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What changed in VERACYTE, INC.'s 10-K — 2023 vs 2024

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

+742 added−755 removedSource: 10-K (2025-02-28) vs 10-K (2024-02-29)

Top changes in VERACYTE, INC.'s 2024 10-K

742 paragraphs added · 755 removed · 543 edited across 6 sections

Item 1. Business

Business — how the company describes what it does

124 edited+33 added−67 removed168 unchanged
Biggest changeIt is possible that legislation could be enacted into law or regulations, or guidance could be issued by the FDA which may result in new or increased regulatory requirements for us to continue to offer our tests or to develop and introduce new tests. 13 Table of Contents If premarket review, clearance, or approval is required for the tests that we market as LDTs, our business could be negatively affected until such review is completed and clearance or approval to market is obtained, and the FDA could require that we stop selling our tests pending premarket clearance or approval.
Biggest changeIt is possible that legislation could be enacted into law or regulations, or guidance could be issued by the FDA which may result in new or increased regulatory requirements for us to continue to offer our tests or to develop and introduce new tests.
We are running the Percepta Nasal Swab test in our CLIA lab in support of our NIGHTINGALE clinical utility study, in an effort to produce data to help drive Medicare and private payer coverage, as well as clinical adoption.
We are running the Percepta Nasal Swab test in our CLIA lab in support of our NIGHTINGALE study, in an effort to produce clinical utility data to help drive Medicare and private payer coverage, as well as clinical adoption.
Under the final rule, for CDLTs furnished on or after January 1, 2018, the amount Medicare pays is equal to the weighted median of private payer rates for the CDLTs, reported triennially for CDLTs, and annually for ADLTs. Since the initial implementation of PAMA, Congress has extended the payment review cycle on multiple occasions.
Under the final rule, for CDLTs furnished on or after January 1, 2018, the amount Medicare pays is equal to the weighted median of private payer rates for the CDLTs, reported annually for ADLTs and triennially for CDLTs. Since the initial implementation of PAMA, Congress has extended the payment review cycle on multiple occasions.
We require all employees and consultants working for us to execute confidentiality agreements, which provide that all confidential information received by them during the course of the employment or consulting relationship be kept confidential, except in specified circumstances.
We require all employees and consultants working for us to execute confidentiality agreements, which provide that all information received by them during the course of the employment or consulting relationship be kept confidential, except in specified circumstances.
Individual members of our leadership team have volunteered to sponsor each aspirational value to ensure the values are embedded into our culture. Corporate and Other information We were incorporated in Delaware as Calderome, Inc. in August 2006. Calderome operated as an incubator until early 2008. We changed our name to Veracyte, Inc. in March 2008.
Individual members of our leadership team have volunteered to sponsor each aspirational value to ensure the values are embedded into our culture. Corporate and Other information We were incorporated in Delaware as Calderome, Inc. in August 2006. Calderome, Inc. operated as an incubator until early 2008. We changed our name to Veracyte, Inc. in March 2008.
In particular, we are subject to the California Confidentiality of Medical Information Act, which is similar to but in some ways more restrictive than the HIPAA regulations, and the California Consumer Privacy Act, or CCPA, which was enacted in California in 2018 and substantially amended and expanded thereafter, most significantly by a ballot initiative adopted in November 2020 that enacted the California Privacy Rights Act.
In particular, we are subject to the California Confidentiality of Medical Information Act, which is similar to but in some ways more restrictive than the HIPAA regulations, and the California Consumer Privacy Act, or CCPA, which was enacted in California in 2018 and substantially amended and expanded thereafter, most significantly by a ballot initiative adopted in November 2020 that enacted the California Privacy Rights Act, or CPRA.
The test was developed with whole-transcriptome RNA sequencing and machine learning technology to provide physicians with clinically actionable results from the same FNA biopsy used for initial cytopathology. Afirma GSC testing also provides important gene mutation information to help guide treatment decisions for patients with thyroid nodules that are suspicious for cancer.
The test was developed with whole-transcriptome RNA sequencing and machine learning to provide physicians with clinically actionable results from the same FNA biopsy used for initial cytopathology. Afirma GSC testing also provides important gene mutation information to help guide treatment decisions for patients with thyroid nodules that are suspicious for cancer.
These include: good manufacturing practice for medical devices as set out in the Quality System Regulation, or QSR, labeling regulations, restrictions on promotion and advertising, the Medical Device Reporting regulation, or MDR (which requires manufacturers to report certain adverse events and product malfunctions to the FDA), and the Reports of Corrections and Removals regulation (which requires manufacturers to report certain field actions to the FDA).
These include: good manufacturing practice requirements for medical devices as set out in the Quality System Regulation, or QSR, labeling regulations, restrictions on promotion and advertising, the Medical Device Reporting regulation, or MDR (which requires manufacturers to report certain adverse events and product malfunctions to the FDA), and the Reports of Corrections and Removals regulation (which requires manufacturers to report certain field actions to the FDA).
We have taken steps to comply with health information privacy requirements to which we are aware that we are subject. For example, the Personal Information Protection Law, or PIPL, was recently implemented in China, and broadly regulates the processing of personal information and imposes compliance obligations and penalties comparable to those of the GDPR.
We have taken steps to comply with health information privacy requirements to which we are aware that we are subject. For example, the Personal Information Protection Law, or PIPL, was implemented in China, and broadly regulates the processing of personal information and imposes compliance obligations and penalties comparable to those of the GDPR.
These include the original clinical validation study, which was published in The New England Journal of Medicine. Afirma testing is included in leading practice guidelines and is covered for over 275 million Medicare and commercial health plan enrollees in the United States.
These include the original clinical validation study, which was published in The New England Journal of Medicine. Afirma testing is currently included in leading practice guidelines and is covered for over 275 million Medicare and commercial health plan enrollees in the United States.
While our French employees are represented by both a union and Social and Economic Committee, or CSE, none of our United States employees are the subject of collective bargaining arrangements, and our management considers its relationships with employees to be good. Diversity, Inclusion, and Belonging.
While our French employees are represented by both a union and Social and Economic Committee, or CSE, none of our United States or Israeli employees are the subject of collective bargaining arrangements, and our management considers its relationships with employees to be good. Diversity, Inclusion, and Belonging.
Medicare coverage for most of Veracyte’s tests is determined through the MolDX program, administered by the MAC Palmetto GBA. Through Local Coverage Determinations, or LCDs, and associated coverage articles, MolDX covers Afirma GSC, Envisia, Decipher Prostate, Decipher Bladder, and Prosigna.
Medicare coverage for most of Veracyte’s tests is determined through the MolDX program, administered by the MAC Palmetto GBA. Through Local Coverage Determinations, or LCDs, and associated coverage articles, MolDX covers Afirma GSC, Decipher Prostate, Decipher Bladder, and Prosigna.
With both prospective and retrospective studies over time, we focus on evidence that allows us to answer key clinical questions while also demonstrating the clinical benefit and impact of our tests, which is needed to drive their adoption and guideline inclusion. 2 Table of Contents With our years of experience in market access and reimbursement, we work closely with public and private payers to leverage this evidence and meet their clinical utility requirements, which facilitates reimbursement.
With both prospective and retrospective studies over time, we focus on evidence that allows us to answer key clinical questions while also demonstrating the clinical benefit and impact of our tests, which is needed to drive their adoption and guideline inclusion. 1 Table of Contents With our years of experience in market access and reimbursement, we work closely with public and private payers to leverage this evidence and meet their clinical utility requirements, which facilitates reimbursement.
In addition, in October 2018, the Eliminating Kickbacks in Recovery Act of 2018, or EKRA, was enacted as part of the SUPPORT for Patients and Communities Act (P.L 115-271).
In addition, the Eliminating Kickbacks in Recovery Act of 2018, or EKRA, was enacted as part of the SUPPORT for Patients and Communities Act (P.L 115-271).
Prior to the utilization of genomics, clinicians relied solely on clinical parameters, such as prostate-specific antigen, or PSA, level and pathology to determine the appropriate treatment for each patient. But those factors alone do not always reflect the true biology of the tumor, which often leads to over- and under-treatment of patients with localized prostate cancer.
Prior to the utilization of genomics, clinicians relied solely on clinical parameters, such as prostate-specific antigen, or PSA, level and pathology to determine the appropriate treatment for each patient. However, those factors alone do not always reflect the true biology of the tumor, which often leads to over- and under-treatment of patients with localized prostate cancer.
While it is intended to last for at least four years, the European Commission may unilaterally revoke the adequacy decision at any point, and, if this occurs, it could lead to additional costs and increase our overall risk exposure. Other Privacy Laws New laws governing privacy may be adopted in the future from time to time.
While it is intended to last for at least four years, the European Commission may unilaterally revoke the adequacy decision at any point, and, if this occurs, it could lead to additional costs and increase our overall risk exposure. Other Privacy Laws Laws governing privacy may continue to be adopted in the future from time to time.
In 2022, a meta-analysis of 13 independent studies assessing the test's performance in a real-world clinical setting found a sensitivity of 97%, a specificity of 88%, and an NPV of 99%, reinforcing Afirma's performance. Afirma GSC and its predecessor, the Afirma Gene Expression Classifier, have been featured in more than 140 peer-reviewed, published studies.
In 2022, a meta-analysis of 13 independent studies assessing the test's performance in a real-world clinical setting found a sensitivity of 97%, a specificity of 88%, and an NPV of 99%, reinforcing Afirma's performance. Afirma GSC and its predecessor, the Afirma Gene Expression Classifier, have been featured in more than 160 peer-reviewed, published studies.
Separately, the CJEU upheld the validity of standard contractual clauses, or SCCs, as a legal mechanism to transfer personal data but companies relying on SCCs will, subject to additional guidance from regulators in the EEA, need to evaluate and implement supplementary measures that provide privacy protections additional to those provided under SCCs.
Separately, the CJEU upheld the validity of standard contractual clauses, or SCCs, as a legal mechanism to transfer personal data, but companies relying on SCCs are subject to additional guidance from regulators in the EEA and need to evaluate and implement supplementary measures that provide privacy protections additional to those provided under SCCs.
We manage our labs with a focus on operational excellence and continuous improvement. We measure performance using such criteria as lab-processing turnaround time, failure rates and deviation vs. control. We have an active monitoring program to ensure lab operations exceed regulatory requirements.
We manage our CLIA labs with a focus on operational excellence and continuous improvement. We measure performance at our CLIA labs using such criteria as lab-processing turnaround time, failure rates and deviation vs. control. We have an active monitoring program to ensure lab operations exceed regulatory requirements.
Not for use in diagnostic procedures." RUOs are a separate regulatory category and include IVD devices that are in the laboratory research phase of development. They are therefore not subject to most FDA regulatory requirements, so long as they are properly labeled and used in accordance with such labeling.
Not for use in diagnostic procedures." RUOs are a separate regulatory category and include IVD products that are in the laboratory research phase of development. They are therefore not subject to most FDA regulatory requirements, so long as they are properly labeled and used in accordance with such labeling.
Strong clinical validation data from a multicenter cohort of prospectively collected patient samples were published in JAMA Surgery in 2018.
Strong clinical validation data from a multicenter cohort of prospectively collected patient samples were initially published in JAMA Surgery in 2018.
C2i's MRD solution requires less than a tube of blood (as little as 3-4 ml blood, or 1-2 ml plasma), can go from sample to result in just two weeks, and delivers improved performance compared to imaging and other molecular tests.
Our MRD solution requires less than a tube of blood (as little as 3-4 ml blood, or 1-2 ml plasma), can go from sample to result in just two weeks, and delivers improved performance compared to imaging and other molecular tests.
All such filings are available free of charge. The information posted on our website is not incorporated into this report. The SEC maintains a website that contains reports, proxy and information statements and other information regarding our filings at www.sec.gov. 21 Table of Contents
All such filings are available free of charge. The information posted on our website is not incorporated into this report. The SEC maintains a website that contains reports, proxy and information statements and other information regarding our filings at www.sec.gov. 19 Table of Contents
When we contract to serve as a contracted provider, reimbursements are made pursuant to a negotiated fee schedule and are limited to only covered indications. Becoming a contracted provider generally results in higher reimbursement for covered 7 Table of Contents indications and lack of reimbursement for non-covered indications.
When we contract to serve as a contracted provider, reimbursements are made pursuant to a negotiated fee schedule and are limited to only covered indications. Becoming a contracted provider generally results in higher reimbursement for covered 5 Table of Contents indications and lack of reimbursement for non-covered indications.
Unless exempt, for Class II devices, the FDC Act requires the submission to FDA of a premarket notification, referred to as a “510(k),” which must 11 Table of Contents provide data and information showing that the device is substantially equivalent to an already legally marketed device, referred to as a predicate device, with respect to the indications for use and the product’s technological characteristics.
Unless exempt, for Class II devices, the FDC Act requires the submission to FDA of a premarket notification, referred to as a “510(k),” which must provide data and information showing that the device is substantially equivalent to an already legally marketed device, referred to as a predicate device, with respect to the indications for use and the product’s technological characteristics.
If clearance or approval is required by the FDA, there can be no assurance that our tests will be cleared or approved on a timely basis, if at all, nor can there be any assurance that approved labeling claims or labeling claims subject to cleared indications for use will be consistent with our current claims or adequate to support continued adoption of and reimbursement for our solutions.
If clearance or approval is required by the FDA, there can be no assurance that our tests will be cleared or 11 Table of Contents approved on a timely basis, if at all, nor can there be any assurance that approved labeling claims or labeling claims subject to cleared indications for use will be consistent with our current claims or adequate to support continued adoption of and reimbursement for our solutions.
When reporting data under PAMA, the President, CEO, or CFO of a reporting entity, or an individual who has been delegated authority to sign for, and who reports directly to, such an officer, must sign the certification statement and be responsible for assuring that the data provided are accurate, complete, and truthful, and meets all the required reporting parameters.
When reporting data under PAMA, the President, CEO, or CFO of a reporting entity, or an individual who has been delegated authority to sign for, and who reports directly to, such an 17 Table of Contents officer, must sign the certification statement and be responsible for assuring that the data provided are accurate, complete, and truthful, and meets all the required reporting parameters.
The findings showed that the Afirma GSC has a sensitivity of 91% and specificity of 68%, meaning that in a patient population with 24% cancer prevalence – which is what would be expected in clinical practice – the test can identify more than two-thirds of benign thyroid nodules, with a negative predictive value, or NPV, of 96%.
The findings showed that the Afirma GSC has a sensitivity of 91% and specificity of 68%, meaning that in a patient population with 24% cancer prevalence – which is expected in clinical practice – the test can identify more than two-thirds of benign thyroid nodules, with a negative predictive value, or NPV, of 96%.
If our clinical reference laboratories are out of compliance with California standards, the California Department of Public Health, or CDPH, may suspend, restrict or revoke our license to operate our clinical reference laboratories, assess substantial 10 Table of Contents civil money penalties, or impose specific corrective action plans. Any such actions could materially affect our business.
If our clinical reference laboratories are out of compliance with California standards, the California Department of Public Health, or CDPH, may suspend, restrict or revoke our license to operate our clinical reference laboratories, assess substantial civil money penalties, or impose specific corrective action plans. Any such actions could materially affect our business.
If these suppliers can no longer provide us with the materials we need to perform the tests and for our collection kits, if the materials do not meet our quality specifications or are otherwise unusable, if we cannot obtain acceptable substitute materials, if materials become unavailable, or if we elect to change suppliers, an interruption in test processing could occur, we may not be able to deliver patient reports and we may incur high switching costs.
If these suppliers can no longer provide us with the materials we need to perform the tests or for our collection kits, if the materials do not meet our quality specifications or are otherwise unusable, if we cannot obtain acceptable substitute materials, if materials become unavailable, or 7 Table of Contents if we elect to change suppliers, an interruption in test processing could occur, we may not be able to deliver patient reports and we may incur high switching costs.
If an arrangement meets the provisions of a safe harbor, it is deemed not to violate the Anti-kickback Statute. An arrangement 18 Table of Contents must fully comply with each element of an applicable safe harbor in order to qualify for protection. Many state anti-kickback statutes have analogous exceptions or safe harbors to those of the federal Anti-kickback Statute.
If an arrangement meets the provisions of a safe harbor, it is deemed not to violate the Anti-kickback Statute. An arrangement must fully comply with each element of an applicable safe harbor in order to qualify for protection. Many state anti-kickback statutes have analogous exceptions or safe harbors to those of the federal Anti-kickback Statute.
The pathologists who review and classify thyroid FNA cytopathology results for Afirma are employed by TCP, a Texas professional association, pursuant to services agreement between us and TCP.
The pathologists who review and classify thyroid FNA cytopathology results for Afirma are employed by Thyroid Cytopathology Partners, or TCP, a Texas professional association, pursuant to services agreement between us and TCP.
The Decipher Prostate cancer tests, developed through whole-transcriptome analysis and machine learning, are used across localized disease to predict a patient’s risk of progressing to metastatic disease within five years, which helps physicians 3 Table of Contents determine an appropriate treatment plan.
The Decipher Prostate cancer tests, developed through whole-transcriptome analysis and machine learning, are used across localized disease to predict a patient’s risk of progressing to metastatic disease within five years, which helps physicians determine an appropriate treatment plan.
Reimbursement United States Revenue from our tests comes from several sources, including commercial third-party payers, such as insurance companies and health maintenance organizations, government payers, such as Medicare and Medicaid, and patients. Medicare generally covers molecular diagnostic tests through the individual Medicare Administrative Contracts, or MACs.
Reimbursement United States Revenue from sales of our tests comes from several sources, including commercial third-party payers, such as insurance companies and health maintenance organizations, government payers, such as Medicare and Medicaid, and patients. Medicare generally covers molecular diagnostic tests through individual Medicare Administrative Contracts, or MACs.
We believe this ability will enable physicians to track a tumor’s progression as it evolves from early diagnosis through patient treatment and follow-up. We expect our first application of C2i’s technology will be a muscle-invasive bladder cancer MRD test, where we plan to leverage our strong urology commercial channel and a clear pathway to expected reimbursement.
We believe this ability will enable physicians to track a tumor’s progression as it evolves from early diagnosis through patient treatment and follow-up. We expect our first application of our MRD technology will be a muscle-invasive bladder cancer, or MIBC, MRD test, where we plan to leverage our strong urology commercial channel and have a clear pathway to expected reimbursement.
Both the Stark Law and PORA contain an exception for compensation paid to a physician for personal services rendered by the physician meeting certain contractual requirements. We have compensation arrangements with a number of physicians 17 Table of Contents for personal services, such as speaking engagements and consulting activities.
Both the Stark Law and PORA contain an exception for compensation paid to a physician for personal services rendered by the physician meeting certain contractual requirements. We have compensation arrangements with a number of physicians for personal services, such as speaking engagements and consulting activities.
If the terms of the discount safe harbor are met, the discounts will not be considered prohibited remuneration under the Anti-kickback Statute. California does not have a discount safe harbor. However, as noted above, Section 650 has generally been interpreted consistent with the Anti-kickback Statute.
If the terms of the discount safe harbor are met, the discounts will not be considered prohibited remuneration under the Anti-kickback Statute. 16 Table of Contents California does not have a discount safe harbor. However, as noted above, Section 650 has generally been interpreted consistent with the Anti-kickback Statute.
Prosigna continues to be marketed in the EU/EEA as a self-declared CE marked device under the IVD Directive (98/79/EC) as regulated under the IVDR transition arrangement defined in EU 2017/746 and amended under EU 2022/112. In Vitro Diagnostic Medical Device Regulations (2017/746) The EU regulatory landscape concerning medical devices and IVDs is significantly changing.
Prosigna continues to be marketed in the EU/EEA as a self-declared CE marked device under the IVD Directive (98/79/EC) as regulated under the IVDR transition arrangement defined in EU 2017/746 and amended under EU 2022/112. In Vitro Diagnostic Medical Device Regulations (2017/746) The EU regulatory landscape concerning medical devices and IVDs has and continues to change significantly.
We developed the noninvasive Percepta Nasal Swab test to help physicians more accurately, quickly and confidently determine lung cancer risk so that patients whose lung nodules are benign may avoid unnecessary invasive procedures and patients whose nodules are likely cancerous may proceed to further diagnostic work-up and, if necessary, treatment.
We developed the noninvasive Percepta Nasal Swab test to help physicians more accurately, quickly and confidently determine lung cancer risk so that patients whose lung 4 Table of Contents nodules are benign may avoid unnecessary invasive procedures and patients whose nodules are likely cancerous may proceed to further diagnostic work-up and, if necessary, treatment.
Moreover, the GDPR grants data subjects the right to claim material and non-material damages resulting from infringement of the GDPR. In June 2021, the CJEU issued a ruling that expanded the scope of the “one stop shop” under the GDPR.
Moreover, the GDPR grants data subjects the right to claim material and non-material damages resulting 14 Table of Contents from infringement of the GDPR. In June 2021, the CJEU issued a ruling that expanded the scope of the “one stop shop” under the GDPR.
Our market-leading, real-world utilization then continues to drive more data, which leads to more insights, more evidence and more utility, all of which provide additional support for and confidence in our tests, further increasing durable reimbursement and guideline inclusion for our tests, along with new insights to support continued innovation and pipeline development. Serving the U.S.
Our market-leading, real-world utilization then continues to drive more data, which leads to more insights, more evidence and more utility, all of which provide additional support for and confidence in our tests, further increasing durable reimbursement and guideline inclusion for our tests, along with new insights to support continued innovation and pipeline development.
Bladder Cancer - Decipher Bladder Genomic Classifier Each year in the United States, approximately 82,000 people are expected to be diagnosed with bladder cancer.
Bladder Cancer - Decipher Bladder Genomic Classifier Each year in the United States, approximately 85,000 people are expected to be diagnosed with bladder cancer.
We believe in an inclusive workforce, where people with diverse backgrounds are represented, engaged and empowered to inspire innovative ideas and decisions. Women comprise 56% of our employees and 40% at the Vice President level and above in the United States, as of December 31, 2023.
We believe in an inclusive workforce, where people with diverse backgrounds are represented, engaged and empowered to inspire innovative ideas and decisions. Women comprise 56% of our employees and 37% at the Vice President level and above in the United States, as of December 31, 2024.
We are subject to CLIA, a federal law that regulates clinical laboratories that test specimens derived from humans for the purpose of providing information for the diagnosis, prevention or treatment of disease.
In the U.S., we are subject to CLIA, a federal law that regulates clinical laboratories that test specimens derived from humans for the purpose of providing information for the diagnosis, prevention or treatment of disease.
Until recently, one such data transfer mechanism was the EU-US Privacy Shield, but the Privacy Shield was invalidated for international transfers of personal data in July 2020 by the Court of Justice of the European Union, or CJEU.
Previously, one such data transfer mechanism was the EU-US Privacy Shield, but the Privacy Shield was invalidated for international transfers of personal data in July 2020 by the Court of Justice of the European Union, or CJEU.
In each case, this data is used to develop a comprehensive and robust assay to address a clinical need. We perform these tests in our clinical labs to generate a growing repository of data.
In each case, this data is used to develop a comprehensive and robust assay to address a clinical need. We perform these tests in our clinical labs, also generating a growing repository of data.
Driving Global Growth with Distributed IVD Tests Once we have developed robust clinical evidence and physician adoption of our tests in the United States, we typically then drive further patient access by launching them, as appropriate, into global markets as IVD tests.
Driving Global Growth with Distributed IVD Tests Once we have developed robust clinical evidence and physician adoption of our tests in the United States, we aim to drive further patient access by launching them, as appropriate, into global markets as IVD tests.
Physicians currently have limited objective tools to help accurately determine which patients with lung nodules found on CT scans have cancer. Approximately 15 million patients are now recommended for annual lung cancer CT screening to detect potentially cancerous lung nodules early.
Physicians currently have limited objective tools to help accurately determine which patients with lung nodules found on computerized axial tomography, or CT, scans have cancer. Approximately 15 million patients are now recommended for annual lung cancer CT screening to detect potentially cancerous lung nodules early.
These requirements vary by jurisdiction, differ from those in the United States and may in some cases require us to perform 20 Table of Contents additional pre-clinical or clinical testing. In many countries outside of the United States, coverage, pricing and reimbursement approvals are also required. Human Capital Our People. At December 31, 2023, we had 815 employees.
These requirements vary by jurisdiction, differ from those in the United States and may in some cases require us to perform additional pre-clinical or clinical testing. In many countries outside of the United States, coverage, pricing and reimbursement approvals are also required. 18 Table of Contents Human Capital Our People. At December 31, 2024, we had 824 employees.
MRD is a large emerging market, currently estimated at a total addressable market, or TAM, of $20 billion annually. We believe we can leverage our specialist commercial channels and relationships to partner early in a patient’s care, using our indication-specific focus and expertise to drive adoption from the first diagnostic test onward.
MRD is a large emerging market, currently estimated at a total addressable market, or TAM, of $20 billion annually. We believe we can leverage our specialist commercial channels while also building relationships with medical oncologists to partner early in a patient’s care, using our indication-specific focus and expertise to drive adoption from the first diagnostic test onward.
The California Privacy Rights Act amends and substantially expands the CCPA. The CCPA, among other things, requires covered companies to provide disclosures to California consumers concerning the collection and sale of personal information, and gives such consumers the right to opt-out of certain sales of personal information.
The CPRA amends and substantially expands the CCPA. The CCPA, among other things, requires covered companies to provide disclosures to California consumers concerning the collection and sale of personal information, and gives such consumers the right to opt-out of certain sales of personal information.
If our test volume decreases or we switch suppliers, we may hold excess inventory with expiration dates that occur before use which would adversely affect our losses and cash flow position. As we introduce any new test, we may experience supply issues as we ramp test volume.
If our test volume decreases or we switch suppliers, we may hold excess inventory with expiration dates that occur before use which would adversely affect our losses and cash flow position. As we introduce any new test or make changes to existing tests, we may experience supply issues as we ramp test volume.
There were no material capital expenditures related to environmental compliance in the year ended December 31, 2023. Similarly, we do not anticipate any significant expenditures for the year ending December 31, 2024. 9 Table of Contents Raw Materials and Suppliers We procure reagents, equipment, and other materials that we use to perform our tests from sole suppliers.
There were no material capital expenditures related to environmental compliance in the year ended December 31, 2024. Similarly, we do not anticipate any significant expenditures for the year ending December 31, 2025. Raw Materials and Suppliers We procure reagents, equipment, and other materials that we use to perform our tests from sole suppliers.
Privacy and Fraud and Abuse Compliance Health Insurance Portability and Accountability Act and State Data Privacy Laws Under the federal Health Insurance Portability and Accountability Act of 1996, or HIPAA, the United States Department of Health and Human Services, or HHS, has issued regulations to protect the privacy and security of protected health information used or disclosed by covered entities, which include health care providers, such as us.
Privacy and Fraud and Abuse Compliance Health Insurance Portability and Accountability Act and State Data Privacy Laws Under the federal Health Insurance Portability and Accountability Act of 1996, or HIPAA, as amended through the Health Information Technology for Economic and Clinical Health Act, or HITECH, the United States Department of Health and Human Services, or HHS, has issued regulations to protect the privacy and security of protected health information used or disclosed by covered entities, which include health care providers, such as us.
We generate extensive genomic and clinical data through our whole-omic approach, fueling insights, evidence and, ultimately, further utility. Today, we take a whole-transcriptome approach to our diagnostic, prognostic and predictive tests. C2i Genomic’s MRD technology will add a whole-genome approach for treatment effectiveness, monitoring, and disease recurrence detection.
We generate extensive genomic and clinical data through our whole-omic approach, fueling insights, evidence and, ultimately, further utility. While we currently take a whole-transcriptome approach to our diagnostic, prognostic and predictive tests, we believe our MRD technology will add a whole-genome approach for treatment effectiveness, monitoring, and disease recurrence detection.
We apply for and in-license patents covering our products and technologies and uses thereof, as we deem appropriate; however, we may fail to apply for patents on important products and technologies in a timely fashion or at all, or we may fail to apply for patents in potentially relevant jurisdictions.
We apply for and in-license patents covering our products and technologies and uses thereof, as we deem appropriate; however, we may fail to apply for patents on important products and technologies in a timely fashion or at all, or we may fail to apply for patents in potentially relevant jurisdictions. Our issued patents expire between 2027 and 2040.
Under CLIA, which is administered by CMS, we are required to hold a certificate applicable to the type of laboratory examinations and tests we perform and to comply with standards covering personnel qualifications, facilities administration, quality systems, inspections, and proficiency testing.
Under CLIA, we are required to hold a certificate applicable to the type of laboratory examinations and tests we perform and to comply with standards covering personnel qualifications, facilities administration, quality systems, inspections, and proficiency testing.
CE marks and certificates issued by EU-designated notified regulatory bodies will continue to be valid for the Great Britain market until June 30, 2023. For medical devices, including IVDs, placed on the market in Great Britain after this period, the UKCA marking will be mandatory.
CE marks and certificates issued by EU-designated notified regulatory bodies for medical devices and IVDs will continue to be valid for the Great Britain market until 2028 and 2030, respectively. For medical devices, including IVDs, placed on the market in Great Britain after this period, the UKCA marking will be mandatory.
In the United States, we offer laboratory developed tests, or LDTs, through our centralized CLIA certified laboratories in South San Francisco and San Diego, California, supported by our cytopathology expertise in Austin, Texas.
In the United States, we offer laboratory developed tests, or LDTs, through our centralized Clinical Laboratory Improvement Amendments of 1988, or CLIA, certified laboratories in South San Francisco and San Diego, California, supported by our cytopathology expertise in Austin, Texas.
Expanding Into Minimal Residual Disease In February 2024, we acquired C2i, an MRD company, adding whole-genome MRD capabilities to our novel diagnostics platform and positioning us to serve physicians and their patients further along the care continuum, in combination with our diagnostic and prognostic tests.
Investing in Innovation to Drive Durable Growth Expanding Into Minimal Residual Disease In February 2024, we acquired C2i, an MRD company, or the C2i Acquisition, adding whole-genome MRD capabilities to our novel diagnostics platform and positioning us to serve physicians and their patients further along the care continuum, in combination with our diagnostic and prognostic tests.
MRD testing will expand the value we provide to clinicians to inform whether a patient’s intervention was successful or if management escalation is required. C2i’s whole-genome, artificial intelligence-powered approach generates broad signatures from blood more quickly and efficiently than bespoke panels.
MRD testing will expand the value we provide to clinicians to inform whether a patient’s intervention was successful or if management escalation is required. Our whole-genome, AI-powered approach generates broad signatures from blood more quickly and efficiently than bespoke tumor informed panels.
If the data and information are sufficient to show that the device is substantially equivalent to the predicate device, FDA issues a Substantially Equivalent letter clearing the device for marketing.
If the data and 9 Table of Contents information are sufficient to show that the device is substantially equivalent to the predicate device, FDA issues a Substantially Equivalent letter clearing the device for marketing.
Among these changes, covered entities are now vicariously liable for violations of HIPAA resulting from acts or omissions of their business associates where the business associate is an agent of the covered entity and was acting within the scope of its agency, regardless of whether the covered entity and business associate entered into a business associate agreement in compliance with HIPAA.
Among the implementing regulations, covered entities are vicariously liable for violations of HIPAA resulting from acts or 13 Table of Contents omissions of their business associates where the business associate is an agent of the covered entity and was acting within the scope of its agency, regardless of whether the covered entity and business associate entered into a business associate agreement in compliance with HIPAA.
Lung Cancer - Percepta Nasal Swab Test Lung cancer has the highest mortality rate of all cancers worldwide, causing approximately 1.8 million deaths each year. Lung nodules are typically the first sign of lung cancer and cannot be ignored, however most of them are benign.
Solving New Cancer Challenges With the Percepta Nasal Swab Test Lung cancer has the highest mortality rate of all cancers worldwide, causing approximately 1.8 million deaths each year. Lung nodules are typically the first sign of lung cancer and should not be ignored, however most of them are benign.
Our online portal enables physicians and their staff to easily submit and track test orders and download results. Prostate Cancer - Decipher Prostate Biopsy and Radical Prostatectomy, or RP, Genomic Classifiers An estimated 288,000 men are diagnosed with prostate cancer each year in the United States.
Our online portal enables physicians and their staff to easily submit and track test orders and download results. Prostate Cancer - Decipher Prostate Genomic Classifiers An estimated 314,000 men are diagnosed with prostate cancer each year in the United States.
Since 1984, Medicare has paid for clinical diagnostic laboratory tests, or CDLTs, on the Clinical Laboratory Fee Schedule, or CLFS, under section 1833(h) of the Social Security Act, or the SSA.
Medicare pays for clinical diagnostic laboratory tests, or CDLTs, on the Clinical Laboratory Fee Schedule, or CLFS, under section 1833(h) of the Social Security Act, or the SSA.
Our Clinical Diagnostic Tests Offered Through Our CLIA Labs Thyroid Cancer - Afirma Genomic Sequencing Classifier Each year in the U.S, approximately 600,000 people undergo fine needle aspiration, or FNA, biopsy evaluation for potentially cancerous thyroid nodules. Many of these patients receive indeterminate results (not clearly benign or malignant) based on traditional cytopathology evaluation.
Thyroid Cancer - Afirma Genomic Sequencing Classifier Each year in the U.S, approximately 600,000 people undergo fine needle aspiration, or FNA, biopsy evaluation for potentially cancerous thyroid nodules. Many of these patients receive indeterminate results (i.e., not clearly benign or malignant) based on traditional cytopathology evaluation.
The Decipher Bladder test is supported by multiple peer-reviewed clinical studies demonstrating its ability to identify which patients have a higher risk of upstaging to non-organ confined disease at surgery and which patients may benefit the most from neoadjuvant therapy.
The Decipher Bladder test is supported by multiple peer-reviewed clinical studies demonstrating its ability to identify which patients have a higher risk of upstaging to non-organ confined disease at surgery and which patients may benefit the most from neoadjuvant therapy. We began commercialization of the Decipher Bladder test in 2021, following final Medicare coverage.
It remains to be seen whether SCCs will remain available. Failure to comply with the requirements of the GDPR and the related national data protection laws of the EEA Member States may result in fines up to €20 million or 4% of a company’s global annual revenues for the preceding financial year, whichever is higher.
Failure to comply with the requirements of the GDPR and the related national data protection laws of the EEA Member States may result in fines up to €20 million or 4% of a company’s global annual revenues for the preceding financial year, whichever is higher.
The Prosigna assay is clinically validated in studies published in Annals of Oncology and the Journal of Clinical Oncology. Medicare coverage for Prosigna has been in effect since 2015. The test is recommended in guidelines from the National Comprehensive Cancer Network and the American Society of Clinical Oncology in the United States.
Medicare coverage for the Prosigna Breast Cancer Assay has been in effect since 2015. The test is recommended in guidelines from the National Comprehensive Cancer Network and the American Society of Clinical Oncology in the United States.
For the years ended December 31, 2023, 2022 and 2021, respectively, revenue was represented by the indicated percent for each payer: Medicare accounted for 35%, 36% and 35% of our testing revenue. Medicaid accounted for 1%, 3%, and 2% of our testing revenue. Private commercial payers accounted for 64%, 61%, and 63% of our testing revenue.
For the years ended December 31, 2024, 2023 and 2022, respectively, revenue was represented by the indicated percent for each payer: Medicare accounted for 33%, 35% and 36% of our testing revenue. Medicaid accounted for 1%, 1%, and 3% of our testing revenue. Private commercial payers, including Medicare advantage, accounted for 66%, 64%, and 61% of our testing revenue.
We identify an unmet clinical need, determine the combination of appropriate biomarkers utilizing cutting-edge genomic and other technologies, and then tune our assays with deep scientific and machine learning capabilities. We then take a comprehensive approach to launching and driving adoption for our tests.
The Veracyte Diagnostics Platform begins by identifying an unmet clinical need, determining the combination of appropriate biomarkers utilizing cutting-edge genomic and other technologies, and then tuning our assays with deep scientific and machine learning capabilities. We then take a comprehensive approach to launching and driving adoption for our tests.
We are a global diagnostics company that empowers clinicians with the high-value insights they need to guide and assure patients at pivotal moments in the race to diagnose and treat cancer.
ITEM 1. BUSINESS General At Veracyte, we believe that exceptional cancer care begins with exceptional diagnostics. We are a global diagnostics company that empowers clinicians with the high-value insights they need to guide and assure patients at pivotal moments in the race to diagnose and treat cancer.
Market Through Our CLIA Labs In the United States, our tests are improving patient care in thyroid, prostate, lung, and bladder cancer, as well as in interstitial lung disease. Currently all of our tests are serviced through our own CLIA certified laboratories in South San Francisco and San Diego, California; and Austin, Texas.
Market With Our Clinical Diagnostic Tests Offered Through Our CLIA Labs In the United States, our tests are improving patient care in thyroid, prostate, and bladder cancer. All of our tests are serviced through our own CLIA certified laboratories in South San Francisco, California, San Diego, California and Austin, Texas.
Breast Cancer - Prosigna Breast Cancer Assay Breast cancer is the most common cancer and the leading cause of cancer-related death in women worldwide. In 2020, there were an estimated 2.3 million new cases of the disease. Hormone receptor positive breast cancer is the most prevalent type 5 Table of Contents of breast cancer, comprising approximately 70% of cases.
Breast Cancer - Prosigna Breast Cancer Assay Breast cancer is the most common cancer and the leading cause of cancer-related death in women worldwide. In 2023, an estimated 2.3 million new cases of breast cancer were diagnosed worldwide. Hormone receptor positive (HR+) breast cancer is the most common type of breast cancer, comprising approximately 70% of cases.
The Prosigna test is FDA 510(k) cleared in the United States for use on the nCounter Analysis System. The Prosigna Breast Cancer Assay is sold to laboratories by our direct sales team and through distributors in certain countries.
The Prosigna test is FDA 510(k) cleared in the United States for use on the nCounter Analysis System. The Prosigna Breast Cancer Assay is sold to laboratories by our direct sales team and through distributors in certain countries. Further, it is clinically validated in studies published in Annals of Oncology and the Journal of Clinical Oncology.
Legislative proposals addressing oversight of LDTs were introduced in recent years, including the Verifying Accurate Leading-edge IVCT Development (VALID) Act of 2018 in December 2018, the most recent version of which was released in July 2022, and we expect that new legislative proposals will be introduced from time to time.
Legislative proposals addressing oversight of LDTs were introduced in recent years, including most recently the Verifying Accurate Leading-edge IVCT Development (VALID) Act of 2023 in March 2023, and we expect that new legislative proposals will be introduced from time to time.
Additionally, companies seeking to combine traditional pathology methods and artificial intelligence powered image analysis could potentially emerge as competitors. Of these, Artera appears to be farthest along in development of a commercial product. In bladder cancer, we are not currently aware of a direct competitor offering genomic testing for prognostic purposes that match the intended use population for our test.
Companies seeking to combine traditional pathology methods and AI powered image analysis, such as ArteraAI, could potentially emerge as competitors. In bladder cancer, we are not currently aware of a direct competitor offering genomic testing for prognostic purposes that match the intended use population for our test.
Sanctions for a violation of the Stark Law include the following: • denial of payment for the services provided in violation of the prohibition; • refunds of amounts collected by an entity in violation of the Stark Law; • a civil penalty of up to $15,000 for each service arising out of the prohibited referral; • possible exclusion from federal healthcare programs, including Medicare and Medicaid; and • a civil penalty of up to $100,000 against parties that enter into a scheme to circumvent the Stark Law's prohibition.
We would be required to refund any payments we receive pursuant to a referral prohibited by these laws to the patient, the payer or the Medicare program, as applicable. 15 Table of Contents Sanctions for a violation of the Stark Law include the following: • denial of payment for the services provided in violation of the prohibition; • refunds of amounts collected by an entity in violation of the Stark Law; • a civil penalty of up to $15,000 for each service arising out of the prohibited referral; • possible exclusion from federal healthcare programs, including Medicare and Medicaid; and • a civil penalty of up to $100,000 against parties that enter into a scheme to circumvent the Stark Law's prohibition.
We use a systematic, analytical approach aimed at delivering optimal outcomes for patients and referring physicians, while driving cost and lab-efficiency improvement as we scale operations.
At our CLIA labs, we use a systematic, analytical approach aimed at delivering optimal outcomes for patients and referring physicians, while driving cost and lab-efficiency improvement as we continue to scale our operations. Serving the U.S.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeRisks Related to Our Business • We have a history of losses, and we expect to incur net losses for the foreseeable future and may never achieve or sustain profitability. • Our financial results currently depend mainly on sales of our Afirma and Decipher Prostate tests, and we will need to generate sufficient revenue from these and our other diagnostic tests to grow our business. • If we are unable to grow sales of our portfolio of tests or products, or we are unable to launch or commercialize our new tests, our business may suffer. • We depend on a few payers for a significant portion of our revenue; if one or more significant payers stops providing reimbursement or decreases the amount of reimbursement for our tests our revenue could decline. • If payers do not provide reimbursement, rescind or modify their reimbursement policies, delay payments for our tests, recoup past payments, or if we are unable to successfully negotiate additional reimbursement contracts, our commercial success could be compromised. • We may experience limits on our revenue if physicians decide not to order our tests or if patients decide not to use our tests as a result of increased costs, fees or changing insurer policies. • If we fail to comply with federal, state and foreign licensing requirements, we could lose the ability to perform our tests or experience disruptions to our business. • Our quarterly operating results may fluctuate significantly or may fall below the expectations of investors or securities analysts for various reasons, including in response to the way we recognize revenue and/or the amount of cash we generate, which may cause our stock price to fluctuate or decline. • If our general strategy of seeking growth through acquisitions and collaborations is not successful, or if we do not successfully integrate companies or assets that we acquire into our business, our prospects and financial condition will suffer. • Our future success and international growth depend, in part, on our ability to adapt and manufacture select tests to be performed on multiple IVD platforms. • The revenue that we are expecting in our biopharma and other services business may not transpire . • We rely on sole suppliers for some of the reagents, equipment, and other materials used to perform our tests, as well as certain sole service providers, and we may not be able to find replacements or transition to alternative suppliers or service providers, which may materially impact our ability to generate revenue. • We may be unable to manage our future growth effectively, which could make it difficult to execute our business strategy. • If we are unable to support demand for our tests, services or products, our business could suffer. • Changes in healthcare policy, including legislation reforming the U.S. healthcare system, may have a material adverse effect on our financial condition and operations. • Because of Medicare billing rules, we may not receive reimbursement for all tests provided to Medicare patients. • If the FDA or foreign authorities were to begin regulating those of our tests that they do not currently regulate, we could incur substantial costs and delays associated with trying to obtain premarket clearance, approval or certification. • Obtaining marketing authorization or certification by the FDA and foreign regulatory authorities or notified regulatory bodies for our diagnostic tests will take significant time and require significant research, development and clinical study expenditures and ultimately may not succeed. • If we are unable to compete successfully, we may be unable to increase or sustain our revenue and/or achieve profitability. 22 Table of Contents • We depend on our senior management team, and the loss of one or more of our executive officers, or the inability to attract and retain highly-skilled employees or other key personnel, could adversely affect our business. • Billing for our diagnostic tests is complex, and we must dedicate substantial time and resources to the billing process in order to collect cash and be paid. • If our internal sales force is less successful than anticipated, our business expansion plans could suffer and our ability to generate revenue could be diminished. • Developing new products involves a lengthy and complex process, and if we do not achieve our projected development and commercialization goals in the timeframes we announce and expect, our business will suffer and our stock price may decline. • We must successfully integrate acquired businesses to realize the financial goals that we currently ant icipate. • Aspects of our international business expose us to business, personnel, regulatory, political, operational, financial, and economic risks associated with doing business outside of the United States. • Our operating results may be adversely affected by unfavorable macroeconomic and market conditions. • Security breaches, loss of data and other disruptions to our or our third-party service providers' data systems could compromise sensitive information related to our business or prevent us from accessing critical information and expose us to liability, which could adversely affect our business and our reputation. • If we are unable to protect or successfully defend our intellectual property effectively, our business may be harmed. • We may be involved in litigation related to intellectual property, which may be time-intensive and costly and may adversely affect our business, operating results or financial condition.
Biggest changeSupreme Court judicial decisions and potential changes in the regulatory environment, may have a material adverse effect on our financial condition and operations. • If the FDA or other foreign authorities regulate those of our tests that they do not currently regulate, we could incur substantial costs and delays associated with trying to obtain premarket clearance, approval or certification. • Obtaining marketing authorization or certification by the FDA and foreign regulatory authorities or notifying regulatory bodies for our diagnostic tests will take significant time and require significant research, development and clinical study expenditures and ultimately may not succeed. • If we are unable to compete successfully, we may be unable to increase or sustain our revenue and profitability. • We depend on our senior management team, and the loss of one or more of our executive officers, or the inability to attract and retain highly-skilled employees or other key personnel in our highly competitive industry, could adversely affect our business. • Billing for our diagnostic tests is complex, and we must dedicate substantial time and resources to the billing process in order to collect cash and be paid. 20 Table of Contents • If our internal sales force is less successful than anticipated, our business expansion plans could suffer and our ability to generate revenue could be diminished. • Developing, commercializing and gaining reimbursement for new products involves a lengthy and complex process, and if we do not achieve our projected development, commercialization and reimbursement goals in the timeframes we announce and expect, our business may suffer, and our stock price may decline. • Aspects of our international business expose us to business, personnel, regulatory, political, operational, financial, and economic risks associated with doing business outside of the United States. • Security breaches, loss of data and other disruptions to our or our third-party service providers' data systems could compromise sensitive information related to our business or prevent us from accessing critical information and expose us to liability, which could adversely affect our business and our reputation. • Risks associated with data privacy issues, including evolving laws, regulations and associated compliance efforts, may adversely impact our business and financial results. • If we are unable to protect or successfully defend our intellectual property effectively, our business may be harmed. • We may be involved in litigation related to intellectual property, which may be time-intensive and costly and may adversely affect our business, operating results or financial condition.
Before we begin to label and market some of our products for use as clinical diagnostics in the United States, unless an exemption applies, we are required to obtain clearance from the FDA by submitting a premarket notification under section 510(k) of the FDC Act or 510(k), or approval from the FDA by submitting a premarket approval, or PMA.
Unless an exemption applies, before we begin to label and market some of our products for use as clinical diagnostics in the United States, we are required to obtain clearance from the FDA by submitting a premarket notification under section 510(k) of the FDC Act or 510(k), or approval from the FDA by submitting a premarket approval, or PMA.
We rely on patent protection as well as trademark, copyright, trade secret and other intellectual property rights protection and contractual restrictions to protect our proprietary technologies, all of which provide limited protection and may not adequately protect our rights or permit us to gain or keep any competitive advantage.
We rely on patent protection as well as trademark, copyright, trade secret and other intellectual property rights and contractual restrictions to protect our proprietary technologies, all of which provide limited protection and may not adequately protect our rights or permit us to gain or keep any competitive advantage.
Risks Related to Our Common Stock Our stock price may be volatile, and you may not be able to sell shares of our common stock at or above the price you paid.
Risks Related to Our Common Stock Our stock price may be volatile, and you may not be able to sell shares of our common stock at or above the price you paid.
These factors include: • actual or anticipated variations in our and our competitors’ results of operations; • the ongoing global macroeconomic impacts of rising interest rates or inflationary pressures; • announcements by us or our competitors of new products, commercial relationships or capital commitments; • changes in reimbursement by current or potential payers, including governmental payers; • issuance of new securities analysts’ reports or changed recommendations for our stock; • fluctuations in our revenue, due in part to the way in which we recognize revenue; • actual or anticipated changes in regulatory oversight of our products; • developments or disputes concerning our intellectual property or other proprietary rights; • commencement of, or our involvement in, litigation; • announced or completed acquisitions of businesses or technologies by us or our competitors, including the effect of additional equity we or our competitors issue as consideration for such acquisitions; • instability in the global banking system; • any major change in our management; and • general economic conditions, including inflation and changes in interest rates, and slow or negative growth of our markets.
These factors include: • actual or anticipated variations in our and our competitors’ results of operations; • the ongoing global macroeconomic impacts of volatile interest rates or inflationary pressures; • announcements by us or our competitors of new products, commercial relationships or capital commitments; • changes in reimbursement by current or potential payers, including governmental payers; • issuance of new securities analysts’ reports or changed recommendations for our stock; • fluctuations in our revenue, due in part to the way in which we recognize revenue; • actual or anticipated changes in regulatory oversight of our products; • developments or disputes concerning our intellectual property or other proprietary rights; • commencement of, or our involvement in, litigation; • announced or completed acquisitions of businesses or technologies by us or our competitors, including the effect of additional equity we or our competitors issue as consideration for such acquisitions; • instability in the global banking system; • any major change in our management; and • general economic conditions, including inflation and changes in interest rates, and slow or negative growth of our markets.
The CCPA was amended several times after its enactment, most recently by the California Privacy Rights Act, or the CPRA, which, as of its effective date of January 1, 2023, gives California residents expanded privacy rights, including the right to opt out of certain personal information sharing, the use of “sensitive personal information,” and the use of personal information for automated decision-making or targeted advertising.
The CCPA was amended several times after its enactment, most recently by the CPRA, which, as of its effective date of January 1, 2023, gives California residents expanded privacy rights, including the right to opt out of certain personal information sharing, the use of “sensitive personal information,” and the use of personal information for automated decision-making or targeted advertising.
Payers may attempt to recoup prior payments after review, sometimes after significant time has passed, which would impact future revenue. We expect to continue to focus substantial resources on increasing adoption, coverage and reimbursement for the Afirma, Decipher Prostate, Prosigna, Envisia and Decipher Bladder, as well as any other future tests we may develop.
Payers may attempt to recoup prior payments after review, sometimes after significant time has passed, which would impact future revenue. We expect to continue to focus substantial resources on increasing adoption, coverage and reimbursement for the Decipher Prostate, Afirma, Prosigna and Decipher Bladder, as well as any other future tests we may develop.
Federal Medicare funding and state budgets are limited and have been placed under tremendous strain in recent years, which is likely to be further exacerbated as a result of macroeconomic uncertainty. Such budgetary pressures may force Medicare or state agencies to reduce payment rates or change coverage policies.
Federal Medicare funding and state budgets are limited and have been placed under tremendous strain in recent years, which is likely to be further exacerbated as a result of macroeconomic uncertainty. Such budgetary pressures may force Medicare, Medicare Advantage or state agencies to reduce payment rates or change coverage policies.
Risks Related to Being a Public Compa ny • If we are unable to implement and maintain effective internal control over financial reporting, investors may lose confidence in the accuracy and completeness of our reported financial information and the market price of our common stock may be negatively affected.
Risks Related to Being a Public Compa ny • If we are unable to maintain effective internal control over financial reporting, investors may lose confidence in the accuracy and completeness of our reported financial information and the market price of our common stock may be negatively affected.
Failure to comply with these regulatory requirements or to obtain required approvals, clearances, and export certifications could impair our ability to commercialize our diagnostic products outside of the United States. For instance, in order to sell some of our products in the EU, those products must comply with the General Safety and Performance Requirements of the IVDR.
Failure to comply with these regulatory requirements or to obtain required approvals, clearances, and export certifications could impair our ability to commercialize our diagnostic products outside of the United States. For instance, in order to sell our products in the EU, those products must comply with the General Safety and Performance Requirements of the IVDR.
CMS bundles payments for many clinical laboratory diagnostic tests together with other services performed during hospital outpatient visits under the Hospital Outpatient Prospective Payment System. CMS currently maintains an exemption for molecular pathology tests and “Criterion A” ADLTs from this bundling provision.
Additionally, CMS bundles payments for many clinical laboratory diagnostic tests together with other services performed during hospital outpatient visits under the Hospital Outpatient Prospective Payment System. CMS currently maintains an exemption for molecular pathology tests and “Criterion A” ADLTs from this bundling provision.
In addition, as we develop diagnostic tests, we will have to make additional investments in our laboratory operations as well as sales and marketing operations, which may be prematurely or unnecessarily incurred if the commercial launch of a test is abandoned or delayed.
In addition, as we develop tests, we will have to make additional investments in our laboratory operations as well as sales and marketing operations, which may be prematurely or unnecessarily incurred if the commercial launch of a test is abandoned or delayed.
Our new tests and products may contain undetected errors or defects that are not identified until after they are first introduced to the market. As all of our tests, products and services progress, we or others may determine that we made unintended scientific or technological mistakes or omissions.
Our tests and products may contain undetected errors or defects that are not identified until after they are first introduced to the market. As all of our tests, products and services progress, we or others may determine that we made unintended scientific or technological mistakes or omissions.
In addition, we perform all of the Afirma and Envisia genomic classifier testing at our laboratory in South San Francisco, California, near major earthquake faults known for seismic activity and in a region affected by wildfires. We perform our urology tests in our laboratory in San Diego, California.
In addition, we perform all of the Afirma and the remaining Envisia genomic classifier testing at our laboratory in South San Francisco, California, near major earthquake faults known for seismic activity and in a region affected by wildfires. We perform our urology tests in our laboratory in San Diego, California in a region affected by wildfires and seismic activity.
It is possible that this exemption could be removed by CMS in future rule making, which might result in lower reimbursement for tests performed in this setting. PAMA includes a substantial new payment system for clinical laboratory tests under the CLFS.
It is possible that this exemption could be removed by CMS in future rule making, which might result in lower reimbursement for tests performed in this setting. PAMA includes a substantial payment system for clinical laboratory tests under the CLFS.
In addition, pursuant to our collaborations with pharmaceutical companies for the development of companion diagnostic tests for use with their drugs, we are responsible for obtaining regulatory authorizations or certifications to use the companion diagnostic tests in clinical studies as well as the authorizations or certifications to sell the companion diagnostic tests following completion of such studies.
In addition, pursuant to our collaborations with pharmaceutical companies for the development of companion diagnostic tests for use with their drugs, we are sometimes responsible for obtaining regulatory authorizations or certifications to use the companion diagnostic tests in clinical studies as well as the authorizations or certifications to sell the companion diagnostic tests following completion of such studies.
Additionally, ongoing widespread inflationary pressures in the United States and across global economies have resulted in higher costs for our raw materials, non-material costs, labor and other business costs, and significant increases in the future could adversely affect our results of operations.
Ongoing widespread inflationary pressures in the United States and across global economies have resulted in higher costs for our raw materials, non-material costs, labor and other business costs, and significant increases in the future could adversely affect our results of operations.
In addition, our agreements with some of our customers, suppliers or other entities with whom we do business require us to defend or indemnify these parties to the extent they become involved in infringement claims, including the types of claims described above.
In addition, our agreements with some of our customers, suppliers, vendors or other entities with whom we do business require us to defend or indemnify these parties to the extent they become involved in infringement claims, including the types of claims described above.
The legal systems of many other countries do not favor the enforcement of patents and other intellectual property protection, particularly those relating to biotechnology, which may make it difficult for us to stop the infringement of our patents in such countries.
The legal systems of many other countries do not favor the enforcement of patents and other intellectual property protection, particularly those relating to biotechnology and diagnostics, which may make it difficult for us to stop the infringement of our patents in such countries.
Although we take measures to protect sensitive information from unauthorized access or disclosure, our information technology and infrastructure may be vulnerable to attacks by hackers or viruses or otherwise breached due to employee error, malfeasance or other activities.
Although we take measures to protect sensitive information from unauthorized access or disclosure, our information technology and infrastructure may be vulnerable to attacks by hackers, viruses, malware or otherwise breached due to employee error, malfeasance or other activities.
LDTs that are considered higher risk IVDs would be subject to premarket review requirements within three and a half years, and LDTs that are considered moderate or low risk IVDs would be subject to premarket submission requirements within four years after the FDA publishes the final rule.
LDTs that are considered higher risk IVDs would be subject to premarket review requirements within three and a half years, and LDTs that are considered moderate or low risk IVDs would be subject to premarket submission requirements beginning four years after the FDA publishes the final rule.
In the event of contamination or injury, we could be held liable for any resulting damages, remediation costs and any related penalties or fines, and any liability could exceed our resources or any applicable insurance coverage we may have.
In the event of contamination, infection or injury, we could be held liable for any resulting damages, remediation costs and any related penalties or fines, and any liability could exceed our resources or any applicable insurance coverage we may have.
Recent global financial conditions have led to a high level of volatility in foreign currency exchange rates and that level of volatility may continue, which could adversely affect our business, financial condition, or results of operations.
Recent global events and financial conditions have led to a high level of volatility in foreign currency exchange rates and that level of volatility may continue, which could adversely affect our business, financial condition, or results of operations.
If our general strategy of seeking growth through acquisitions and collaborations is not successful, or if we do not successfully integrate companies or assets that we acquire into our business, our prospects and financial condition will suffer.
If our general strategy of seeking incremental growth through acquisitions and collaborations is not successful, or if we do not successfully integrate companies or assets that we acquire into our business, our prospects and financial condition will suffer.
We face a number of risks related to our protection of, and our service providers’ protection of, this critical information, including loss of access, inappropriate disclosure and inappropriate access, as well as risks associated with our ability to identify and audit such events.
We face a number of risks related to our protection of, and our service providers’ protection of, this critical information, including loss of access, blocked access, inappropriate disclosure and inappropriate access, as well as risks associated with our ability to identify and audit such events.
We believe our principal competitor in the breast cancer diagnostics market is Exact Sciences, Inc., which currently commands a substantial majority of the market. Other competitors in the breast cancer diagnostics market include Myriad Genetics, Inc. and Agendia, Inc.
We believe our principal competitor in the breast cancer diagnostics market is Exact Sciences Corporation, which currently commands a substantial majority of the market. Other competitors in the breast cancer diagnostics market include Myriad Genetics, Inc. and Agendia, Inc.
Additionally, the marketing, sale and use of our current or future tests could lead to product liability claims if someone were to allege that the tests failed to perform as they were designed.
Additionally, the marketing, sale and use of our current or future tests could lead to product liability claims if someone were to allege that the tests failed to perform as they were designed or marketed.
If we were to lose our licenses issued by New York or by other states where we are required to hold licenses, we would not be able to test specimens from those states.
If we were to lose our licenses issued by New York or by any other states where we are required to hold licenses, we would not be able to test specimens from those states.
Moreover, complying with the stricter regulatory requirements of the IVDR, including with respect to clinical evaluation requirements, quality systems, and post-market surveillance, may require us to incur significant expenditures.
Complying with the stricter regulatory requirements of the IVDR, including with respect to clinical evaluation requirements, quality systems, and post-market surveillance, may require us to incur significant expenditures.
Our business strategy currently includes international presence and expansion in select countries and may include developing and maintaining physician outreach and education capabilities outside of the United States, establishing agreements with laboratories, and expanding our relationships with international payers. In 2021, we acquired HalioDx, an immuno-oncology diagnostics company that is based in Marseille, France, and operates globally.
Our business strategy currently includes international presence and expansion in select countries and may include developing and maintaining physician outreach and education capabilities outside of the United States, establishing agreements with laboratories, and expanding our relationships with international payers. For example, in 2021, we acquired HalioDx, an immuno-oncology diagnostics company that is based in Marseille, France, and operates globally.
War, terrorism, geopolitical uncertainties, including any developments or consequences of regional conflicts globally or related sanctions, trade restrictions, public health issues, natural disasters and other catastrophic events may cause damage or disruption to the economy and commerce on a global, regional or country-specific basis, and could disrupt supply or delivery of, or demand for, our products.
War, terrorism, geopolitical uncertainties, including any developments or consequences of regional conflicts globally or related sanctions, trade restrictions, public health issues, natural disasters and other catastrophic events and the responses thereto may cause damage or disruption to the economy and commerce on a global, regional or country-specific basis, and could disrupt supply or delivery of, or demand for, our products.
In the CY 2020 Hospital Outpatient Prospective Payment System Proposed Rule, CMS solicited comments on potential revisions to these billing rules that could have impacted our ability to bill Medicare directly for our Afirma, Decipher Prostate Biopsy, Decipher Prostate RP, Envisia, and Decipher Bladder classifiers, as well as for Prosigna, when performed on specimens collected from hospital outpatients.
In the CY 2020 Hospital Outpatient Prospective Payment System Proposed Rule, CMS solicited comments on potential revisions to these billing rules that could have impacted our ability to bill Medicare directly for our Decipher Prostate, Afirma, Envisia, and Decipher Bladder classifiers, as well as for Prosigna, when performed on specimens collected from hospital outpatients.
We may be involved in litigation related to intellectual property, which may be time-intensive and costly and may adversely affect our business, operating results or financial condition. There is a substantial amount of intellectual property litigation involving liquid biopsy technologies, including assays for detection or quantification of MRD in patients who have had cancer.
We may be involved in litigation related to third party intellectual property, which may be time-intensive and costly and may adversely affect our business, operating results or financial condition. There is a substantial amount of intellectual property litigation involving liquid biopsy technologies, including assays for detection or quantification of MRD in patients who have had cancer.
Critical accounting policies and estimates used in preparing our consolidated financial statements include those related to: revenue recognition; write-down of supplies; the useful lives of property, plant and equipment; the recoverability of long-lived assets; the incremental borrowing rate for leases; the estimation of the fair value of intangible assets and contingent consideration; variable interest entity assessment; impairment of equity investment, at cost; stock options; income tax uncertainties, including a valuation allowance for deferred tax assets; reserve on accounts receivable and contingencies.
Critical accounting policies and estimates used in preparing our consolidated financial statements include those related to: revenue recognition; 58 Table of Contents write-down of supplies; the useful lives of property, plant and equipment; the recoverability of long-lived assets; the incremental borrowing rate for leases; the estimation of the fair value of intangible assets and contingent consideration; variable interest entity assessment; impairment of equity investment, at cost; stock options; income tax uncertainties, including a valuation allowance for deferred tax assets; reserve on accounts receivable and contingencies.
These laws and regulations currently include, among others: • the Federal Health Insurance Portability and Accountability Act of 1996, or HIPAA, which established comprehensive federal standards with respect to the privacy and security of protected health information and requirements for the use of certain standardized electronic transactions, and amendments made to those standards in 2013 pursuant to the Health Information Technology for Economic and Clinical Health Act, or HITECH Act, which strengthened and expanded HIPAA privacy and security compliance requirements, increased penalties for violators, extended enforcement authority to state attorneys general, and imposed new requirements for breach notification; • Medicare billing and payment regulations applicable to clinical laboratories, including requirements to have an active CLIA certificate; • the Federal Anti-kickback Statute (and state equivalents), which prohibits knowingly and willfully offering, paying, soliciting, or receiving remuneration, directly or indirectly, in exchange for or to induce either the referral of an individual, or the furnishing, arranging for, or recommending of an item or service that is reimbursable, in whole or in part, by a federal healthcare program; • the Eliminating Kickbacks in Recovery Act of 2018, which prohibits the solicitation, receipt, payment or offering of any remuneration in return for referring a patient or patronage to a recovery home, clinical treatment facility, or laboratory for services covered by both government and private payers; • the Federal Stark physician self-referral law (and state equivalents), which prohibits a physician from making a referral for certain designated health services covered by the Medicare program, including laboratory and pathology services, if the physician or an immediate family member has a financial relationship with the entity providing the designated health services, unless the financial relationship falls within an applicable exception to the prohibition; • the Federal Civil Monetary Penalties Law, which prohibits, among other things, the offering or transfer of remuneration to a Medicare or state health-care program beneficiary if the person knows or should know it is likely to influence the beneficiary’s selection of a particular provider, practitioner, or supplier of services reimbursable by Medicare or a state health-care program, unless an exception applies; • the Federal False Claims Act, which imposes liability on any person or entity who knowingly presents, or causes to be presented, a false, fictitious, or fraudulent claim for payment to the federal government; 44 Table of Contents • the Physician Payments Sunshine Act, enacted as part of the ACA, which imposes annual reporting requirements on manufacturers of certain devices, drugs and biologics for certain payments and transfers of value by them and in some cases their distributors to covered recipients, including physicians, as defined by such law, teaching hospitals, and certain healthcare providers as well as ownership or investment interests that physicians or physicians’ immediate family members hold with the reporting entity; • other federal and state fraud and abuse laws, such as anti-kickback laws, prohibitions on self-referral, fee-splitting restrictions, prohibitions on the provision of products at no or discounted cost to induce physician or patient adoption, and false claims acts, which may extend to services reimbursable by any third-party payer, including private insurers; • the prohibition on reassignment of Medicare claims, which, subject to certain exceptions, precludes the reassignment of Medicare claims to any other party; • the Protecting Access to Medicare Act of 2014, which requires us to report private payer rates and test volumes for specific CPT codes on a triennial basis and imposes penalties for failures to report, omissions, or misrepresentations; • the No Surprises Act and its implementing regulations (effective January 1, 2022), which prohibit an out-of-network provider from billing a patient at an amount in excess of the in-network cost sharing for services furnished with respect to a visit at certain in-network health-care facilities, as well as various state laws restricting balance billing of patients; • the rules regarding billing for diagnostic tests reimbursable by the Medicare program, which prohibit a physician or other supplier from marking up the price of the technical component or professional component of a diagnostic test ordered by the physician or other supplier and supervised or performed by a physician who does not “share a practice” with the billing physician or supplier; • state laws that prohibit other specified practices related to billing such as billing physicians for testing that they order, waiving co-insurance, co-payments, deductibles, and other amounts owed by patients, and billing a state Medicaid program at a price that is higher than what is charged to other payers; • the Foreign Corrupt Practices Act of 1977, and other similar laws, which apply to our international activities; • unclaimed property (escheat) laws and regulations, which may require us to turn over to governmental authorities the property of others held by us that has been unclaimed for a specified period of time; • enforcing our intellectual property rights; and • foreign laws and regulations equivalent to the above.
These laws and regulations currently include, among others: • HIPAA, which established comprehensive federal standards with respect to the privacy and security of protected health information and requirements for the use of certain standardized electronic transactions, and amendments made to those standards in 2013 pursuant to the HITECH Act, which strengthened and expanded HIPAA privacy and security compliance requirements, increased penalties for violators, extended enforcement authority to state attorneys general, and imposed new requirements for breach notification; • Medicare billing and payment regulations applicable to clinical laboratories, including requirements to have an active CLIA certificate; • the Federal Anti-kickback Statute (and state equivalents), which prohibits knowingly and willfully offering, paying, soliciting, or receiving remuneration, directly or indirectly, in exchange for or to induce either the referral of an individual, or the furnishing, arranging for, or recommending of an item or service that is reimbursable, in whole or in part, by a federal healthcare program; • the Eliminating Kickbacks in Recovery Act of 2018, which prohibits the solicitation, receipt, payment or offering of any remuneration in return for referring a patient or patronage to a recovery home, clinical treatment facility, or laboratory for services covered by both government and private payers; • the Federal Physician Self-Referral Law (or the “Stark law” and state equivalents), which prohibits a physician from making a referral for certain designated health services covered by the Medicare program, including laboratory and pathology services, if the physician or an immediate family member has a financial relationship with the entity providing the designated health services, unless the financial relationship falls within an applicable exception to the prohibition; • the Federal Civil Monetary Penalties Law, which prohibits, among other things, the offering or transfer of remuneration to a Medicare or state healthcare program beneficiary if the person knows or should know it is likely to influence the beneficiary’s selection of a particular provider, practitioner, or supplier of services reimbursable by Medicare or a state healthcare program, unless an exception applies; • the Federal False Claims Act, which imposes liability on any person or entity who knowingly presents, or causes to be presented, a false, fictitious, or fraudulent claim for payment to the federal government; • the Physician Payments Sunshine Act, enacted as part of the ACA, which imposes annual reporting requirements on manufacturers of certain devices, drugs and biologics for certain payments and transfers of value by them and in some cases their distributors to covered recipients, including physicians, as defined by such law, teaching hospitals, and certain healthcare providers as well as ownership or investment interests that physicians or physicians’ immediate family members hold with the reporting entity; • other federal and state fraud and abuse laws, such as anti-kickback laws, prohibitions on self-referral, fee-splitting restrictions, prohibitions on the provision of products at no or discounted cost to induce physician or patient adoption, and false claims acts, which may extend to services reimbursable by any third-party payer, including private insurers; • the prohibition on reassignment of Medicare claims, which, subject to certain exceptions, precludes the reassignment of Medicare claims to any other party; • the Protecting Access to Medicare Act of 2014, which requires us to report private payer rates and test volumes for specific CPT codes on a triennial basis and imposes penalties for failures to report, omissions, or misrepresentations; 41 Table of Contents • the No Surprises Act and its implementing regulations, which prohibit an out-of-network provider from billing a patient at an amount in excess of the in-network cost sharing for services furnished with respect to a visit at certain in-network healthcare facilities, as well as various state laws restricting balance billing of patients; • the rules regarding billing for diagnostic tests reimbursable by the Medicare program, which prohibit a physician or other supplier from marking up the price of the technical component or professional component of a diagnostic test ordered by the physician or other supplier and supervised or performed by a physician who does not “share a practice” with the billing physician or supplier; • state laws that prohibit other specified practices related to billing such as billing physicians for testing that they order, waiving co-insurance, co-payments, deductibles, and other amounts owed by patients, and billing a state Medicaid program at a price that is higher than what is charged to other payers; • the Foreign Corrupt Practices Act of 1977, and other similar laws, which apply to our international activities; • unclaimed property (escheat) laws and regulations, which may require us to turn over to governmental authorities the property of others held by us that has been unclaimed for a specified period of time; • enforcing our intellectual property rights; and • foreign laws and regulations equivalent to the above.
If we are unable to change clinical practice in a meaningful way or compete successfully against current and future competitors, we may be unable to increase market acceptance and sales of our products, which could prevent us from increasing our revenue or achieving profitability and could cause the market price of our common stock to decline.
If we are unable to change clinical practice in a meaningful way or compete successfully against current and future competitors, we may be unable to increase market acceptance and sales of our products, which could prevent us from increasing our revenue or sustaining profitability and could cause the market price of our common stock to decline.
Reimbursement by a payer may depend on a number of factors, including a payer’s determination that these tests are: • not experimental or investigational; • pre-authorized and appropriate for the specific patient; • cost-effective; • supported by peer-reviewed publications; and • included in clinical practice guidelines.
Reimbursement by a payer may depend on a number of factors, including a payer’s determination that these tests are: • not experimental or investigational; • pre-authorized and appropriate for the specific patient; • medically necessary; • cost-effective; • supported by peer-reviewed publications; and • included in clinical practice guidelines.
We may incur substantial costs and divert the attention of our management and technical personnel in defending against any of these claims. Parties making claims against us may be able to obtain injunctive or other relief, which may block our ability to develop, commercialize and sell products, and may result in the award of substantial damages against us.
We may incur substantial costs and divert the attention of our management and technical personnel in defending against any of these claims. Parties making claims against us may be able to obtain injunctive or other relief, which may block our ability to manufacture, commercialize and sell products, and may result in the award of substantial damages against us.
To the extent that we continue to generate taxable losses, unused losses will carry forward to offset future taxable income, if any, until such unused losses expire.
To the extent that we generate any taxable losses, unused losses will carry forward to offset future taxable income, if any, until such unused losses expire.
Periodically we experience supply chain disruptions, although, to date, this has not resulted in delays in our ability to timely return test results. Any such interruption may significantly affect our future revenue, cause us to incur higher costs, and harm our customer relationships and reputation.
Further, we experience supply chain disruptions, although, to date, this has not resulted in delays in our ability to timely return test results. Any such interruption may significantly affect our future revenue, cause us to incur higher costs, and harm our customer relationships and reputation.
We rely on sole service providers for certain services such as cytopathology professional diagnoses on thyroid fine needle aspiration.
We also rely on sole service providers for certain services such as cytopathology professional diagnoses on thyroid fine needle aspiration.
We might not have been the first to make the inventions covered by each of our pending patent applications, and we might not have been the first to file patent applications for these inventions. To determine the priority of these inventions, we may have to participate in interference proceedings, derivation proceedings, or other post-grant proceedings declared by the U.S.
We might not have been the first to make the inventions covered by each of our pending patent applications, and we might not have been the first to file patent applications for these inventions. To determine the priority of these inventions, we may have to participate in interference proceedings, derivation proceedings, or other post-grant proceedings at the U.S.
If the FDA or foreign authorities were to begin regulating those of our tests that they do not currently regulate, we could incur substantial costs and delays associated with trying to obtain premarket clearance, approval or certification. Clinical laboratory tests have long been subject to comprehensive regulations under CLIA, as well as by applicable state laws.
If the FDA or foreign authorities regulate those of our tests that they do not currently regulate, we could incur substantial costs and delays associated with trying to obtain premarket clearance, approval or certification. Clinical laboratory tests have long been subject to comprehensive regulations under CLIA, as well as by applicable state laws.
In 2024, we acquired C2i, an oncology diagnostics company based in Tel Aviv, Israel, with global operations.
In addition, in 2024, we acquired C2i, an oncology diagnostics company based in Tel Aviv, Israel, with global operations.
The impact to Ukraine as well as actions taken by other countries, including new and stricter sanctions imposed by the United States and the European Union, and other countries and companies and organizations, could adversely affect the global economy and financial markets and thus could affect our business and results of operations, as well as the price of our common stock and our ability to raise additional capital when needed on acceptable terms.
The wars as well as actions taken by other countries, including new and stricter sanctions imposed by the United States and the European Union, and other countries and companies and organizations, could adversely affect the global economy and financial markets and thus could affect our business and results of operations, as well as the price of our common stock and our ability to raise additional capital when needed on acceptable terms.
CLIA 27 Table of Contents certification is also required for us to be eligible to bill state and federal healthcare programs, as well as many private third-party payers. To renew these certifications, we are subject to survey and inspection every two years. Moreover, CLIA inspectors may conduct random inspections of our clinical reference laboratories.
CLIA certification is also required for us to be eligible to bill state and federal healthcare programs, as well as many private third-party payers. To renew these certifications, we are subject to survey and inspection every two years. Moreover, CLIA inspectors may conduct random inspections of our clinical reference laboratories.
We apply for and in-license patents covering our products and technologies and uses thereof, as we deem appropriate, however we may fail to apply for patents on important products and technologies in a timely fashion or at all, or we may fail to apply for patents in potentially relevant jurisdictions.
We apply for patents covering our products, services and technologies and uses thereof, as we deem appropriate; however, we may fail to apply for patents on important products, services or technologies in a timely fashion or at all, or we may fail to apply for patents in potentially relevant jurisdictions.
Declines in operating results, divestitures, sustained market declines and other factors that impact the fair value of our reporting unit could result in an impairment of goodwill or 57 Table of Contents intangible assets and, in turn, a charge to net income. Any such charges could have a material adverse effect on our results of operations or financial condition.
Declines in operating results, divestitures, sustained market declines and other factors that impact the fair value of our reporting unit could result in an impairment of goodwill or intangible assets and, in turn, a charge to net income. Any such charges could have a material adverse effect on our results of operations or financial condition.
In addition, rising interest rates and ongoing inflation in the United States and globally may put further pressure on insurers and other providers to raise prices or reduce reimbursement, increasing the cost to the patient.
In addition, volatile interest rates and ongoing inflation in the United States and globally may put further pressure on insurers and other providers to raise prices or reduce reimbursement, increasing the cost to the patient.
In particularly, substantially more IVDs require the involvement of a notified body to be able to affix a CE Mark to the product, which may lead to delay in being able to place such products on the market.
In particular, substantially more IVDs require the involvement of a notified body to be able to affix a CE Mark to the product, which may lead to delay in being able to place such products on the market.
The EU Commission announced July 2023 that it had adopted a new adequacy decision with respect to the United States under a new regulatory structure known as the EU-US Data Privacy Framework.
The European Commission announced in July 2023 that it had adopted a new adequacy decision with respect to the United States under a new regulatory structure known as the EU-US Data Privacy Framework.
We are also required to maintain state licenses to conduct testing in our laboratories. California, New York, and Texas, among other states’ laws, require that we maintain a license and comply with state regulation as a clinical laboratory. Other states may have similar requirements or may adopt similar requirements in the future.
We are also required to maintain state licenses to conduct testing in our laboratories. California, New York, and Texas, among other states’ laws, require that we maintain a license and comply with state regulation, in addition to the federal CLIA regulation, as a clinical laboratory. Other states may have similar requirements or may adopt similar requirements in the future.
Continued compliance with these obligations could cause us to change our business practices, and we risk financial penalties for noncompliance (including possible fines of up to 4% of global annual turnover for the preceding financial year or €20 million (whichever is higher) for the most serious infringements).
Continued compliance with these obligations could cause us to change our 46 Table of Contents business practices, and we risk financial penalties for noncompliance (including possible fines of up to 4% of global annual turnover for the preceding financial year or €20 million (whichever is higher) for the most serious infringements).
In the event of a successful claim of infringement against us, we may be required to pay damages and ongoing royalties, and obtain one or more licenses from third parties, or be prohibited from selling certain products. We may not be able to obtain these licenses on acceptable terms, if at all.
In the event of a successful claim of infringement against us, we may be required to pay damages and ongoing royalties, and obtain one or more licenses from third parties, or be prohibited from manufacturing, commercializing or selling certain products. We may not be able to obtain these licenses on acceptable or reasonable terms, if at all.
We cannot guarantee that the regulatory authorization or certification for Prosigna will be granted or, if granted, will not be revoked, which could adversely impact our business, financial condition, and operations.
We cannot guarantee that the regulatory authorization or certification for Prosigna or other tests will be granted or, if granted, will not be revoked, which could adversely impact our business, financial condition, and operations.
Before we can successfully develop and commercialize any of our currently planned or other new diagnostic solutions, we will need to: • conduct substantial research and development; • obtain the necessary testing samples and related data; • conduct analytical and clinical validation studies, as well as clinical utility studies; • expend significant funds; • expand and scale-up our laboratory processes; • expand and train our sales force; • gain acceptance from a large number of ordering clinicians; • gain acceptance from ordering laboratories; and • seek and obtain regulatory clearances, approvals or certifications of our new solutions, as required by applicable regulatory bodies.
Before we can successfully develop and commercialize any of our currently planned or other new diagnostic solutions, we will need to: • co nduct substantial research and development; 54 Table of Contents • obtain the necessary testing samples and related data; • conduct analytical and clinical validation studies, as well as clinical utility studies; • expend significant funds; • expand and scale-up our laboratory processes; • expand and train our sales force; • gain acceptance from a large number of ordering clinicians; • gain acceptance from ordering laboratories; and • seek and obtain regulatory clearances, approvals or certifications of our new solutions, as required by applicable regulatory bodies.
Our ability to process, use and transfer such personal data may be subject to Israel’s privacy and data protection laws including but not limited to Basic Law: Human Dignity and Liberty, 53 Table of Contents 5752 -1992; the Protection of Privacy Law, 5741-1981 and the regulations promulgated thereunder, or the PPL, and the guidelines of the Israel Privacy Authority.
Our ability to process, use and transfer such personal data may be subject to Israel’s privacy and data protection laws including but not limited to Basic Law: Human Dignity and Liberty, 5752 -1992; the Protection of Privacy Law, 5741-1981 and the regulations promulgated thereunder, or the PPL, and the guidelines of the Israel Privacy Authority.
This litigation, if instituted against us, could result in substantial costs and a diversion of our management’s attention and resources. Anti-takeover provisions in our charter documents and under Delaware law could discourage, delay or prevent a change in control and may affect the trading price of our common stock.
This litigation, if instituted against us, could result in substantial costs and a diversion of our management’s attention and resources. 53 Table of Contents Anti-takeover provisions in our charter documents and under Delaware law could discourage, delay or prevent a change in control and may affect the trading price of our common stock.
In addition, the revised SCCs are not to be relied on for data transfers to non-EEA entities subject to the GDPR, and we are waiting for further guidance on valid mechanisms for data transfers from the EEA to such entities.
The revised SCCs are not to be relied on for data transfers to non-EEA entities subject to the GDPR, and we are waiting for further guidance on valid mechanisms for data transfers from the EEA to such entities.
Our quarterly operating results may fluctuate significantly or may fall below the expectations of investors or securities analysts for various reasons, including in response to the way we recognize revenue and/or the amount of cash we generate, which may cause our stock price to fluctuate or decline.
Our quarterly operating results may fluctuate significantly or may fall below our guidance or the expectations of investors or securities analysts for various reasons, including in response to the way we recognize revenue, our level of profitability and/or the amount of cash we generate, which may cause our stock price to fluctuate or decline.
We believe it will take several years to achieve coverage and contracted reimbursement with a majority of third-party payers across our entire portfolio of tests. We cannot predict whether, under what circumstances, or at what payment levels payers will reimburse for our tests.
We believe it will take several years to achieve coverage and contracted reimbursement with most third-party payers across our entire portfolio of tests. We cannot predict whether, under what circumstances, or at what payment levels payers will reimburse for our tests.
Effective January 1, 2018, CMS revised its billing rules to allow the performing laboratory to bill Medicare directly for molecular pathology tests and Criterion A ADLTs performed on specimens collected from hospital outpatients, even when those tests are ordered less than 14 days after the date of discharge, if certain conditions are met.
In 2018, CMS revised its billing rules to allow the performing laboratory to bill Medicare directly for molecular pathology tests and Criterion A ADLTs performed on specimens collected from hospital outpatients, even when those tests are ordered less than 14 days after the date of discharge, if certain conditions are met.
Furthermore, our acquisition of C2i included acquiring personal data that may originate from, be processed in, or be transferred to and from, Israel, the EU and other jurisdictions.
Furthermore, the C2i Acquisition included acquiring personal data that may originate from, be processed in, or be transferred to and from, Israel, the EU and other jurisdictions.
Our restated certificate of incorporation and amended and restated bylaws include provisions that: • authorize our board of directors to issue, without further action by the stockholders, up to 5.0 million shares of undesignated preferred stock; • require that any action to be taken by our stockholders be effected at a duly called annual or special meeting and not by written consent; • specify that special meetings of our stockholders can be called only by our board of directors, our chairman of the board, or our chief executive officer; 60 Table of Contents • establish an advance notice procedure for stockholder approvals to be brought before an annual meeting of our stockholders, including proposed nominations of persons for election to our board of directors; • establish that our board of directors is divided into three classes, with each class serving staggered three-year terms.
Our restated certificate of incorporation and amended and restated bylaws include provisions that: • authorize our board of directors to issue, without further action by the stockholders, up to 5.0 million shares of undesignated preferred stock; • require that any action to be taken by our stockholders be effected at a duly called annual or special meeting and not by written consent; • specify that special meetings of our stockholders can be called only by our board of directors, our chairman of the board, or our chief executive officer; • establish an advance notice procedure for stockholder proposals to be brought before an annual meeting of our stockholders, including proposed nominations of persons for election to our board of directors; • previously established that our board of directors is divided into three classes, with each class serving staggered three-year terms.
As a general rule, demonstration of conformity of IVD MDs and their manufacturers with the essential requirements must be based, among other things, on the evaluation of clinical data supporting the safety and performance of the products during normal conditions 36 Table of Contents of use.
As a general rule, demonstration of conformity of IVD MDs and their manufacturers with the essential requirements must be based, among other things, on the evaluation of clinical data supporting the safety and performance of the products during normal conditions of use.
In addition, we are in various stages of research and development for other diagnostic tests that we may offer, but there can be no assurance that we will be able to identify other diseases that can be effectively addressed or, if we are able to identify such diseases, whether or when we will be able to successfully commercialize solutions for these diseases and obtain the evidence and coverage decisions from payers.
We are in various stages of research and development for other diagnostic tests that we may offer, but there can be no assurance that we will be able to identify other diseases that can be effectively addressed or, if we are able to identify such 21 Table of Contents diseases, whether or when we will be able to successfully commercialize solutions for these diseases and obtain the evidence and coverage decisions from payers.
A mutual recognition agreement, or MRA, aligning IVD regulations between the European Union and Switzerland has officially expired following the In Vitro Diagnostic Medical Devices Regulation’s, or IVDR, May 26, 2022 date of application, impacting certification and authorized representation requirements for manufacturers. The Swiss government has issued its own Ordinance on In Vitro Diagnostic Medical Devices, or IvDO.
A mutual recognition agreement, or MRA, aligning IVD regulations between the European Union and Switzerland expired following the IVDR's May 26, 2022 date of application, impacting certification and authorized representation requirements for manufacturers. The Swiss government has issued its own Ordinance on In Vitro Diagnostic Medical Devices, or IvDO.
Many of the countries in which we operate, including the United States and those in Europe, have experienced and continue to experience uncertain economic conditions, including increased inflation and interest rates, resulting from global as well as local factors.
Many of the countries in which we operate, including the United States and those in Europe, have experienced and continue to experience uncertain economic conditions, including persistent inflation and volatile interest rates, resulting from global as well as local factors.
Moreover, we cannot predict how future economic conditions will affect our customers, suppliers and distributors and any negative impact on our critical customers, suppliers or distributors may also have an adverse impact on our results of operations 48 Table of Contents or financial condition.
Moreover, we cannot predict how future economic conditions will affect our customers, suppliers and distributors. Any negative impact on our critical customers, suppliers or distributors may also have an adverse impact on our results of operations or financial condition.
Any of these factors could cause us to experience an effective tax rate significantly different from previous periods or our current expectations, which could have an adverse effect on our business and results of operations.
Any of these factors could cause us to experience an effective tax rate significantly different from previous 57 Table of Contents periods or our current expectations, which could have an adverse effect on our business and results of operations.
Our manufacturing facility in Marseille, France, produces many of our Prosigna tests, as well as products for our IVD manufacturing services, and is subject to the risk of power outages resulting from constrained European energy supply.
Our manufacturing facility in Marseille, France, has produced many of our Prosigna tests, as well as products for our IVD manufacturing services, and is subject to the risk of power outages resulting from constrained European energy supply.
The GDPR imposed new compliance obligations applicable to our business, including accountability obligations requiring data controllers and processors to maintain a record of their data processing and implement policies as part of its mandated privacy governance framework.
The GDPR imposes compliance obligations applicable to our business, including accountability obligations requiring data controllers and processors to maintain a record of their data processing and implement policies as part of its mandated privacy governance framework.
In addition, to the extent international markets have existing practices and standards of care that are different than those in the United States, we may face challenges with the adoption of 29 Table of Contents our tests in international markets.
In addition, to the extent international markets have existing practices and standards of care that are different than those in the United States, we may face challenges with the adoption of our tests in international markets.
The FDA guidance also stated that while there may be cases when a companion diagnostic could come to market through the 510(k) pathway, the FDA expects that most companion diagnostics will be Class III devices.
Additionally, FDA guidance has stated that while there may be cases when a companion diagnostic could come to market through the 510(k) pathway, the FDA expects that most companion diagnostics will be Class III devices.
Our test development and commercialization efforts may be delayed or fail for many reasons, including: • failure of the test at the research or development stage; • difficulty in accessing suitable testing samples, especially testing samples with known clinical results; • lack of analytical and clinical validation data to support the effectiveness of the test, or lack of clinical utility data to support the value of the test; • delays resulting from the failure of third-party suppliers or contractors to meet their obligations in a timely and cost-effective manner; • failure to obtain or maintain necessary clearances, approvals or certifications to market the test; • manufacturing constraints due to limited energy supply in Europe or other supply constraints; or 28 Table of Contents • lack of commercial acceptance by patients, clinicians or third-party payers.
Our test development and commercialization efforts may be delayed or fail for many reasons, including: • fai lure of the test at the research or development stage; • difficulty in accessing suitable testing samples, especially testing samples with known clinical results; • lack of analytical and clinical validation data to support the effectiveness of the test, or lack of clinical utility data to support the value of the test; • delays resulting from the failure of third-party suppliers or contractors to meet their obligations in a timely and cost-effective manner; • failure to obtain or maintain necessary clearances, approvals or certifications to market the test; • manufacturing constraints due to limited energy supply in Europe or other supply constraints; or • lack of commercial acc eptance by patients, clinicians or third-party payers.
The inability to perform our tests for even a short period of time may result in the loss of customers or harm our reputation, and we may be unable to regain those customers in the future.
Repeated or prolonged delays or the inability to perform our tests for even a short period of time may result in the loss of customers or harm our reputation, and we may be unable to regain those customers in the future.
Either of our facilities may be harmed or rendered inoperable by natural or man-made disasters, including earthquakes, flooding and power outages, which may render it difficult or impossible for us to perform our testing services for some period of time or to receive and store samples.
Any of our facilities may be harmed or rendered inoperable by natural or man-made disasters, including earthquakes, flooding and power outages, which may lead to delays or render it difficult or impossible for us to perform our testing services for some period of time or to receive and store samples.
The ACA, enacted in March 2010, made changes that significantly affected the pharmaceutical and medical device industries and clinical laboratories.
For example, the ACA, enacted in March 2010, made changes that significantly affected the pharmaceutical and medical device industries and clinical laboratories.
We believe that the Afirma, Decipher Prostate Biopsy, Decipher Prostate RP, Envisia, and Decipher Bladder classifiers, have been developed and are performed in a manner consistent with the FDA’s enforcement discretion policy concerning LDTs.
We believe that our Decipher Prostate, Afirma, Envisia, and Decipher Bladder classifiers, have been developed and are performed in a manner consistent with the FDA’s enforcement discretion policy concerning LDTs.
Several factors make the billing process complex, including: • differences between the list price for our tests and the reimbursement rates of payers; • compliance with complex federal and state regulations related to billing government payers, such as Medicare and Medicaid, including requirements to have an active CLIA certificate; • risk of government audits related to billing Medicare and other government payers; 41 Table of Contents • disputes among payers as to which party is responsible for payment; • differences in coverage and in information and billing requirements among payers, including the need for prior authorization and/or advanced notification; • the effect of patient co-payments or co-insurance; • individual payers may argue technical contract noncompliance and withhold payment; • changes to billing codes used for our tests; • incorrect or missing billing information; and • the resources required to manage the billing and claims appeals process.
Several factors make the billing process complex, including: • differences between the list price for our tests and the reimbursement rates of payers; • compliance with complex federal and state regulations related to billing government payers, such as Medicare and Medicaid, including requirements to have an active CLIA certificate; • risk of government audits related to billing Medicare and other government payers; • disputes among payers as to which party is responsible for payment; • differences in coverage and in information and billing requirements among payers, including the need for prior authorization and/or advanced notification; • the effect of patient co-payments or co-insurance; 38 Table of Contents • individual payers may argue technical contract noncompliance and withhold payment; • challenges obtaining medical records from the ordering providers; • changes to billing codes used for our tests; • incorrect or missing billing information; and • the resources required to manage the billing and claims appeals process.

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Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

7 edited+2 added−1 removed13 unchanged
Biggest changeRisk Management and Strategy As one of the critical elements of our overall ERM approach, our cybersecurity program is focused on the following key areas: Governance: As discussed in more detail under the heading “Governance,” the board of directors' oversight of cybersecurity risk management is supported by the Audit Committee of the board of directors, or the Audit Committee, our Chief Information Officer, or CIO, other members of management and relevant management committees as appropriate. 61 Table of Contents Collaborative Approach: We have implemented a cross-functional approach to identifying, preventing and mitigating cybersecurity threats and incidents, while also implementing controls and procedures that provide for the escalation of certain cybersecurity incidents so that decisions regarding the public disclosure and reporting of such incidents can be made by management in a timely manner.
Biggest changeIn general, we seek to address cybersecurity risks through a cross-functional approach that is focused on preserving the confidentiality, security and availability of the information that we collect and store by identifying, preventing and mitigating cybersecurity threats and effectively responding to cybersecurity incidents when they occur. 59 Table of Contents Risk Management and Strategy As one of the critical elements of our overall ERM approach, our cybersecurity program is focused on the following key areas: Governance: As discussed in more detail under the heading “Governance,” the board of directors' oversight of cybersecurity risk management is supported by the Audit Committee of the board of directors, or the Audit Committee, our Chief Information Officer, or CIO, other members of management and relevant management committees as appropriate.
On an annual basis, the board of directors and the Audit Committee discuss our approach to cybersecurity risk management with the members of management, including the CIO. The Cybersecurity Executive Leadership Team is composed of the CIO, in coordination with our Chief Executive Officer, or CEO, Chief Financial Officer, or CFO, Chief Compliance Officer and General Counsel, or GC.
On an annual basis, the board of directors and the Audit Committee discuss our approach to cybersecurity risk management with the members of management, including the CIO. 60 Table of Contents The Cybersecurity Executive Leadership Team is composed of the CIO, in coordination with our Chief Executive Officer, or CEO, Chief Financial Officer, or CFO, Chief Compliance Officer and General Counsel, or GC.
Our Director of Cybersecurity has over 25 years’ of experience in enhancing digital security and driving technological innovation. He holds a B.Sc. (Honors) in Computer Information Systems from the National University along with several industry related Cybersecurity certifications.
He holds a M.S. in Business Technology Management, and a B.S. in Computer Applications and Networks from Coleman University. Our Director of Cybersecurity has over 25 years’ of experience in enhancing digital security and driving technological innovation. He holds a B.Sc. (Honors) in Computer Information Systems from the National University along with several industry related Cybersecurity certifications.
In addition, workstation and device security is controlled with proper logging and identity access controls to protect our physical assets. Administrative Safeguards: We have implemented policies, security standards and procedures to ensure proper user and protection of our assets.
In addition, workstation and device security is controlled with proper logging and identity access controls to protect our physical assets. Administrative Safeguards: We have implemented policies, security standards and procedures to ensure proper user and protection of our assets. We maintain cybersecurity risk insurance coverage to provide financial protection in the event a cybersecurity breach was to occur.
Education and Awareness: We provide regular, mandatory training for personnel regarding cybersecurity threats to help equip our personnel with tools to address such threats, and to communicate our evolving information security policies, standards, processes and practices. Incident Response and Recovery Planning: We have established and maintain a cybersecurity incident response plan that addresses our response to a cybersecurity incident.
Education and Awareness: We provide regular, mandatory, and ongoing training and reinforcement for personnel regarding cybersecurity threats to help equip our personnel with tools to address such threats, and to communicate our evolving information security policies, standards, processes and practices.
Through ongoing communications with these teams, the CIO and the Cybersecurity Executive Leadership Team monitor the prevention, detection, mitigation and remediation of cybersecurity threats and incidents in real time, and report such threats and incidents to the Audit Committee when appropriate. 62 Table of Contents Our CIO brings more than 20 years of information and operational leadership experience in the life sciences and technology industries to his role at Veracyte.
Through ongoing communications with these teams, the CIO and the Cybersecurity Executive Leadership Team monitor the prevention, detection, mitigation and remediation of cybersecurity threats and incidents in real time, and report such threats and incidents to the Audit Committee when appropriate.
He holds a B.B.A. and an M.B.A from the University of San Diego. Our VP, Global IT Operation oversees IT operations for all sites globally, and has more than 20 years’ of experience. He holds a M.S. in Business Technology Management, and a B.S. in Computer Applications and Networks from Coleman University.
Our CIO brings more than 20 years of information and operational leadership experience in the life sciences and technology industries to his role at Veracyte. He holds a B.B.A. and an M.B.A from the University of San Diego. Our VP, Global IT Operation oversees IT operations for all sites globally, and has more than 20 years’ of experience.
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In general, we seek to address cybersecurity risks through a cross-functional approach that is focused on preserving the confidentiality, security and availability of the information that we collect and store by identifying, preventing and mitigating cybersecurity threats and effectively responding to cybersecurity incidents when they occur.
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Collaborative Approach: We have implemented a cross-functional approach to identifying, preventing and mitigating cybersecurity threats and incidents, while also implementing controls and procedures that provide for the escalation of certain cybersecurity incidents so that decisions regarding the public disclosure and reporting of such incidents can be made by management in a timely manner.
Added
Incident Response and Recovery Planning: We have established and maintain a cybersecurity incident response plan that addresses our response to a cybersecurity incident.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeThe comparisons in the table are required by the SEC and are not intended to forecast or be indicative of future performance of our common stock.
Biggest changeThe comparisons in the table are required by the SEC and are not intended to forecast or be indicative of future performance of our common stock. 62 Table of Contents December 31, 2019 December 31, 2020 December 31, 2021 December 31, 2022 December 31, 2023 December 31, 2024 Veracyte, Inc. $ 100 $ 175 $ 148 $ 85 $ 99 $ 142 Nasdaq Global Market Index $ 100 $ 144 $ 174 $ 117 $ 167 $ 215 Nasdaq Biotechnology Index $ 100 $ 126 $ 126 $ 114 $ 119 $ 118
In addition, we may also enter into credit agreements or other borrowing arrangements in the future that may restrict our ability to declare or pay dividends on our common stock. 63 Table of Contents Recent Sale of Unregistered Securities and Use of Proceeds None. Purchases of Equity Securities by the Issuer and Affiliated Purchasers None.
In addition, we may also enter into credit agreements or other borrowing arrangements in the future that may restrict our ability to declare or pay dividends on our common stock. Recent Sale of Unregistered Securities and Use of Proceeds None. Purchases of Equity Securities by the Issuer and Affiliated Purchasers None.
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Market Information Our common stock is traded on the Nasdaq Global Market under the symbol "VCYT". Holders of Record As of February 23, 2024, there were 38 holders of record of our common stock.
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Market Information Our common stock is traded on the Nasdaq Global Market under the symbol "VCYT". Holders of Record As of February 21, 2025, there were 16 holders of record of our common stock.
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December 31, 2018 December 31, 2019 December 31, 2020 December 31, 2021 December 31, 2022 December 31, 2023 Veracyte, Inc. $ 100.00 $ 222.00 $ 389.00 $ 328.00 $ 189.00 $ 219.00 Nasdaq Global Market Index $ 100.00 $ 135.00 $ 194.00 $ 236.00 $ 158.00 $ 226.00 Nasdaq Biotechnology Index $ 100.00 $ 125.00 $ 158.00 $ 158.00 $ 142.00 $ 149.00

Item 7. Management's Discussion & Analysis

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

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Biggest changeOur comprehensive loss includes our net loss and gains and losses from the foreign currency translation of the assets and liabilities of our foreign subsidiaries. 72 Table of Contents Results of Operations Comparison of the Years Ended December 31, 2023 and 2022 (in thousands of dollars, except percentages and test volume) Year Ended December 31, 2023 Change % 2022 Revenue: Testing revenue $ 326,542 $ 75,998 30 % $ 250,544 Product revenue 15,588 2,956 23 % 12,632 Biopharmaceutical and other revenue 18,921 (14,439) (43) % 33,360 Total revenue 361,051 64,515 22 % 296,536 Operating expense: Cost of testing revenue 88,913 13,596 18 % 75,317 Cost of product revenue 8,666 846 11 % 7,820 Cost of biopharmaceutical and other revenue 15,324 (3,121) (17) % 18,445 Research and development 57,305 16,702 41 % 40,603 Selling and marketing 101,490 3,930 4 % 97,560 General and administrative 86,229 13,029 18 % 73,200 Impairment of long-lived assets 68,349 65,031 1,960 % 3,318 Intangible asset amortization 20,570 (784) (4) % 21,354 Total operating expenses 446,846 109,229 32 % 337,617 Loss from operations (85,795) (44,714) (109) % (41,081) Other income, net 9,183 4,529 97 % 4,654 Loss before income tax benefit (76,612) (40,185) 110 % (36,427) Income tax (benefit) provision (2,208) (2,341) (1,760) % 133 Net loss $ (74,404) $ (37,844) (104) % $ (36,560) Other Operating Data: Diagnostic tests reported 115,785 22,445 24 % 93,340 Product tests sold 11,192 2,008 22 % 9,184 Total test volume 126,977 24,453 24 % 102,524 Depreciation and amortization expense $ 27,188 $ 1,260 5 % $ 25,928 Stock-based compensation expense $ 33,489 $ 6,033 22 % $ 27,456 Revenue Revenue increased $64.5 million, or 22%, for the year ended December 31, 2023 compared to 2022.
Biggest changeOur comprehensive income (loss) includes our net income (loss) and gains and losses from the foreign currency translation of the assets and liabilities of our foreign subsidiaries. 72 Table of Contents Results of Operations Comparison of the Years Ended December 31, 2024 and 2023 (in thousands of dollars, except percentages and test volume) Year Ended December 31, 2024 Change % 2023 Revenue: Testing revenue $ 418,961 $ 92,419 28 % $ 326,542 Product revenue 13,650 (1,938) (12) % 15,588 Biopharmaceutical and other revenue 13,153 (5,768) (30) % 18,921 Total revenue 445,764 84,713 23 % 361,051 Cost of revenue: Cost of testing revenue 114,573 25,660 29 % 88,913 Cost of product revenue 9,110 444 5 % 8,666 Cost of biopharmaceutical and other revenue 12,384 (2,940) (19) % 15,324 Intangible asset amortization - cost of revenue 11,552 (6,912) (37) % 18,464 Total cost of revenue 147,619 16,252 12 % 131,367 Gross profit 298,145 68,461 30 % 229,684 Operating expenses: Research and development 69,294 11,989 21 % 57,305 Selling and marketing 95,434 (6,056) (6) % 101,490 General and administrative 110,610 24,381 28 % 86,229 Impairment of long-lived assets 3,368 (64,981) (95) % 68,349 Intangible asset amortization - operating expenses 3,297 1,191 57 % 2,106 Total operating expenses 282,003 (33,476) (11) % 315,479 Income (loss) from operations 16,142 101,937 119 % (85,795) Other income, net 9,602 419 5 % 9,183 Income (loss) before income taxes 25,744 102,356 (134) % (76,612) Income tax provision (benefit) 1,606 3,814 (173) % (2,208) Net income (loss) $ 24,138 $ 98,542 132 % $ (74,404) Other Operating Data: Diagnostic tests reported 142,925 27,140 23 % 115,785 Product tests sold 9,825 (1,367) (12) % 11,192 Total test volume 152,750 25,773 20 % 126,977 Depreciation and amortization expense $ 23,459 $ (3,729) (14) % $ 27,188 Stock-based compensation expense $ 36,249 $ 2,760 8 % $ 33,489 Revenue Revenue increased $84.7 million, or 23%, for the year ended December 31, 2024 compared to 2023.
Finally, when we increase our list price, it will increase the cumulative amounts billed but may not positively impact accrued revenue. In addition, payer contracts generally include the right of offset and payers may offset payments prior to resolving disputes over tests performed.
Finally, when we increase our list price, it will increase the cumulative amounts billed but not positively impact accrued revenue. In addition, payer contracts generally include the right of offset and payers may offset payments prior to resolving disputes over tests performed.
This process involves identifying the contract with a customer, determining the performance obligations in the contract, determining the contract price, allocating the contract price to the distinct performance obligations in the contract, and recognizing revenue when the performance obligations have been satisfied.
This process involves identifying the contract with a customer, determining the performance obligations in the contract, determining the contract price, allocating the contract price to the distinct performance obligations in the contract, and recognizing revenue when the performance obligations have been satisfied.
Cash Flows from Financing Activities Cash provided by financing activities for the year ended December 31, 2023 was $2.8 million, consisting of $9.6 million in proceeds from the exercise of options to purchase our common stock and purchase of stock under our Employee Stock Purchase Plan, or ESPP, partially offset by $6.7 million in tax payments during the period related to the vesting of restricted stock units granted to employees.
Cash provided by financing activities for the year ended December 31, 2023 was $2.8 million, consisting of $9.6 million in proceeds from the exercise of options to purchase our common stock and purchase of stock under our Employee Stock Purchase Plan, or ESPP, partially offset by $6.7 million in tax payments during the period related to the vesting of restricted stock units granted to employees.
Cash Flows from Investing Activities Cash provided by investing activities for the year ended December 31, 2023 was $15.1 million consisting of $25.1 million from the purchase and maturity of short-term investments, offset by $10.0 million used in the acquisition of property and equipment.
Cash provided by investing activities for the year ended December 31, 2023 was $15.1 million consisting of $25.1 million from the purchase and maturity of short-term investments, offset by $10.0 million used in the acquisition of property and equipment.
Our ability to increase our revenue will depend on our ability to penetrate the market, obtain positive coverage policies from additional third-party payers, obtain reimbursement and/or enter into contracts with additional third-party payers for our current and new tests, and increase reimbursement rates for tests performed.
Our ability to increase our testing revenue will depend on our ability to penetrate the market, obtain positive coverage policies from additional third-party payers, obtain reimbursement and/or enter into contracts with additional third-party payers for our current and new tests, and increase reimbursement rates for tests performed.
Our finite-lived intangible assets are being amortized using the straight-line method over their estimated useful lives of 4 to 15 years, based on management's estimate of the period over which their economic benefits will be realized, product life and patent life. Our in-process research and development, or IPR&D, is not amortized until it becomes commercially viable and placed in service.
Our finite-lived intangible assets are being amortized using the straight-line method over their estimated useful lives of 5 to 15 years, based on management's estimate of the period over which their economic benefits will be realized, product life and patent life. Our in-process research and development, or IPR&D, is not amortized until it becomes commercially viable and placed in service.
As we introduce new tests, initially our cost of testing revenue will be high as we expect to run suboptimal batch sizes, run quality control batches, test batches, registry samples, and generally incur costs that may suppress or reduce gross margins. This will disproportionately increase our aggregate cost of testing revenue until we achieve efficiencies in processing these new tests.
As we introduce new tests, initially our cost of testing revenue will be high as we expect to run suboptimal batch sizes, run quality control batches, test batches, registry samples, and generally incur costs that may suppress or reduce gross margins. This will disproportionately increase our aggregate cost of testing revenue until we achieve processing efficiencies.
General and Administrative General and administrative expenses include compensation expenses for executive officers and administrative, billing and client service personnel, professional fees for legal and audit services, occupancy costs, depreciation and amortization, and other expenses such as information technology and miscellaneous expenses, offset by allocation of facility and information technology expenses to other functions.
General and Administrative General and administrative expenses include compensation expenses for executive officers and administrative, billing and client service personnel, professional fees for legal and audit services, occupancy costs, depreciation and amortization, and other expenses such as information technology, acquisition related costs and miscellaneous expenses, offset by allocation of facility and information technology expenses to other functions.
The estimation of the fair value of the contingent consideration is based on the present value of the expected payments calculated by assessing the likelihood of when the related milestones would be achieved, discounted using our estimated borrowing rate. Intangible Asset Amortization We have acquired finite-lived and indefinite-lived intangible assets in business combinations.
The estimation of the fair value of the contingent consideration is based on the present value of the expected payments calculated by assessing the likelihood of when the related milestones would be achieved, discounted using our estimated borrowing rate. 70 Table of Contents Intangible Asset Amortization We have acquired finite-lived and indefinite-lived intangible assets in business combinations.
We expect that our near- and longer-term liquidity requirements will continue to consist of costs to run our laboratories, research and development expenses, selling and marketing expenses, general and administrative expenses, working capital, capital expenditures, lease obligations, potential milestones associated with the C2i acquisition and general corporate expenses associated with the growth of our business.
We expect that our near- and longer-term liquidity requirements will continue to consist of costs to run our laboratories, research and development expenses, selling and marketing expenses, general and administrative expenses, working capital, capital expenditures, lease obligations, potential milestones associated with the C2i Acquisition, costs to fund our overseas operations, and general corporate expenses associated with the growth of our business.
Right-of-use, or ROU, assets and lease liabilities are recognized at commencement based on the present value of lease payments over the lease term. We use our incremental borrowing rate based on the estimated rate of interest for collateralized borrowing over a similar term of the lease payments.
Right-of-use, or ROU, assets and lease 71 Table of Contents liabilities are recognized at commencement based on the present value of lease payments over the lease term. We use our incremental borrowing rate based on the estimated rate of interest for collateralized borrowing over a similar term of the lease payments.
The net loss of $74.4 million includes non-cash charges of $68.3 million tied to the impairment of long-lived assets, $33.1 million of stock-based compensation expense, $27.2 million of depreciation and amortization, including $20.6 million of intangible asset amortization, $5.4 million from the revaluation of contingent consideration, and noncash lease expense of $4.2 million.
The net loss of $74.4 million includes non-cash charges of $68.3 million tied to the impairment of long-lived assets, $33.1 million of stock-based compensation expense, $27.2 million of depreciation and amortization, of which $20.6 million was related to intangible asset amortization, $5.4 million from the revaluation of contingent consideration, and noncash lease expense of $4.2 million.
We generally invoice third-party payers upon delivery of a patient report to the prescribing physician. As such, we take the assignment of benefits and the risk of cash collection from the third-party payer and individual patients.
We generally invoice third-party payers upon delivery of a patient report to the prescribing physician. As such, we take the assignment of benefits and the risk of cash collection from 67 Table of Contents the third-party payer and individual patients.
We expense all research and development costs in the periods in which they are incurred. We incurred a majority of our research and development expenses in the years ended December 31, 2023 and December 31, 2022 in support of our early-stage products, including Percepta Nasal Swab, as well as the development of new IVD products.
We expense all research and development costs in the periods in which they are incurred. We incurred a majority of our research and development expenses in the year ended December 31, 2023 in support of our early-stage products, including Percepta Nasal Swab, as well as the development of new IVD products and discovery.
The estimation of the stand-alone selling price may include independent evidence of 70 Table of Contents market price, forecasted revenues or costs, development timelines, discount rates, and probabilities of technical and regulatory success.
The estimation of the stand-alone selling price may include independent evidence of market price, forecasted revenues or costs, development timelines, discount rates, and probabilities of technical and regulatory success.
A performance obligation is considered distinct from other obligations in a contract when it provides a benefit to the customer, either on its own or together with other resources that are readily available to the customer, and is separately identified in the contract.
A performance obligation is considered distinct from other obligations in a contract when it provides a benefit to the customer, either on its own or together with other resources that are readily available to the customer, and is separately 66 Table of Contents identified in the contract.
We estimate the variable consideration under the portfolio approach and consider the historical reimbursement data from third-party commercial and governmental payers and patients, as well as known or anticipated reimbursement trends not reflected in the historical data.
We estimate the variable consideration under the 69 Table of Contents portfolio approach and consider the historical reimbursement data from third-party commercial and governmental payers and patients, as well as known or anticipated reimbursement trends not reflected in the historical data.
We expect general and administrative expenses to continue to increase as we build our infrastructure to scale revenue growth, and to decline as a percentage of revenue thereafter. 69 Table of Contents Intangible Asset Amortization Our finite-lived intangible assets, acquired in business combinations, are being amortized over 4 to 15 years, using the straight-line method.
We expect general and administrative expenses to continue to increase as we build our infrastructure to scale revenue growth, and to decline as a percentage of revenue thereafter. Intangible Asset Amortization - Operating Expenses Our finite-lived intangible assets, acquired in business combinations, are being amortized over 5 to 15 years, using the straight-line method.
See "Risk Factors" for further discussion. 65 Table of Contents Factors Affecting Our Performance Reported Total Test Volume Our performance depends on the number of tests that we perform and report as completed in our CLIA-certified laboratories and Prosigna tests purchased by our customers.
See "Risk Factors" for further discussion. 64 Table of Contents Factors Affecting Our Performance Reported Total Test Volume Our performance currently depends on the number of tests that we perform and report as completed in our CLIA-certified laboratories and the number of Prosigna tests purchased by our customers, which we refer to as our reported total test volume.
Spending on research and development, for both experiments and studies, may vary significantly by quarter depending on the timing of these various expenses. Financial Overview Revenue Through December 31, 2023, we derived most of our revenue from the sale of Decipher and Afirma tests, delivered primarily to physicians in the United States.
Spending on research and development, for both experiments and studies, may vary significantly by quarter depending on the timing of these various expenses. Financial Overview Revenue Through December 31, 2024, we derived the majority of our revenue as testing revenue from the sale of Decipher Prostate and Afirma tests, delivered primarily to physicians in the United States.
Cost of Biopharmaceutical and Other Revenue Our cost of biopharmaceutical and other revenue are the costs of performing activities under arrangements that require us to perform research and development, commercialization, contract manufacturing and development, and previously included contract testing services on behalf of a customer. This cost is mainly composed of compensation expense, manufacturing and laboratory supplies and pass-through costs.
Cost of Biopharmaceutical and Other Revenue Our cost of biopharmaceutical and other revenue are the costs of performing activities under arrangements that require us to perform research and development, contract testing services, commercialization, and contract manufacturing and development. This expense is mainly composed of compensation, manufacturing and laboratory supplies, and pass-through costs.
Product Revenue Our products consist of the Prosigna breast cancer assay, the nCounter Analysis System, related diagnostic kits, and services. We recognize product revenue when control of the promised goods is transferred to our customers, in an amount that reflects the consideration expected to be received in exchange for those products.
Product Revenue Our product revenue consists primarily of sales of the Prosigna breast cancer assay and related diagnostic kits and services. We recognize product revenue when control of the promised goods is transferred to our customers, in an amount that reflects the consideration expected to be received in exchange for those products.
Product Revenue Our products consist of the Prosigna breast cancer assay, the nCounter Analysis System, related diagnostic kits, and services. We recognize product revenue when control of the promised goods is transferred to our customers, in an amount that reflects the consideration expected to be received in exchange for those products.
Product Revenue Our product revenue consists primarily of sales of the Prosigna breast cancer assay and related diagnostic kits and services. We recognize product revenue when control of the promised goods is transferred to our customers, in an amount that reflects the consideration expected to be received in exchange for those products.
If we are not able to secure additional funding when needed, we may have to delay, reduce the scope of or eliminate one or more research and development programs or selling and marketing initiatives, or forgo potential acquisitions or investments.
If we are not able to secure additional financing when needed, or on terms that are favorable to us, we may have to delay, reduce the scope of or eliminate one or more research and development programs or selling and marketing initiatives, or forgo potential acquisitions or investments.
Factors impacting the number of tests that we report as completed include, but are not limited to: • the number of samples that we receive that meet the medical indication for each test performed; • the quantity and quality of the sample received; • receipt of the necessary documentation, such as physician order and patient consent, required to perform, bill and collect for our tests; • the patient's ability to pay or provide necessary insurance coverage for the tests performed; • the time it takes us or our customers to perform our tests and report the results, including as a result of supply chain challenges (including quality of reagents); • the seasonality inherent in our business, such as the impact of work-days per period, timing of industry conferences and timing of when patient deductibles are exceeded, which also impacts the reimbursement we receive from insurers; and • our ability to obtain prior authorization or meet other requirements instituted by payers, benefit managers, or regulators necessary to be paid for our tests.
Factors impacting our reported total test volume include, but are not limited to: • the number of samples that we receive that meet the medical indication for each test performed; • the quantity and quality of the sample received; • receipt of the necessary documentation, such as physician order and patient consent, required to perform, bill and collect for our tests; • the patient's ability to pay or provide necessary insurance coverage for the tests performed; • the time it takes us or our customers to perform our tests and report the results, including as a result of supply chain challenges (including quality of single-source reagents); • the seasonality inherent in our business, such as the impact of workdays per period, timing of industry conferences and timing of when patient deductibles are exceeded, which also impacts the reimbursement we receive from insurers; • fluctuations in demand for our product test kits, including as a result of higher average selling prices and overall spending constraints across our industry; and • our ability to obtain prior authorization or meet other requirements instituted by payers, benefit managers, or regulators necessary to be paid for our tests.
The net loss of $36.6 million includes non-cash charges of $26.7 million of stock-based compensation expense, $25.9 million of depreciation and amortization, including $21.4 million of intangible asset amortization, $3.3 million of impairment of intangible asset, 78 Table of Contents noncash lease expense of $3.3 million, and $0.5 million of foreign currency loss.
The net loss of $36.6 million includes non-cash charges of $26.7 million of stock-based compensation expense, $25.9 million of depreciation and amortization, of which $21.4 million was related to intangible asset amortization, $3.3 million of impairment of intangible asset, noncash lease expense of $3.3 million, and $0.5 million of foreign currency loss.
Going forward, we expect to incur significant expense as we invest in the development of our innovation engine, early-stage products including our MRD tests, required clinical studies and the development of current tests on multiple IVD platforms.
Going forward, we expect to incur 68 Table of Contents significant expense as we invest in the continued development of our innovation engine, early-stage products including our MRD tests, required clinical studies and the development of current IVD tests.
Biopharmaceutical and other revenue decreased by $14.4 million for the year ended December 31, 2023 driven primarily by the reduction of customer projects given overall spending constraints across the industry.
Biopharmaceutical and other revenue decreased by $5.8 million for the year ended December 31, 2024 compared to 2023 driven primarily by the reduction of customer projects given overall spending constraints across the industry.
As our Prosigna test kits are sold in various configurations with different number of tests, our product cost per test will vary based on the specific kit configuration purchased by customers.
As our Prosigna test kits and any additional IVDs we produce are sold in various configurations with different number of tests, our product cost per test will continue to vary based on the specific kit configuration purchased by customers.
As a result, our cost of testing revenue as a percentage of testing revenue may vary significantly from period to period because we may not recognize all revenue in the period in which the associated costs are incurred.
As a result, our cost of testing revenue as a percentage of testing revenue may vary significantly from period to period because we may not recognize all revenue in the period in which the associated costs are incurred. We expect cost of testing revenue in absolute dollars to increase as the number of tests we perform increases.
Cash provided by changes in operating assets and liabilities was $4.2 million, primarily comprised of an increase in accrued liabilities of $14.4 million and an increase in accounts payable of $5.2 million, partially offset by an increase in accounts receivable of $8.6 million, an increase in prepaid expense and other current assets of $3.3 million, an increase in supplies of $1.5 million and a decrease in operating lease liability of $1.8 million.
Cash used as a result of changes in operating assets and liabilities was $21.3 million, primarily comprising an increase in accounts receivable of $6.4 million, an increase in supplies and inventory of $5.9 million, a decrease in operating lease liability of $5.4 million, a decrease in accounts payable of $4.3 million, an increase in other assets of $1.6 million, and an increase in prepaid expense and other current assets of $1.3 million, partially offset by an increase in accrued liabilities of $3.5 million.
Comparison of research and development expense for the years ended December 31, 2022 and 2021 are included in Item 8 of Part II of the Annual Report on Form 10-K filed with the Securities and Exchange Commission dated March 1, 2023.
Comparison of selling and marketing expense for the years ended December 31, 2023 and 2022 are included in Item 8 of Part II of the Annual Report on Form 10-K for the year ended December 31, 2023, filed with the Securities and Exchange Commission on February 29, 2024.
If we are not able to generate cash flows from our revenue to finance our cash requirements, we will need to finance future cash needs primarily through public or private equity offerings, debt financings, borrowings or strategic collaborations or licensing arrangements. If we raise funds by issuing equity securities, dilution to stockholders could result.
If we are not able to generate cash flows from our revenue to finance our cash requirements, we 77 Table of Contents will need to finance future cash needs primarily through public or private equity offerings, debt financings, borrowings or strategic collaborations or licensing arrangements.
Factors that could cause or contribute to such differences include, but are not limited to, those identified below and those set forth under the section entitled "Risk Factors" in Item 1A, and other documents we file with the Securities and Exchange Commission. Historical results are not necessarily indicative of future results.
Factors that could cause or contribute to such differences include, but are not limited to, those identified below and those set forth herein under the heading "Forward-Looking Statements and Market Data" and in the section entitled "Risk Factors" in Part I, Item 1A of this report, and in the other documents we file with the Securities and Exchange Commission.
We believe our existing cash and cash equivalents of $216.5 million as of December 31, 2023, and cash flows generated by our revenue during the next 12 months will be sufficient to meet our anticipated cash requirements for at least the next 12 months.
We believe our existing cash and cash equivalents and short-term investments as of December 31, 2024, and cash flows generated by our revenue during the next 12 months will be sufficient to meet our anticipated cash requirements for at least the next 12 months from the filing date of this report.
Cost of Product Revenue Our cost of product revenue consists primarily of costs of purchasing instruments and diagnostic kits from third-party contract manufacturers, installation, warranty, service and packaging and delivery costs. In addition, cost of product revenue includes royalty costs for licensed technologies included in our products and labor expenses.
Cost of Product Revenue Our cost of product revenue consists primarily of costs of purchasing diagnostic kit components, labor, installation, service and packaging and delivery costs. In addition, cost of product revenue includes royalty costs for licensed technologies included in our products.
We also spend a significant amount on activities to secure clinical trial results in support of our testing and product development portfolio and on-market tests, as well as clinical validation and utilization studies. The timing of these research and development activities is difficult to predict, as is the timing of clinical trial enrollments and sample acquisitions.
Timing of Our Research and Development Expenses We incur a significant amount of expenses related to activities to secure clinical trial results in support of our testing and product development portfolio and on-market tests, as well as clinical validation and utilization studies.
Comparison of general and administrative expense for the years ended December 31, 2022 and 2021 are included in Item 8 of Part II of the Annual Report on Form 10-K filed with the Securities and Exchange Commission dated March 1, 2023.
Comparison of cost of revenue for the years ended December 31, 2023 and 2022 are included in Item 8 of Part II of the Annual Report on Form 10-K for the year ended December 31, 2023, filed with the Securities and Exchange Commission on February 29, 2024.
In the event we determine that it is more likely than not the carrying value of the reporting unit is higher than its fair value, quantitative testing is performed comparing 71 Table of Contents recorded values to estimated fair values.
In the event we determine that it is more likely than not the carrying value of the reporting unit is higher than its fair value, quantitative testing is performed comparing recorded values to estimated fair values. If impairment is present, the impairment loss is measured as the excess of the recorded goodwill over its implied fair value.
Timing of Our Research and Development Expenses We deploy state-of-the-art and costly genomic technologies in our biomarker discovery experiments, and our spending on these technologies may vary substantially from quarter to quarter.
We also deploy state-of-the-art and costly genomic technologies in our discovery experiments, and our spending on these technologies may vary substantially from quarter to quarter. The timing of these research and development activities is difficult to predict, as is the timing of clinical trial enrollments and sample acquisitions.
Testing Revenue We bill for testing services at the time of test completion as defined by the delivery of test results. We recognize revenue based on estimates of the amount that will ultimately be realized.
Testing Revenue We generally bill for testing services at the time of test completion, upon delivery of a patient report to the prescribing physician. We recognize revenue based on estimates of the amount that will ultimately be realized.
We identify each sale of our test to a customer as a single performance obligation. A stated contract price does not exist and the transaction price for each implied contract with our customer represents variable consideration.
A stated contract price does not exist and the transaction price for each implied contract with our customer represents variable consideration.
In addition, we may have to work with a partner on one or more of our products or development programs, which could lower the economic value of those programs to us.
In addition, we may have to work with a partner on one or more of our products or development programs, which could lower the economic value of those programs to us. Moreover, any instability in the global credit markets or the banking system may impact our liquidity both in the short term and long term.
We expect cost of testing revenue in absolute dollars to increase as the number of tests we 68 Table of Contents perform increases. However, we expect that the cost per test will decrease over time due to leveraging fixed costs, efficiencies we may gain as test volume increases and from automation, process efficiencies and other cost reductions.
However, we expect that the cost per test will decrease over time due to leveraging fixed costs, efficiencies we may gain as test volume increases and process enhancements such as automation, and other cost reductions.
Amortization expense is expected to be approximately $13.5 million per year through 2024 and decrease thereafter. Other Income (Loss), Net Other income (loss), net consists primarily of interest income from our cash held in interest bearing accounts, realized and unrealized gains and losses on foreign currency transactions, and French research tax credits.
Other Income (Loss), Net Other income (loss), net consists primarily of interest income from our cash held in interest bearing accounts, realized and unrealized gains and losses on foreign currency transactions, and French research tax credits.
If impairment is present, the impairment loss is measured as the excess of the recorded goodwill over its implied fair value. We perform our annual evaluation of goodwill during the fourth quarter of each fiscal year. There was no impairment recognized during the years ended December 31, 2023, 2022, or 2021.
We perform our annual evaluation of goodwill during the fourth quarter of each fiscal year. There was no impairment recognized during the years ended December 31, 2024, 2023, or 2022.
Macroeconomic Factors Recent interest rate increases and inflation in the United States and other markets globally, as well as turmoil in the global banking and finance system, have heightened the risk of an economic downturn or recession and volatility and have resulted in recent volatility in the capital or credit markets in the United States and globally.
Macroeconomic Factors Recent macroeconomic factors, such as interest rate fluctuations and inflation in the United States and other markets, as well as volatility in the global banking and finance systems, have resulted in volatility in the capital and credit markets globally.
Acquisition-Related Contingent Consideration As part of our agreement to acquire the exclusive global diagnostic license to the nCounter Analysis System, we may pay up to an additional $10.0 million in cash, contingent upon first achievement or occurrence, by or on behalf of Veracyte, of the commercial launch of the first, second and third diagnostic tests for use on the nCounter multiplex analysis system.
As of December 31, 2024, we expect to achieve a portion or all of the remaining milestones contained in the Merger Agreement within the next 12 months, requiring payments totaling approximately $16.6 million. nCounter Analysis System Acquisition Contingent Consideration As part of our agreement to acquire the exclusive global diagnostic license to the nCounter Analysis System, we may be required to pay up to an additional $10.0 million in cash, contingent upon first achievement or occurrence, by us or on our behalf, of the commercial launch of the first, second and third diagnostic tests for use on the nCounter multiplex analysis system.
Revenue growth also depends on our ability to secure reimbursement from government payers at a reimbursement rate that is consistent with past reimbursement rates. How We Recognize Revenue We recognize revenue in accordance with the provisions of ASC 606, Revenue from Contracts with Customers , or ASC 606.
Revenue growth also depends on our ability to secure reimbursement from government payers at a reimbursement rate that is consistent with past reimbursement rates.
Overview We are a global diagnostics company that empowers clinicians with the high-value insights they need to guide and assure patients at pivotal moments in the race to diagnose and treat cancer.
Historical results are not necessarily indicative of future results. Overview We are a global diagnostics company that empowers clinicians with the high-value insights they need to guide and assure patients at pivotal moments in the race to diagnose and treat cancer. Our high-performing tests enable clinicians to make more confident diagnostic, prognostic and treatment decisions.
Consideration associated with at-risk substantive performance milestones is recognized as revenue when it is probable that a significant reversal of the cumulative revenue recognized will not occur.
The consideration allocated to each distinct performance obligation is recognized as revenue when control is transferred which may be at a point in time or over time. Consideration associated with at-risk substantive performance milestones is recognized as revenue when it is probable that a significant reversal of the cumulative revenue recognized will not occur.
The estimated selling price of each deliverable reflects our best estimate of what the selling price would be if the deliverable was regularly sold by us on a stand-alone basis or using an adjusted market assessment approach if the selling price on a stand-alone basis is not available. 67 Table of Contents The consideration allocated to each distinct performance obligation is recognized as revenue when control is transferred which may be at a point in time or over time.
The estimated selling price of each deliverable reflects our best estimate of what the selling price would be if the deliverable was regularly sold by us on a stand-alone basis or using an adjusted market assessment approach if the selling price on a stand-alone basis is not available.
Comprehensive Loss Comprehensive loss is the change in stockholders’ equity from transactions and other events and circumstances other than those resulting from investments by stockholders and distributions to stockholders.
Foreign currency transaction gains and losses are recorded in other income (loss), net, on the consolidated statements of operations. Comprehensive Income (Loss) Comprehensive income (loss) is the change in stockholders’ equity from transactions and other events and circumstances other than those resulting from investments by stockholders and distributions to stockholders.
Biopharmaceutical and Other Revenue We enter into arrangements to license or provide access to our assets or services, including clinical services, research and development, contract manufacturing and development, as well as other services. Such arrangements may require us to deliver various rights, data, services, manufactured diagnostic test kits, access and/or testing services to partner biopharmaceutical and other companies.
Biopharmaceutical and Other Revenue We enter into arrangements to license or provide access to our assets or services to third parties, including clinical and testing services, research and development, contract manufacturing and development, as well as other services.
Revenue and expenses from our foreign subsidiaries are translated using the monthly average exchange rates in effect during the period in which the transactions occur. Foreign currency transaction gains and losses are recorded in other income (loss), net, on the consolidated statements of operations.
Foreign currency translation adjustments are recorded as a component of accumulated other comprehensive income (loss) within stockholders’ equity. Revenue and expenses from our foreign subsidiaries are translated using the monthly average exchange rates in effect during the period in which the transactions occur.
The extent of the macroeconomic factors on our future liquidity and operational performance will depend on certain developments, the impact on our customers' operations; the impact to our sales and renewal cycles; changes in central bank policies and interest rates; rates of inflation; and changes in foreign currency exchange rates.
The extent of the impact of macroeconomic factors on our future liquidity and operational performance will depend on future developments and their impact on our customers' operations and our sales and renewal cycles.
Testing Revenue We recognize revenue from the sale of our tests performed for customers, including patients and institutions, at the time test results are reported to physicians. Most tests requested by customers are sold without a written agreement; however, we determine that an implied contract exists with our customers for whom a physician will order the test.
Most tests requested by customers are sold without a written agreement; however, we determine that an implied contract exists with our customers for whom a physician will order the test. We identify each sale of our test to a customer as a single performance obligation.
This was primarily due to a $76.0 million increase in testing revenue driven by a 24% volume increase, partially offset by a $14.4 million decrease in our Biopharmaceutical and other revenue.
This was primarily due to a $92.4 million increase in testing revenue driven by a 23% volume increase and a 4% average selling price increase, partially offset by a $5.8 million decrease in our Biopharmaceutical and other revenue, as well as a $1.9 million decrease in our product revenue.
Cash Flows The following table summarizes our cash flows for the years ended December 31, 2023, 2022 and 2021 (in thousands of dollars): Years Ended December 31, 2023 2022 2021 Net cash provided by (used in) operating activities $ 44,222 $ 7,535 $ (31,621) Net cash provided by (used in) investing activities 15,112 (29,387) (739,206) Net cash provided by financing activities 2,837 3,494 596,320 Cash Flows from Operating Activities Cash provided by operating activities for the year ended December 31, 2023 was $44.2 million.
As of December 31, 2024, the achievement of one of the milestones is forecasted to occur within the next 12 months, requiring payments totaling $3.5 million. 78 Table of Contents Cash Flows The following table summarizes our cash flows for the years ended December 31, 2024, 2023 and 2022 (in thousands of dollars): Years Ended December 31, 2024 2023 2022 Net cash provided by operating activities $ 75,096 $ 44,222 $ 7,535 Net cash provided by (used in) investing activities (56,275) 15,112 (29,387) Net cash provided by financing activities 4,904 2,837 3,494 Cash Flows from Operating Activities Cash provided by operating activities for the year ended December 31, 2024 was $75.1 million.
Foreign Currency Translation The functional currency of our foreign subsidiary, Veracyte SAS, is the Euro. Assets and liabilities denominated in foreign currencies are translated to U.S. dollars using the exchange rates at the balance sheet date. Foreign currency translation adjustments are recorded as a component of accumulated other comprehensive income (loss) within stockholders’ equity.
Foreign Currency Translation The functional currency of our foreign subsidiaries, Veracyte SAS and C2i Genomics, Ltd., are the Euro and the Israeli Shekel, respectively. Assets and liabilities denominated in foreign currencies are translated to U.S. dollars using the exchange rates at the balance sheet date.
Prosigna sales outside of the United States are led by country managers that call on laboratories and breast cancer oncologists and have dedicated marketing support.
The business units have dedicated marketing support, as well as a marketing operations team that serves the commercial organization broadly. Prosigna sales outside of the U.S. are led by country managers and sales teams that call on laboratories and breast cancer oncologists with dedicated marketing support.
These estimates require significant judgment by management. Actual results could differ from those estimates and assumptions. Generally, cash we receive is collected within 12 months of the date the test is billed. We cannot provide any assurance as to when, if ever, or to what extent, any of these amounts will be collected.
These estimates require significant judgment by management. Actual results could differ from those estimates and assumptions. Upon ultimate collection, the amount received is compared to previous estimates and the amount accrued is adjusted accordingly. Generally, cash we receive is collected within 12 months of the date the test is billed.
Cost of biopharmaceutical and other revenue decreased by $3.1 million driven by reductions of variable expenses related to projects.
Cost of biopharmaceutical and other revenue includes labor costs, laboratory supplies and pass-through expenses incurred. Cost of biopharmaceutical and other revenue decreased by $2.9 million driven by reductions of staffing and variable expenses related to projects.
Comparison of Other income, net, for the years ended December 31, 2022 and 2021 are included in Item 8 of Part II of the Annual Report on Form 10-K filed with the Securities and Exchange Commission dated March 1, 2023. 76 Table of Contents Liquidity and Capital Resources From inception through December 31, 2023, we have been financed primarily through net proceeds from the sale of our equity securities.
Comparison of Other income, net, for the years ended December 31, 2023 and 2022 are included in Item 8 of Part II of the Annual Report on Form 10-K for the year ended December 31, 2023, filed with the Securities and Exchange Commission on February 29, 2024.
Cash used in operating activities for the year ended December 31, 2021 was $31.6 million.
Cash provided by operating activities for the year ended December 31, 2023 was $44.2 million.
Cash provided by financing activities for the year ended December 31, 2021 was $596.3 million, consisting of $593.8 million in net proceeds from the issuance of common stock in a public offering in February 2021, $11.5 million in proceeds from the exercise of options to purchase our common stock and purchase of stock under our ESPP partially offset by $9.0 million in tax payments during the period related to the vesting of restricted stock units granted to employees.
Cash used in investing activities for the year ended December 31, 2022 was $29.4 million for the purchase and maturity of short-term investments and acquisition of property and equipment. 79 Table of Contents Cash Flows from Financing Activities Cash provided by financing activities for the year ended December 31, 2024 was $4.9 million, consisting of $20.0 million in proceeds from the exercise of options to purchase our common stock and purchase of stock under our Employee Stock Purchase Plan, or ESPP, partially offset by $10.6 million in tax payments during the period related to the vesting of restricted stock units granted to employees and $4.5 million in payment of contingent consideration.
The net loss of $75.6 million includes non-cash charges of $22.5 million of stock-based compensation expense, $19.6 million of depreciation and amortization, including $16.0 million of intangible asset amortization, $6.3 million of deferred income taxes, noncash lease expense of $1.6 million, $1.2 million of foreign currency loss, and a $0.8 million expense for the revaluation of the contingent consideration related to the NanoString transaction.
The net income of $24.1 million includes non-cash charges of $36.2 million of stock-based compensation expense, $23.5 million of depreciation and amortization, of which $14.8 million was related to intangible asset amortization, $3.4 million tied to the impairment of long-lived assets, $2.2 million from the revaluation of contingent consideration, and noncash lease expense of $5.0 million.
Finally, should the judgments underlying our estimated reimbursement change, our accrued revenue and financial results could be negatively impacted in future periods.
Finally, should the judgments underlying our estimated reimbursement change, our accrued revenue and financial results could be negatively impacted in future periods. We bill list price regardless of contract rate, but only recognize revenue from amounts that we estimate are collectible and meet our revenue recognition criteria.
Other income, net Other income, net, increased $4.5 million for the year ended December 31, 2023 compared to 2022, primarily due to an increase of $5.4 million of interest and dividend income partially offset by a decrease of $1.9 million related to reserves established for the French research tax credit receivable and revisions to the current year estimate.
Other income, net Other income, net, increased $0.4 million for the year ended December 31, 2024 compared to 2023, primarily due to an increase of $3.8 million of interest and dividend income, partially offset by an increased loss of $2.8 million related to unrealized foreign currency gain(loss).
Our high-performing tests enable clinicians to make more confident diagnostic, prognostic and treatment decisions, helping patients avoid unnecessary procedures and interventions, and accelerating time to appropriate treatment, thereby improving outcomes for patients all over the world. We currently offer tests in thyroid cancer (Afirma); prostate cancer (Decipher Prostate); breast cancer (Prosigna); bladder cancer (Decipher Bladder); and interstitial lung diseases (Envisia).
Insights from these tests help patients avoid unnecessary procedures and interventions and accelerate time to appropriate treatment, thereby improving outcomes for patients in our global markets. In the United States, we currently offer tests in prostate cancer (Decipher Prostate), thyroid cancer (Afirma), breast cancer (Prosigna) and bladder cancer (Decipher Bladder).
Cost of Testing Revenue The components of our cost of testing revenue are sample collection kit costs, reagent expenses, compensation expense, license fees and royalties, depreciation, other expenses such as equipment and laboratory supplies, and allocations of facility and information technology expenses.
Third-party payers and other customers in excess of 10% of total revenue and their related revenue as a percentage of total revenue were as follows for the years presented: Year Ended December 31, 2024 2023 2022 Medicare 31 % 31 % 31 % UnitedHealthcare 13 % 11 % 11 % 44 % 42 % 42 % Cost of Testing Revenue The components of our cost of testing revenue are sample collection kit costs, reagent expenses, compensation expense, license fees and royalties, depreciation, other expenses such as equipment and laboratory supplies, and allocations of facility and information technology expenses.
Finally, the ongoing conflict in the Middle East may disrupt our Israel business operations and employees which we acquired through our acquisition of C2i.
In addition, regional conflicts like those between Russia and Ukraine and in Israel may adversely impact our business and operating results. Finally, the ongoing conflict in the Middle East and related political, military and security conditions in and around Israel may disrupt our Israel business operations and employees that we acquired through the C2i Acquisition.
Cash used in investing activities for the year ended December 31, 2022 was $29.4 million for the purchase and maturity of short-term investments and acquisition of property and equipment.
Cash Flows from Investing Activities Cash used in investing activities for the year ended December 31, 2024 was $56.3 million consisting of $50.0 million from the purchase of short-term investments and $11.3 million used in the acquisition of property and equipment, offset by $5.0 million net cash acquired from C2i excluding post-close transactions costs.
Comparison of cost of revenue for the years ended December 31, 2022 and 2021 are included in Item 8 of Part II of the Annual Report on Form 10-K filed with the Securities and Exchange Commission dated March 1, 2023. 74 Table of Contents Research and development Comparison of the years ended December 31, 2023 and 2022 was as follows (in thousands of dollars, except percentages): Year Ended December 31, 2023 Change % 2022 Research and development expense Compensation expense $ 29,180 $ 1,797 7 % $ 27,383 Direct research and development expense 12,918 7,243 128 % 5,675 Depreciation and amortization 939 415 79 % 524 Other expenses 9,341 5,195 125 % 4,146 Allocations 4,927 2,052 71 % 2,875 Total $ 57,305 $ 16,702 41 % $ 40,603 Research and development expense increased $16.7 million, or 41%, for the year ended December 31, 2023 compared to 2022.
Comparison of research and development expense for the years ended December 31, 2023 and 2022 are included in Item 8 of Part II of the Annual Report on Form 10-K for the year ended December 31, 2023, filed with the Securities and Exchange Commission on February 29, 2024. 75 Table of Contents Selling and marketing Comparison of the years ended December 31, 2024 and 2023 was as follows (in thousands of dollars, except percentages): Year Ended December 31, 2024 Change % 2023 Selling and marketing expense: Compensation expense $ 67,662 $ (7,224) (10) % $ 74,886 Direct marketing expense 6,283 861 16 % 5,422 Other expenses 13,488 (1,096) (8) % 14,584 Allocations 8,001 1,403 21 % 6,598 Total $ 95,434 $ (6,056) (6) % $ 101,490 Selling and marketing expense decreased $6.1 million, or 6%, for the year ended December 31, 2024 compared to 2023.
Selling and Marketing Selling and marketing expenses consist of compensation expenses, direct marketing expenses, professional fees, other expenses such as travel and communications costs, as well as allocation of facility and information technology expenses.
Selling and Marketing Selling and marketing expenses consist of compensation expenses, direct marketing expenses, professional fees, other expenses such as travel and communications costs, as well as allocation of facility and information technology expenses. Our sales team of approximately 110 representatives is organized by business unit in the U.S., with separate teams calling on thyroid cancer and urologic cancer physicians.
Our net proceeds from the offering were approximately $593.8 million, after deducting underwriting discounts and commissions and offering expenses of $38.7 million. Operating Leases We lease office and laboratory facilities in South San Francisco and San Diego, California; Austin, Texas; Marseille, France; and Richmond, Virginia, and lease certain equipment under various non-cancelable lease agreements.
Our material cash requirements include the following obligations: Operating Leases We lease office and laboratory facilities in South San Francisco and San Diego, California; Austin, Texas; Marseille, France; Richmond, Virginia; and Watertown, Massachusetts, and lease certain equipment under various non-cancelable lease agreements. The lease terms extend to March 2040 and contain extension of lease term and expansion options.
In the United States, we offer LDTs through our centralized CLIA certified laboratories in South San Francisco and San Diego, California, supported by our cytopathology expertise in Austin, Texas. Additionally, primarily outside of the United States, we provide tests to patients through distribution to laboratories and hospitals that can perform the tests locally.
In addition, our Percepta Nasal Swab test is being run in our CLIA labs in support of clinical studies. We serve global markets with two complementary models. In the United States, we offer LDTs through our centralized CLIA certified laboratories in South San Francisco and San Diego, California, supported by our cytopathology expertise in Austin, Texas.
General and administrative expenses related to occupancy costs and information technology costs are allocated monthly to general and administrative expense, selling and marketing expense, research and development expense, and cost of revenue based on the headcount and employee location.
General and administrative expenses related to occupancy costs and information technology costs are allocated to general and administrative expense, selling and marketing expense, research and development expense, and cost of revenue based on the headcount and employee location. 76 Table of Contents Comparison of general and administrative expense for the years ended December 31, 2023 and 2022 are included in Item 8 of Part II of the Annual Report on Form 10-K for the year ended December 31, 2023, filed with the Securities and Exchange Commission on February 29, 2024.
Cost of product revenue increased $0.8 million, or 11%, for the year ended December 31, 2023 compared to the same period in 2022, driven by increased product test volume. Cost of biopharmaceutical and other revenue includes labor costs incurred by our employees working on customer projects and laboratory supplies and pass-through expenses incurred on these projects.
Cost of product revenue increased $0.4 million, or 5%, for the year ended December 31, 2024 compared to the same period in 2023, driven by increased overhead and expenses related to the build out of our Marseille, France manufacturing site, partially offset by variable costs due to the lower volume of tests.

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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 changeITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Interest Rate Risk We are exposed to market risks in the ordinary course of our business. These risks primarily relate to interest rates. We had cash and cash equivalents of $216.5 million as of December 31, 2023 which consisted of bank deposits and money market funds.
Biggest changeITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Interest Rate Risk We are exposed to market risks in the ordinary course of our business. These risks primarily relate to interest rates.
As of December 31, 2023 a hypothetical 10% appreciation or depreciation of the U.S. dollar relative to the Euro would not have had a material impact on our consolidated financial statements.
As of December 31, 2024 a hypothetical 10% appreciation or depreciation of the U.S. dollar relative to the Euro would not have had a material impact on our consolidated financial statements.
Inflation Risk We are facing inflation headwinds in compensation, travel, supply and inventory costs, however we do not believe that inflation has had a material effect on our business, financial condition, or operating results to date. 80 Table of Contents
However, we do not believe that inflation has had a material effect on our business, financial condition, or operating results to date. 80 Table of Contents
Such Euro denominated deposits carry a degree of risk from changes in currency exchange rates as the gains or losses from changes in exchange rates are included in our net loss and comprehensive loss.
Foreign Currency Risk As of December 31, 2024, we held $3.6 million of bank deposits denominated in Euros. Such Euro denominated deposits carry a degree of risk from changes in currency exchange rates as the gains or losses from changes in exchange rates are included in our net income (loss) and comprehensive income (loss).
Such interest-bearing instruments carry a degree of risk; however, As of December 31, 2023, a hypothetical 10% change in interest rates would not have had a material impact on our consolidated financial statements. Foreign Currency Risk As of December 31, 2023, we held $4.1 million of bank deposits denominated in Euros.
Such interest-bearing instruments carry a degree of risk; however, as of December 31, 2024, a hypothetical 10% change in interest rates would not have had a material impact on our consolidated financial statements. This analysis is based on a sensitivity model that measures market value changes when changes in interest rates occur.
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We had cash and cash equivalents and short-term investments of $289.4 million as of December 31, 2024 which consisted of bank deposits, money market funds and United States treasury securities.
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Any realized gains or losses resulting from such interest rate changes and from the current unrealized gains or losses would only occur if we sold the investments prior to maturity. We do not enter into investments for trading purposes and have not used any derivative financial instruments to manage our interest rate risk exposure.
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At this time, we have not entered into, but in the future we may enter into, derivatives or other financial instruments in an attempt to hedge our foreign currency risk. Inflation Risk We are facing inflation headwinds in compensation, travel, supply and inventory costs.

Other VCYT 10-K year-over-year comparisons