harry) Gao, M.D., Ph.D., D.A.B.M.G., F.A.C.M.G.
The following persons currently serve as the directors and executive officers of Fulgent: Directors and Executive Officers Position Ming Hsieh Chairperson of the Board of Directors and Chief Executive Officer Paul Kim Chief Financial Officer Hanlin (Harry) Gao, M.D., Ph.D., D.A.B.M.G., F.A.C.M.G.
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, in certain instances, prompt disclosure within a specified amount of time to affected individuals.
With the 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 undertake if it experiences a data breach, as defined by state law, including, in certain instances, prompt disclosure within a specified amount of time to affected individuals.
Generally, therapeutic products require government authorization before they may be clinically tested and commercially marketed for human therapeutic use in the United States and other countries. The precise regulatory requirements with which we will have to comply are undergoing periodic revisions and refinement. In the United States, the FDA regulates drugs under the FDC Act and its implementing regulations.
Generally, therapeutic products require government authorization before they may be clinically tested and commercially marketed for human therapeutic use in the United States and other countries. The precise regulatory requirements with which we will have to comply undergo periodic revisions and refinement. In the United States, the FDA regulates drugs under the FDC Act and its implementing regulations.
Our Laboratory Services Business We have broad testing capabilities with a testing and testing services menu that is scalable and affordable to our customers. Our testing services include: Comprehensive anatomic pathology testing services, including gastrointestinal pathology, dermatopathology, urologic pathology, breast pathology, neuropathology, and hematopathology.
Our Laboratory Services Business We have broad testing capabilities with a testing services menu that is scalable and affordable for our customers. Our testing services include: Comprehensive anatomic pathology testing services, including gastrointestinal pathology, dermatopathology, urologic pathology, breast pathology, neuropathology, and hematopathology.
Our Australian laboratory is also subject to Australian regulatory requirements. Other states may adopt similar licensure requirements in the future, which could require us to modify, delay, or discontinue our operations in such jurisdictions.
Our laboratory located in Australia is also subject to Australian regulatory requirements. Other states may adopt similar licensure requirements in the future, which could require us to modify, delay, or discontinue our operations in such jurisdictions.
As a result, a drug candidate approved on this basis is subject to rigorous post-marketing compliance requirements, including the completion of Phase 4 or post-approval clinical trials to confirm the effect on the clinical endpoint.
As a result, a product candidate approved on this basis is subject to rigorous post-marketing compliance requirements, including the completion of Phase 4 or post-approval clinical trials to confirm the effect on the clinical endpoint.
The level of risk associated with a new diagnostic test combined with available controls to mitigate risk determines whether a companion diagnostic device requires PMA approval from the FDA or if it can be cleared by the agency through the 510(k) premarket notification process based on a showing of substantial equivalence to a commercially available device.
The level of risk associated with a new diagnostic test combined with available controls to mitigate risk determines whether a companion diagnostic device requires PMA approval from the FDA or if it can be cleared by the agency through the 510(k) pre-market notification process based on a showing of substantial equivalence to a commercially available device.
In 2024, we conducted a recurrent employee feedback survey and utilized the survey results to enhance employee engagement, implement various improvements to extend continuous learning opportunities and refine our benefit plans for 2025.
In 2025, we conducted a recurrent employee feedback survey and utilized the survey results to enhance employee engagement, implement various improvements to extend continuous learning opportunities and refine our benefit plans for 2026.
Federal Regulations Applicable to Our Laboratory Operations As we operate clinical laboratories in the United States, we are required to hold certain federal licenses, certifications, and permits to conduct our business. Clinical Laboratory Improvement Amendments, or CLIA, establishes quality standards for all laboratory testing to ensure the accuracy, reliability and timeliness of patient test results.
Federal Regulations Applicable to Our Laboratory Operations As we operate clinical laboratories in the United States, we are required to hold certain federal licenses, certifications, and permits to conduct our business. CLIA establishes quality standards for all laboratory testing to ensure the accuracy, reliability and timeliness of patient test results.
Rules and Regulations Relating to Companion or Complementary Diagnostics The success of one or more of our drug candidates may depend, in part, on the development and commercialization of either a companion diagnostic or a complementary diagnostic.
Rules and Regulations Relating to Companion or Complementary Diagnostics The success of one or more of our product candidates may depend, in part, on the development and commercialization of either a companion diagnostic or a complementary diagnostic.
The outcome of such lawsuits, as well as potential legislative changes enacted by Congress or programmatic changes implemented at HRSA by the incoming Trump Administration, may impact the 340B program in the future.
The outcome of such ongoing lawsuits, as well as potential legislative changes enacted by Congress or programmatic changes implemented at HRSA by the Trump Administration, may impact the 340B program in the future.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeComplying 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 and material penalties. • We may be required to modify our business practices, pay fines, incur significant expenses, or experience losses due to litigation or governmental investigations as a result of voluntary disclosure processes. 29 Risk Related to the Development of Drug Candidates • Our drug candidates are in early stages of development and may fail or suffer delays that materially and adversely affect their future commercial viability. • Any drug candidate that we may attempt to develop, manufacture, or market in the United States will be subject to extensive regulation by the FDA, including regulations relating to development, preclinical testing, performance of clinical trials, manufacturing, and post-approval commercialization and will be subject to extensive regulations outside of the United States.
Biggest changeComplying 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 and material penalties. • We have and may again be required to modify our business practices, pay fines, incur significant expenses, or experience losses due to litigation, governmental investigations, or as a result of voluntary disclosure processes.
The risk factors described below are a summary of the principal risk factors associated with an investment in us. Cybersecurity Risks • Actual or attempted security incidents or breaches, loss of data, or other disruptions could expose us to material liability and materially and adversely affect our business, financial condition, and our reputation.
The risk factors described below are a summary of the principal risk factors associated with an investment in us. Cybersecurity Risks • Actual or attempted security incidents or breaches, loss of data, or other disruptions could expose us to material liability and materially and adversely affect our business, financial condition, and reputation.
To finance any acquisitions, investments, joint ventures, or other strategic relationships, we may seek to raise additional funds through securities offerings, credit facilities, asset sales or collaborations, or licensing arrangements.
To finance any acquisitions, investments, joint ventures, or other strategic relationships, we may seek to raise additional funds through securities offerings, credit facilities, asset sales, collaborations, or licensing arrangements.
Our laboratory services competitors include dozens of companies focused on pathology, genetic, and diagnostic testing services, including specialty and reference laboratories that offer traditional single-gene and multi-gene tests. As such, we face intense competition from other life science, biotechnology, pharmaceutical, research and development, and diagnostic companies.
Our laboratory services competitors include dozens of companies focused on pathology, genetic, and diagnostic testing services, including specialty and reference laboratories that offer traditional single-gene and multi-gene tests. As such, we face intense competition from other life science, biotechnology, pharmaceutical, research and development, laboratory, and diagnostic companies.
Each payor makes its own decision as to whether to establish a policy or enter into a contract to cover our tests and the amount it will reimburse for each test, and any determination by a payor regarding coverage and amount of reimbursement for our tests would likely be made on an indication-by-indication basis.
Each payor makes its own decision as to whether to establish a policy or enter into a contract to cover our tests and the amount it will reimburse for each test, and any determination by a payor regarding coverage and the amount of reimbursement for our tests would likely be made on an indication-by-indication basis.
Our business is subject to federal and state laws that protect the privacy and security of personal information, including the HIPAA, HITECH, and similar state laws, as well as numerous other federal, state and foreign laws, including consumer protection laws and regulations, that govern the collection, dissemination, use, access to, confidentiality and security of patient health information.
Our business is subject to federal and state laws that protect the privacy and security of personal information, including HIPAA, HITECH, and similar state laws, as well as numerous other federal, state and foreign laws, including consumer protection laws and regulations, that govern the collection, dissemination, use, access to, confidentiality and security of patient health information.
Doing business internationally involves a number of risks, including, among others: • compliance with the laws and regulations of multiple jurisdictions, which may be conflicting or subject to increasing stringency or other changes, including privacy and data protection regulations, tax laws, tariffs, employment laws, healthcare regulatory requirements, and other related approvals, including permitting and licensing requirements; • logistics associated with the shipment of blood or other tissue specimens, including infrastructure conditions, transportation delays, and the impact of United States and local laws and regulations, such as export and import permit requirements or restrictions, tariffs, or other charges and other trade barriers, all of which involve increased risk related to 37 the trade policies of the current administration, which may threaten existing and proposed trade agreements and impose more restrictive U.S. export-import regulations that impact our business; • limits on our ability to penetrate international markets, including legal and regulatory requirements that would force us to conduct our tests locally by building additional laboratories or engaging in joint ventures or other relationships in order to offer our tests in certain countries, which relationships could involve significant time and resources to establish, deny us control over certain aspects of the foreign operations, or reduce the economic value to us of these operations; • failure by us, any joint venturers, or other arrangements we have or may establish, or by any distributors or other commercial partners we have engaged or may engage to obtain any regulatory approvals required to market, sell, and use our tests in various countries; • challenges predicting the market for our tests and services generally and tailoring our test menu to meet varying customer expectations in different countries and territories; • difficulties gaining market share in territories in which we do not have a strong physical presence or brand awareness; • complexities and difficulties obtaining protection for and enforcing our intellectual property rights; • difficulties in staffing and managing foreign operations; • complexities associated with managing multiple payor coverage and reimbursement regimes, government payors, or patient self-pay systems; • financial risks, such as longer payment cycles, difficulty collecting trade accounts receivable and the impact of local and regional financial conditions on demand and payment for our tests; • inflationary pressures, such as those the global market is currently experiencing, which have and may increase costs for materials, supplies, and services; • exposure to foreign currency exchange rate fluctuations, conversions of currencies, and the risk of repatriation of certain foreign currencies; • natural disasters; political and economic instability, including wars, terrorism and political unrest, such as conflicts in the Ukraine and the Middle East and tensions between China and Taiwan; outbreak of disease; boycotts; and other business restrictions; and • regulatory and compliance risks related to applicable anti-bribery laws, including requirements to maintain accurate information and control over activities that may fall within the purview of these laws.
Doing business internationally involves a number of risks, including, among others: • compliance with the laws and regulations of multiple jurisdictions, which may be conflicting or subject to increasing stringency or other changes, including privacy and data protection regulations, tax laws, tariffs, employment laws, healthcare regulatory requirements, and other related approvals, including permitting and licensing requirements; • logistics associated with the shipment of blood or other tissue specimens, including infrastructure conditions, transportation delays, and the impact of United States and local laws and regulations, such as export and import permit requirements or restrictions, tariffs, or other charges and other trade barriers, all of which involve increased risk related to the trade policies of the current administration, which may threaten existing and proposed trade agreements and impose more restrictive U.S. export-import regulations that impact our business; • limits on our ability to penetrate international markets, including legal and regulatory requirements that would force us to conduct our tests locally by building additional laboratories or engaging in joint ventures or other relationships in order to offer our tests in certain countries, which relationships could involve significant time and resources to establish, deny us control over certain aspects of the foreign operations, or reduce the economic value to us of these operations; • failure by us, any joint venturers, or other arrangements we have or may establish, or by any distributors or other commercial partners we have engaged or may engage to obtain any regulatory approvals required to market, sell, and use our tests in various countries; • challenges predicting the market for our tests and services generally and tailoring our test menu to meet varying customer expectations in different countries and territories; • difficulties gaining market share in territories in which we do not have a strong physical presence or brand awareness; • complexities and difficulties obtaining protection for and enforcing our intellectual property rights; • difficulties in staffing and managing foreign operations; • complexities associated with managing multiple payor coverage and reimbursement regimes, government payors, or patient self-pay systems; • financial risks, such as longer payment cycles, difficulty collecting trade accounts receivable and the impact of local and regional financial conditions on demand and payment for our tests; • inflationary pressures, such as those the global market is currently experiencing, which have and may increase costs for materials, supplies, and services; • exposure to foreign currency exchange rate fluctuations, conversions of currencies, and the risk of repatriation of certain foreign currencies; • natural disasters; political and economic instability, including wars, terrorism and political unrest, such as conflicts in Ukraine and the Middle East and tensions between China and Taiwan; outbreak of disease; boycotts; and other business restrictions; and • regulatory and compliance risks related to applicable anti-bribery laws, including requirements to maintain accurate information and control over activities that may fall within the purview of these laws.
In the event that any of our drug candidates receives marketing approval and we, our collaborators or others identify undesirable side effects caused by a product or any other similar drugs, any of the following adverse events could occur: • regulatory authorities may withdraw their approval of the product; • additional restrictions may be imposed on the marketing of the particular product or the manufacturing processes for the product or any component of the product; • we may be subject to fines, injunctions or the imposition of civil or criminal penalties; • regulatory authorities may require the addition of safety-related labeling statements, such as a “black box” warning or a contraindication; • we may be required to create a Medication Guide outlining the risks of such side effects for distribution to patients or to implement other aspects of a REMS such as a restricted distribution program or educational programs for prescribers; • we could be sued and held liable for harm caused to patients; • the product may become less competitive; and • our reputation may suffer.
In the event that any of our product candidates receives marketing approval and we, our collaborators or others identify undesirable side effects caused by a product or any other similar drugs, any of the following adverse events could occur: • regulatory authorities may withdraw their approval of the product; • additional restrictions may be imposed on the marketing of the particular product or the manufacturing processes for the product or any component of the product; • we may be subject to fines, injunctions or the imposition of civil or criminal penalties; • regulatory authorities may require the addition of safety-related labeling statements, such as a “black box” warning or a contraindication; • we may be required to create a Medication Guide outlining the risks of such side effects for distribution to patients or to implement other aspects of a REMS such as a restricted distribution program or educational programs for prescribers; • we could be sued and held liable for harm caused to patients; • the product may become less competitive; and • our reputation may suffer.
Further, a clinical trial may be suspended or terminated by the company, the IRBs of the institutions in which such trials are being conducted, the Data Safety Monitoring Board, or DSMB, for such trial or by the FDA or other regulatory authorities due to a number of factors, including failure to conduct the clinical trial in accordance with regulatory requirements or our clinical protocols, inspection of the clinical trial operations or trial site by the FDA or other regulatory authorities resulting in the imposition of a clinical hold, unforeseen safety issues or adverse side effects, failure to demonstrate a benefit from using an investigational drug, changes in governmental regulations, administrative actions or lack of adequate funding to continue the clinical trial.
Further, a clinical trial may be suspended or terminated by the Company, the IRBs of the institutions in which such trials are being conducted, the Data Safety Monitoring Board, or DSMB, for such trial, or by the FDA or other regulatory authorities due to a number of factors, including failure to conduct the clinical trial in accordance with regulatory requirements or our clinical protocols, inspection of the clinical trial operations or trial site by the FDA or other regulatory authorities resulting in the imposition of a clinical hold, unforeseen safety issues or adverse side effects, failure to demonstrate a benefit from using an investigational drug, changes in 57 governmental regulations, administrative actions or lack of adequate funding to continue the clinical trial.
However, some of these accounts exceed the Federal Deposit Insurance Corporation, or FDIC, insurance limit of $250,000 and, while we believe the Company is not exposed to significant credit risk due to the financial strength of these depository institutions or investments, if any such depositary institution fails to return our deposits, or if a depository institution is subject to other adverse conditions in the financial or credit markets, this could further impact access to our invested cash or cash equivalents and could adversely impact our operating liquidity and financial performance.
However, some of these accounts exceed the Federal Deposit Insurance Corporation, or FDIC, insurance limit of $250,000 and, while we believe the Company is not exposed to significant credit risk due to the financial strength of these depository institutions or investments, if any such depository institution fails to return our deposits, or if a depository institution is subject to other adverse conditions in the financial or credit markets, this could further impact access to our invested cash or cash equivalents and could adversely impact our operating liquidity and financial performance.
Drug candidates could fail to receive, or could be delayed in receiving, marketing approval for many reasons, including any one or more of the following: • the FDA, EMA, or comparable foreign regulatory authorities may disagree with the design or implementation of clinical trials; • we may be unable to demonstrate to the satisfaction of the FDA, EMA or comparable foreign regulatory authorities that a drug candidate is safe and effective for its proposed indication(s) for use; • the results of clinical trials may not meet the level of statistical significance required by the FDA, EMA or comparable foreign regulatory authorities for marketing approval; • we may be unable to demonstrate that a drug candidate’s clinical and other benefits outweigh its safety risks; • the FDA, EMA or comparable foreign regulatory authorities may disagree with our interpretation of data from non-clinical studies or clinical trials; • the data collected from clinical trials of drug candidates may not be sufficient to support the submission of an application to obtain marketing approval in the United States or elsewhere; • upon review of clinical trial sites and data, the FDA or comparable foreign regulatory authorities may find record keeping or the record keeping of clinical trial sites to be inadequate or may identify other deficiencies related to the trials; • the manufacturing processes or facilities of third-party manufacturers with which we or Fulgent Pharma contract for clinical and commercial supplies may fail to meet the requirements of the FDA, EMA or comparable foreign regulatory authorities; or • the medical standard of care or the approval policies or regulations of the FDA, EMA or comparable foreign regulatory authorities may significantly change in a manner that renders our clinical data insufficient for approval.
Product candidates could fail to receive, or could be delayed in receiving, marketing approval for many reasons, including any one or more of the following: • the FDA, EMA, or comparable foreign regulatory authorities may disagree with the design or implementation of clinical trials; • we may be unable to demonstrate to the satisfaction of the FDA, EMA or comparable foreign regulatory authorities that a product candidate is safe and effective for its proposed indication(s) for use; • the results of clinical trials may not meet the level of statistical significance required by the FDA, EMA or comparable foreign regulatory authorities for marketing approval; • we may be unable to demonstrate that a product candidate’s clinical and other benefits outweigh its safety risks; • the FDA, EMA or comparable foreign regulatory authorities may disagree with our interpretation of data from non-clinical studies or clinical trials; • the data collected from clinical trials of product candidates may not be sufficient to support the submission of an application to obtain marketing approval in the United States or elsewhere; • upon review of clinical trial sites and data, the FDA or comparable foreign regulatory authorities may find record keeping or the record keeping of clinical trial sites to be inadequate or may identify other deficiencies related to the trials; • the manufacturing processes or facilities of third-party manufacturers with which we or Fulgent Pharma contract for clinical and commercial supplies may fail to meet the requirements of the FDA, EMA or comparable foreign regulatory authorities; or • the medical standard of care or the approval policies or regulations of the FDA, EMA or comparable foreign regulatory authorities may significantly change in a manner that renders our clinical data insufficient for approval.
Further, to the extent our performance under a contract does not meet a government agency’s expectations, the customer might seek to terminate the contract prior to its scheduled expiration date, provide a negative assessment of our performance to government-maintained contractor past-performance data repositories, fail to award us additional business under existing contracts or otherwise, and direct future business to our competitors, suspend or debar from contracting with the federal government or any significant agency, including the VA.
Further, to the extent our performance under a contract does not meet a government agency’s expectations, the customer might seek to terminate the contract prior to its scheduled expiration date, provide a negative assessment of our performance to government-maintained contractor past-performance data repositories, fail to award us additional business under existing contracts or otherwise, direct future business to our competitors, or suspend or debar us from contracting with the federal government or any significant agency, including the VA.
If we are found to be out of compliance with California requirements, the CA Department of Public Health may suspend, restrict or revoke our license or laboratory permit, and may exclude persons or entities from owning, operating or directing a laboratory for two years following such license revocation, assess civil monetary penalties, or impose specific corrective action plans, among other sanctions.
If we are found to be out of compliance with California requirements, the CA Department of Public Health may suspend, restrict, or revoke our license or laboratory permit, and it may exclude persons or entities from owning, operating or directing a laboratory for two years following such license revocation, assess civil monetary penalties, or impose specific corrective action plans, among other sanctions.
Reimbursement Risks • Our ability to achieve or sustain profitability also depends on our collection of payment for the tests we deliver, which we may not be able to do successfully. • Failure to comply with government laws and regulations related to submission of claims for our services could result in significant monetary damages and penalties and exclusion from the Medicare and Medicaid programs and corresponding foreign reimbursement programs.
Reimbursement Risks • Our ability to achieve or sustain profitability also depends on our collection of payment for the tests we deliver, which we may not be able to do successfully. • Failure to comply with government laws and regulations related to submission of claims for our tests and testing services could result in significant monetary damages and penalties and exclusion from the Medicare and Medicaid programs and corresponding foreign reimbursement programs.
While there are several sequencer suppliers that we believe could replace Illumina, and while we believe that we have sufficient alternative suppliers for our other needs, 35 transitioning to a new supplier or locating a temporary substitute, if any are available, would be time-consuming and expensive, could result in interruptions in or otherwise affect the performance specifications of our laboratory operations or could require that we revalidate our tests.
While there are several sequencer suppliers that we believe could replace Illumina, and while we believe that we have sufficient alternative suppliers for our other needs, transitioning to a new supplier or locating a temporary substitute, if any are available, would be time-consuming and expensive, could result in interruptions in or otherwise affect the performance specifications of our laboratory operations or could require that we revalidate our tests.
Grounds for an unenforceability assertion could be an allegation that someone connected with prosecution of the patent withheld relevant information from the USPTO, or made a misleading statement, during prosecution. Third parties may raise claims challenging the validity or enforceability of our owned patents before administrative bodies in the United States or abroad, even outside the context of litigation.
Grounds for an unenforceability assertion could be an allegation that someone connected with prosecution of the patent withheld relevant information from the USPTO, or made a misleading statement, during prosecution. Third parties may raise claims challenging the validity or enforceability of our owned patents before administrative bodies in the United 65 States or abroad, even outside the context of litigation.
It is possible that none of the drug candidates we may develop will obtain the marketing approvals necessary for us or our collaborators to sell the products either in the United States or any other country. Furthermore, approval by the FDA of a therapeutic product does not assure approval by regulatory authorities outside the United States and vice versa.
It is possible that none of the product candidates we may develop will obtain the marketing approvals necessary for us or our collaborators to sell the products either in the United States or any other country. Furthermore, approval by the FDA of a therapeutic product does not assure approval by regulatory authorities outside the United States and vice versa.
Our international operations are subject to various anti-bribery laws, including the FCPA and similar anti-bribery laws in the non-U.S. jurisdictions in which we operate. The FCPA prohibits companies and their intermediaries from offering, making, or authorizing improper payments to non-U.S. or foreign officials for the purpose of obtaining or retaining business or securing any other 53 improper advantage.
Our international operations are subject to various anti-bribery laws, including the FCPA and similar anti-bribery laws in the non-U.S. jurisdictions in which we operate. The FCPA prohibits companies and their intermediaries from offering, making, or authorizing improper payments to non-U.S. or foreign officials for the purpose of obtaining or retaining business or securing any other improper advantage.
These provisions, among other things: • authorize our board of directors to issue, without further action by our stockholders, up to 1.0 million shares of undesignated or “blank check” preferred stock; • prohibit stockholder action by written consent, thus requiring all stockholder actions to be taken at a duly noticed and held meeting of our stockholders; • specify that special meetings of our stockholders can be called only by our board of directors, the Chairman of our board of directors or our President, thereby eliminating the ability of our stockholders to call special meetings; • permit only our board of directors to establish the number of directors and fill vacancies on the board of directors, except as may be required by law; • permit our board of directors to amend our bylaws, subject to the power of our stockholders to repeal any such amendment; • do not permit cumulative voting by our stockholders on the election of directors; and • establish advance notice requirements for stockholders to propose nominees for election as directors or matters to be acted upon at annual meetings of stockholders.
These provisions, among other things: • authorize our board of directors to issue, without further action by our stockholders, up to 1.0 million shares of undesignated or “blank check” preferred stock; • prohibit stockholder action by written consent, thus requiring all stockholder actions to be taken at a duly noticed and held meeting of our stockholders; • specify that special meetings of our stockholders can be called only by our board of directors, the Chairperson of our board of directors or our President, thereby eliminating the ability of our stockholders to call special meetings; • permit only our board of directors to establish the number of directors and fill vacancies on the board of directors, except as may be required by law; • permit our board of directors to amend our bylaws, subject to the power of our stockholders to repeal any such amendment; • do not permit cumulative voting by our stockholders on the election of directors; and • establish advance notice requirements for stockholders to propose nominees for election as directors or matters to be acted upon at annual meetings of stockholders.
As part of our business strategy, we have previously and may again in the future pursue acquisitions of complementary businesses or assets (such as our acquisitions of Cytometry Specialist, Inc. or CSI; Fulgent Pharma; and Symphony Buyer, Inc., or Inform Diagnostics), investments in other companies (such as our investment in Helio Health), technology licensing arrangements, joint ventures, or other strategic relationships.
As part of our business strategy, we have previously and may again in the future pursue acquisitions of complementary businesses or assets (such as our acquisitions of Cytometry Specialist, Inc., or CSI; Fulgent Pharma; Symphony Buyer, Inc., or Inform Diagnostics; and ANP), investments in other companies (such as our investment in Helio Health), technology licensing arrangements, joint ventures, or other strategic relationships.
The primary objective of our investment activity is to maintain the safety of principal, preserve capital and provide for future liquidity requirements while maximizing yields without significantly increasing risk. Should any of our investments or marketable securities lose value or have their liquidity impaired, it could materially affect our overall financial condition.
The primary objective of our investment activity is to maintain the safety of principal, preserve capital and provide for future liquidity requirements while maximizing yields without significantly increasing risk. Should any of our investments or marketable securities lose value or have their liquidity impaired, it could materially 40 affect our overall financial condition.
There can be no assurance as to the cost, scope or impact on our business, results of operations, financial condition or prospects of the actions that may be required to obtain regulatory approvals. Further, even following completion of an acquisition, applicable government agencies may disagree with our interpretation of these complicated statutes and regulations.
There can be no assurance as to the cost, scope or impact on our business, results of operations, financial condition or prospects of the actions that may be required to obtain regulatory approvals. Further, even following completion of an acquisition, applicable government agencies may disagree with our interpretation of complicated applicable statutes and regulations.
In addition, competitors may be acquired by, receive investments from, or enter into other 33 commercial relationships with larger, well-established and well-financed companies, which may result in even more resources being concentrated among our competitors. Smaller or early-stage companies may also prove to be significant competitors, particularly through collaborative arrangements with large and established companies.
In addition, competitors may be acquired by, receive investments from, or enter into other commercial relationships with larger, well-established and well-financed companies, which may result in even more resources being concentrated among our competitors. Smaller or early-stage companies may also prove to be significant competitors, particularly through collaborative arrangements with large and established companies.
The degree of market acceptance of any drug candidate for which we receive approval depends on a number of factors, including: • the efficacy and potential advantages compared to alternative treatments or competitive products; • perceptions by the medical community, physicians, and patients, regarding the safety and effectiveness of our products and the willingness of the target patient population to try new therapies and of physicians to prescribe these therapies; • the size of the market for such drug candidate, based on the size of the patient subsets that we are targeting, in the territories for which we gain regulatory approval and have commercial rights; • the safety of the drug candidate as demonstrated through broad commercial distribution; • the ability to offer our drug candidates for sale at competitive prices; • the availability of adequate coverage and reimbursement for our products from governmental health programs and other insurance payors; • relative convenience and ease of administration compared to alternative treatments; • cost-effectiveness of our product relative to competing products; • the prevalence and severity of any side effects; • the adequacy of supply of our drug candidates; • the timing of any such marketing approval in relation to other product approvals; • any restrictions on concomitant use of other medications; • support from patient advocacy groups; and • the effectiveness of sales, marketing and distribution efforts by us and our licensees and distributors, if any. 59 Our drug candidates may cause undesirable side effects that could delay or prevent their marketing approval, limit the commercial profile of an approved label, or result in significant negative consequences following marketing approval, if any.
The degree of market acceptance of any product candidate for which we receive approval depends on a number of factors, including: • the efficacy and potential advantages compared to alternative treatments or competitive products; • perceptions by the medical community, physicians, and patients, regarding the safety and effectiveness of our products and the willingness of the target patient population to try new therapies and of physicians to prescribe these therapies; • the size of the market for such product candidate, based on the size of the patient subsets that we are targeting, in the territories for which we gain regulatory approval and have commercial rights; • the safety of the product candidate as demonstrated through broad commercial distribution; • the ability to offer our product candidates for sale at competitive prices; • the availability of adequate coverage and reimbursement for our products from governmental health programs and other insurance payors; • relative convenience and ease of administration compared to alternative treatments; • cost-effectiveness of our product relative to competing products; • the prevalence and severity of any side effects; • the adequacy of supply of our product candidates; • the timing of any such marketing approval in relation to other product approvals; • any restrictions on concomitant use of other medications; • support from patient advocacy groups; and • the effectiveness of sales, marketing and distribution efforts by us and our licensees and distributors, if any. 60 Our product candidates may cause undesirable side effects that could delay or prevent their marketing approval, limit the commercial profile of an approved label, or result in significant negative consequences following marketing approval, if any.
To date, these incidents have not materially affected our business. While we are not currently aware of any cyber breaches, attacks, malicious software, or hardware that would materially and adversely affect our business, such security incident could be present in any of our or our subsidiaries’ systems or in the systems of our suppliers, customers, vendors, or contractors.
To date, these incidents have not materially affected our business. While we are not currently aware of any cyber breaches, attacks, malicious software, or hardware that would materially and adversely affect our business, such a security incident could be present in any of our or our subsidiaries’ systems or in the systems of our suppliers, customers, vendors, or contractors.
These fluctuations in our operating results could cause our performance in any particular period to fall below the expectations of securities analysts or investors or guidance we have provided to the public, which could negatively affect the price of our common stock. We have a history of losses, and we may not be able to sustain profitability.
These fluctuations in our operating results could cause our performance in any particular period to fall below the expectations of securities analysts or investors or guidance we have provided to the public, which could negatively affect the price of our common stock. We have a history of losses, and we may not be able to regain or sustain profitability.
Common Stock Risks • An active, liquid trading market for our common stock may not be sustained, which could make it difficult for stockholders to sell their shares of our common stock. • The price of our common stock may be volatile, and you could lose all or part of your investment. • Future issuances of our common stock or rights to purchase our common stock, including pursuant to our equity incentive plan, could result in additional dilution to the percentage ownership of our stockholders and could cause the price of our common stock to fall. • We do not intend to pay dividends on our common stock, so any returns will be limited to the value of our common stock. 30 Cybersecurity Risks Actual or attempted security incidents or breaches, loss of data, or other disruptions could expose us to material liability and materially and adversely affect our business, financial condition, and our reputation.
Common Stock Risks • An active, liquid trading market for our common stock may not be sustained, which could make it difficult for stockholders to sell their shares of our common stock. • The price of our common stock may be volatile, and stockholders could lose all or part of their investment. • Future issuances of our common stock or rights to purchase our common stock, including pursuant to our equity incentive plan, could result in additional dilution to the percentage ownership of our stockholders and could cause the price of our common stock to fall. • We do not intend to pay dividends on our common stock, so any returns will be limited to the value of our common stock. 30 Cybersecurity Risks Actual or attempted security incidents or breaches, loss of data, or other disruptions could expose us to material liability and materially and adversely affect our business, financial condition, and reputation.
While we believe that we compare favorably to these competitors, some of our competitors may have technical, competitive, or other advantages over us for the development of technologies and processes or greater experience in particular diagnostics or therapeutic development areas, and consolidation among pharmaceutical, diagnostic, and biotechnology companies can enhance these advantages.
While we believe that we compare favorably to these competitors, some of our competitors may have technical, competitive, marketing, or other advantages over us for the development of technologies and processes or greater experience in particular diagnostics or therapeutic development areas, and consolidation among pharmaceutical, diagnostic, and biotechnology companies can enhance these advantages.
More specifically, many of our competitors have longer operating histories, larger customer bases, larger research and development staffs, more expansive brand recognition, established manufacturing capabilities and facilities, deeper market penetration, substantially greater financial, technological and research and development resources and selling and marketing capabilities with established sales forces; and considerably more experience dealing with insurance payors.
More specifically, many of our competitors have longer operating histories, larger customer bases, larger research and development staffs, more expansive brand recognition, established manufacturing capabilities and facilities, deeper market penetration, substantially greater financial, technological, and research and development resources and selling and marketing capabilities with established sales forces; and considerably more leverage and experience dealing with insurance payors.
In addition to fines and penalties imposed upon violators, some of these state laws also afford private rights of action to individuals who believe their personal information has been misused. California’s patient privacy laws, for example, provide for penalties of up to $250,000 and permit injured parties to sue for damages.
In addition to fines and penalties imposed upon violators, some of these state laws also afford private rights of action to individuals who believe their personal information has been misused. California’s patient privacy laws, for example, provide for penalties of up to 48 $250,000 and permit injured parties to sue for damages.
Additionally, other U.S. companies in the medical device and pharmaceutical fields have faced substantial fines and criminal penalties in the recent past for violating the FCPA and we could also incur these types of penalties, including criminal and civil penalties, disgorgement, and other remedial measures, if we violate the FCPA or other applicable anti-bribery laws.
Additionally, other U.S. companies in the medical device 54 and pharmaceutical fields have faced substantial fines and criminal penalties in the recent past for violating the FCPA, and we could also incur these types of penalties, including criminal and civil penalties, disgorgement, and other remedial measures, if we violate the FCPA or other applicable anti-bribery laws.
Furthermore, in some cases, we may not be able to obtain issued claims covering compositions of matter relating to any drug candidates we develop and instead may need to rely on filing patent applications with claims covering a method of use and/or method of manufacture. Method of use patents protect the use of a product for the specified method.
Furthermore, in some cases, we may not be able to obtain issued claims covering compositions of matter relating to any product candidates we develop and instead may need to rely on filing patent applications with claims covering a method of use and/or method of manufacture. Method of use patents protect the use of a product for the specified method.
Any failure to make such improvements or any significant delay in the planned implementation of new or enhanced systems could render our systems obsolete or inadequate, in which case our service to our customers and our other business activities could suffer, and we could be more vulnerable to electronic breaches from outside sources.
Any failure to make such improvements or any significant delay in the planned implementation of new or enhanced systems could render our systems obsolete or inadequate, in which case our service to our customers and our other business activities could materially suffer, and we could be more vulnerable to electronic breaches from outside sources.
Moreover, any joint venture we may seek to establish may never produce sufficient revenue for us to recover our capital and other investments in the joint venture, and we could become subject to liabilities based on our involvement in the joint venture’s operations. The materialization of any of these risks could materially harm our performance and prospects.
Moreover, any joint venture we may seek to establish may never produce sufficient revenue for us to recover our capital and other investments in the joint venture, and we could become subject to 38 liabilities based on our involvement in the joint venture’s operations. The materialization of any of these risks could materially harm our performance and prospects.
If there are delays in the completion of, or termination of, any clinical trial of drug candidates, the commercial prospects of those drug candidates may be harmed. In addition, any delays in completing clinical trials will increase costs, slow down product development and approval processes, and jeopardize the ability to commence product sales and generate revenue.
If there are delays in the completion of, or termination of, any clinical trial of product candidates, the commercial prospects of those product candidates may be harmed. In addition, any delays in completing clinical trials will increase costs, slow down product development and approval processes, and jeopardize the ability to commence product sales and generate revenue.
These aspects of many foreign legal systems could make it difficult for us to prevent or stop the misappropriation of our intellectual property rights in these jurisdictions. Moreover, changes in the law and legal decisions by courts in foreign countries could affect our ability to obtain adequate protection for our technologies and enforce our intellectual property rights.
These aspects of many foreign legal systems could make it difficult for us to prevent or stop the misappropriation of our intellectual property rights in these jurisdictions. Moreover, changes in the law and legal decisions by courts in foreign countries could affect our ability to obtain adequate protection 66 for our technologies and enforce our intellectual property rights.
If these third parties do not perform as contractually required, fail to satisfy regulatory or legal requirements, or miss 60 expected deadlines, our development programs could be delayed with material and adverse effects on our business, financial condition, results of operations and prospects.
If these third parties do not perform as contractually required, fail to satisfy regulatory or legal requirements, or miss expected deadlines, our development programs could be delayed with material and adverse effects on our business, financial condition, results of operations, and prospects.
Many countries have compulsory licensing laws under which a patent owner may be compelled to grant licenses to third parties. In addition, many countries limit the enforceability of patents against 65 government agencies or government contractors. In these countries, the patent owner may have limited remedies, which could materially diminish the value of such patent.
Many countries have compulsory licensing laws under which a patent owner may be compelled to grant licenses to third parties. In addition, many countries limit the enforceability of patents against government agencies or government contractors. In these countries, the patent owner may have limited remedies, which could materially diminish the value of such patent.
Satisfaction of these and other regulatory requirements is costly, time-consuming, uncertain, and subject to unanticipated delays. The time required to obtain FDA approval, and any other required approvals for pharmaceutical products, including any accelerated approval, is unpredictable but typically requires years to several years and may never be obtained.
Satisfaction of these and other regulatory requirements is costly, time-consuming, uncertain, and subject to unanticipated delays. The time required to obtain FDA approval, and any other required approvals for pharmaceutical products, including accelerated approval, is unpredictable but typically requires up to several years and may never be obtained.
If any of the reagents we obtain from suppliers and use in our tests are affected by future regulatory actions, our business could be adversely affected, including by increasing the cost of testing or delaying, limiting or prohibiting the purchase of reagents necessary to perform testing with our products.
If any of the reagents we obtain from suppliers and use in our tests are affected by future regulatory actions, our business could be adversely affected, including by increasing the cost of testing or delaying, limiting or prohibiting the purchase of reagents necessary to perform diagnostic testing with our products.
Any action brought against us for violation of these or other laws or regulations, even if we successfully defend against it, could cause us to incur significant legal expenses, divert our management’s attention from the operation of our business and materially harm our reputation.
Any action brought against us for violation of these or other laws or regulations, even if 50 we successfully defend against it, could cause us to incur significant legal expenses, divert our management’s attention from the operation of our business, and materially harm our reputation.
Our clinical trials to date have been conducted on a small number of subjects in limited numbers of clinical trial sites for a limited number of indications. We will have to conduct larger, well-controlled trials in our proposed indications to verify the results obtained to date and to support any regulatory submissions for further clinical development.
Our clinical trials to date have been conducted on a small number of subjects in a limited number of clinical trial sites for a limited number of indications. We will have to conduct larger, well-controlled trials in our proposed indications to verify the results obtained to date and to support any regulatory submissions for further clinical development.
If this were to occur, the time and financial resources required to obtain FDA approval, as well as the development complexity and risk associated with these programs, would likely substantially increase, which could have a material adverse effect on our business and financial condition.
If this were to occur, the time and financial resources required to obtain FDA approval, as well as the development complexity and risk 59 associated with these programs, would likely substantially increase, which could have a material adverse effect on our business and financial condition.
Events that may prevent successful or timely completion of clinical development include but are not limited to: • potential delays in patient enrollment for our clinical trials due to public health emergencies or pandemics, natural disasters, staffing shortages, or other events, which may affect our ability to initiate and/or complete preclinical studies, conduct ongoing clinical trials, and delay initiation of planned and future clinical trials; • inability to generate satisfactory preclinical, toxicology or other in vivo or in vitro data or to develop diagnostics capable of supporting the initiation or continuation of clinical trials; • delays in reaching agreement on acceptable terms with CROs, and clinical trial sites, the terms of which can be subject to extensive negotiation and may vary significantly among different CROs and clinical trial sites; • delays or failure in obtaining required an IRB approval for clinical trial site; • failure to obtain or delays in obtaining a permit from regulatory authorities to conduct a clinical trial; • delays in recruiting or failure to recruit sufficient eligible volunteers or subjects in our clinical trials; • failure by clinical trial sites or CROs or other third parties to adhere to clinical trial requirements; • failure by our clinical trial sites, CROs or other third parties to perform in accordance with the good clinical practices requirements of the FDA or applicable foreign regulatory guidelines; • subjects withdrawing from our clinical trials; • adverse events or other issues of concern significant enough for the FDA, or comparable foreign regulatory authority, to put a clinical trial or an IND on clinical hold; • occurrence of adverse events associated with our drug candidates; • changes in regulatory requirements and guidance that require amending or submitting new clinical protocols; • the cost of clinical trials of our drug candidates; • negative or inconclusive results from our clinical trials which may result in us deciding, or regulators requiring us, to conduct additional clinical trials or abandon development programs in other ongoing or planned indications for a drug candidate; and • delays in reaching agreement on acceptable terms with third-party manufacturers or an inability to manufacture sufficient quantities of our drug candidates for use in clinical trials.
Events that may prevent successful or timely completion of clinical development include but are not limited to: • potential delays in patient enrollment for our clinical trials due to public health emergencies or pandemics, natural disasters, staffing shortages, or other events, which may affect our ability to initiate and/or complete pre-clinical studies, conduct ongoing clinical trials, and delay initiation of planned and future clinical trials; • inability to generate satisfactory pre-clinical, toxicology or other in vivo or in vitro data or to develop diagnostics capable of supporting the initiation or continuation of clinical trials; • delays in reaching agreement on acceptable terms with CROs, and clinical trial sites, the terms of which can be subject to extensive negotiation and may vary significantly among different CROs and clinical trial sites; • delays or failure in obtaining required IRB approval for clinical trial site; • failure to obtain or delays in obtaining a permit from regulatory authorities to conduct a clinical trial; • delays in recruiting or failure to recruit sufficient eligible volunteers or subjects in our clinical trials; • failure by clinical trial sites or CROs or other third parties to adhere to clinical trial requirements; • failure by our clinical trial sites, CROs, or other third parties to perform in accordance with the good clinical practices requirements of the FDA or applicable foreign regulatory guidelines; • subjects withdrawing from our clinical trials; • adverse events or other issues of concern significant enough for the FDA, or comparable foreign regulatory authority, to put a clinical trial or an IND on clinical hold; • occurrence of adverse events associated with our product candidates; • changes in regulatory requirements and guidance that require amending or submitting new clinical protocols; • the cost of clinical trials of our product candidates; • negative or inconclusive results from our clinical trials, which may result in us deciding, or regulators requiring us, to conduct additional clinical trials or to abandon development programs in other ongoing or planned indications for a product candidate; or • delays in reaching agreement on acceptable terms with third-party manufacturers or an inability to manufacture sufficient quantities of our product candidates for use in clinical trials.
We have also received a CID issued by the DOJ pursuant to the False Claims Act related to its investigation of allegations of medically unnecessary laboratory testing, improper billing for laboratory testing, and remuneration received or provided in violation of the Anti-Kickback Statute and the Stark Law.
We have received a CID issued by the DOJ pursuant to the False Claims Act related to its investigation of allegations of medically unnecessary laboratory testing, improper billing for laboratory testing, and remuneration received or provided in violation of the Anti-Kickback Statute and the Stark Law.
Other factors that may contribute to this volatility include, among others: • actual or anticipated fluctuations in our operating results; • competition from existing tests or new tests that may emerge, particularly if competitive factors in our industry, including prices for testing and testing services, become more acute or the introduction of new products by our competitors; • failures to meet or exceed financial estimates and projections of the investment community or guidance we have provided to the public; • issuance of new or updated research or reports by securities analysts or changed recommendations for our common stock; • announcements by us or our competitors of significant acquisitions, investments, strategic relationships, joint ventures, collaborations or capital commitments; • the timing and amount of our investments in our business and the market’s perception of these investments and their impact on our prospects; • actual or anticipated changes in laws or regulations applicable to our business or our tests; • whether and when we are able to obtain marketing approval to market any of our drug candidates and the outcome of meetings with applicable regulatory agencies, including the FDA; • the outcome, success, costs and timing of preclinical studies and clinical trials for our current or future drug candidates; • failure of any our drug candidates, if approved, to achieve commercial success; • additions or departures of key management or other personnel; • changes in coverage and reimbursement by current or potential payors; • inability to obtain additional funding as and when needed on reasonable terms; • disputes or other developments with respect to our or others’ intellectual property rights; • product liability claims or other litigation; • sales of our common stock by us or our stockholders; • general economic, political, industry and market conditions, including factors not directly related to our operating performance or the operating performance of our competitors, such as increased uncertainty in the U.S. regulatory environment for healthcare, trade and tax-related matters; • events that affect, or have the potential to affect, general economic conditions, including but not limited to political unrest, global trade wars, natural disasters, act of war, terrorism, or disease outbreaks; and 67 • the other risk factors discussed in this report.
Other factors that may contribute to this volatility include, among others: • actual or anticipated fluctuations in our operating results; • competition from existing tests or new tests that may emerge, particularly if competitive factors in our industry, including prices for testing and testing services, become more acute or the introduction of new products by our competitors; • failures to meet or exceed financial estimates and projections of the investment community or guidance we have provided to the public; • issuance of new or updated research or reports by securities analysts or changed recommendations for our common stock; • announcements by us or our competitors of significant acquisitions, investments, strategic relationships, joint ventures, collaborations or capital commitments; • the timing and amount of our investments in our business and the market’s perception of these investments and their impact on our prospects; • actual or anticipated changes in laws or regulations applicable to our business or our tests; • whether and when we are able to obtain marketing approval to market any of our product candidates and the outcome of meetings with applicable regulatory agencies, including the FDA; • the outcome, success, costs and timing of pre-clinical studies and clinical trials for our current or future product candidates; • failure of any our product candidates, if approved, to achieve commercial success; • additions or departures of key management or other personnel; • changes in coverage and reimbursement by current or potential payors; • inability to obtain additional funding as and when needed on reasonable terms; • disputes or other developments with respect to our or others’ intellectual property rights; • product liability claims or other litigation; • sales of our common stock by us or our stockholders; • general economic, political, industry and market conditions, including factors not directly related to our operating performance or the operating performance of our competitors, such as increased uncertainty in the U.S. regulatory environment for healthcare, trade and tax-related matters; • events that affect, or have the potential to affect, general economic conditions, including but not limited to political unrest, global trade wars, natural disasters, act of war, terrorism, or disease outbreaks; and 68 • the other risk factors discussed in this report.
Development of new tests and testing services is time-consuming and costly, as development and marketing of new tests and testing services often requires us to conduct research and development activities regarding the new tests and to further scale our laboratory processes and infrastructure to be able to analyze increasing amounts of more diverse data.
Development of new tests, diagnostic and testing services is time-consuming and costly, as development and marketing of new tests, diagnostic and testing services often requires us to conduct research and development activities regarding the new tests, diagnostic and testing services and to further scale our laboratory processes and infrastructure to be able to analyze increasing amounts of more diverse data.
In addition, the laboratory director must maintain a Certificate of Qualification issued by New York’s DOH in permitted categories. We are subject to on-site routine and complaint-driven inspections under both California and New York state laboratory laws and regulations.
In addition, the laboratory director must maintain a Certificate of Qualification issued by New York’s DOH in permitted categories. 46 We are subject to on-site routine and complaint-driven inspections under both California and New York state laboratory laws and regulations.
We have previously and may again in the future acquire businesses or assets, form joint ventures, make investments in other companies or technologies, or establish other strategic relationships, any of which could harm our operating results or dilute our stockholders’ ownership.
We have previously acquired, and may again in the future acquire, businesses or assets, form joint ventures, make investments in other companies and technologies, or establish other strategic relationships, any of which could harm our operating results or dilute our stockholders’ ownership.
We may not be successful in launching or marketing any new tests we may develop; in expanding into any new or existing markets; and, even if we are successful, the demand for our tests or testing services could decrease or may not continue to increase at historical rates.
We may not be successful in launching or marketing any new tests or services we may develop; in expanding into any new or existing markets; and, even if we are successful, the demand for our tests, diagnostic or testing services could decrease or may not continue to increase at historical rates.
Further, we may be unable to discover or develop and launch new tests or testing services for a variety of reasons, including failure of any proposed test to perform as expected, lack of validation or reference data for the test, or failure to demonstrate the utility of the test.
Further, we may be unable to discover or develop and launch new tests, diagnostic or testing services for a variety of reasons, including failure of any proposed test to perform as expected, lack of validation or reference data for the test, or failure to demonstrate the utility of the test.
The development and use of AI presents risks and challenges that can impact our business, including by posing security risks to our confidential information, proprietary information, and personal data and could give rise to legal and/or regulatory actions, damage our reputation, or otherwise materially harm our business.
Our development and use of AI presents risks and challenges that can impact our business, including by posing security risks to our confidential information, proprietary information, and personal data and could give rise to legal and/or regulatory actions, damage our reputation, or otherwise materially harm our business.
If we are unable to secure funding if and when needed and on reasonable terms, we may be forced to delay, reduce the scope of or eliminate one or more sales and marketing initiatives, research and development programs or other growth plans or strategies.
If we are unable to secure funding if and when needed and on reasonable terms, we may be forced to delay, reduce the scope of or eliminate one or more sales and marketing initiatives, research 39 and development programs or other growth plans or strategies.
Regardless of outcome, litigation can have an adverse impact on us due to defense and settlement costs, diversion of management resources, negative publicity, and reputational harm, among other factors. Political uncertainty may have an adverse impact on our operating performance and results of operations. General political uncertainty may have an adverse impact on our operating performance and results of operations.
Regardless of outcome, litigation can have an adverse impact on us due to defense and settlement costs, diversion of management resources, negative publicity, and reputational harm, among other factors. Political uncertainty may have an adverse impact on our operating performance and results of operations.
We are also subject to governmental audits and investigations, such as the current HRSA Audit and CIDs, that could result in material refunds or settlements. Our business, prospects and financial condition may be adversely affected as the result of the current HRSA Audit and CIDs.
We are also subject to governmental audits and investigations, such as the HRSA Audit and CIDs, that could result in material refunds or settlements. Our business, prospects, and financial condition may be adversely affected as the result of the HRSA Audit and CIDs.
If the FDA determines that we may not use this regulatory pathway, then we would need to seek regulatory approval via a “full” or “stand-alone” NDA under 58 Section 505(b)(1) of the FDC Act.
If the FDA determines that we may not use this regulatory pathway, then we would need to seek regulatory approval via a “full” or “stand-alone” NDA under Section 505(b)(1) of the FDC Act.
We believe our future success will depend in part on our ability to continue to expand our test and testing service offerings and develop and sell new tests and testing services and on our ability to expand our presence in new and existing markets, including our 36 presence in the molecular diagnostic and cancer testing markets.
We believe our future success will depend in part on our ability to continue to expand our test, diagnostic and testing service offerings and to develop and sell new tests, diagnostic services and testing services and on our ability to expand our presence in new and existing markets, including our presence in the molecular diagnostic and cancer testing markets.
If these reports are not filed timely, regulators may impose sanctions and sales of our 54 products may suffer, and we may be subject to product liability or regulatory enforcement actions, all of which could harm our business.
If these reports are not filed timely, regulators may impose sanctions and sales of our products may suffer, and we may be subject to product liability or regulatory enforcement actions, all of which could harm our business.
If our operations, including the conduct of our employees, consultants and commercial partners, are found to be in violation of any of these laws and regulations, (including in connection with the voluntary disclosure process described above), we may be subject to applicable penalties associated with the violation, including administrative, civil and criminal penalties, damages, fines, individual imprisonment, exclusion from participation in federal healthcare programs, refunding of payments received by us and curtailment or cessation of our operations, which could materially harm our reputation, business, prospects or results of operations.
If our operations, including the conduct of our employees, consultants and commercial partners, are found to be in violation of any of these laws and regulations, (including in connection with the voluntary disclosure process described above), we may be subject to material penalties associated with the violation, including administrative, civil and criminal penalties, damages, fines, individual imprisonment, exclusion from participation in federal healthcare programs, refunding of payments received by us and curtailment or cessation of our operations, which could materially harm our reputation, business, prospects, or results of operations.
If the federal government terminates a contract for convenience, we generally would be entitled to recover only our incurred or committed costs, settlement expenses and profit on the work completed prior to termination.
If the federal government terminates a contract for convenience, we generally would be entitled to recover only our incurred or 42 committed costs, settlement expenses, and profit on the work completed prior to termination.
We intend to develop and seek approval for our drug candidates developed using our nano-drug delivery platform technology, including FID-007, FID-022, and other candidates it may develop, pursuant to the FDA’s 505(b)(2) pathway.
We intend to develop and seek approval for our product candidates developed using our nano-drug delivery platform technology, including FID-007, FID-022, and other candidates it may develop, pursuant to the FDA’s 505(b)(2) pathway.
As such, the time and attention of our management team in responding to these matters may limit their time available to devote to our business, and we may also incur significant expenses or experience losses in relation to these matters.
As such, the time and attention of our management team in responding to 51 these matters may limit their time available to devote to our business, and we may also incur significant expenses or experience losses in relation to these matters.
The OIG and a variety of states’ Attorneys General have issued fraud alerts regarding a variety of cancer genetic testing fraud schemes, and the DOJ has announced indictments and guilty pleas in such fraud schemes involving a variety of individuals and entities, including genetic testing and other laboratories, physicians who ordered genetic testing for a large volume of patients without treating them, and third parties who arranged for the genetic testing by approaching patients through telemarketing calls, booths at public events, health fairs, and door-to-door visits.
The OIG and a variety of states’ Attorneys General have issued fraud alerts regarding a variety of cancer genetic testing fraud schemes, and the DOJ has announced civil settlements, indictments and guilty pleas in such fraud schemes involving a variety of individuals and entities, including genetic testing and other laboratories, physicians who ordered genetic testing for a large volume of patients without treating them, and third parties who arranged for the genetic testing by approaching patients through telemarketing calls, booths at public events, health fairs, and door-to-door visits.
Our certificate of incorporation and bylaws provide that, unless we consent in writing to the selection of an alternative forum, the Court of Chancery of the State of Delaware shall be the sole and exclusive forum for: • any derivative action brought on our behalf; • any direct action brought by a stockholder against us or any of our directors, officers or other employees, alleging a breach of a fiduciary duty; 69 • any action brought by a stockholder against us or any of our directors, officers or other employees, alleging a violation of the DGCL, our certificate of incorporation or our bylaws; and • any action brought by a stockholder against us or any of our directors, officers or other employees, asserting a claim against us governed by the internal affairs doctrine.
Our certificate of incorporation and bylaws provide that, unless we consent in writing to the selection of an alternative forum, the Court of Chancery of the State of Delaware shall be the sole and exclusive forum for: • any derivative action brought on our behalf; • any direct action brought by a stockholder against us or any of our directors, officers or other employees, alleging a breach of a fiduciary duty; 70 • any action brought by a stockholder against us or any of our directors, officers or other employees, alleging a violation of the DGCL, our certificate of incorporation or our bylaws; and • any action brought by a stockholder against us or any of our directors, officers or other employees, asserting a claim against us governed by the internal affairs doctrine.
If our marketing activities are found to be in violation of local laws, regulations or practices, we may be subject to fines and other penalties and may be required to cease marketing or commercialization activities in such jurisdiction.
If our marketing activities are found to be in violation of these or other local laws, regulations or practices, we may be subject to fines and other penalties and may be required to cease marketing or commercialization activities in such jurisdiction.
We have incurred and expect to continue to incur significant expenses and devote substantial management effort toward compliance with the auditor attestation requirements of 39 Section 404 of the Sarbanes-Oxley Act.
We have incurred and expect to continue to incur significant expenses and devote substantial management effort toward compliance with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act.
If we do not pay dividends, our common stock may be less valuable because stockholders must rely on sales of their common stock after price appreciation, which may never occur, to realize any gains on their investment. 68 If securities or industry analysts do not publish research or reports about our business or if they issue an adverse or misleading opinion regarding our common stock, our stock price and trading volume could decline.
If we do not pay dividends, our common stock may be less valuable because stockholders must rely on sales of their common stock after price appreciation, which may never occur, to realize any gains on their investment. 69 If securities or industry analysts do not publish research or reports about our business or if they issue an adverse or misleading opinion regarding our common stock, our stock price and trading volume could decline.
Securing marketing approval also typically requires the submission of information about the product manufacturing process, and in many cases the inspection of manufacturing, processing, and packaging facilities by the applicable regulatory authorities.
Securing marketing approval also requires the submission of information about the product manufacturing process, and in many cases the inspection of manufacturing, processing, and packaging facilities by the applicable regulatory authorities.
Our ability to integrate any organizations or technology that we may acquire is subject to a number of risks, including the following: • failure to integrate successfully the personnel, information systems, technology, and operations of the acquired business; • failure to maximize the potential financial and strategic benefits of the acquisition; • failure to realize the expected synergies of the acquired business; • possible impairment of relationships with employees and clients as a result of any integration of new businesses and management personnel; • impairment of goodwill, such as the impairment charge we incurred in the fourth quarter of 2023; • increased demand on human resources and operating systems, procedures and controls; and • reductions in future operating results as a result of the amortization of intangible assets.
Our ability to integrate any organizations or technology that we may acquire is subject to a number of risks, including the following: • failure to integrate successfully the personnel, information systems, technology, and operations of the acquired business; • failure to maximize the potential financial and strategic benefits of the acquisition; • failure to realize the expected synergies of the acquired business; • failure of an acquired business to perform as originally expected; • possible impairment of relationships with employees and clients as a result of any integration of new businesses and management personnel; • impairment of goodwill, such as the impairment charge we incurred in the fourth quarter of 2023; • increased demand on human resources and operating systems, procedures, and controls; and • reductions in future operating results as a result of the amortization of intangible assets.
The failure to report and return an 43 overpayment to the Medicare or Medicaid programs within 60 days of identifying its existence can give rise to liability under the False Claims Act. Further, a government agency could attempt to hold us liable for causing the improper submission of claims by another entity for services that we performed.
The failure to report and return an overpayment to the Medicare or Medicaid programs within 60 days of identifying its existence also can give rise to liability under the False Claims Act. Further, a government agency could attempt to hold us liable for causing the improper submission of claims by another entity for services that we performed.
To the extent these delivered substances cause undesirable side effects, encounter competition or experience regulatory limitations either prior or following market approval or are otherwise unavailable to us due to our lack of rights or ability to utilize supplies of these candidates, the prospects for our drug candidates or, as applicable, approved therapeutics could be materially and negatively affected.
To the extent these delivered substances cause undesirable side effects, encounter competition, or experience regulatory limitations either prior or following market approval or are otherwise unavailable to us due to our lack of rights or ability to utilize supplies of these candidates, the prospects for our product candidates or, as applicable, approved therapeutics could be materially and negatively affected.
Moreover, the interpretation of statutes and regulations may be subject to government policies reflecting domestic political agendas. Enforcement of existing laws or contracts based on existing law may be uncertain and sporadic. We cannot assure you that the PRC regulatory authorities will not determine that our joint venture in China does not violate PRC laws, rules or regulations.
Moreover, the interpretation of statutes and regulations may be subject to government policies reflecting domestic political agendas. Enforcement of existing laws or contracts based on existing law may be uncertain and sporadic. We cannot assure stockholders that the PRC regulatory authorities will not determine that our joint venture in China does not violate PRC laws, rules, or regulations.
Our drug candidates may not be effective, may be only moderately effective or may prove to have undesirable or unintended side effects, toxicities or other characteristics that may preclude our obtaining marketing approval or prevent or limit commercial use, or there may be deficiencies in manufacturing compliance by us or by our contract manufacturing organizations and partners that could result in the candidate not being approved.
Our product candidates may not be effective, may be only moderately effective or may prove to have undesirable or unintended side effects, toxicities or other characteristics that may preclude our obtaining marketing approval or prevent or limit commercial use, or there may be deficiencies in manufacturing compliance by us or by our contract manufacturing organizations and partners that could result in the candidate not being approved.
Utilization of the Section 505(b)(2) NDA pathway could expedite the development program for our lead drug candidates, FID-007 and of FID-022. Notwithstanding the approval of an increasing number of products by the FDA under Section 505(b)(2) over the last few years, certain brand-name pharmaceutical companies and others have objected to the FDA’s interpretation of Section 505(b)(2).
Utilization of the Section 505(b)(2) NDA pathway could expedite the development program for our lead product candidates, FID-007 and FID-022. Notwithstanding the approval of an increasing number of products by the FDA under Section 505(b)(2) over the last few years, certain brand-name pharmaceutical companies and others have objected to the FDA’s interpretation of Section 505(b)(2).
In addition, adverse side effects caused by any drugs that may be similar in nature to our drug candidates or in connection with the nanoencapsulated drugs or therapeutics used in connection with our drug candidates (similar to paclitaxel with FID-007) could delay or prevent marketing approval of our drug candidates, limit the commercial profile of an approved label for our drug candidates, or result in significant negative consequences for our drug candidates following marketing approval.
In addition, adverse side effects caused by any drugs that may be similar in nature to our product candidates or in connection with the nanoencapsulated drugs or therapeutics used in connection with our product candidates (similar to paclitaxel with FID-007) could delay or prevent marketing approval of our product candidates, limit the commercial profile of an approved label for our product candidates, or result in significant negative consequences for our product candidates following marketing approval.
We believe our ability to succeed will depend in part on our avoidance of infringement of patents and other proprietary rights owned by third parties, including the intellectual property rights of competitors. There are numerous third-party-owned U.S. and foreign patents, pending patent applications and other intellectual property rights that cover technologies relevant to our testing, testing services and drug candidates.
We believe our ability to succeed will depend in part on our avoidance of infringement of patents and other proprietary rights owned by third parties, including the intellectual property rights of competitors. There are numerous third-party-owned U.S. and foreign patents, pending patent applications, and other intellectual property rights that cover technologies relevant to our testing, testing services, and product candidates.
If a third-party were to prevail on a legal assertion of invalidity or unenforceability, we would lose at least part, and perhaps all, of the patent protection on any drug candidates it develops or other technologies. Such a loss of patent protection would have a material adverse impact on our business, financial condition, results of operations, and prospects.
If a third-party were to prevail on a legal assertion of invalidity or unenforceability, we would lose at least part, and perhaps all, of the patent protection on any product candidates it develops or other technologies. Such a loss of patent protection would have a material adverse impact on our business, financial condition, results of operations, and prospects.
As a result, our future owned and licensed patent portfolio may not provide us with sufficient rights to exclude others from commercializing products or drug candidates similar or identical to ours. If we do not obtain patent term extension and/or data exclusivity for any drug candidate that we may develop, our business may be materially harmed.
As a result, our future owned and licensed patent portfolio may not provide us with sufficient rights to exclude others from commercializing products or product candidates similar or identical to ours. If we do not obtain patent term extension and/or data exclusivity for any product candidate that we may develop, our business may be materially harmed.
For example, we may have inventorship disputes arise from conflicting obligations of consultants or others who are involved in developing our drugs or drug candidates and other proprietary technologies we may develop. Litigation may be necessary to defend against these and other claims challenging inventorship or our ownership of our owned patents, trade secrets, or other intellectual property.
For example, we may have inventorship disputes arise from conflicting obligations of consultants or others who are involved in developing our drugs or product candidates and other proprietary technologies we may develop. Litigation may be necessary to defend against these and other claims challenging inventorship or our ownership of our owned patents, trade secrets, or other intellectual property.
Although we have implemented systems, processes and controls and performed this evaluation as of the end of 2024, we will need to maintain and enhance these controls if and as we grow. Moreover, we may need to hire additional personnel and devote more resources to our financial reporting function in order to do so, which will increase our operating expenses.
Although we have implemented systems, processes and controls and performed this evaluation as of the end of 2025, we will need to maintain and enhance these controls if and as we grow. Moreover, we may need to hire additional personnel and devote more resources to our financial reporting function in order to do so, which will increase our operating expenses.

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Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

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Biggest changeThey are also a Certified Information Privacy Professional (CIPP/US/E), a Certified Privacy Manager (CIPM), and a Privacy Law Specialist (PLS) with the International Association of Privacy Professionals (IAPP). As discussed above, our CISO and/or General Counsel and Chief Privacy Officer report to our board of directors about cybersecurity threat risks, among other cybersecurity related matters, on a quarterly basis.
Biggest changeOur General Counsel and Chief Privacy Officer is an attorney with 19 years of experience, including experience in privacy matters and is also a Certified Information Privacy Professional (CIPP/US/E), a Certified Privacy Manager (CIPM), and a Privacy Law Specialist (PLS) with the International Association of Privacy Professionals (IAPP).
We describe whether and how risks from identified cybersecurity threats, including as a result of any previous cybersecurity incidents, have materially affected or are reasonably likely to materially affect us, including our business strategy, results of operations, or financial condition under the heading “Actual or attempted security incidents or breaches, loss of data, or other disruptions could expose us to material liability and materially and adversely affect our business, financial condition, and our reputation,” which disclosures are incorporated by reference herein.
We describe whether and how risks from identified cybersecurity threats, including as a result of any previous cybersecurity incidents, have materially affected or are reasonably likely to materially affect us, including our business strategy, results of operations, or financial condition under the heading “Actual or attempted security incidents or breaches, loss of data, or other disruptions could expose us to material liability and materially and adversely affect our business, financial condition, and reputation,” which disclosures are incorporated by reference herein.
To provide for the availability of critical data and systems, maintain regulatory compliance, manage our material risks from cybersecurity threats, and protect against and respond to cybersecurity incidents, we also perform periodic risk assessments, which includes cybersecurity risks, monitor emerging data protection laws and implement changes to our processes that are designed to comply with such laws; through our policies, practices, and/or contracts (as applicable), require employees and certain third parties to treat confidential information and data with care; periodically update our relevant policies and procedures; employ technical safeguards that are designed to protect our information systems from cybersecurity threats, including firewalls, intrusion prevention and detection systems, anti-malware functionality, and access controls, which are evaluated and improved through vulnerability assessments and cybersecurity threat intelligence; provide 70 regular, mandatory training for our employees regarding cybersecurity threats as a means to equip them with effective tools and knowledge necessary to identify or address cybersecurity threats and to communicate our evolving information security policies, standards, processes and practices; conduct regular phishing email simulations to enhance awareness and responsiveness to possible threats; conduct annual cybersecurity training for our board of directors and senior management; run tabletop exercises to simulate a response to a cybersecurity incident and use the findings to improve our processes and technologies; leverage the NIST incident handling framework to help us identify, protect, detect, respond, and recover when there is an actual or potential cybersecurity incident; engage consultants to help us oversee and manage cybersecurity risks, processes, and incident response measures; and carry information security risk insurance that provides protection against the potential losses arising from a cybersecurity incident.
To provide for the availability of critical data and systems, maintain regulatory compliance, manage our material risks from cybersecurity threats, and protect against and respond to cybersecurity incidents, we also perform periodic risk assessments, which includes cybersecurity risks, monitor emerging data protection laws and implement changes to our processes that are designed to comply with such laws; through our policies, practices, and/or contracts (as applicable), require employees and certain third parties to treat confidential information and data with care; periodically update our relevant policies and procedures; employ technical safeguards that are designed to protect our information systems from cybersecurity threats, including firewalls, intrusion prevention and detection systems, anti-malware functionality, and access controls, which are evaluated and improved through vulnerability assessments and cybersecurity threat intelligence; provide 71 regular, mandatory training for our employees regarding cybersecurity threats as a means to equip them with effective tools and knowledge necessary to identify or address cybersecurity threats and to communicate our evolving information security policies, standards, processes and practices; conduct regular phishing email simulations to enhance awareness and responsiveness to possible threats; conduct annual cybersecurity training for our board of directors and senior management; run tabletop exercises to simulate a response to a cybersecurity incident and use the findings to improve our processes and technologies; leverage the NIST incident handling framework to help us identify, protect, detect, respond, and recover when there is an actual or potential cybersecurity incident; engage consultants to help us oversee and manage cybersecurity risks, processes, and incident response measures; and carry information security risk insurance that provides protection against the potential losses arising from a cybersecurity incident.
Material cybersecurity threat risks are also considered during separate board meeting discussions of important matters like enterprise risk management, operational budgeting, business continuity planning, mergers and acquisitions, brand management, and other relevant matters. Our Chief Information Security Officer advises our Board on the specific vulnerabilities we identified and the controls we put in place to mitigate our risk.
Material cybersecurity threat risks are also considered during separate board meeting discussions of important matters like enterprise risk management, operational budgeting, business continuity planning, mergers and acquisitions, brand management, and other relevant matters. Our Chief Information Security Officer advises our board of directors on the specific vulnerabilities we identified and the controls we put in place to mitigate our risk.
Our cyber risk management program is integrated within the Company’s enterprise risk management system and addresses both the corporate information technology environment and customer-facing products and services. The risk management program is focused on safeguarding the organization ’s digital assets, ensuring continuous business operations, and minimizing the potential impact of cyber threats. Regular assessments, including penetration tests, are performed.
Our cyber risk management program is integrated within the Company’s enterprise risk management program and addresses both the corporate information technology environment and customer-facing products and services. The risk management program is focused on safeguarding the organization ’s digital assets, ensuring continuous business operations, and minimizing the potential impact of cyber threats. Regular assessments, including penetration tests, are performed.
Members of board of directors are also encouraged to regularly engage in conversations with management on cybersecurity-related news and events and discuss any updates to our cybersecurity risk management and strategy programs.
Members of the board of directors are also encouraged to regularly engage in conversations with management on cybersecurity-related news and events and discuss any updates to our cybersecurity risk management and strategy programs.
Our board of directors executes its oversight responsibility for risk management both directly and through delegating oversight of 71 certain of these risks to its committees, and our board of directors has authorized our audit committee to oversee risks from cybersecurity threats.
Our board of directors executes its oversight responsibility for risk management both directly and through delegating oversight of 72 certain of these risks to its committees, and our board of directors has authorized our audit committee to oversee risks from cybersecurity threats.
Our cybersecurity program is managed by a dedicated team, which is led by our Chief Information Security Officer, (CISO who reports to the Chief Operating Officer and has to the ability to communicate directly to our CEO if necessary).
Our cybersecurity program is managed by a dedicated team, which is led by our CISO, who reports to the Chief Operating Officer and has to the ability to communicate directly to our CEO and the board if necessary.
Our CISO has over 20 years of IT experience, including over 18 years of cybersecurity experience, holds an M.S. degree in Information Security, and is a Certified Information Systems Security Professional (CISSP). Our General Counsel and Chief Privacy Officer is an attorney with 18 years of experience, including experience in privacy matters.
Our CISO has over 20 years of IT experience, including over 18 years of cybersecurity experience, holds an M.S. degree in Information Security, and is a Certified Information Systems Security Professional (CISSP).
In addition, our cybersecurity risk management and data strategy processes are further overseen by certain management team members.
As discussed above, our CISO and/or General Counsel and Chief Privacy Officer report to our board of directors about cybersecurity threat risks, among other cybersecurity related matters, on a quarterly basis. In addition, our cybersecurity risk management and data strategy processes are further overseen by certain management team members.

Item 2. Properties

Properties — owned and leased real estate

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Biggest changeIn Alpharetta, Georgia, we own and occupy approximately 65,000 square feet of building and space situated on 8.5 acres of land. In Phoenix, Arizona, we lease and occupy approximately 25,000 square feet under a lease that will expire in November 2025.
Biggest changeIn Alpharetta, Georgia, we own and occupy approximately 65,000 square feet of building and space situated on 8.5 acres of land.
Added
In Phoenix, Arizona, we previously leased and occupied approximately 25,000 square feet under a lease that expired in November 2025, and in October 2025, we entered into a new lease and occupy approximately 7,000 square feet under a lease that will expire in November 2028.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeAs disclosed in Note 8, Debt, Commitments and Contingencies to the Consolidated Financial Statements, we are engaged in certain legal investigations, 72 audits and voluntary disclosure processes, and the disclosure set forth in Note 8 relating to these certain legal matters is incorporated herein by reference.
Biggest changeThe disclosure set forth in Note 8, Debt, Commitments and Contingencies , to our consolidated financial statements included in this report relating to these certain legal matters is incorporated herein by reference. The outcome of these matters are inherently uncertain, and there can be no assurances that a favorable outcome will be obtained.
The outcome of these matters are inherently uncertain, and there can be no assurances that a favorable outcome will be obtained. Regardless of outcome, litigation can have an adverse impact on us due to defense and settlement costs, diversion of management resources, negative publicity and reputational harm, among other factors. Item 4. M ine Safety Disclosures.
Regardless of outcome, litigation can have an adverse impact on us due to defense and settlement costs, diversion of management resources, negative publicity and reputational harm, among other factors. Item 4. M ine Safety Disclosures. Not applicable. 74 PART II
Item 3. Legal Proceedings. From time to time, we may be involved in legal proceedings arising in the ordinary course of our business.
Item 3. Legal Proceedings. From time to time, we may be involved in legal proceedings arising in the ordinary course of our business. As disclosed in Note 8, Debt, Commitments and Contingencies , to our consolidated financial statements, we are engaged in certain legal investigations, and 73 subject to audits.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeThe comparison assumes that $100 was invested in the Company’s common stock, the NASDAQ Composite Index, and the Nasdaq Biotechnology Index as of the market close on December 31, 2019.
Biggest changeThe comparison assumes that $100 was invested in our common stock, the NASDAQ Composite Index, and the Nasdaq Biotechnology Index as of the market close on December 31, 2020.
Holders of Common Stock As of February 1, 2025, there were 11 holders of record of our common stock, plus an indeterminate number of additional stockholders whose shares of our common stock are held on their behalf by brokerage firms or other agents.
Holders of Common Stock As of February 1, 2026, there were 11 holders of record of our common stock, plus an indeterminate number of additional stockholders whose shares of our common stock are held on their behalf by brokerage firms or other agents.
Common Stock Performance Graph The following graph compares the cumulative total stockholder return, calculated on a dividend-reinvested basis, in Fulgent's Common Stock, the Nasdaq Composite Index, and the Nasdaq Biotechnology Index for the five years ended December 31, 2024.
Common Stock Performance Graph The following graph compares the cumulative total stockholder return, calculated on a dividend-reinvested basis, in our common stock, the Nasdaq Composite Index, and the Nasdaq Biotechnology Index for the five years ended December 31, 2025.
Removed
Use of Proceeds from Registered Securities To date, we have used $190.8 million of the net proceeds from sales of our common stock, of which, $4.5 million was used for contributions to FF Gene Biotech prior to the FF Gene Biotech Acquisition, $170.5 million was used to fund the Company’s operation and a business combination, and $15.8 million was used to pay off the investment margin loan.
Added
Note that historic stock price performance is not necessarily indicative of future stock price performance. 75 Information on Share Repurchases There were no shares of common stock purchased during the three months ended December 31, 2025. For further information about shares repurchased, see Note 16, Stock Repurchase Program , to our consolidated financial statements. Item 6. [R eserved] 76
Removed
All other net proceeds from sales of our common stock are invested in investment-grade and interest-bearing securities, such as corporate bonds, municipal bonds, and U.S. government and U.S. agency debt securities. There has been no material change in the planned use of proceeds from the sales of our common stock from that described in the Prospectus.
Removed
Note that historic stock price performance is not necessarily indicative of future stock price performance. 74 Information on Share Repurchases The number of shares of common stock repurchased by the Company during the year ended December 31, 2024 and the average price paid per share are as follows: Period (a) Total Number of Shares Purchased (b) Average Price Paid Per Share (1) (c) Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (d) Maximum Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs March 2024 (3/1/2024-3/31/2024) 10,000 $ 22.02 10,000 $ 150,461,000 Total 10,000 10,000 (1) Includes commissions for the shares repurchased under the stock repurchase program.

Item 7. Management's Discussion & Analysis

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

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Biggest changeYear Ended December 31, 2024 2023 $ Change % Change (in thousands, except percentages) Statement of Operation Data Revenue $ 283,470 $ 289,213 $ (5,743 ) (2 )% Cost of revenue 176,255 184,757 (8,502 ) (5 )% Gross profit 107,215 104,456 2,759 3 % Operating expenses: Research and development 48,816 41,440 7,376 18 % Selling and marketing 36,246 41,467 (5,221 ) (13 )% General and administrative 88,106 88,999 (893 ) (1 )% Amortization of intangible assets 7,965 7,845 120 2 % Goodwill impairment loss — 120,234 (120,234 ) (100 )% Total operating expenses 181,133 299,985 (118,852 ) (40 )% Operating (loss) income (73,918 ) (195,529 ) 121,611 (62 )% Other income (expenses): Interest income 31,304 21,612 9,692 45 % Interest expense 170 (488 ) 658 (135 )% Impairment of available-for-sale debt securities (10,073 ) — (10,073 ) * Other income, net 561 320 241 75 % Total other income, net 21,962 21,444 518 2 % (Loss) income before income taxes (51,956 ) (174,085 ) 122,129 (70 )% (Benefit from) provision for income taxes (8,136 ) 1,154 (9,290 ) (805 )% Net (loss) income from consolidated operations (43,820 ) (175,239 ) 131,419 (75 )% Net loss attributable to noncontrolling interests 1,112 7,414 (6,302 ) (85 )% Net (loss) income attributable to Fulgent $ (42,708 ) $ (167,825 ) $ 125,117 (75 )% * not meaningful 80 Revenue Year Ended December 31, 2024 2023 $ Change % Change (in thousands, except percentages) Revenue from laboratory services Precision diagnostics $ 167,745 $ 131,990 $ 35,755 27 % Anatomic pathology 97,080 104,655 (7,575 ) (7 )% BioPharma services 16,338 25,416 (9,078 ) (36 )% COVID-19 2,307 27,152 (24,845 ) (92 )% Total laboratory services $ 283,470 $ 289,213 $ (5,743 ) (2 )% Revenue decreased by $5.7 million, or 2%, from $289.2 million in 2023 to $283.5 million in 2024.
Biggest changeYear Ended December 31, 2025 2024 $ Change % Change (in thousands, except percentages) Statement of Operation Data Revenue $ 322,671 $ 283,470 $ 39,201 14 % Cost of revenue 191,796 176,255 15,541 9 % Gross profit 130,875 107,215 23,660 22 % Operating expenses Research and development 53,905 48,816 5,089 10 % Selling and marketing 43,371 36,246 7,125 20 % General and administrative 116,664 88,106 28,558 32 % Amortization of intangible assets 8,031 7,965 66 1 % Total operating expenses 221,971 181,133 40,838 23 % Operating loss (91,096 ) (73,918 ) (17,178 ) 23 % Other income (expenses) Interest income 30,919 31,304 (385 ) (1 )% Interest expense (75 ) 170 (245 ) (144 )% Impairment loss (9,926 ) (10,073 ) 147 (1 )% Other income, net 153 561 (408 ) (73 )% Total other income, net 21,071 21,962 (891 ) (4 )% Loss before income taxes (70,025 ) (51,956 ) (18,069 ) 35 % Benefit from income taxes (8,394 ) (8,136 ) (258 ) 3 % Net loss from consolidated operations (61,631 ) (43,820 ) (17,811 ) 41 % Net loss attributable to noncontrolling interests 1,118 1,112 6 1 % Net loss attributable to Fulgent $ (60,513 ) $ (42,708 ) $ (17,805 ) 42 % Revenue Year Ended December 31, 2025 2024 $ Change % Change Revenue from laboratory services Precision diagnostics (1) $ 190,472 $ 167,745 $ 22,727 14 % Anatomic pathology 106,442 97,080 9,362 10 % BioPharma services 25,310 16,338 8,972 55 % COVID-19 — 2,307 (2,307 ) (100 )% Total laboratory services 322,224 283,470 38,754 14 % Revenue from therapeutic development BioPharma services 447 — 447 * Total therapeutic development 447 — 447 * Total revenue $ 322,671 $ 283,470 $ 39,201 14 % * not meaningful (1) Beginning in 2025, COVID-19 revenue is grouped with precision diagnostics, which was insignificant in 2025.
Off-Balance Sheet Arrangements We did not have, and do not currently have, any off-balance sheet arrangements during the periods presented, as defined in the rules and regulations of the SEC, that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenue or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to investors.
Off-Balance Sheet Arrangements We did not have, and do not currently have, any off-balance sheet arrangements during the periods presented, as defined in the rules and regulations of the SEC, that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenue or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to investors.
We are not able to market a human therapeutic without obtaining regulatory approvals, and such approvals require completing clinical trials that demonstrate a drug candidate is safe and effective. In addition, the availability and extent of coverage and reimbursement from insurance payors, including government healthcare programs and private insurance plans, impact the revenues a product can generate.
We are not able to market a human therapeutic without obtaining regulatory approvals, and such approvals require completing clinical trials that demonstrate a product candidate is safe and effective. In addition, the availability and extent of coverage and reimbursement from insurance payors, including government healthcare programs and private insurance plans, impact the revenues a product can generate.
This technology platform enables us to perform each test and deliver its results at a lower cost to us than many of our competitors, and this low cost allows us to maintain affordable and competitive pricing for our customers, which we believe encourages repeat ordering from existing customers and attracts new customers.
This technology platform enables us to perform each test and deliver its results at a lower cost to us than many of our competitors, and this low cost allows us to maintain affordable and competitive pricing for our customers, which we 78 believe encourages repeat ordering from existing customers and attracts new customers.
Moreover, we may incur substantial costs in pursuing future capital, including investment banking, legal and accounting fees, printing and distribution expenses and other similar costs. Additional funding may not be available to us when needed, on acceptable terms or at all.
Moreover, we may incur substantial costs in pursuing future capital raises, including investment banking, legal and accounting fees, printing and distribution expenses and other similar costs. Additional funding may not be available to us when needed, on acceptable terms or at all.
Ability to Obtain Reimbursement and Government Audits and Investigations Much of our revenue depends on receiving reimbursement for our tests from insurance payors, including our Insurance and Institutional customers. These payors have complicated rules and procedures regarding submissions for reimbursement and their 77 reimbursement practices and procedures may vary from period to period.
Ability to Obtain Reimbursement and Government Audits and Investigations Much of our revenue depends on receiving reimbursement for our tests from insurance payors, including our Insurance and Institutional customers. These payors have complicated rules and procedures regarding submissions for reimbursement, and their reimbursement practices and procedures may vary from period to period.
We also expect to continue to incur general and administrative expenses as a result of operating as a public company, including expenses related to compliance with the rules and regulations of the SEC, and Nasdaq, additional insurance expenses, investor relations activities and other administrative and professional services.
We also expect to continue to incur general and administrative expenses as a result of operating as a public company, including expenses related to compliance with the rules and 80 regulations of the SEC, and Nasdaq, additional insurance expenses, investor relations activities and other administrative and professional services.
We expect that these factors could cause our consolidated effective tax rate to differ significantly from the U.S. federal income tax rate in future periods. Results of Operations The table below summarizes the results of our continuing operations for each of the periods presented.
We expect that these factors could cause our consolidated effective tax rate to differ significantly from the U.S. federal income tax rate in future periods. 81 Results of Operations The table below summarizes the results of our continuing operations for each of the periods presented.
Costs associated with performing tests are recorded as tests are processed. 78 Operating Expenses Our operating expenses are classified into five categories: research and development; selling and marketing; general and administrative; amortization of intangible assets; and goodwill impairment loss, if any.
Costs associated with performing tests are recorded as tests are processed. Operating Expenses Our operating expenses are classified into five categories: research and development; selling and marketing; general and administrative; amortization of intangible assets; and goodwill impairment loss, if any.
We expense all research and development costs in the periods in which they are incurred. We expect our research and development expenses will continue to increase in absolute dollars, as we expect to continue to invest in research and development activities and continue to innovate and expand the application of our platform.
We expense all research and development costs in the periods in which they are incurred. We expect our research and development expenses will continue to increase in absolute dollars, as we expect to continue to invest in research and development activities and continue to innovate and expand the application of our testing platform.
We currently classify our customers into three payor types: (i) Insurance, (ii) Institutional, including hospitals, medical institutions, other laboratories, governmental bodies, municipalities, and large corporations or (iii) Patients who pay directly.
We currently classify our customers into three payor types: (i) Insurance, (ii) Institutional, including hospitals, medical institutions, other laboratories, governmental bodies, and large corporations or (iii) Patients who pay directly.
These reimbursement activities also subject us to payor and government audits and investigations such as the HRSA audit and the CIDs discussed in Note 8, Debt, Commitments and Contingencies to the Consolidated Financial Statements.
These reimbursement activities also subject us to payor and government audits and investigations such as the HRSA audit and the CIDs discussed in Note 8, Debt, Commitments and Contingencies to our consolidated financial statements.
Estimated collection amounts from insurance payors are subject to the complexities and ambiguities of billing, reimbursement regulations and claims processing, as well as considerations unique to Medicare and Medicaid programs. Because our proprietary technology platform allows for repaid scaling of a broad, flexible testing menu, we can offer our customers more scalable and affordable testing.
Estimated collection amounts from insurance payors are subject to the complexities and ambiguities of billing, reimbursement regulations and claims processing, as well as considerations unique to Medicare and Medicaid programs. Because our proprietary technology platform allows for rapid scaling of a broad, flexible testing menu, we can offer our customers more scalable and affordable testing.
Cost of Revenue Cost of revenue reflects the aggregate costs incurred in delivering test results and consists of: costs of laboratory reagents and supplies; personnel costs, including salaries, employee benefit costs, bonuses and equity-based compensation expenses; depreciation of laboratory equipment; delivery and courier costs relating to the transportation of specimens to be tested; amortization of leasehold improvements; and allocated overhead expenses, including rent and utilities.
Cost of Revenue Cost of revenue reflects the aggregate costs incurred in delivering test results and consists of: costs of laboratory reagents and supplies; personnel costs, including salaries, employee benefit costs, bonuses and equity-based compensation expenses; depreciation of laboratory equipment; delivery and courier costs relating to the transportation of specimens to be tested; amortization of building or leasehold improvements; and allocated overhead expenses, including rent and utilities.
Amortization of Intangible Assets Our consolidated amortization of intangible assets represents amortization expenses on the intangible assets that arose from the business combinations in 2022 and 2021, and a patent purchased in 2021.
Amortization of Intangible Assets Our consolidated amortization of intangible assets represents amortization expenses on the intangible assets that arose from the business combinations in 2025, 2022 and 2021, and a patent purchased in 2021.
For all IPR&D projects, there are major risks and uncertainties associated with the timely and successful completion of development and commercialization of these drug candidates, including the ability to confirm their efficacy based on data from clinical trials, the ability to obtain necessary regulatory approvals, and the ability to successfully complete these tasks within budgeted costs.
For all IPR&D projects, there are major risks and uncertainties associated with the timely and successful completion of development and commercialization of these product candidates, including the ability to confirm their efficacy based on data from clinical trials, the ability to obtain necessary regulatory approvals, and the ability to successfully complete these tasks within budgeted costs.
For each category except for amortization of intangible assets and goodwill impairment loss, the largest component is personnel costs, which include salaries, employee benefit costs, bonuses and equity-based compensation expenses. Research and Development Expenses Research and development expenses represent costs incurred to develop our technology and future tests and treatments and our drug candidates.
For each category except for amortization of intangible assets and goodwill impairment loss, the largest component is personnel costs, which include salaries, employee benefit costs, bonuses and equity-based compensation expenses. Research and Development Expenses Research and development expenses represent costs incurred to develop our technology and future tests and treatments and our product candidates.
Furthermore, we expect our research and development expenses for our therapeutic development segment to increase as we incur incremental expenses associated with our drug candidates that are currently under development and in clinical trials. Drug candidates in later stages of clinical development generally have higher development costs, primarily due to the increased size and duration of later-stage clinical trials.
Furthermore, we expect our research and development expenses for our therapeutic development segment to increase as we incur incremental expenses associated with our product candidates that are currently under development and in clinical trials. Product candidates in later stages of clinical development generally have higher development costs, primarily due to the increased size and duration of later-stage clinical trials.
Ability to Maintain Low Internal Costs and Inflation We have developed various proprietary technologies that improve our laboratory efficiency and reduce the costs we incur to perform our tests, including our proprietary gene probes, data algorithms, adaptive learning software and genetic reference library.
Ability to Maintain Low Internal Costs and Inflation We have developed various proprietary technologies, including various AI tools, that improve our laboratory efficiency and reduce the costs we incur to perform our tests, including our proprietary gene probes, data algorithms, adaptive learning software and genetic reference library.
Our therapeutic development business is focused on developing drug candidates for treating a broad range of cancers using a novel nanoencapsulation and targeted therapy platform designed to improve the therapeutic window and PK profile of new and existing cancer drugs.
Our therapeutic development business is focused on developing product candidates for treating a broad range of cancers using a novel nanoencapsulation and targeted therapy platform designed to improve the therapeutic window and PK profile of new and existing cancer drugs.
In 2024, the research and development expenses primarily consisted of $25.3 million in personnel expenses, including bonuses and equity-based compensation, $1.4 million in reagent and supply costs, $0.6 million in facility expenses, $0.4 million in depreciation expense, and $0.4 million in software and licensing fees.
The 2024 expenses primarily consisted of $25.3 million in personnel expenses, including bonuses and equity-based compensation, $1.4 million in reagent and supply costs, $0.6 million in facility expenses, $0.4 million in depreciation expense, and $0.4 million in software and licensing fees.
We expect to incur more operating expenses and use more cash in operating activities in the coming year as a result of our planned and ongoing clinical trials for FID-007 and FID-022, and as we continue to invest resources to grow our laboratory services business. 84 Investing Activities The cash provided by or used in investing activities are impacted by capital expenditures for operation needs and timing of payments, timing of maturities of marketable securities, and discretionary business combinations and other investment.
We expect to incur more operating expenses and use more cash in operating activities in the coming year as a result of our planned and ongoing clinical trials for FID-007 and FID-022, and as we continue to invest resources to grow our laboratory services business. 86 Investing Activities The cash provided by or used in investing activities is impacted by capital expenditures for operation needs and timing of payments, timing of maturities of marketable securities, and discretionary business combinations and other investment.
We have omitted discussion of 2022 results where it would be redundant to the discussion previously included in Item 7 of our 2023 Annual Report on Form 10-K.
We have omitted discussion of 2023 results where it would be redundant to the discussion previously included in Item 7 of our 2024 Annual Report on Form 10-K.
The composition and concentration of our customer base can fluctuate from period to period, and in certain prior periods, a small number of customers have accounted for a significant portion of our revenue.
The composition and concentration of our customer base often fluctuate from period to period, and in certain prior periods, a small number of customers have accounted for a significant portion of our revenue.
We currently receive payments from: insurance, institutional customers, including hospitals, medical institutions, other laboratories, governmental bodies, municipalities, and large corporations; and patients who pay directly. We recognize revenue in an amount that reflects the consideration to which we expect to be entitled in exchange for the transfer of promised goods or services to our customers.
We currently receive payments from: (i) Insurance, (ii) Institutional customers, including hospitals, medical institutions, other laboratories, governmental bodies, and large corporations; and (iii) Patients, who pay directly. We recognize revenue in an amount that reflects the consideration to which we expect to be entitled in exchange for the transfer of promised goods or services to our customers.
Our marketable securities primarily consist of U.S. government and U.S. agency debt securities, U.S. treasury bills, corporate bonds, municipal bonds, and Yankee debt securities as of December 31, 2024 and 2023.
Our marketable securities primarily consist of U.S. government and U.S. agency debt securities, U.S. treasury bills, corporate bonds, municipal bonds, and Yankee debt securities as of December 31, 2025, and 2024.
These fluctuations can occur because of a variety of factors, including, among others, factors relating to the demand for our tests, the amount and timing of sales, the prices we charge for our tests due to changes in product mix, customer mix, general price degradation for tests, or other factors, the rate and timing of our billing and collections cycles and the timing and amount of our commitments and other payments.
These fluctuations can occur because of a variety of factors, including, among others, factors relating to the demand for our tests, whether large customers continue ordering our tests, the amount and timing of sales, the prices we charge for our tests due to changes in product mix, customer mix, general price degradation for tests, or other factors, the rate and timing of our billing and collections cycles and the timing and amount of our commitments and other payments.
Cash used to fund operating expenses is impacted by the timing of our expense payments, as reflected in the changes in our outstanding accounts payable and accrued expenses. We expect our existing cash, cash equivalent, and short-term marketable securities to continue to be sufficient to meet our anticipated cash requirements for at least the next 12 months.
Cash used to fund operating expenses is impacted by the timing of our expense payments, as reflected in the changes in our outstanding accounts payable and accrued expenses. We expect our existing cash, cash equivalents, restricted cash, and marketable securities to continue to be sufficient to meet our anticipated cash requirements for at least the next 12 months.
Material Cash Requirements and Contractual Obligations as of December 31, 2024 As of December 31, 2024, we have an outstanding balance of $2.9 million on an installment loan, of which, the current portion is $0.4 million. See Note 8, Debt, Commitments and Contingencies , of our consolidated financial statements included in this report.
Material Cash Requirements and Contractual Obligations as of December 31, 2025 As of December 31, 2025, we have an outstanding balance of $2.4 million on an installment loan, of which, the current portion is $0.5 million. See Note 8, Debt, Commitments and Contingencies , to our consolidated financial statements included in this report.
We re-assess our estimated transaction price at the end of each reporting period, including our assessment of whether our estimate of variable consideration is constrained to the extent that it is probable that a significant reversal of cumulative revenue will not occur once any uncertainty is resolved.
We re-assess our estimated transaction price at the end of each reporting period, including our assessment of whether our estimate of variable consideration is constrained to the extent that it is probable that a significant reversal of cumulative revenue will not occur once any uncertainty is resolved. We record any necessary adjustments in the current period’s revenue.
We expect our selling and marketing expenses will increase in absolute dollars, primarily driven by our increased investment in sales and marketing, including developing and expanding our sales team, creating and implementing new sales and marketing strategies and increasing the overall scope of our marketing efforts.
We expense all selling and marketing costs as incurred. We expect our selling and marketing expenses will increase in absolute dollars, primarily driven by our increased investment in sales and marketing, including developing and expanding our sales team, creating and implementing new sales and marketing strategies and increasing the overall scope of our marketing efforts.
Also see Note 17, Goodwill and Intangible Assets , to our consolidated financial statements included in this report for details on the valuation estimate and results for 2024.
Also see Note 17, Goodwill and Intangible Assets , to our consolidated financial statements included in this report for details on the valuations and results for 2025.
During all periods covered by this report, we consider the estimated effect on our revenue of foreign currency exchange rate fluctuations to be immaterial; however, the impact of foreign currency exchange rate fluctuations may increase in future periods as we pursue continued international expansion.
During all periods covered by this report, we consider the estimated effect on our revenue of foreign currency exchange rate fluctuations to be immaterial; however, the impact of foreign currency exchange rate fluctuations may increase in future periods as we pursue continued international expansion. Business Risks and Uncertainties Our business and prospects are exposed to numerous risks and uncertainties.
Our primary uses of cash are for capital expenditures mainly in buildings, building improvements, and equipment, to repurchase our stock, fund our operations, and to fund strategic acquisitions as we continue to invest in and seek to grow our business.
Our primary uses of cash are for strategic acquisitions; capital expenditures, mainly in buildings, building improvements, and equipment; repurchases of our stock; the funding of our clinical trials; and the funding of our operations as we continue to invest in and seek to grow our business.
For further information, refer to Note 9, Leases, to the Consolidated Financial Statements. (2) Represents non-cancelable finance leases. For further information, refer to Note 9, Leases , to the Consolidated Financial Statements. (3) Represents purchase obligations for medical lab equipment, reagents and other supplies, see Note 8, Debt, Commitment and Contingencies , to the Consolidated Financial Statements.
For further information, refer to Note 9, Leases, to our consolidated financial statements. (2) Represents non-cancelable finance leases. For further information, refer to Note 9, Leases , to our consolidated financial statements. (3) Represents purchase obligations for medical lab equipment, reagents and other supplies.
Net Loss Attributable to Noncontrolling Interest Net loss attributable to noncontrolling interest represents net loss attributable to minority shareholders from entities not wholly owned. 83 Liquidity and Capital Resources Liquidity and Sources of Cash We had $828.6 million and $847.7 million in cash, cash equivalents, restricted cash, and marketable securities as of December 31, 2024 and 2023, respectively.
Net Loss Attributable to Noncontrolling Interest Net loss attributable to noncontrolling interest represents net loss attributable to minority stockholders from entities not wholly owned. 85 Liquidity and Capital Resources Liquidity and Sources of Cash We had $705.5 million and $828.6 million in cash, cash equivalents, restricted cash, and marketable securities as of December 31, 2025 and 2024, respectively.
GAAP requires management to make certain estimates, judgments and assumptions and decisions that affect the reported amounts and related disclosures, including the selection of appropriate accounting principles and the assumptions on which to base accounting estimates.
The preparation of consolidated financial statements in accordance with U.S. GAAP requires management to make certain estimates, judgments, assumptions and decisions that affect the reported amounts and related disclosures, including the selection of appropriate accounting principles and the assumptions on which to base accounting estimates.
The 2023 expenses primarily consisted of $25.5 million in personnel expenses, including bonuses and equity-based compensation, $1.4 million in reagent and supply costs, $1.1 million in facility expenses, $0.7 million in depreciation expense, and $0.4 million in software and licensing fees.
In 2025, the research and development expenses primarily consisted of $26.6 million in personnel expenses, including bonuses and equity-based compensation, $1.3 million in reagent and supply costs, $0.5 million in facility expenses, $0.4 million in depreciation expense, and $0.2 million in software and licensing fees.
Cash Flows The following table summarizes cash flows from continuing operations for each of the periods presented: Year Ended December 31, 2024 2023 (in thousands) Net cash provided by operating activities $ 21,060 $ 27,003 Net cash (used in) provided by investing activities $ (58,352 ) $ 38,898 Net cash used in financing activities $ (4,847 ) $ (47,785 ) Operating Activities During the year ended December 31, 2024, our operations provided $21.1 million of cash as compared to $27.0 million in 2023.
Cash Flows The following table summarizes cash flows from continuing operations for each of the periods presented: Year Ended December 31, 2025 2024 (in thousands) Net cash (used in) provided by operating activities $ (101,638 ) $ 21,060 Net cash provided by (used in) investing activities $ 111,371 $ (58,352 ) Net cash used in financing activities $ (14,789 ) $ (4,847 ) Operating Activities During the year ended December 31, 2025, our operations used $101.6 million of cash as compared to $21.1 million provided in 2024.
Variable consideration attributable to these price concessions measured at the expected value using the “most likely amount” method under Accounting Standards Codification, or ASC, 606 Revenue from Contracts with Customers, or ASC 606.
Variable consideration attributable to these price concessions is measured using the “expected value” method under Accounting Standards Codification, or ASC, 606 Revenue from Contracts with Customers, or ASC 606.
Financing Activities Cash used in financing activities in 2024 was $4.8 million, which primarily related to $1.2 million used in the repayment of notes payable, and $2.9 million used in common stock withholding for employee tax obligations.
Financing Activities Cash used in financing activities in 2025 was $14.8 million, which primarily related to $3.0 million used in common stock withholding for employee tax obligations, $10.9 million used to repurchase common stock, and $0.5 million used in the repayment of notes payable.
The decrease in cash provided from operating activities in 2024 compared to the corresponding 2023 period was primarily due to timing of cash receipts from customers and cash payments for operating expenses.
The decrease in cash provided from operating activities in 2025 compared to the corresponding 2024 period was primarily due to the purchase of Investment Tax Credits for $99.6 million in cash in 2025, as well as by timing of cash receipts from customers and cash payments for operating expenses.
A deferred tax liability is recognized for all taxable temporary differences, and a deferred tax asset is recognized for all deductible temporary differences, operating losses and tax credit carryforwards. A valuation allowance is provided when it is more likely than not that some portion or all of a deferred tax asset will not be realized.
A valuation allowance is provided when it is more likely than not that some portion or all of a deferred tax asset will not be realized.
For the therapeutic development segment, the research and development expenses in 2024 included $10.9 million in CRO costs, $8.6 million in personnel costs, including equity-based compensation, and $0.7 million in depreciation expenses. In 2023, these expenses comprised $6.4 million of personnel expenses, including equity-based compensation, $4.5 million in CRO costs, and $0.7 million in depreciation expenses.
Therapeutic Development For the therapeutic development segment, the research and development expenses in 2025 included $12.4 million in CRO costs, $10.5 million in personnel costs, including equity-based compensation, $0.5 million in facility expenses, and $0.5 million in depreciation expenses.
Critical Accounting Policies and Use of Estimates This discussion and analysis is based on our consolidated financial statements included in this report, which have been prepared in accordance with U.S. GAAP. The preparation of consolidated financial statements in accordance with U.S.
These purchase obligations are not unconditional, and they are generally cancellable in full or in part through the contractual provisions. Critical Accounting Policies and Use of Estimates This discussion and analysis is based on our consolidated financial statements included in this report, which have been prepared in accordance with U.S. GAAP.
Cash provided by investing activities in 2023 was $38.9 million, which primarily related to $508.6 million related to maturities of marketable securities, $44.1 million related to proceeds from sales of marketable securities, and $0.8 million related to the sale of fixed assets, and partially offset by $491.9 million in purchase of marketable securities, $22.2 million related to the purchase of fixed assets consisting mainly of medical laboratory equipment and building improvement, and $0.4 million related to a business acquisition.
Cash provided by investing activities in 2025 was $111.4 million, which primarily related to $211.0 million related to maturities of marketable securities, and $3.8 million related to the acquisition of ANP, and partially offset by $80.8 million in purchase of marketable securities, $22.6 million related to the purchase of fixed assets consisting mainly of building improvement and medical laboratory equipment.
Cost of Revenue Year Ended December 31, 2024 2023 $ Change % Change (in thousands, except percentages) Cost of revenue $ 176,255 $ 184,757 $ (8,502 ) (5 )% Cost of revenue as a % of revenue 62.2 % 63.9 % 81 Our consolidated cost of revenue decreased by $8.5 million, or 5%, from $184.8 million in 2023 to $176.3 million in 2024.
Cost of Revenue Year Ended December 31, 2025 2024 $ Change % Change Cost of revenue $ 191,796 $ 176,255 $ 15,541 9 % Cost of revenue as a % of revenue 59.4 % 62.2 % Our consolidated cost of revenue increased by $15.5 million, or 9%, from $176.3 million in 2024 to $191.8 million in 2025.
During the year ended December 31, 2023, we repurchased 1.0 million shares of our common stock at an aggregate cost of $25.1 million under the stock repurchase program. During the year ended December 31, 2022, we repurchased 1.8 million shares of our common stock at an aggregate cost of $74.3 million under the stock repurchase program.
During the year ended December 31, 2023, we repurchased 1.0 million shares of our common stock at an aggregate cost of $25.1 million under the stock repurchase program. As of December 31, 2025, a total of approximately $139.6 million remained available for future repurchases of our common stock under our stock repurchase programs.
Research and development expenses for the therapeutic development segment increased by $8.7 million, or 74%, from $11.7 million in 2023 to $20.4 million in 2024. The increase was primarily driven by increases of $6.4 million in CRO costs and $2.2 million in personnel costs, including equity-based compensation expense.
In 2024, these expenses comprised $10.9 million in CRO costs, $8.6 million of personnel expenses, including equity-based compensation, $0.7 million in depreciation expense, and insignificant facility expenses. Research and development expenses for the therapeutic development segment increased by $3.9 million, or 19%, from $20.4 million in 2024 to $24.3 million in 2025.
The decrease was primarily due to decreases of $6.7 million in consulting and outside labor costs for production, $1.7 million in software and software licensing expenses, $1.4 million in personnel costs, including equity-based compensation, $0.8 million in shipping expenses, and $0.2 million in dues and subscriptions expense, related to efforts of optimizing cost structures including bringing certain operations in house, consolidating laboratory operations, and the cessation of our COVID-19 testing operations, and partially offset by an increase of $1.8 million in reagent and supply costs and $0.5 million in depreciation expenses.
The increase was primarily due to increases of $7.5 million in personnel costs, including equity-based compensation, $4.2 million in reagent and supplies cost, $1.7 million in consulting and outside labor costs for production, $1.1 million in depreciation expenses, $0.8 million in software and software licensing expenses, $0.7 million in office expenses, and $0.7 million in facilities expenses, and partially offset by a decrease of $1.1 million in shipping and handling costs.
Other Income (Expenses) Other income, net, is primarily comprised of interest income, which was $31.3 million and $21.6 million for 2024 and 2023, respectively, and impairment of available-for-sale debt securities of $10.1 million in 2024. This interest income included interest earned on marketable securities and realized gain or loss on sale of marketable securities.
Other Income (Expenses) Other income (expense) is primarily comprised of interest income, which was $30.9 million and $31.3 million for 2025 and 2024, respectively, and impairment of available-for-sale debt and equity securities of $9.9 million and $10.1 million in 2025 and 2024, respectively.
Under the stock repurchase program, the Company may repurchase shares from time to time in the open market or in privately negotiated transactions. During the year ended December 31, 2024, we repurchased 10,000 shares of our common stock at an aggregate cost of $0.2 million under the stock repurchase program.
During the year ended December 31, 2025, we repurchased 0.6 million shares of our common stock at an aggregate cost of $10.9 million under the stock repurchase program. During the year ended December 31, 2024, we repurchased ten thousand shares of our common stock at an aggregate cost of $0.2 million under the stock repurchase program.
The acquisition method of accounting for business combinations requires us to estimate the fair value of assets acquired, liabilities assumed, and any noncontrolling interest in an acquired business to properly allocate purchase price consideration between assets that are depreciated or amortized and goodwill. 86 See Note 2, Summary of Significant Accounting Policies , to our consolidated financial statements included in this report for information about our valuation and assessment process with regard to potential impairment of goodwill and indefinite-lived intangibles.
The acquisition method of accounting for business combinations requires us to estimate the fair value of assets acquired, liabilities assumed, and any noncontrolling interest in an acquired business to properly allocate purchase price consideration between assets that are depreciated or amortized and goodwill.
Financial Overview Revenue Our laboratory service segment generates revenue from molecular testing, including precision diagnostics and anatomic pathology, BioPharma services, and COVID-19 testing. We recognize revenue upon delivery of a report to the ordering physician or other customer based on the established billing rate, less contractual and other adjustments, to arrive at the amount we expect to collect.
We recognize revenue upon delivery of a report to the ordering physician or other customer based on the established billing rate, less contractual and other 79 adjustments, to arrive at the amount we expect to collect. Our therapeutic development segment has started producing BioPharma services revenue with the acquisition of ANP.
The increase in interest income was primarily due to increased interest rates on marketable securities relative to the prior comparative period. (Benefit from) Provision for Income Taxes (Benefit from) provision for income taxes were ($8.1) million and $1.2 million in 2024 and 2023, respectively.
This interest income included interest earned on marketable securities and realized gain or loss on sale of marketable securities. The decrease in interest income was primarily due to decreased interest rates on marketable securities relative to the prior comparative period. Benefit from Income Taxes Benefit from income taxes were $8.4 million and $8.1 million in 2025 and 2024, respectively.
For the laboratory services segment, aggregating customers that are under common control, one customer comprised $62.6 million or 22% of our revenue in 2024 and $35.7 million or 12% of our revenue in 2023. To reduce this revenue risk, we will focus on increasing the number of customers and thereby reducing the concentration.
For the laboratory services segment, aggregating customers that are under common control, one customer comprised $70.8 million or 22% of our revenue in 2025 and $62.6 million or 22% of our revenue in 2024.
We amortize finite lived intangible assets over the period of estimated benefit using the straight-line method. Indefinite lived intangible assets are tested for impairment annually or whenever events or circumstances indicate that the carrying amount of the asset may not be recoverable.
Indefinite lived intangible assets are tested for impairment annually or whenever events or circumstances indicate that the carrying amount of the asset may not be recoverable. If impairment is indicated, we measure the amount of the impairment loss as the amount by which the carrying amount exceeds the fair value of the asset.
Revenue from non-U.S. sources increased by $4.1 million, or 20%, from $20.2 million in 2023 to $24.3 million in 2024. The increase in revenue from non-U.S. sources between periods were primarily due to increased sales of our traditional genetic testing services to customers in China through our joint venture, which contributed $11.8 million in total revenue in 2024.
The increase in revenue from non-U.S. sources between periods were primarily due to increased sales of our traditional genetic testing services to customers in China, which increased $0.3 million in 2025, as well as increases in total revenue to Australia of $0.7 million and Canada of $0.5 million.
Selling and Marketing Expenses Selling and marketing expenses consist of personnel costs, customer service expenses, direct marketing expenses, educational and promotional expenses, market research and analysis and allocated overhead expenses, including rent and utilities. We expense all selling and marketing costs as incurred.
Accordingly, we expect to incur significant research and development expenses in connection with our clinical trials for FID-007 and FID-022. Selling and Marketing Expenses Selling and marketing expenses consist of personnel costs, customer service expenses, direct marketing expenses, educational and promotional expenses, market research and analysis and allocated overhead expenses, including rent and utilities.
Cash used in financing activities in 2023 was $47.8 million, which primarily related to $25.1 million used in the repurchase of common stock, $15.0 million used in the repayment for the margin account, $4.3 million used in the repayment of notes payable, and $2.7 million used in common stock withholding for employee tax obligations.
Cash used in financing activities in 2024 was $4.8 million, which primarily related to $2.9 million used in common stock withholding for employee tax obligations and $1.2 million used in the repayment of notes payable. We do not expect to use any credit facilities due to the strong cash position as of December 31, 2025.
Continued COVID-19 revenues after March 2023 are due to variable consideration recognized for services completed in prior periods. The decrease in anatomic pathology services was due to lower reimbursement rates from insurance payors and client losses.
Continuing COVID-19 revenues after March 2023 are expected to be minimal, and are typically due to variable consideration recognized for services completed in prior periods.
The expenses decreased by $1.3 million, or 4%, from $29.7 million in 2023 to $28.4 million in 2024. The decrease was primarily attributed to reductions of $0.6 million in facility expenses due to the consolidation of office and laboratory space, $0.3 million in depreciation expenses, $0.2 million in personnel expenses, and $0.1 million in consulting and external labor expenses.
The expenses increased by $1.2 million, or 4%, from $28.4 million in 2024 to $29.6 million in 2025. The increase was primarily attributed to an increase of $1.3 million in personnel expenses.
Goodwill Impairment Loss A goodwill impairment loss is measured as the amount by which a reporting unit’s carrying value, including goodwill, exceeds its fair value, not to exceed the carrying amount of goodwill. 79 Amortization of Intangible Assets Amortization of intangible assets consist of amortization expense on customer relationships, royalty-free technology, trade name, laboratory information system platform and in-place intangible assets that arose from the business combinations and a patent acquired.
Amortization of Intangible Assets Amortization of intangible assets consist of amortization expense on customer relationships, royalty-free technology, trade name, laboratory information system platform and in-place intangible assets that arose from the business combinations and a patent acquired. We amortize finite lived intangible assets over the period of estimated benefit using the straight-line method.
We did not expect to use any credit facilities due to the strong cash position as of December 31, 2024. Stock Repurchase Program In March 2022, our Board authorized a $250.0 million stock repurchase program. The stock repurchase program has no expiration from the date of authorization.
Stock Repurchase Program In March 2022, our board of directors authorized a $250.0 million stock repurchase program. The stock repurchase program has no expiration from the date of authorization. Under the stock repurchase program, we may repurchase shares from time to time in the open market or in privately negotiated transactions.
The decrease was primarily due to decreases of $1.9 million in facility expenses due to the consolidation of office space, $1.3 million in consulting and outside labor expenses, $1.0 million in advertising and marketing expenses, $0.9 million in commissions, $0.6 million in depreciation expenses, $0.3 million in losses of fixed asset disposals, and $0.2 million in software and software licensing expenses, and partially offset by an increase of $1.0 million personnel costs, including equity-based compensation expense. 82 General and Administrative Our consolidated general and administrative expenses decreased by $0.9 million, or 1%, from $89.0 million in 2023 to $88.1 million in 2024.
The increase was primarily due to increases of $4.0 million personnel costs, including equity-based compensation expense, $1.9 million in advertising and marketing expenses, $0.4 million in travel expenses, $0.3 million in consulting and outside labor expenses, $0.2 million in supply and material costs, and $0.2 million in software and software licensing expenses.
The decrease in revenue between periods was driven by decreases of $24.8 million in COVID-19 testing, $9.1 million in BioPharma services, and $7.6 million in anatomic pathology. However, these declines were offset by an increase of $35.8 million in precision diagnostics. The decrease in COVID-19 testing services resulted from the cessation of testing operations at the end of March 2023.
Revenue increased by $39.2 million, or 14%, from $283.5 million in 2024 to $322.7 million in 2025. The increase in revenue between periods was driven by increases of $22.7 million in precision diagnostics, $9.4 million in anatomic pathology, and $9.4 million in BioPharma services. However, these increases were offset by a decrease of $2.3 million in COVID-19 revenue.
Conversely, the increase in precision diagnostics revenue was driven by growth in our reproductive health services and legacy diagnostic offerings.
The increase in precision diagnostics revenue for the year was driven by growth in our reproductive health services and continued strength in legacy diagnostic offerings. The increase in anatomic pathology services was primarily due to the absence of weather-related disruptions and client losses that had affected the prior year.
The decrease was primarily due to decreases of $10.1 million in legal and professional fees related to a voluntary disclosure, see Note 8, Debt, Commitments and Contingencies , of our consolidated financial statements included in this report, $1.6 million in insurance expenses, $0.8 million in provision for credit losses due to subsequent collections from customers who were previously reserved, and $0.7 million in depreciation expenses and partially offset by increases of $11.4 million in personnel costs, including equity-based compensation, and $0.8 million in software and software licensing fees.
The increase was primarily due to increases of $17.0 million in legal and professional fees including an accrual related to a professional liability matter, $9.4 million in provision for credit losses, $2.2 million in personnel costs, including equity-based compensation, $1.9 million in acquisition-related costs, $1.0 million in consulting and outside labor costs, $0.9 million in 84 insurance expenses, and $0.9 million in office expenses, and partially offset by decreases of $2.5 million in facility expenses and $1.6 million in depreciation expenses, and $0.8 million in accounting expenses.
The following summarizes our contractual obligations as of December 31, 2024: Payments Due by Period Total Less than 1 year 1-3 years 3-5 years More than 5 years (in thousands) Operating lease obligations (1) $ 6,651 $ 1,707 $ 2,128 $ 984 $ 1,832 Finance lease obligations (2) 783 417 366 — — Purchase obligations (3) 40,604 31,638 6,639 2,327 — Total contractual obligations $ 48,038 $ 33,762 $ 9,133 $ 3,311 $ 1,832 85 (1) Represents non-cancelable operating leases.
The following summarizes our contractual obligations as of December 31, 2025: Payments Due by Period Total Less than 1 year 1-3 years 3-5 years More than 5 years (in thousands) Operating lease obligations (1) $ 6,214 $ 1,724 $ 1,849 $ 1,124 $ 1,517 Finance lease obligations (2) 366 366 — — — Purchase obligations (3) 39,759 26,637 11,459 1,127 535 Total contractual obligations $ 46,339 $ 28,727 $ 13,308 $ 2,251 $ 2,052 87 (1) Represents non-cancelable operating leases.
The increase in the valuation allowance for 2024 was primarily due to the increase in capitalized Section 174 expenditures. See Note 11, Income Taxes , to our consolidated financial statements included in this report for more information regarding our income taxes.
The legislation does not have a material impact on our consolidated financial statements for the year ended December 31, 2025. See Note 11, Income Taxes , to our consolidated financial statements included in this report for more information regarding our income taxes.
The overall increase was attributed to the advancement and continuation of the clinical study of FID-007, along with the completion of preclinical work for FID-022. In 2024, approximately $2.1 million was incurred for the preclinical development of FID-022, whereas related costs in 2023 were minimal.
In 2024, approximately $2.1 million was incurred for the pre-clinical development of FID-022, compared to $3.2 million in 2025 for the pre-clinical and clinical development.
Our consolidated cost of revenues as a percentage of revenue decreased from 63.9% to 62.2%. Our gross profit increased by $2.8 million, or 3%, from $104.5 million in 2023 to $107.2 million in 2024. Our gross profit as a percentage of revenue, or gross margin, increased from 36.1% to 37.8%.
Our gross profit increased by $23.7 million, or 22%, from $107.2 million in the year ended December 31, 2024, to $130.9 million in the year ended December 31, 2025. Our gross profit as a percentage of revenue, or gross margin, increased from 38% in the year ended December 31, 2024, to 41% in the year ended December 31, 2025.
Research and Development Year Ended December 31, 2024 2023 $ Change % Change (in thousands, except percentages) Research and development Laboratory services $ 28,424 $ 29,748 $ (1,324 ) (4 )% Therapeutic development 20,392 11,692 8,700 74 % Total research and development $ 48,816 $ 41,440 $ 7,376 For the laboratory services segment, the research and development expenses were mainly for advancing our technology and future testing and testing services.
This was driven by the increased revenue, efforts of optimizing cost structures as discussed above, and efficiency as a result of our investments in scaling and centralizing lab operations. 83 Research and Development Year Ended December 31, 2025 2024 $ Change % Change Research and development Laboratory services $ 29,575 $ 28,424 $ 1,151 4 % Therapeutic development 24,330 20,392 3,938 19 % Total research and development $ 53,905 $ 48,816 $ 5,089 Laboratory Services For the laboratory services segment, the research and development expenses were mainly for advancing our technology and future testing and testing services.
The decrease in BioPharma services revenue was primarily due to the scaling back or termination of certain projects, as some clients faced financial distress, underwent restructuring, shifted strategic priorities, adapted to market changes, or completed large clinical trials. BioPharma services revenue is expected to remain variable due to the long sales cycle and project timing differences.
The increase in BioPharma services revenue was 82 primarily due to the timing of service projects, though this revenue is expected to remain variable due to the long sales cycle and fluctuations in project timing.
Looking ahead, we expect research and development expenses to continue increasing as clinical trials progress for FID-007, FID-022, and other preclinical studies. Selling and Marketing Our consolidated selling and marketing expenses decreased by $5.2 million, or 13%, from $41.5 million in 2023 to $36.2 million in 2024.
“government shutdowns,” which may affect the FDA’s ability to provide any required approvals or review in a timely manner or in the timelines expected. Looking ahead, we expect research and development expenses to continue increasing as clinical trials progress for FID-007, FID-022, and other pre-clinical studies.
However, due to decreased demand of COVID-19 testing following the pandemic and our decision to scale back our COVID-19 testing services, we do not expect material revenue from COVID-19 testing in future periods. Business Risks and Uncertainties Our business and prospects are exposed to numerous risks and uncertainties. For more information, see “Item 1A. Risk Factors” in this report.
For more information, see “Item 1A. Risk Factors” in this report. Financial Overview Revenue Our laboratory service segment generates revenue from molecular testing, including precision diagnostics and anatomic pathology, BioPharma services, and COVID-19 testing (which is not expected to produce material revenue).
Removed
We recorded revenue and net (loss) from operations of $283.5 million and ($42.7) million, respectively, in 2024, compared to revenue and net (loss) from operations of $289.2 million and ($167.8) million, respectively, in 2023. 2024 Developments In 2024, we began enrollment of a Phase 2, randomized, multi-center, open-label trial of FID-007 in patients with recurrent or metastatic H&N squamous cell carcinoma, established seven testing sites, and as of December 31, 2024, we had enrolled 17 patients.
Added
We recorded revenue and net (loss) from operations of $322.7 million and ($60.5) million, respectively, in 2025, compared to revenue and net (loss) from operations of $283.5 million and ($42.7) million, respectively, in 2024. 2025 Developments Bako and StrataDx Acquisition In December 2025, we announced that we entered into definitive agreements to acquire selected assets of Bako Diagnostics, a premier pathology laboratory headquartered in Alpharetta, Georgia and to acquire StrataDx, a premier dermatopathology laboratory located in Lexington, Massachusetts for a total combined purchase price of approximately $55.5 million, subject to adjustments, to be paid from cash on hand.
Removed
In December 2024, we filed an IND for the investigation of FID-022 in a Phase 1/1b clinical trial, and in January 2025, the IND for this trial was cleared by the FDA.
Added
The acquisition is expected to close during the first half of 2026, subject to satisfying customary closing conditions, including regulatory approvals. Refer to Note 15. Business Combinations , for additional details.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeFor the purpose of analyzing foreign currency exchange risk, we considered the historical trends in foreign currency exchange rates and determined that it was reasonably possible that adverse changes in exchange rates of 10% could be experienced in the near term. 87 If an adverse 10% foreign currency exchange rate change was applied to total monetary assets denominated in currencies other than the functional currencies at the balance sheet date, it would have resulted in decrease in assets of approximately $1.1 million as of December 31, 2024, and $1.3 million as of December 31, 2023.
Biggest changeFor the purpose of analyzing foreign currency exchange risk, we considered the historical trends in foreign currency exchange rates and determined that it was reasonably possible that adverse changes in exchange rates of 10% could be experienced in the near term. 89 If an adverse 10% foreign currency exchange rate change was applied to total monetary assets denominated in currencies other than the functional currencies at the balance sheet date, it would have resulted in a decrease in assets of approximately $0.7 million as of December 31, 2025, and $1.1 million as of December 31, 2024.
Based on investment positions as of December 31, 2024 and 2023, a hypothetical 100 basis point increase in interest rates across all maturities would result in an incremental decline of $14.5 million and $10.1 million, respectively, in the fair market value of the portfolio. Such losses would only be realized if we sold the investments prior to maturity.
Based on investment positions as of December 31, 2025 and 2024, a hypothetical 100 basis point increase in interest rates across all maturities would result in an incremental decline of $10.1 million and $14.5 million, respectively, in the fair market value of the portfolio. Such losses would only be realized if we sold the investments prior to maturity.
The impact to income (loss) before income tax was not significant. 88 Item 8. Financial Statemen ts and Supplementary Data. The information required by this Item 8 immediately follows the signature page to this report and is incorporated herein by reference. Item 9. Changes in and Disagreements with Accou ntants on Accounting and Financial Disclosure. None.
The impact to income (loss) before income tax was not significant. 90 Item 8. Financial Statemen ts and Supplementary Data. The information required by this Item 8 immediately follows the signature page to this report and is incorporated herein by reference. Item 9. Changes in and Disagreements with Accou ntants on Accounting and Financial Disclosure. None.

Other FLGT 10-K year-over-year comparisons