IMDX US Equity☆

UNITED

STATES

SECURITIES

AND EXCHANGE COMMISSION

Washington,

D.C. 20549

FORM

10-K

☒

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For

the fiscal year ended December 31, 2021

OR

☐

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For

the transition period from ___________ to __________

Commission

file number 1-37648

Oncocyte

Corporation

(Exact

name of registrant as specified in its charter)

15

Cushing

Irvine,

California92618

(Address

of principal executive offices) (Zip Code)

Registrant’s

telephone number, including area code (949)409-7600

Securities

registered pursuant to Section 12(b) of the Act:

Title of each class Trading Symbol Name of each exchange on which registered

Common Stock, no par value OCX The Nasdaq Stock Market LLC

Securities

registered pursuant to Section 12(g) of the Act:

None

Indicate

by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐ No ☒

Indicate

by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐ No ☒

Indicate

by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange

Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2)

has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate

by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule

405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant

was required to submit such files). Yes ☒ No ☐

Indicate

by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting

company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,”

“smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer ☐ Accelerated filer ☐

Non-accelerated filer ☒ Smaller reporting company ☒

Emerging growth company ☐

If

an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying

with any new or revised financial accounting standards provided to Section 13(a) of the Exchange Act. ☐

Indicate

by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness

of internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public

accounting firm that prepared or issued its audit report. ☐

Indicate

by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act): Yes ☐ No ☒

The

approximate aggregate market value of shares of voting common stock held by non-affiliates computed by reference to the price at which

shares of common stock were last sold as of June 30, 2021 was approximately $297.6 million. Shares held by each executive officer and

director and by each person who beneficially owns more than 5% of the outstanding common stock have been excluded in that such persons

may under certain circumstances be deemed to be affiliates. This determination of affiliate status is not necessarily a conclusive determination

for other purposes.

As

of March 3, 2022, there were outstanding 92,246,604 shares of common stock, no par value.

DOCUMENTS

INCORPORATED BY REFERENCE

Portions

of the registrant’s Proxy Statement for its 2022 Annual Meeting of Shareholders are incorporated by reference in Part III

Oncocyte

Corporation

Table

of Contents

Page Number

Part I. Financial Information

Item 1. Business 5

Item 1A. Risk Factors 26

Item 1B. Unresolved Staff Comments 47

Item 2. Properties 47

Item 3. Legal Proceedings 47

Item 4. Mine Safety Disclosures 47

Part II. Other Information

Item 6. Selected Financial Data 48

Item 7A. Quantitative and Qualitative Disclosures about Market Risk 64

Item 8. Financial Statements and Supplementary Data 65

Item 9A. Controls and Procedures 117

Item 9B. Other Information 117

Item 9C. Disclosure Regarding Foreign Jurisdictions That Prevent Inspections 117

Part III.

Item 10. Directors, Executive Officers, and Corporate Governance 118

Item 11. Executive Compensation 118

Item 14. Principal Accounting Fees and Services 118

Part IV.

Item 15. Exhibits, Financial Statement Schedules 119

PART

I

Certain

statements contained herein are forward-looking statements, within the meaning of the Private Securities Litigation Reform Act of 1995,

including, but not limited to, statements pertaining to future financial and/or operating results, future growth in research, technology,

clinical development, and potential opportunities for Oncocyte, along with other statements about the future expectations, beliefs, goals,

plans, or prospects expressed by management constitute forward-looking statements. Any statements that are not historical fact (including,

but not limited to statements that contain words such as “anticipate,” “believe,” “can,” “continue,”

“could,” “estimate,” “expect,” “intend,” “may,” “plan,” “project,”

“seek,” “should,” “strategy,” “target,” “will,” “would”) should

also be considered to be forward-looking statements. Forward-looking statements involve risks and uncertainties, including, without limitation,

risks inherent in the development and/or commercialization of potential products, uncertainty in the results of clinical trials or regulatory

approvals, need and ability to obtain future capital, and maintenance of intellectual property rights. Actual results may differ materially

from the results anticipated in these forward-looking statements and as such should be evaluated together with the many uncertainties

that affect the businesses of Oncocyte, particularly those mentioned in this Report under “Risk Factors”. Except as required

by law, Oncocyte undertakes no obligation to update any forward-looking statements to reflect events or circumstances after the date

of such statements.

The

forward-looking statements include, among other things, statements about:

● the timing and potential achievement of future milestones;

● our plans to pursue research and development of diagnostic test candidates;

● our assumptions regarding obtaining reimbursement and reimbursement rates;

● our intellectual property position;

● the impact of government laws and regulations;

● our competitive position.

Unless

the context otherwise requires, all references to “Oncocyte,” “we,” “us,” “our,” “the

Company” or similar words refer to Oncocyte Corporation, together with our consolidated subsidiaries.

The

description or discussion, in this Form 10-K, of any contract or agreement is a summary only and is qualified in all respects by reference

to the full text of the applicable contract or agreement.

DetermaRxTM,

DetermaIOTM, DetermaTxTM, DetermaMxTM, DetermaCNITM, and DetermaDxTM are trademarks of Oncocyte Corporation,

and TheraSureTM is a trademark of Chronix Biomedical, Inc., regardless of whether the “TM” symbol accompanies the use

of or reference to the applicable trademark in this Report.

INDUSTRY

AND MARKET DATA

This

Annual Report (“Report”) on Form 10-K contains market data and industry forecasts that were obtained from industry publications,

third party market research and publicly available information. These publications generally state that the information contained therein

has been obtained from sources believed to be reliable. While we believe that the information from these publications is reliable, we

have not independently verified such information.

This

Report also contains estimates and other statistical data made by independent parties and by us relating to market size and growth and

other data about our industry. We obtained the industry and market data in this Report from our own research as well as from industry

and general publications, surveys and studies conducted by third parties, some of which may not be publicly available. Such data involves

a number of assumptions and limitations and contains projections and estimates of the future performance of the industries in which we

operate that are subject to a high degree of uncertainty. We caution you not to give undue weight to such projections, assumptions and

estimates.

Item

1. Business

Development

of Our Business

Oncocyte

is a molecular diagnostics company focused on developing and commercializing proprietary tests, initially offered as laboratory-developed

tests (“LDTs”), to serve unmet medical needs across the cancer care continuum. Our tests aim to provide actionable information

to physicians and patients at critical decision points to optimize treatment decisions, including the selection of immunotherapy, targeted

therapy and blood-based treatment monitoring to improve patient outcomes, and reduce overall cost of care.

We

have completed three strategic asset and business acquisitions during 2019, 2020 and early 2021 that transformed Oncocyte into a company

with a broad menu of laboratory-developed tests that physicians may use at different critical decision points in cancer diagnosis and

treatment to support decision-making. In the cancer space, physicians utilize DNA and RNA based testing, also known as molecular testing,

to inform treatment decisions for patients diagnosed with cancer. Increasingly, physicians are also performing blood-based molecular

testing multiple times during the course of a patient’s treatment, also known as monitoring, to detect response or lack of response

to therapy in order to make early and timely changes in patient management. We believe that our menu, which includes proprietary tests

for treatment selection (DetermaIOTM), and blood-based monitoring detecting cell-free derived tumor DNA (DetermaCNITM),

will enable the physician to better manage their patient’s disease from diagnosis through monitoring and deliver a significant

source of corporate differentiation in the LDT space. We believe that our effort to provide clinically actionable tests for certain key

decision points along the continuum of patient management (shown below) will mitigate the inherent risk of being a single product company

and should lead to greater revenue opportunities in rapidly emerging markets in cancer treatment.

As

part of the strategy to become relevant in the broader diagnostic continuum, we launched DetermaRxTM via our acquisition of

in Razor Genomics, Inc. (“Razor”) in September 2019. DetermaRxTM, is the first and only test to predict patient’s

risk of cancer recurrence following surgery and response to chemotherapy in early-stage lung cancer, and is our first test to be commercialized

and reimbursed by Medicare. DetermaRxTM serves an unmet clinical need by helping to guide treatment decisions given the 30-50%

mortality rate in patients in the absence of timely chemotherapy treatment. During February 2021 we acquired all outstanding shares of

Razor common stock which is now a wholly owned subsidiary of Oncocyte.

In

January 2020, we acquired Insight Genetics, Inc. (“Insight”) which significantly expanded our product pipeline by adding

DetermaIOTM, a proprietary gene expression assay that is designed to classify the tumor immune microenvironment and identify

patients most likely to respond to immune checkpoint inhibition (ICI). The clinical utility of this test is supported by data in hundreds

of patients across multiple cancers, including Lung, Breast, Bladder and Kidney cancers and using diverse ICI agents including Keytruda

(pembrolizumab), Tecentriq (atezolizumab), Opdivo (nivolumab). This class of drugs are now approved for 16 different cancers and more

than one million patients are estimated to be eligible annually in the United States alone. The worldwide market opportunity is

4.1 million patients. However, the response prediction based on treatment selection using currently available biomarkers like PD-L1 and

TMB to ICI treatment is not very accurate. DetermaIOTM addresses the unmet need for a test that can improve upon the performance

of these tests in better identifying responders and non-responders to immunotherapies. In clinical studies, DetermaIOTM has

showed 41% higher response (PFS) compared to standard of care biomarker (PD-L1). Compared to TMB, DetermaIOTM identified up

to 30% more patients and compared to PD-L1, DetermaIOTM identified up to 20% more patients who benefited from Immune Checkpoint

Inhibitors (ICI). This test has now been commercialized via an Early Access Program.

During

February 2021, we and our newly organized wholly owned subsidiary CNI Monitor Sub, Inc. entered into an Agreement and Plan of Merger

(the “Chronix Merger Agreement”) pursuant to which, in April 2021, we acquired Chronix Biomedical, Inc. (“Chronix”)

through a merger of Chronix with our subsidiary. By acquiring Chronix, we added Chronix’s TheraSureTM-CNI Monitor to our diagnostic

test pipeline. The CNI Monitor, which we plan to market as DetermaCNITM, is a patented, blood only test for treatment response

monitoring. Oncocyte’s DetermaCNITM is a test used to measure and monitor cancer treatment success by detecting

changes in circulating tumor DNA (ctDNA) levels, a minimally-invasive biomarker, during the course of treatment. The test is differentiated

from other currently used methods because it does not require an upfront tissue sample, which can be hard to obtain, and also provides

a genome-wide assessment as opposed to evaluating a subset of genes. Current tests that monitor Minimal Residual Disease measure the

amount of cfDNA in a patient’s blood post-surgery to determine if there is a chance for recurrence, where as, DetermaCNITM

measures Copy Number Instability to monitor whether the disease is progressing and help determine whether the treatment is having

the intended impact on a patient’s tumor. The test converts cell-free DNA (cfDNA) next-generation sequencing (NGS) results

into a proprietary genome-wide copy number instability (CNI) score which can be used to monitor and guide ongoing treatment decisions.

This test is differentiated from other monitoring tests in two ways. The first is that it does not require tumor tissue

upfront which can be hard or impossible to obtain. The second is that the test measures copy number variation across the whole genome

as opposed to existing tests that focus on mutations identified in a patient’s diagnostic biopsy specimen. This test is supported

by several publications including a publication for detecting progression on immunotherapy, and detecting recurrence in patients with

ovarian cancer following surgery. Our initial focus will be to offer the CNI Monitor for research use and pharma trials. Our ultimate

goal will be to establish the CNI Monitor for clinical use as a blood-based monitoring test.

In

addition to the CNI Monitor, Chronix has certain IP-protected organ transplant technology, which enables a precise quantification of

donor-derived cell-free DNA (dd-cfDNA) using digital PCR. dd-cfDNA monitoring after solid organ transplantation is a well published technology

that has been shown to aid in the early detection of transplant rejection. Chronix has published clinical validation in large cohorts

of kidney, liver and heart recipients. Chronix has laboratory operations in Germany that can support the continued development and commercial

launch of the Therasure TM CNI Monitor, Therasure TM Transplant Monitor and other tests, including our DetermaRxTM and

DetermaIOTM, in Germany and other EU member countries after the merger.

The

Cancer Care Continuum

The

cancer care continuum that is the focus of our business can be divided into three important components of information that physicians

require to manage their patients through the full term of cancer care:

1. Diagnosing cancer, including the type of cancer.

2. Determining the best course of treatment for the patient.

This

three-component continuum represents a large unmet total available market or TAM in the United States and the rest of the world as reflected

in graphic below. Oncocyte’s mission is to address the second and third components of the continuum after cancer has been diagnosed,

with the goal of ensuring that each patient has the best chance for disease free survival.

Since

the advent of genomic scale characterization of cancer, oncologists have strived to apply genomic targeted testing to improvement in

selection of treatment and management of disease progression. We are initially applying a comprehensive targeted approach to lung cancer

where management paradigms are most mature and believe a similar approach will have utility across solid tumors grounded in their common

features in responding to immune therapy. Our first indication for commercialization is lung cancer which remains the leading cause of

cancer death in the United States and the rest of the world, making it one of the largest molecular diagnostic market opportunities.

While

our sales efforts currently focus on physicians managing patients with lung cancer, the pipeline of tests we plan to offer in

the future will expand to all solid tumors and, strategically, our clinical studies and trials with pharma companies will not be limited

to lung cancer given the early success of our test in other solid tumors. Our proprietary diagnostic tests are focused on the interrogation

of RNA signatures, the coding component that converts DNA code into actual protein production within a cell, from tumor tissue or peripheral

blood samples and target key clinical questions that are critical to better management of cancer, from treatment through monitoring of

therapeutic efficacy and recurrence of certain cancers. As we expand the scope of our test offerings towards the goal of addressing more

key clinical decision points in lung and other cancers, we remain technology agnostic, and aim to continue to identify tests that allow

us to reduce to practice the findings from large scale genomic profiling leading to the best approach that addresses the needs of patients

and physicians in a manner consistent with the need for rapid turnaround time and judicious use of precious tumor tissue or blood samples

while delivering good health economic outcomes.

Our

primary growth engines are tests that are novel and proprietary. Through our strategic acquisitions, we have added significant bioinformatics

expertise in algorithm development and validation that we can use to analyze functional gene expression and other biological data in

order to develop tests that address significant clinical challenges that have not been successfully addressed by currently available

technologies. At the same time our tests are run on instruments with a high global installed base enabling decentralization of testing

to labs worldwide.

Business

Strategy

Why

Treatment Selection in Cancer

Approximately

1.8 million people were diagnosed with cancer in 2020 in the United States, and an estimated 17 million worldwide, according to the American

Cancer Society. Despite the advancements in therapeutics, cancer remains the second leading cause of death in the United States. Biomarkers

are playing an increasingly important role in helping pharmaceutical companies and oncologists identify and select patients for established

and new therapies to ensure the right patient gets the right treatment as early as possible post-diagnosis, in order to best improve

patient outcomes.

We

are building Oncocyte to be a “one stop lab” for treatment decisions for every patient diagnosed with a solid tumor, by delivering

to the treating oncologist proprietary biomarker testing that offers incremental information to inform patient treatment and monitor

response to therapy, in combination with the current standard of care testing they order today. Since DetermaRxTM and DetermaIOTM

would only be offered by Oncocyte, our goal is to become the preferred lab for physicians for both our proprietary tests and more

traditional tests otherwise offered by many different labs that we can perform in our CLIA laboratories. An example of this testing would

be for a patient diagnosed with lung cancer, for whom standard of care targeting information on EGFR, ALK, PD-L1 would be offered, plus

DetermaIOTM our proprietary test for informing immune therapy decisions, all using the same patient tumor or blood

sample. This would allow informed selection of targeted immune-therapy and potentially the need for additional cytotoxic chemotherapy.

For the course of treatment, we are developing blood-based monitoring tools to detect non-response or progression on therapy to inform

timely treatment changes.

This

“one-stop” approach offers several practical advantages. Today, the testing needs of physicians managing cancer patients

are met by several specialty reference labs, meaning the physician or hospital must split the sample and send portions to several different

labs to complete the various tests needed to accurately diagnose the cancer type and select a therapy. Not only does this process consume

a large amount of sparse patient biopsy sample risking depletion of the sample before completing all testing, but also the process can

take up to three weeks for the compilation of all the results to make it back to the treating physician to inform therapeutic decision

making. All too often in the existing paradigm, patients are committed to a therapeutic approach before all the information is returned

from the different clinical labs. Oncocyte’s consolidation of testing modalities will allow the judicious use of limited patient

biopsy samples and deliver results to the ordering physician within a more expeditious time frame for optimizing the treatment regimen.

Our survey of cancer physicians indicates a significant demand for the attributes of consuming a minimal portion of patient biopsy sample

and faster turnaround of testing results.

Our

Laboratory Tests — Strategically Addressing Unmet Clinical Questions Across the Cancer Care Continuum

We

are developing molecular LDTs that provide physicians information to enable the timely diagnosis and treatment of cancer with the ultimate

goal of transforming this deadly cancer to a curable or chronic disease. We believe that the proprietary tests in our product pipeline

will allow Oncocyte to be relevant in the early stage of decision making giving us unique access to the sample “tumor block”

from the beginning of the diagnostic process, thus allowing us to offer other follow up tests without physicians needing to send patient

samples to another laboratory. Although we may sometimes refer to our tests as “diagnostic tests,” our laboratory-developed

tests are intended to support and help inform physician decision-making, but are not themselves diagnostic or prescriptive of treatment

decisions.

DetermaRxTM

– Treatment selection in early-stage lung cancer

Oncocyte’s

first commercially available laboratory-developed test is DetermaRxTM, the only commercialized predictive molecular

test for early-stage adenocarcinoma of the lung. This gene expression-based test provides information that a physician can use to help

identify early-stage, surgically resected patients with Stage I and IIA non-squamous non-small cell lung cancer (NSCLC) who are at high-risk

of recurrence and may benefit from chemotherapy.

NSCLC

of the lung is the most common type of lung cancer accounting for 80% to 85% of incidence. Survival rates for patients diagnosed at an

early stage are significantly higher than those for patients whose lung cancer is diagnosed at an advanced stage such as Stage III or

Stage IV. Surgery is the standard of care for patients diagnosed with early-stage (Stage I and Stage IIA) lung cancer. Yet even after

complete surgical resection, between 30% to 50% of those early-stage patients have a recurrence of the disease. Trials of chemotherapy

treatment in early-stage disease have been inconclusive as to whether the early-stage treatment improves outcomes in un-stratified patients.

Current guidelines suggest risk stratification and use of adjuvant (post-surgery) chemotherapy in “high-risk” patients. However,

the recommendations for assessment of risk are subjective and lack clinical studies that validate their usefulness in informing the use

of chemotherapy.

DetermaRxTM

is a 14-gene molecular stratification test performed on surgically resected tissue and is indicated for patients with Stage I and Stage

IIA NSCLC to help determine who may benefit from adjuvant chemotherapy. Typically, thoracic surgeons or medical oncologists order the

test after surgical resection. These surgical samples are processed as formalin fixed and paraffin embedded (FFPE) tissue samples. We

receive blocks or scrolls of FFPE samples for testing in our CLIA-certified laboratory. A test report is generated classifying patient

risk of recurrence and returned to the ordering physician, generally within 10 business days. This turnaround time enables the treating

physician to have the report in time for discussion of a treatment plan with the patient, usually a month after surgery.

The

results from the prospective study published in Clinical Lung Cancer 2018 and presented at the North American Lung Conference (NA IASCLC)

in 2020 were compelling. Patients who were identified as “high risk” and treated with double platinum chemotherapy had a

3% recurrence rate compared to a 30% cancer recurrence rate in high-risk patients who declined chemotherapy.

We

believe that there is an annual U.S. market opportunity of approximately 40,000 patients or approximately $126 million for DetermaRxTM

based on our reimbursement levels approved by CMS in 2021. This market is expected to grow as high-risk screening recommendations

are adopted, resulting in more patients being screened through Low Dose CT (LDCT) scans and diagnosed at an early stage. The European

market presents a similar number of patients per year, while China represents the largest patient population with over 250,000 early-stage

lung cancer cases per year.

DetermaRxTM

has been validated in three independent cohorts with close to 1,400 patients and test data has been published in top-tier peer

reviewed publications including Lancet Oncology, JAMA, and the Journal of Thoracic Oncology. Importantly, the impact of the use of chemotherapy

in high-risk patients was demonstrated in a paper published in Clinical Lung Cancer in 2017. We have also initiated an international

prospective definitive clinical trial randomizing molecular high-risk patients to adjuvant chemotherapy or surgical intervention

alone in order to gather the highest level of evidence supporting the predictive information of DetermaRxTM. If successful,

this study will strongly support access to the entire global market, including countries whose regulatory entities require the most stringent

evidence for test reimbursement or marketing.

DetermaIOTM

– Immunotherapy treatment selection

For

patients diagnosed with cancer, immunotherapies, particularly immune checkpoint inhibitors (ICI’s) targeting PD-1 and PD-L1, drug

class that helps recruit the body’s immune system to attack the growing tumor. ICIs are approved in 16 different tumor types and

it is estimated that 4.1 million patients are eligible for these drugs in the US alone. Pharmaceutical companies are continuing to invest

heavily in this space, with hundreds of clinical trials ongoing, and a number of drugs approved by the FDA for all solid tumors, including

pembrolizumab (KeytrudaTM), nivolumab (OpdivoTM), and atezolizumab (TecentriqTM).

Through

the acquisition of Insight in January 2020, Oncocyte has expanded its portfolio to include a novel gene expression-based test called

DetermaIOTM, which is being developed to identify patients most likely to respond to immunotherapy drugs. Current predictive biomarkers,

including PD-L1 and Tumor Mutational Burden or TMB, have shown only limited ability to accurately predict which patients will respond

to an immunotherapy. For example, according to published literature, more than half of PD-L1 positive patients do not respond to immune-

checkpoint inhibitors, and 1 in 6 patients who will respond are missed (referred to as a “false negative”).

While

ICIs represent a significant advancement in treatment options for patients diagnosed with advanced solid cancers, the response rates

have been modest, based on treatment directed by the current standard of care biomarker PD-L1 immunohistochemistry. Depending on the

solid tumor type, only approximately 15% to 40% of PD-L1 positive tumors respond to ICIs, while a significant number of PDL-1 negative

patients do respond. Another issue with ICIs is that although ICI treatments can be highly effective in the right patients, ICI’s

also have significant side effects which include exacerbation of latent autoimmune disorders. There is a compelling medical and health

economic unmet need for a biomarker that can provide three improvements to the use of ICIs: (1) the identification of additional patients

who may respond to the treatment and missed by the existing biomarkers, (2) enable additional or alterative treatment options for the

60% to 85% of patients who may receive these expensive drugs without benefit but while still facing the risk of side effects associated

with ICIs, and (3) inform the use of ICI’s in combination with traditional cytotoxic chemotherapy to enhance response rates.

DetermaIOTM

represents an opportunity to enter a very large market to help identify patients who will respond to immune therapy, with more

than 750,000 U.S. patients eligible for ICI therapy annually and growing with expanding indications for this type of treatment. As depicted

in the image below, analyst predict the ICI spend in the US alone will exceed $125 billion by 2025 meaning the healthcare system will

deploy well over $60 billion on drug therapies that will offer no benefit to many of the patients who would receive ICI therapy.

DetermaIOTM

is a proprietary molecular test that has proven in multiple clinical studies, including a gold-standard randomized clinical trial

(RCT) to provide incremental utility beyond the current tests being used to identify patients who will have a response to ICIs, and represents

a solid opportunity to provide better information for patient management leading to better patient outcomes as well as saving the healthcare

systems in the US significant cost. The test has been successfully validated in four tumor types and across all four major ICIs (Keytruda,

Opdivo, Tecentriq and Imfinizi). In clinical studies DetermaIOTM Showed 41% higher response (PFS) compared to standard of

care biomarker (PD-L1). Compared to the other commonly used biomarker, Tumor Mutational Burden (TMB), DetermaIOTM identified

up to 30% more patients, and compared to PD-L1, DetermaIOTM identified up to 20% more patients who benefited from Immune Checkpoint

Inhibitors (ICI We completed the CLIA validation of DetermaIOTM in April 2020 and launched the test for research use. The test

was launched via an Early Access Program in the fourth quarter of 2021. There are approximately 3,000 PD-1/PD-L1 targeted therapy clinical

trials ongoing that are expected to recruit over 500,000 patients. This represents a potential $1 billion market opportunity for immune-therapy

clinical trial services to pharma companies developing ICIs which could be addressed by our Pharma Services operations

We

also believe, based on our projected reimbursable pricing model, that the clinical use of DetermaIOTM will address a potential

$3 billion TAM opportunity. The actual TAM for DetermaIOTM in medical practice will depend upon a variety of factors including our

ability to demonstrate the efficacy and clinical utility of the test, the extent of physician acceptance of the test, whether the test

will be approved for Medicare reimbursement, and, if reimbursement is approved, the actual approved reimbursement price.

How

DetermaIOTM May Inform the Choice of Therapies

Despite

the potential benefit of immunotherapy, the treatment is very costly, while only a fraction of patients respond, and the treatment is

associated with side effects including emergence of autoimmune disorders. There is a pressing need to more accurately identify responders

and non-responders to maximize optimize use of the therapies in responders while reducing its use in likely non-responders. DetermaIOTM

was developed for that purpose. The test measures the expression level of twenty-seven selected genes which are interpreted through the

use of a proprietary algorithm (patent pending) which computes a quantitative score that incorporates information from the immune inflammatory

infiltrates within and around the tumor combined with information from the wound response surrounding the tumor. An established threshold

is used to classify patients as likely responder or likely non-responder whose association with response to immune therapy has now been

validated in several independent clinical studies in multiple different cancer types.

The

diagram below reflects the importance of the biology of the tissue immune micro-environment and explains why we believe DetermaIOTM

is an important breakthrough complimenting the current therapy decision process for physicians considering immune checkpoint inhibitors.

The figure depicts that every individual forms tumor cells during their lifetime, but our immune system recognizes these abnormal cells

and attacks and removes them keeping them from growing into a clinically relevant cancer. When the immune system is over-active and reacts

to normal cells, it results in autoimmune disorders. The balance between killing these near normal tumor cells and normal cells is called

immune homeostasis and is largely governed by biologic systems called immune checkpoints. When tumors cells disrupt these checkpoints

and overwhelm the immune system, a cancer develops. One mechanism by which tumor and the immune system regulate the intensity of immune

surveillance is through modulating expression of PD-1 and PD-L1 that together regulate the activity immune effector cells. ICI therapeutics

have been developed that block these receptor sites and allow the immune system to once again “see” the tumor and attack

and restore the immune system’s ability to kill cancer cells. Because these drugs work on immune cells regardless of their targets,

the side effects of these drugs can be enhanced autoimmunity. Unfortunately, response rates to ICI’s are only approximately 15%

to 40% depending upon tumor type. However, responses are often durable although resistance does evolve during treatment in some patients.

The early success of these drugs has stimulated deeper investigation into the mechanism by which tumors evade the immune system which

has revealed a complex interplay between tumor evasion strategies, the activity of immune effector cells and the tissue repair mechanisms

that modulate anti-tumor activity. The balance between signal from the tumor, signals from the inflammatory cells invading the tumor,

and signals from the wound response are now understood to account for resistance to ICI’s and are the target of second-generation

therapeutic strategies to overcome resistance.

DetermaIOTM

was developed to measure the status of the immune system in immune and wound response tissue surrounding tumors. It incorporates

measurement of the complete microenvironment including activity of genes expressed in immune effector cells, genes expressed in activated

wound response cells, and in some cases, genes expressed by the tumor itself. It is the combination of measurement of these three signals

that we believe distinguishes DetermaIOTM from most other approaches. Current biomarkers being used to assess the likelihood

of immune response have shown only modest ability to predict responses to ICI’s. PDL-1 immunohistochemistry looks at the presence

of PDL-1 receptors and tumor mutation burden (TMB) at the number of mutations (neoantigens) in the tumor genome. We believe DetermaIOTM

is a direct measure the status of the immune microenvironment and as such identifies those tumors poised to respond to the addition

of ICI’s. We believe and now have data to support that the integration of the signal from the “Hot” component of the

tumor with the “Cold” immune repressive features, and in some cases the exclusion of immune cells altogether, the immune

desert, is superior to measuring any of these physiologies alone.

The

ability to accurately determine response to immunotherapies has important implications for both the patients themselves and the healthcare

economy as a whole. For the patients that are likely to respond to immunotherapies, these drugs can be a much more effective and less

toxic treatment option than standard chemotherapy. For the patients who are unlikely to respond, opting for a different course of treatment

would eliminate exposure to potentially serious side effects such as autoimmune diseases, and could save payers in the healthcare industry

use of extremely costly therapy regimens. The market continues to seek a test that is predictive, uses very little tissue, and can be

performed rapidly. We believe DetermaIOTM meets all the important criteria for a precision medicine test that can be routinely use.

The

origin of the gene expression classifier used in DetermaIOTM was work done to better classify triple negative breast cancer (TNBC)

into four tumor cell subtypes that could be modified by the immune classifier. It started with a greater than 2200 gene unsupervised

classifier that recognized both the physiological differences between tumor types within TNBC, and the activated immune and stromal signatures

characteristic of advanced cancers. The original development team from Insight had success reducing the large gene signature to a 101-gene

panel for classification of TNBC, and then recognized that the only twenty-seven RNAs from the tumor could provide the appropriate classification

of the immune environment that has now matured into DetermaIOTM, our CLIA certified PCR test for immune response classification.

Since this immune classifier relies upon gene expression signatures derived primarily from inflammatory cells and activated stromal cells,

there is no reason to assume that DetermaIOTM’s immune classification function would be limited to only these tissue

types. This prompted our work in lung cancer where the unmodified classifier performed very similarly to breast cancer. We are working

to validate the classification function and classifier threshold using publicly available gene expression datasets and testing the classifier

as a predictor of response to ICI therapy in other solid tumor types.

Blood

Based Monitoring Opportunity

The

next emerging opportunity in cancer diagnostics is in the area of therapy response monitoring Analysts have estimated a worldwide TAM

ranging from $5 billion to $10 billion for monitoring for therapeutic efficacy and disease recurrence. Monitoring is a “repeat”

testing opportunity and given the limitations of current standard of care, CT/MRI imaging, there is an emerging and potentially large

market for a blood-based test that can inform a treating physician that a tumor is becoming resistant to a patient’s current treatment

protocol before an imaging technique can detect whether there is shrinkage in a tumor. Our mission is to provide relevant, high value

information from our menu of tests to treating physicians throughout the “patient journey” for people with lung cancer and

other solid tumors. DetermaRxTM and DetermaIOTM were developed to help physicians choose the right therapy, and

our entry into blood-based monitoring is a natural addition to our test menu to help physicians understand whether their therapeutic

choice is working for their patient and to help them make appropriate changes to a patient’s protocol if the tumor is non-responsive.

Once the patient’s tumor resolves and they become “Disease Free”, monitoring for recurrence 3 to 4 times a year using

a simple blood test could become a way to help turn cancer into a chronic disorder versus a deadly disease, an important part of our

corporate mission.

Most

approaches to blood-based detection and quantitation of tumor load involve genome scale sequencing of a patient’s tumor to identify

“personal” mutations in the tumor and then develop a custom NGS panel assay to monitor for those mutations in each patient’s

blood. This process requires significant investment in time and money upfront and complicated infrastructure to manage these “tumor

informed” personalized custom panels. We believe there is an opportunity to develop tests that do not require this personalization

and therefore eliminate the burdensome tissue requirement and shorten the time to initiate therapeutic monitoring. With our acquisition

of Chronix, we added to our test pipeline their Therapy Monitoring solution, TheraSure CNI, which we expect to market as DetermaCNITM

in the United States. This new monitoring test does not require tumor sequencing prior to blood testing therefore is intended

to be an alternative to the tumor informed approach that requires a tissue biopsy. Chronix also brings to Oncocyte a world class assay

development team with deep experience and a portfolio of intellectual property in the field of digital-PCR based detection of DNA in

blood that will be the foundation for development of our next generation tumor monitoring products.

We are currently in the process

of transferring the technology to our CLIA lab in Nashville and expect to finalize the technology transfer in Q2 2022.

Through

our acquisition of Chronix we gained access to two patents in the field of the detection and quantification of donor derived cell-free

DNA (dd-cfDNA) in patients after organ transplantation. dd-cfDNA has been shown to be a very useful addition to the traditional surveillance

of graft health after transplantation and is currently reimbursed in the United States under a blanket LCD document. In September

2020, the United States District Court for the District of Delaware declared three patents in the field of dd-cfDNA (US 8,703,652, 9,845,497

and 10,329,607) invalid, which cleared a year’s long patent infringement case and potentially removes barriers that we may face

in the diagnostic field. In October 2021, our patent filing for the use of digital PCR to quantify dd-cfDNA was issued by

the USPTO. The issuance of our final patent gave us confidence that we have a patent protected test that has advantages over the current

tests in use today and since the assay is already clinically validated in the three major solid organ transplant types (kidney, liver

and heart) by peer reviewed international publications, we also believe that we will receive reimbursement approval after a successful

technology transfer to our laboratory in Nashville, which is planned to be finalized by the end of Q1 2022. Given the combination

of reimbursement likelihood and patent protection, management and the board made the decision to go direct in the US market as an LDT

test and seek a platform partner to ultimately provided a regulated, kitted product allowing greater decentralization and better patient

access.

Commercialization

of our Molecular Diagnostic Tests

Our first commercial diagnostic

test is DetermaRxTM which we began to commercialize in 2020. We are presently performing the DetermaRxTM tests at our

CLIA certified laboratory in Irvine. We also have a CLIA certified laboratory and Pharma Services lab in Nashville, Tennessee, which

is intended to serve as our Immune Diagnostic Center of Excellence, and, through the Chronix merger in April 2021, we acquired and operate

our Blood Based Monitoring Center of Excellence from Göttingen, Germany.

As

of December 31, 2021 we had a sales team of eleven that have been hired in the geographical regions with the highest volume of

thoracic surgeries who have extensive experience selling high value oncology molecular tests, and a medical education team which

includes a board-certified genetic counselor. The product was launched to seven Early Adopter Sites in February 2020 to

establish and test our CLIA lab protocols and workflows, gain customer feedback on the final patient report and validate our logistical

plan for sample transport. The decision was made to enter a full market launch in late February 2020 after successful validation

of our processes, and full engagement started in early March. To expand our customer base for DetermaRxTM, we have hired a limited

sales force in focused regions of the country to identify and target hospitals and physicians that perform a high volume of surgical

resections, which include large group practices (LGPs), as well as National Comprehensive Cancer Network (NCCN) and NCI cancer centers.

Our primary call point is thoracic surgeons because they manage most early-stage lung cancer patients, and refer patients to medical

oncologists for further treatment post-surgery as needed. Our sales representatives also call on medical oncologists who make the chemotherapy

treatment decision for patients identified high-risk by the test. These are complimentary call points as often decisions to adopt a test

are made by a multi-disciplinary team. Unfortunately, the world was facing the emergence of a pandemic of a Novel Coronavirus, called

SARS- CoV2, which ultimately led to the COVID-19 pandemic that severely impacted our sales forces’ ability to engage new

accounts and surgeons in person at the critical early phase of full market launch. In late March 2020, our medical education team pivoted

to a virtual training program and began to offer Medical Education events over virtual calls and video meetings which allowed our sales

representatives to set up virtual presentations to educate physicians about DetermaRxTM. We believe the program was successful

because through the end of 2021, the virtual programs had reached over 5,000 healthcare professionals.

Since

our broad commercial launch in March 2020, DetermaRxTM has now been ordered at more than 183 hospitals and by 213 physicians

in the United States. The strategy we are pursuing to market DetermaRxTM is likely to be replicated in large measure for

the market launch of our other cancer tests as we complete test development.

In

December 2020, we entered into an Exclusive Sublicense Agreement in the PRC Territory (the “Sublicense Agreement”) with Burning

Rock Biotech Limited (“Burning Rock”), Razor and Razor’s largest shareholder Encore Clinical Inc. pursuant to which

rights to DetermaRxTM in the Peoples Republic of China, including Hong Kong, Macau, and Taiwan are sublicensed to Burning Rock.

Under the Burning Rock Sublicense Agreement, we are entitled to receive certain payments (the “Initial Milestone Payments”)

totaling $4 million subject to the successful transfer and installation of the DetermaRxTM technology on Burning Rock’s platforms,

and additional payments if certain milestones are achieved and running royalties. As of December 31, 2021, we have received $3

million of the Initial Milestone Payments.

We

are investing in physician education to drive demand for DetermaRxTM. A central pillar of our physician education efforts is our

Key Opinion Leader-led speaker program that is focused on peer-to-peer engagement. We have 16 community and academic speakers

representing DetermaRxTM in commercial peer-to-peer programs. Our marketing and physician education efforts also include

participation in lung cancer focused national and regional medical meetings and symposia, and grant support of accredited continuing

medical education (CME) events. In 2021, we held six national-level KOL engagement activities and 85 speaker programs, including

a CME event at the San Antonio Breast Cancer Symposium chaired by KOL Hope Rugo from UCSF, and Adam Brufsky, among others.

Lastly, we held six Regional Perspectives In Early-stage Lung Cancer programs that bought together regional KOLs to discuss real-world

use cases of DetermaRxTM and its impact on patient care.

Market

Access – Reimbursement

Billing,

Coverage, and Reimbursement for our Diagnostic Tests

Currently

DetermaRxTM is Oncocyte’s only commercialized clinical test. We expect that revenues from our clinical laboratory for

this test will be derived from several different sources:

● Payments due to us under the Burning Rock Sublicense Agreement.

In

August 2020, Noridian Healthcare Solutions, LLC, CMS’ Medicare Administrative Contractor (“MAC”) for laboratories

located in California, delivered a final coverage and pricing decision. This decision and coverage by other MACs is

important because approximately 70% of patients for whom the test is indicated are eligible for Medicare coverage.

However, in the absence of reimbursement by a health insurance plan or Medicare, patients who would be candidates for the use of our

tests may decline to use our tests, and physicians may be reluctant to prescribe our tests, due to the cost of the test to the patients.

Because of this patient cost factor, revenues from any new cancer test that we market may experience slow growth until the test is approved

for reimbursement by larger payer plans which cover many patients.

Medicare

For

cancer diagnostics, Medicare or CMS reimbursement approval is critical. CMS relies on a network of Medicare Administrative Contractors

(“MACs”) to make Local Coverage Decisions approving a test for reimbursement. The Molecular Diagnostics Services (“MolDx”)

Program was developed by Palmetto GBA (the previous MAC for California) to identify and establish coverage and reimbursement for molecular

diagnostics tests. The program has developed guidelines for the level of evidence of efficacy required to be obtained through clinical

trials. Palmetto, which contracted with CMS to administer the MolDx, issues Local Coverage Determinations that affect coverage, coding,

and billing of many molecular tests and the current MAC for California, Noridian Healthcare Solutions, LLC, has adopted the coverage

policies from Palmetto. MACs also serve as the primary operational contact between the Medicare Fee-For-Service program, for paying Medicare

claims, and approximately 1.5 million health care providers enrolled in the program. Delays in obtaining MAC approval, or any changes

made related to any favorable Local Coverage Determinations, could have a material adverse impact on our business.

Private

Third-Party Payers

In

addition to seeking Medicare reimbursement approval, we will seek reimbursement approval from private payers such as health insurance

companies and HMOs. Private payers generally will determine whether to approve a diagnostic test for reimbursement based on the published

results of clinical validity and clinical utility studies, and may base their decision on whether to cover a test, and at what level

to reimburse, on the MAC’s local coverage determination. Obtaining private payer medical coverage generally takes twelve to twenty-four

months from the time that sufficient evidence is demonstrated. In the interim we will bill commercial payers and appeal any denials using

the published clinical evidence supporting the utility of the test.

Reimbursement

rates paid by private third-party payers can vary based on whether the provider is considered to be an “in-network” provider,

a participating provider, a covered provider, an “out-of-network” provider or a non-participating provider. Currently, we

are out-of-network with all commercial payers. These definitions can vary among payers. An in-network provider usually has a contract

with the payer or benefits provider. This contract governs, among other things, service-level agreements and reimbursement rates. In

certain instances, an insurance company may negotiate an in-network rate for our testing. An in-network provider may have rates that

are lower per test than those that are out-of-network, and that rate can vary widely. Rates vary based on the payer, the testing type

and often the specifics of the patient’s insurance plan. If a laboratory agrees to contract as an in-network provider, it generally

expects to receive quicker payment and access to additional covered patients. However, it is likely that we will initially be considered

an “out-of-network” or non-participating provider by payers who cover the vast majority of patients until we can negotiate

contracts with the payers.

We

cannot predict whether, or under what circumstances, payers will reimburse for patients for our tests or whether our efforts to appeal

denied claims will be successful. While we have a rigorous process for prior authorization and appeals to overturn denials and to

get contracted with commercial payers, full or partial denial of coverage by payers, or reimbursement at inadequate levels,

would have a material adverse impact on our business and on market acceptance of our tests.

Billing

and Collection

Where

there is a private or governmental third-party payer coverage policy in place, we will bill the payer and the patient in accordance with

the established policy. Our efforts in obtaining reimbursement based on individual claims, including pursuing appeals or reconsiderations

of claims denials, could take a substantial amount of time, and bills may not be paid for many months, if at all. Furthermore, if a third-party

payer denies coverage after final appeal, payment may not be received at all.

Where

there is no coverage policy in place, we will pursue reimbursement on a case-by-case basis. In some cases, if not prohibited by law or

regulation, we may bill physicians, hospitals and other laboratories directly for the services that they order. However, laws and regulations

in certain states prohibit laboratories from billing physicians or other purchasers for testing that they order. Some states may allow

laboratories to bill physicians directly but may prohibit the physician and, in some cases, other purchasers from charging more than

the purchase price for the services, or may allow only for the recovery of acquisition costs, or may require disclosure of certain information

on the invoice. An increase in the number of states that impose similar restrictions could adversely affect us by encouraging physicians

to perform laboratory services in-house or by causing physicians to refer services to other laboratories that are not subject to the

same restrictions. Adoption or expansion of laws and regulations that limit our ability to bill and obtain reimbursement for the full

costs of our services would have a material adverse impact on our business and on market acceptance of our tests.

Corporate

Information