10-K
Table of Contents
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
For the fiscal year ended December 31, 2025
OR
For the transition period from ___________ to __________
Commission file number 001-37648
Insight Molecular Diagnostics Inc.
(Exact name of registrant as specified in its charter)
2 International Plaza Dr., Suite 510
Nashville, Tennessee37217
(Address of principal executive offices) (Zip Code)
Registrant’s telephone number, including area code (615)255-8880
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Trading Symbol(s) Name of each exchange on which registered
Common Stock, no par value IMDX 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 pursuant 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 its 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. ☐
If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements. ☐
Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act): Yes ☐ No ☒
The aggregate market value of shares of voting and non-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, 2025 was approximately $32.4 million. Shares held by each executive officer and director and by each person who beneficially owns more than 10% 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.
The number of shares of issuer's common stock, no par value, outstanding as of March 19, 2026 was 32,167,978.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the registrant’s Proxy Statement for its 2026 Annual Meeting of Shareholders (the “Proxy Statement”), to be filed with the Securities and Exchange Commission (“SEC”) within 120 days after the end of the fiscal year ended December 31, 2025, are incorporated herein by reference in Part III of this Annual Report on Form 10-K.
Table of Contents
INSIGHT MOLECULAR DIAGNOSTICS INC.
TABLE OF CONTENTS
December 31, 2025
PageNumber
Cautionary Note Regarding Forward-Looking Statements 2
Industry and Market Data 3
Part I Item 1. Business 6
Item 1A. Risk Factors 18
Item 1B. Unresolved Staff Comments 39
Item 1C. Cybersecurity 39
Item 2. Properties 39
Item 3. Legal Proceedings 40
Item 4. Mine Safety Disclosures 40
Item 6. [Reserved] 41
Item 7A. Quantitative and Qualitative Disclosures about Market Risk 53
Item 8. Financial Statements and Supplementary Data 54
Item 9A. Controls and Procedures 54
Item 9B. Other Information 55
Item 9C. Disclosure Regarding Foreign Jurisdictions That Prevent Inspections 55
Part III Item 10. Directors, Executive Officers and Corporate Governance 56
Item 11. Executive Compensation 56
Item 14. Principal Accountant Fees and Services 56
Part IV Item 15. Exhibits and Financial Statement Schedules 57
Signatures 63
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CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
Certain statements contained in this Annual Report on Form 10-K for the year ended December 31, 2025 (this “Report”) 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 Insight Molecular Diagnostics Inc., or iMDx (f/k/a Oncocyte Corporation), along with other statements about the future expectations, beliefs, goals, plans, or prospects expressed by management. 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” or similar expressions or the negative of such terms) 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 iMDx, particularly those mentioned in this Report under “Risk Factors” in Part I, Item 1A. Except as required by law, iMDx 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:
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the timing and potential achievement of future milestones;
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the timing and our ability to obtain and maintain coverage and reimbursements from the Centers for Medicare and Medicaid Services and other third-party payers, including within the U.S. and outside of the U.S.;
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our plans to pursue research and development of diagnostic test candidates;
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the potential commercialization of diagnostic tests currently in development;
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the timing and success of future clinical research and the period during which the results of the clinical research will become available;
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the potential receipt of revenue from current sales of our diagnostic tests and/or diagnostic tests in development;
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our assumptions regarding obtaining reimbursement and reimbursement rates of our current diagnostic tests and/or diagnostic tests in development;
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our estimates regarding future orders of tests and our ability to perform a projected number of tests;
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our estimates and assumptions around the patient populations, market size and price points for reimbursement for our diagnostic tests;
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our estimates regarding future revenues, operating expenses, and future capital requirements;
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our intellectual property position;
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our ability to continue as a going concern;
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our dependency on our collaboration with Bio-Rad Laboratories, Inc. for the development and commercialization of products;
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the impact of government laws and regulations, including the impact of a prolonged government shutdown; and
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our competitive position.
Unless the context otherwise requires, all references to “iMDx,” “we,” “us,” “our,” “the Company” or similar words refer to Insight Molecular Diagnostics Inc., together with our consolidated subsidiaries.
The description or discussion, in this Report, 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.
iMDxTM, DetermaIOTM, DetermaCNITM, GraftAssureCoreTM, GraftAssureIQTM and GraftAssureDxTM are trademarks of iMDx, regardless of whether the “TM” symbol accompanies the use of or reference to the applicable trademark in this Report.
We have rebranded our VitaGraft assay (VitaGraft Kidney and VitaGraft Liver), which is our lab developed test, under the name GraftAssureCore. We also rebranded our kitted research use only assay, GraftAssure, as “GraftAssureIQ,” and our future kitted clinical assay as “GraftAssureDx.”
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INDUSTRY AND MARKET DATA
This Report 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.
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PART I
Summary of Risk Factors
We face many risks and uncertainties, as more fully described in this section under the heading Item 1A. “Risk Factors.” Some of these risks and uncertainties are summarized below. The summary below does not contain all of the information that may be important to you, and you should read this summary together with the more detailed discussion of these risks and uncertainties contained in “Risk Factors.”
Summary - Risks Related to Our Capital Resources
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We have incurred operating losses since inception, and we do not know if we will attain profitability.
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We have historically been dependent upon outside financing capital to fund our operations and until such time as our revenues are sufficient to finance our operating expenses, we may need to issue additional equity or debt securities to raise the capital needed to pay our operating expenses.
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We may incur significant cash payment and common stock issuance obligations under our agreements arising from our investments in IGI and Chronix.
Summary - Risks Related to Our Business Operations
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Our revenues in the near term will depend on our ability to commercialize a small number of diagnostic tests.
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The research and development work we are doing is costly, time consuming, and uncertain as to its results.
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Increased competition from, and technological advances by, our competitors could negatively affect our operating results.
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Sales of our diagnostic tests could be adversely impacted by the reluctance of physicians to adopt the use of our tests and by the availability of competing diagnostic tests.
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Defects, failures or quality issues associated with our products could lead to product recalls or safety alerts, adverse regulatory actions, product liability lawsuits and other litigation and negative publicity. If we are unable to obtain or maintain sufficient insurance, a product liability claim against us could adversely affect our business.
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We have limited capital, marketing, sales, and regulatory compliance resources for the commercialization of our diagnostic tests.
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We may face technology transfer challenges and expenses in adding new tests to our portfolio and in expanding our reach into new geographical areas on new instrument platforms.
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If our laboratory facilities become damaged or inoperable, or we are required to vacate any facility, our ability to provide services and pursue our research and development and commercialization efforts may be jeopardized.
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There is a limited number of manufacturers of molecular diagnostic testing equipment and related chemical reagents necessary for the provision of our diagnostic tests.
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If we fail to enter into and maintain successful strategic alliances for diagnostic tests that we elect to co-develop, co-market, or out-license, we may have to reduce or delay our diagnostic test development or increase our expenditures.
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We are, and may become, dependent on collaborations to develop and commercialize our diagnostic test candidates and to provide the manufacturing, regulatory compliance, sales, marketing and distribution capabilities required for the success of our business.
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Our business could be adversely affected if we lose the services of the key personnel upon whom we depend.
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Our business and operations could suffer in the event of system failures.
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Security breaches and other disruptions could compromise our information and expose us to liability, and could cause our business and reputation to suffer.
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Failure of our internal control over financial reporting could harm our business and financial results.
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We are subject to laws and regulations governing corruption, which may require us to develop, maintain, and implement costly compliance programs.
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We may become subject to litigation, which could harm our stock price, business, results of operations and financial condition.
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We may undertake strategic acquisitions in the future, and difficulties integrating such acquisitions could damage our ability to achieve or sustain profitability.
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Our business could be adversely impacted by inflation.
Summary - Risks Related to Our Industry
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Our operations as a clinical laboratory in the United States are subject to oversight by CMS under CLIA, as well as certain state agencies, and our operation of clinical laboratories in any foreign jurisdictions are subject to similar regulatory oversight. Any failure to maintain our CLIA or applicable state or international permits and licenses may affect our ability to commercialize our diagnostic tests.
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While we believe our LDTs are within the scope of the FDA’s enforcement discretion policy, and therefore not required to obtain clearance or approval before commercialization, the FDA may attempt to regulate LDTs in the future, which could lead to LDT product development delays and increased costs.
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We currently market certain IVDs for RUO that have not been cleared by the FDA in reliance on the regulatory exemption for IVDs intended for RUO, but if the FDA determines that our RUO tests do not meet the applicable requirements for exemption or have intended uses that are inconsistent with RUO tests, we may be required to suspend commercialization of such products until we can obtain the requisite FDA clearance and/or subject to FDA warning or untitled letters, seizure, injunction, fines, or other enforcement action.
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We will need to obtain FDA and other regulatory approvals for any IVDs that we may develop in order to market those IVD tests, and we may not be able to obtain those regulatory approvals in a timely manner or at all.
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Our ability to commercialize our products is dependent on availability and sufficiency of third-party payer coverage and our ability to ensure our tests remain reimbursed or attain reimbursement by Medicare, and the loss of, or a significant reduction in, reimbursement from Medicare or the CMS would have a material adverse impact on our business.
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Clinical trial failures can occur at any stage of the testing and we may experience numerous unforeseen events during, or as a result of, the clinical trial process that could delay or prevent commercialization of our current or future diagnostic tests.
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Changes in healthcare laws may have a material adverse effect on our financial condition, results of operations and cash flows.
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Because of certain Medicare billing policies, we may not receive complete reimbursement for tests provided to Medicare patients.
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Long payment cycles of Medicare, Medicaid and other third-party payers, or other payment delays, could hurt our cash flows and increase our need for working capital.
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Private health insurance company policies may deny coverage or limit reimbursement for the performance of our diagnostic tests.
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We will be required to comply with federal and state laws governing the privacy of health information, and any failure to comply with these laws could result in material criminal and civil penalties.
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We are subject to numerous federal and state statutes and regulations pertaining to our business and are subject to government oversight and scrutiny for our compliance with such laws. Laboratory and health care regulatory compliance efforts are expensive and time-consuming, and failure to maintain compliance with applicable laws could result in enforcement action which could be detrimental to our business.
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Tariff policies and potential countermeasures could increase our costs and disrupt our global supply chain, which could negatively impact the results of our operations.
Summary - Risks Related to Intellectual Property
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We rely on patents and trade secrets, and our financial success will depend, in part, on our ability to obtain commercially valuable patent claims, protect our intellectual property rights and operate without infringing upon the proprietary rights of others.
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We may not be able to obtain patent protection for our diagnostic tests if our pending U.S. patent applications are found to be directed to unpatentable subject matter.
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Changes to the patent laws in the United States and other jurisdictions could diminish the value of patents in general, thereby impairing our ability to protect our diagnostic tests.
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Other companies or organizations may challenge our patent rights or may assert patent rights that prevent us from developing and commercializing our diagnostic tests.
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If we are unable to protect the confidentiality of our trade secrets, the value of our technology could be materially adversely affected, and our business would be harmed.
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We may become involved in lawsuits to protect or enforce our patents or other intellectual property, which could be expensive, time-consuming and unsuccessful.
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We may not be able to enforce our intellectual property rights throughout the world.
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If we are sued for infringing intellectual property rights of third parties, such litigation could be costly and time consuming and could prevent or delay us from developing or commercializing our diagnostic tests.
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Failure to adequately protect, or disputes relating to, trademarks or patents, could harm our business.
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Patent terms may be inadequate to protect our competitive position on our diagnostic tests for an adequate amount of time.
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Obtaining and maintaining patent protection depends on compliance with various procedures and other requirements, and our patent protection could be reduced or eliminated in case of non-compliance with these requirements.
Summary - Risks Related to Our Common Stock
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The trading price of our common stock is highly volatile, and purchasers of our common stock could incur substantial losses.
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Because we do not pay dividends, our stock may not be a suitable investment for anyone who needs to earn dividend income.
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Securities analysts may not cover our common stock, and this may have a negative impact on the market price of our shares.
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You may experience dilution of your ownership interests if we issue additional shares of common stock or preferred stock.
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We are a “smaller reporting company” under the SEC’s disclosure rules and have elected to comply with the reduced disclosure requirements applicable to smaller reporting companies.
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Failure to establish and maintain adequate finance infrastructure and accounting systems and controls could impair our ability to comply with the financial reporting and internal controls requirements for publicly traded companies.
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Failure to meet the continued listing requirements of The Nasdaq Capital Market could result in a delisting of our common stock.
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Item 1. Business.
Overview
We are a pioneering diagnostics technology company. Our mission is to expand access to novel molecular diagnostic testing, most immediately in the transplanted organ rejection testing category.
We are developing molecular diagnostic test kits designed to empower our customers to run their own tests in-house to participate in the patient-care value chain, which is counter-positioned with the send-out-testing central laboratory model. Our decentralized approach also puts testing in the hands of researchers to enable more studies, which we believe can improve standards of care while also creating demand for more testing. We believe that combining innovative science with a simple, but disruptive, business model can create substantial value. Our initial targeted customer institutions are hospitals, transplant centers and labs. The decisions to deploy our tests come from doctors, including surgeons, nephrologists and oncologists, as well as researchers, pathologists, lab directors, medical directors, department heads, lab managers and chief medical officers.
We are a science-driven organization that champions scientific integrity and inquiry. We employ scientists who generate intellectual property in our strategic target markets. We have built and acquired an intellectual property portfolio that we believe will enable us to gain share in well-established clinical and research markets.
Our current intellectual property portfolio comprises three general areas: 1) organ transplant, 2) oncology therapy selection, and 3) oncology therapy monitoring. Within these categories, we have developed or are in the process of developing laboratory developed tests (“LDTs”) that can be run at our Franklin, Tennessee laboratory, kitted research use only (“RUO”) tests, and in vitro diagnostic (“IVD”) kitted clinical tests that can be run by local labs.
Our primary near-term strategic market is organ transplant. We seek to deliver the industry-leading molecular diagnostic test kit for clinical use that decentralizes access to organ health testing for transplant patients. We expect that enabling in-house testing will deliver new value in the roughly $2 billion addressable market for kitted transplant rejection testing. We also believe that decentralizing access to transplanted organ rejection testing will bring care closer to the patient and help hospitals to operate more sustainably, as well as create a rapidly growing, high-margin, recurring business model.
iMDx’s flagship transplant testing technology quantifies a molecular biomarker known as donor-derived cell-free DNA (“dd-cfDNA”). Our scientists in Germany and the U.S. have played a critical role over the past decade in developing the science that helped establish dd-cfDNA as a trusted biomarker of transplanted organ rejection. Under the GraftAssureTM brand, iMDx’s transplant diagnostics include the following:
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GraftAssureCore – The company’s LDT, currently reimbursed by Centers for Medicare & Medicaid Services (“CMS”) and performed at iMDx’s Clinical Laboratory Improvements Amendment (“CLIA”) certified laboratory in Franklin, Tennessee.
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GraftAssureIQ – An RUO kit intended and labeled for non-clinical applications.
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GraftAssureDx – The IVD kit currently in development for use in clinical decision-making.
Our GraftAssure family of assays are performed on a digital PCR instrument that is manufactured by Bio-Rad Laboratories, Inc. (“Bio-Rad”). Consequently, we have entered into a global strategic partnership agreement with Bio-Rad to collaborate in the development and the commercialization of kitted transplant products for clinical use (see Note 10, “Collaborative Arrangements,” to our consolidated financial statements included elsewhere in this Report for additional information). In May 2025, we sold our first GraftAssureIQ kits to a research laboratory customer (see Note 2, “Revenue Recognition – Kitted Products,” to our consolidated financial statements included elsewhere in this Report for additional information).
On February 20, 2026, we entered into a Specimen Collection Agreement with a national reference lab provider. Pursuant to the agreement, the lab provider will provide specimen collection-related services, which may include, among other things, the collection, handling, processing, and delivery of specimens upon which we will perform testing with our GraftAssureCore test. See Note 13, “Subsequent Events – Specimen Collection Agreement,” to our consolidated financial statements included elsewhere in this Report for additional information.
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Under strict regulatory rules, our kitted tests may not be used in a clinical treatment setting until they have attained marketing authorization from the Food and Drug Administration (“FDA”) for U.S. sales, and In Vitro Diagnostic Medical Devices Regulation approval, for European Union (“EU”) sales. As such, we are working with these regulatory bodies to attain such clearance and approval, as applicable, supporting future distribution and higher sales of our products for clinical use. In 2025, we started a clinical trial in conjunction with our IVD submission for GraftAssureDx. On March 25, 2026, we submitted a data package to the FDA seeking marketing authorization for GraftAssureDx, which is the kitted version of our transplanted organ rejection monitoring assay. We believe that our assays will perform across multiple tissue, or organ, types, and we are pursuing regulatory authorization in kidneys first.
We also have a services lab, certified under the CLIA and accredited by the College of American Pathologists (“CAP”), in Franklin, Tennessee, and research and development labs in Nashville, Tennessee and Göttingen, Germany. Our innovation centers in Nashville and Germany employ research scientists whom we believe are leaders in their fields.
Our secondary strategic market is in the field of oncology. The inherent uncertainties of developing and commercializing new diagnostic tests for medical use make it impossible to predict the amount of time and expense that will be required to complete the development and commercialization of our oncology tests. We continue to dedicate a minimum amount of resources to our oncology assays, DetermaIO and DetermaCNI, although currently we do not intend to commercialize either in the next 12 months.
We also perform other assay development and clinical testing services for life sciences and biotechnology companies through our Laboratory Services operations.
We believe that the experience of our team with diverse technologies through our Laboratory Services activities, strong scientific integrity regarding evidence generation and innovation mentality, alongside our flexibility in operations and regulatory strategy, will drive our success, differentiate us from our competition, and are foundational to our future. We are focusing on executing the technology priorities discussed herein, which have evolved to reflect our operations and strategic vision.
Billing, Coverage, and Reimbursement for our Laboratory Tests
We are currently in the process of developing and commercializing GraftAssureCore, GraftAssureIQ and GraftAssureDx.
Medicare
For diagnostic tests, CMS reimbursement is critically important. CMS relies on a network of Medicare Administrative Contractors (“MACs”) to develop and implement local coverage determinations (“LCDs”), which are jurisdiction-specific coverage policies that define the clinical and technical criteria under which Medicare will reimburse for particular tests or services.
The MolDX Program was developed by the Palmetto GBA MAC to establish coverage and reimbursement for molecular diagnostic tests. MolDX has developed guidelines outlining the level of clinical evidence required to support positive coverage determinations under specific LCD policies. Its coverage and reimbursement decisions are followed by MACs overseeing healthcare reimbursement in 28 of 50 states.
MACs also serve as the primary operational contacts between the Medicare Fee-For-Service program, for paying Medicare claims, and the approximately 1.5 million healthcare providers enrolled in the program. Delays in obtaining MAC approval, or any changes made related to any favorable LCDs, could have a material adverse impact on our business. Any such decision could also cause affected clinicians treating Medicare-covered patients to reduce or discontinue the use of our tests. Further, third‐party payers often follow Medicare coverage policy and payment limitations in setting their own coverage and payment rates and therefore their coverage and payment determinations may likewise be affected by any such decisions. See Part I, Item 1A. “Risk Factors – Risks Related to Our Industry – Our ability to commercialize our products is dependent on availability and sufficiency of third-party payer coverage and our ability to ensure our tests remain reimbursed or attain reimbursement by Medicare, and the loss of, or a significant reduction in, reimbursement from Medicare or the CMS would have a material adverse impact on our business.”
CMS issued a positive coverage decision for GraftAssureCore in August 2023, and since then, expanded coverage to include the test for organ rejection surveillance in certain high-risk transplant patients. In May 2025, CMS increased its reimbursement price for the assay to $2,753 per result.
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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 utility studies and may base their decision on whether to cover a test, and at what level to reimburse, on the MAC’s LCD. 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 laboratory is considered “in-network,” “participating,” “covered,” “out-of-network” or “non-participating.” Currently, we are out-of-network with all commercial payers. While these definitions can vary among payers, an in-network laboratory usually has a contract with the payer or benefits provider. Such contracts govern, 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 laboratory may have per-test reimbursement rates that are lower than those that are out-of-network, and such rates 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 faster payment and access to a larger population of covered patients. However, until we are able to negotiate contracts with commercial payers, we expect to be considered “out-of-network” or “non-participating” by payers who cover the vast majority of commercially insured patients.
We cannot predict whether, or under what circumstances, payers will reimburse for our tests or if our efforts to appeal denied claims will be successful. While we have a rigorous process for prior authorization, appeals to overturn denials, and contract negotiation 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 in accordance with the established policy. Where there is no coverage policy in place, we will pursue reimbursement on a case-by-case basis. Our efforts in obtaining reimbursement based on individual claims, including pursuing appeals or reconsideration 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.
Corporate Information
We were incorporated in September 2009 in the state of California. Our principal executive offices are located at 2 International Plaza Dr., Suite 510, Nashville, Tennessee, 37217. Our telephone number is (615) 255-8880. Our website is www.imdxinc.com. Information contained on, or that can be accessed through, our website, is not, and shall not be deemed to be, incorporated into or be considered a part of this Report.
Competition
Our industry is highly competitive and characterized by rapid technological change, including the rapid expansion of the use of artificial intelligence (“AI”) and machine learning. Key competitive factors in our industry include, among others, the ability to successfully complete clinical studies, the ability to obtain any required regulatory approval, average selling prices of competing tests, CLIA laboratory capacity and costs, intellectual property and patent rights, and sales and marketing capabilities. We are an early-stage company with limited resources and many of our competitors have substantially more resources than we do, including financial, technical and sales resources. In addition, many of our competitors have more experience than we have in the development and commercialization of diagnostic tests. We are also competing with academic institutions, governmental agencies and private organizations that conduct research in our field. Our competition will be determined in part by the potential indications for which our lead test candidates are developed and ultimately marketed. Additionally, the timing of market introduction of our diagnostic tests or of competitors’ tests may be an important competitive factor.
Our organ transplant rejection monitoring tests compete with other methods of assessing graft organ health, such as performing a manual biopsy, as well as liquid biopsy tests from competitors that measure dd-cfDNA, including CareDx, Inc., Natera, Inc., Transplant Genomics, Omixon Inc. and Devyser. Three of our competitors (CareDx, Inc., Natera, Inc. and Transplant Genomics) have an established customer base. We aim to compete by selling test kits that enable labs to run patient samples locally. We believe that by leveraging digital PCR technology, our tests have attractive sample economics even at low volumes, offer fast turnaround times and offer native absolute quantification, which we expect may be differentiators in the marketplace. Based on our research of customer needs, we believe that turnaround time matters to practitioners and that sample economics are important to local labs.
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Our oncology assets compete with multiple biomarkers already in clinical use or in development. We continue to dedicate a minimum amount of resources to our oncology assays, DetermaIO and DetermaCNI, however, we currently do not intend to begin commercializing our oncology assets in the next 12 months.
Facilities
We operate a CLIA-certified laboratory and maintain office space located in the Nashville, Tennessee area under multiple lease arrangements. Since June 2025, our Nashville location serves as our principal executive and administrative offices. We also operate a research and development laboratory and maintain office space in Göttingen, Germany under multiple lease arrangements. Our Germany lab serves as the center of excellence for our blood-based monitoring program.
Materials
There is a limited number of manufacturers of molecular testing equipment and related chemical reagents necessary for the provision of our tests. Additionally, the chemical reagents used with the testing equipment we choose are available only from the equipment manufacturer. This situation poses a risk to us. If we were to encounter inconsistent results using testing equipment and reagents from one manufacturer, we would need to switch to testing equipment from a different manufacturer. If issues were to arise with the testing equipment or with the reagents we are using, causing us to acquire different testing equipment again, we would need to conduct additional laboratory studies to determine whether our previous test results can be reproduced using the new equipment. If similar issues were to arise after commercialization of a test, we could experience a disruption in providing the tests to patients and we would lose revenue and potentially market share as a result. See Part I, Item 1A. “Risk Factors – Risks Related to Our Business Operations – There is a limited number of manufacturers of molecular diagnostic testing equipment and related chemical reagents necessary for the provision of our diagnostic tests.”
Patents and Trade Secrets
We rely primarily on patents and contractual obligations with employees and third parties to protect our proprietary rights. We have sought, and intend to continue to seek, appropriate patent protection for important and strategic components of our proprietary technologies by filing patent applications in the United States and certain foreign countries. There can be no assurance that any of our patents will guarantee protection or market exclusivity for our diagnostic tests and diagnostic test candidates. We may also use license agreements both to access technologies developed by other companies and universities and to convey certain intellectual property rights to others. Our financial success will be dependent, in part, on our ability to obtain commercially valuable patent claims, to protect our intellectual property rights, and to operate without infringing upon the proprietary rights of others.
Through our acquisition of Insight Genetics, Inc. (“IGI”) in January 2020 and Chronix Biomedical, Inc. (“Chronix”) in April 2021, we obtained exclusive rights to additional intellectual property, including trade secrets, registered trademarks, domain names, copyrights, issued and reissued patents and pending applications, and software material, and have, since our acquisition of IGI, filed our own patents applications to protect DetermaIO in Australia, Canada, China, Europe, Japan, Korea, and the U.S.
Through our acquisition of Chronix in April 2021, we obtained intellectual property rights to nine patent families in the field of detection of cell-free tumor DNA and quantification of dd-cfDNA, with numerous already issued patents in the U.S. and EU, expiring between April 2031 and September 2035. In addition, we obtained trade secrets, registered trademarks, domain names, copyrights and proprietary software material.
On July 15, 2025, we were awarded U.S. Patent No. 12,359,252, which covers our method for detecting and treating colorectal cancer using circulating nucleic acid biomarkers. This patent reinforces our intellectual property around noninvasive cancer detection and supports our strategy to expand into blood-based cancer diagnostics. Protecting a method to identify and treat colorectal cancer using cell-free DNA from a simple blood draw opens the door for us for future screening tools that could broaden our clinical offerings and create new oncology market opportunities.
In addition to relying on patents, we rely on trade secrets, know-how, continuing technological advancement, and licensing opportunities to maintain our competitive position. The molecular diagnostics that we are developing use gene expression classifiers or algorithms, which are mathematical models that weigh the biomarkers to produce a score. We treat the mathematical models as trade secrets. We have entered into intellectual property, invention, and non-disclosure agreements with our employees, and it is our practice to enter into confidentiality agreements with our consultants. There can be no assurance, however, that these measures will prevent the unauthorized disclosure or use of our trade secrets and know-how, or that others may not independently develop similar trade secrets and know-how or obtain access to our trade secrets, know-how, or proprietary technology.
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General Risks Related to Obtaining and Enforcing Patent Protection
Our patents and patent applications are directed to compositions of matter, formulations, methods of use and/or methods of manufacturing. The patent positions of pharmaceutical and biotechnology companies, including ours, are generally uncertain and involve complex legal and factual questions. Our business could be negatively impacted by any of the following:
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The claims of any patents that are issued may not provide meaningful protection, may not provide a basis for commercially viable diagnostic tests or may not provide us with any competitive advantages;
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Our patents may be challenged by competitors or other third parties and, if the third parties are successful in their challenge, the patents could be invalidated, permitting third parties to use the patented inventions to compete with us;
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Others may have patents that relate to our technology or business that may prevent us from marketing our diagnostic test candidates unless we are able to obtain a license to those patents;
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Patent applications to which we have rights may not result in issued patents and the information disclosed in those applications could be used by our competitors;
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Changes in government regulations or patent laws; and
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We may not be successful in developing additional proprietary technologies that are patentable.
In addition, others may independently develop similar or alternative technologies, duplicate any of our technologies and, if patents are licensed or issued to us, design around the patented technologies licensed to or developed by us. Moreover, we could incur substantial costs in litigation if we have to defend ourselves in patent lawsuits brought by third parties or if we initiate such lawsuits. For additional information regarding the risks related to obtaining and enforcing patent protection, see Part I, Item 1A. “Risk Factors – Risks Related to Intellectual Property.”
The United States Supreme Court’s decisions in Mayo Collaborative Services v. Prometheus Laboratories, Inc. and Association for Molecular Pathology v. Myriad Genetics may limit our ability to obtain patent protection on diagnostic methods that merely recite a correlation between a naturally occurring event and a diagnostic outcome associated with that event. For example, in Mayo Collaborative Services v. Prometheus Laboratories, Inc., the Supreme Court ruled that patent protection is not available for the simple use of a mathematical correlation of the presence of a well-known naturally occurring metabolite (a body chemical) as a means of determining proper drug dosage, which may be relevant to our oncology assays under development. This ruling may limit the patentability of diagnostic methods relying on natural biological processes.
In Association for Molecular Pathology v. Myriad Genetics, the Supreme Court ruled that claims to isolated DNA are not patent eligible because the claims cover a product of nature. This may enable companies to develop and offer copycat-type DNA isolates and diagnostic tests for patented genes without fear of infringement because such previously existing patents are likely now invalid. In contrast, the Court held that a modified version of DNA is patent-eligible because it is not naturally occurring. This ruling may limit the patentability of composition claims on certain gene sequences.
The United States Patent and Trademark Office (the “USPTO”) has said that diagnostic processes based on natural principles can still be patentable if they include meaningful additional steps that go beyond the natural principle itself. For example, adding a specific limitation other than what is well-understood, routine, conventional activity in the field, or adding unconventional steps that confine the claim to a particular useful application can prove to be meaningful. Because our tests use new methods as well as newly discovered materials, we believe patent protection is still possible, but there is no guarantee that pending patent applications will be granted or that our existing patents would hold up if challenged.
The USPTO has also issued multiple Subject Matter Eligibility Updates, including new examples in the life sciences, to provide further guidance in determining subject matter eligibility. In one example related to diagnosing and/or treating julitis in a patient, claims that recited specific and unconventional reagents and/or treatments were determined to be patent eligible. Similarly, in another example related to screening for gene alterations, claims were considered patent eligible because they recited specific and unconventional ways of gathering data. These examples provide favorable exemplary subject matter eligibility analysis of hypothetical claims covering diagnostic tests and claims drawn from case law. This update from the USPTO does not change our opinion on our ability to obtain meaningful patent protection.
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There is a risk that any patent applications that we file and any patents that we hold or later obtain could be challenged by third parties and declared invalid or infringing of third-party claims. A patent interference proceeding may be instituted with the USPTO when more than one person files a patent application covering the same technology, or if someone wishes to challenge the validity of an issued patent filed before March 16, 2013. At the completion of the interference proceeding, the USPTO will determine which competing applicant is entitled to the patent, or whether an issued patent is valid. Patent interference proceedings are complex, highly contested legal proceedings, and the USPTO’s decision is subject to appeal. This means that if an interference proceeding arises with respect to any of our patent applications, we may experience significant expenses and delay in obtaining a patent, and, if the outcome of the proceeding is unfavorable to us, the patent could be issued to a competitor rather than to us. In addition to interference proceedings, the USPTO can review issued patents at the request of a third party seeking to have the patent invalidated. Currently an inter partes review proceeding will allow third parties to challenge the validity, based on issues of novelty and non-obviousness, in view of patents and printed publications, of an issued patent where there is a reasonable likelihood of invalidity. This means that patents owned or licensed by us may be lost if the outcome of the review is unfavorable to us.
Post Grant Review under the America Invents Act makes available opposition-like proceedings in the United States. As with the USPTO interference proceedings, Post Grant Review proceedings will be very expensive to contest and can result in invalidation of a recently issued patent. To invoke a post-grant review, a challenge must be filed within nine months of a patent’s issuance or reissuance. Post-grant review can be sought based on any grounds that can be used to challenge the validity of a patent claim, with the exception of failure to disclose the best mode. Also, a derivation proceeding may be instituted by the USPTO based on a petition filed by an applicant alleging that an earlier patent or application was derived from the work of the applicant.
Oppositions to the issuance of patents may be filed under European patent law and the patent laws of certain other countries. As with the USPTO interference proceedings, these foreign proceedings can be very expensive to contest and can result in significant delays in obtaining a patent or can result in a denial of a patent application.
The enforcement of patent rights often requires litigation against third party infringers, and such litigation can be costly to pursue. Even if we succeed in having new patents issued or in defending any challenge to issued patents, there is no assurance that our patents will be comprehensive enough to provide us with meaningful patent protection against our competitors. Further, should we sue a third-party infringer for patent infringement, the infringer may assert counter claims and attempt to invalidate some or all of the asserted patent claims. There is always some risk that such a counter claim could result in invalidation of one or more claims of an asserted patent.
Government Regulation
CLIA—Clinical Laboratory Improvement Amendments of 1988 and State Regulation
We expect that GraftAssureCore, GraftAssureIQ, GraftAssureDx, DetermaIO and DetermaCNI will continue to be regulated under the CLIA as LDTs. In 1988, Congress enacted CLIA, which established quality standards for all laboratories that provide testing services to ensure the accuracy, reliability and timeliness of patient test results regardless of where the test is performed.
Under CLIA, a laboratory is defined as any facility that performs laboratory testing on specimens derived from humans for the purpose of providing information for the diagnosis, prevention or treatment of disease, or the impairment of, or assessment of health of human beings. Since our laboratory in Franklin, Tennessee meets this definition, CLIA requires that we hold a certificate applicable to the complexity of the categories of testing we perform and that we comply with certain standards. Laboratories performing high complexity testing are required to meet more stringent requirements than laboratories performing less complex tests. CLIA regulations require clinical laboratories like ours to comply with various operational, personnel, facilities administration, quality, and proficiency testing requirements intended to ensure that testing services are accurate, reliable and timely. CLIA certification is a prerequisite for reimbursement eligibility for services provided to state and federal health care program beneficiaries. CLIA is user-fee funded. Therefore, all costs of administering the program must be covered by the regulated facilities, including certification and survey costs. CMS enforces CLIA compliance. CMS granted the CAP Laboratory Accreditation Program deeming authority, which allows CAP inspection in lieu of a CMS inspection. Our laboratory in Franklin, Tennessee is CLIA-certified and CAP-accredited.
FDA Regulation of Diagnostic Tests
We believe we have designed, developed, and are validating our tests as LDTs and within the scope of the FDA’s enforcement discretion policy, and therefore not required to comply with FDA requirements for medical devices, such as registration, device listing, quality systems regulations, premarket clearance or premarket approval, and post-market controls.
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However, there have been initiatives to end FDA’s policy of enforcement discretion and subject IVDs to regulation as medical devices. Such initiatives have been unsuccessful, but we cannot predict whether there will be additional initiatives in the future and whether they will be successful in increasing the regulatory requirements for IVDs. For example, in May 2024, the FDA finalized a rule, amending its definition of “in vitro diagnostic products” in FDA regulations to state that IVDs are devices under the Federal Food, Drug, and Cosmetic Act “including when the manufacturer of these products is a laboratory” and announced that the general enforcement discretion approach should be phased out. Before the rule took effect, a federal district court vacated the rule, reinstating the FDA’s policy of enforcement discretion.
In addition, Congress has previously considered, and may consider in the future, legislative proposals that would amend the regulatory framework for LDTs, including, among other requirements, FDA premarket review of certain LDTs. We cannot predict the outcome of any future legislation relating to the FDA’s regulation of LDTs.
International Regulations
The EU has adopted the EU in vitro Diagnostics Regulation (the “EU IVDR”), which imposes stricter requirements for the marketing and sale of in vitro diagnostics products (as compared to the predecessor in vitro Diagnostics Directive), including in the areas of clinical evaluation requirements, quality systems, economic operators and post-market surveillance. Manufacturers of currently marketed in vitro diagnostics products had until May 2022 to meet the requirements of the EU IVDR, though the EU Council and Parliament signed an amendment that delays certain previously mandated deadlines to allow more time for Notified Body of EU countries to manage the entire portfolio of IVD products on the European market.
In addition, Russia has enacted more stringent medical product registration and labeling regulations, China has enacted stricter labeling requirements, and we expect other countries, such as Brazil and India, to impose more regulations that impact our product registrations. The United Kingdom’s (“UK”) withdrawal from the EU is resulting in additional regulatory requirements associated with goods manufactured and sold in the UK and additional complexities and delays with respect to goods, raw materials and personnel moving between the UK and the EU. In addition, new government administrations may interpret existing regulations or practices differently. Due to these evolving and diverse requirements, we face uncertain product approval timelines, additional time and effort to comply, as well as the potential for reduced sales and/or fines for noncompliance.
State Laboratory Licensing
In addition to federal certification requirements of laboratories under CLIA, we are required to maintain licensure under Tennessee law for our laboratory in Franklin, Tennessee. State laws generally include standards for the day-to-day operation of a clinical reference laboratory, including the training and skills required of personnel and quality control. In addition, those laws often mandate proficiency testing, which involves testing of specimens that have been specifically prepared for the laboratory.
Some states require licensure of out-of-state laboratories that accept specimens from those states (e.g., Pennsylvania, Rhode Island, Maryland and California). Our laboratories will need to pass various state inspections in order to get licensed to provide LDTs in each of state that requires licensure. CLIA provides that a state may adopt laboratory regulations that are more stringent than those under federal law, and two states, New York and Washington, have met that standard and therefore substitute for the federal CLIA program. In addition, some, but not all, states require a separate state license or permit, which must be obtained in addition to a CLIA certificate, and some states require a laboratory doing business in that state to be licensed even if the laboratory is located in another state.
Our laboratory in Franklin, Tennessee is licensed by the appropriate state agencies in the states in which we do business, if such licensure is required. We may become aware from time to time of certain states that require out-of-state laboratories to obtain licensure to accept specimens from patients within the state. If we identify any other state with such requirements, or if we are contacted by any other state advising us of such requirements, we intend to follow all instructions from the state regulators regarding compliance with such requirements. If our laboratory is out of compliance with state laws or regulations governing licensed laboratories, a state may impose penalties, which vary from state to state but may include suspension, limitation, revocation or annulment of the license, assessment of financial penalties or fines, or imprisonment. We believe that we are in material compliance with all applicable licensing laws and regulations applicable to us.
International Laboratory Licensing
We also maintain laboratory operations in Germany and could expand our laboratory operations to other foreign jurisdictions. Therefore, we are subject to laboratory quality regulations and accreditation standards in Germany, and will be subject to such regulations and standards in any other jurisdictions where we may operate or accept samples from. These requirements may vary by jurisdiction and differ from those in the United States, and may require us to implement additional compliance measures. We believe that we are in material compliance with all applicable licensing laws and regulations applicable to us.
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Regulation of Research Use Only Products
Some of our product development projects are intended to be sold for research purposes in the U.S., and labeled “For Research Use Only” or “for molecular biology applications.” RUO refers to devices that are in the laboratory phase of development, while investigational use only, or IUO, refers to devices that are in the product testing phase of development. These types of devices are exempt from most regulatory controls pursuant to long-standing FDA guidance on RUO/IUO products. These products are exempt from FDA’s premarket review and other requirements as long as they are not promoted for clinical diagnostic use, and iMDx does not provide technical assistance to clinical laboratories with respect to these tests. If FDA were to disagree with our designation of any of these products, we could be forced to obtain the appropriate regulatory clearances or approval prior to commercialization and could face enforcement action.
Regulation of In Vitro Diagnostics
Unless subject to an exemption, such as being labeled for research use only, IVDs are regulated by the FDA as medical devices and subject to the regulatory controls under CLIA and the Federal Food, Drug, and Cosmetic Act and the FDA’s implementing regulations, including both premarket and post market regulatory controls.
The particular premarket requirements that must be met to market a medical device in the United States will depend on the classification of the device under FDA regulations based on the degree of risk it presents. Class I devices (lowest risk) are generally subject to “general controls”; Class II devices (moderate risk) are subject to general and “special controls”; and Class III devices (highest risk) typically require Premarket Approval (“PMA”).
Most Class I and some Class II devices are exempt from premarket submission requirements, while most Class II devices and some Class I require a 510(k) premarket notification. while a more extensive PMA is required to market Class III devices. Class III devices typically require a PMA prior to commercialization, which is a more extensive and resource intensive process.
If we elect to develop additional IVDs or LDTs, commercialization of our future screenings diagnostics may require a 510(k) submission, authorization via the de novo pathway, or approval of a PMA, depending on classification and technology. In a 510(k) submission, the device sponsor must demonstrate that the new device is “substantially equivalent” to another device that is legally marketed in the United States, known as a predicate device. A device may be established as substantially equivalent if, in comparison to a predicate it (a) has the same intended use as the predicate and has the same technological characteristics, and safety and efficacy testing; or (b) has the same intended use as the predicate, has different technological characteristics, and the information submitted to the FDA does not raise new questions of safety and effectiveness. A claim of substantial equivalence does not mean the new and predicate devices must be identical. Substantial equivalence is established with respect to intended use, design, energy used or delivered, materials, chemical composition, manufacturing process, performance, safety, effectiveness, labeling, biocompatibility, standards, and other characteristics.
A device may not be marketed in the United States until the submitter receives a letter from the FDA declaring the device substantially equivalent. If the FDA determines that a device is not substantially equivalent, the applicant may resubmit another 510(k) with new data, or request a Class I or II designation through the FDA’s de novo process that allows a new device without a valid predicate to be classified into Class I or II if it meets certain criteria, or file a reclassification petition, or submit a PMA.
A new 510(k) submission is required for changes or modifications to an existing approved device, where the modifications could significantly affect the safety or effectiveness of the device or the device is to be marketed for a new or different indication for use.
A PMA for Class III devices is the most stringent type of premarket submission. Before the FDA approves a PMA, the sponsor must provide valid scientific evidence demonstrating reasonable assurance of safety and effectiveness for the device’s intended use.
Health Insurance Portability and Accountability Act and Other Data Privacy and Security Laws
We are subject to an extensive and evolving framework of federal, state, and foreign laws and regulations governing the collection, use, disclosure, transfer, retention, and security of personal and sensitive information including those described further below. In the ordinary course of our operations, we collect and process health and other confidential data, which subjects us to certain federal, state, and foreign data privacy and security laws. These laws and regulations vary by jurisdiction, are frequently updated, and are interpreted and enforced differently over time. We expect to remain subject to heightened regulatory scrutiny, and any actual or perceived noncompliance with any applicable data privacy, security, or breach-notification requirements could result in significant penalties, litigation exposure, and adverse effects on our business.
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Health Insurance Portability and Accountability Act
Under the Health Insurance Portability and Accountability Act of 1996 (“HIPAA”), as amended by the Health Information Technology for Economic and Clinical Health Act of 2009 (“HITECH”), HHS has issued regulations to protect the privacy and security of protected health information (“PHI”) and to address breach notification requirements. HIPAA also regulates standardization of data content, codes and formats used in health care transactions and standardization of identifiers for health plans and providers. Penalties for violations of HIPAA regulations include civil and criminal penalties.
The HIPAA privacy regulations cover the use and disclosure of PHI by covered entities as well as business associates, which are persons or entities that perform certain functions for or on behalf of a covered entity that involve the creation, receipt, maintenance, or transmittal of PHI. Business associates are defined to include a subcontractor to whom a business associate delegates a function, activity, or service, other than in the capacity of the business associate’s workforce. As a general rule, a covered entity or business associate may not use or disclose PHI except as permitted or required under the privacy regulations. The privacy regulations also set forth certain rights that an individual has with respect to his or her PHI, including rights to access or amend certain records, to request restrictions on the use or disclosure of PHI, or to request an accounting of disclosures of his or her PHI.
Covered entities and business associates must also comply with the HIPAA’s security regulations, which establish minimum requirements for safeguarding the confidentiality, integrity, and availability of PHI that is electronically transmitted or electronically stored. In addition, HITECH established, among other things, certain breach notification requirements with which covered entities and business associates must comply. In particular, a covered entity must notify any individual whose unsecured PHI is breached according to the specifications set forth in the breach notification rule. A covered entity must also notify the Secretary of the HHS and, under certain circumstances, the media of a breach of unsecured PHI.
CMS and the Office of Civil Rights issued a final rule in February 2014 to amend both the HIPAA and CLIA regulations. The final rule amended the HIPAA Privacy Rule to remove the CLIA laboratory exceptions, and as a result, HIPAA-covered laboratories are now required to provide individuals, upon request, with access to their completed test reports. Under the 2014 rule, CLIA laboratories and CLIA-exempt laboratories may provide copies of a patient’s completed test reports that, using the laboratory’s authentication process, can be identified as belonging to that patient. These changes to the CLIA regulations and the HIPAA Privacy Rule were intended to provide individuals with a greater ability to access their health information. CLIA laboratories must create and maintain policies, procedures, and other documentation necessary to inform patients of the right to access laboratory test reports and how to exercise that right.
HHS has pursued initiatives to update the HIPAA Privacy and Security Rules, resulting in a series of proposed and finalized changes over recent years. For example, in December 2020, HHS proposed further changes to the HIPAA Privacy Rule aiming to remove regulations that impede communication and data exchange between providers and health plans and expand individuals’ rights to access their own digital health information. The public comment period for the proposed updates to the HIPAA Privacy Rule has closed, but it remains unclear how HHS has addressed those comments or when a final rule will be issued. On April 22, 2024, HHS issued a final rulemaking containing modifications to the HIPAA Privacy Rule to address the use or disclosure of PHI in relation to the provision of reproductive health care, which were later vacated in June 2025, and certain changes to Notices of Privacy Practices related to Substance Use Disorder patient records. In January 2025, HHS proposed to modify the HIPAA Security Rule to address prescriptive requirements for administrative, physical, and technical safeguards in response to increased cybersecurity incidents in the health care industry. The public comment period for the proposed updates to the HIPAA Security Rule has closed, but it remains unclear how HHS has addressed those comments or when a final rule will be issued. While final rules have not yet been issued for certain proposed updates to HIPAA Privacy and Security rules, any proposed changes, if adopted, would potentially require significant operational adjustments and costs to comply.
In addition, under the 21st Century Cures Act, the Office of the National Coordinator for Health Information Technology prohibits “information blocking,” defined as practices likely to interfere with the access, exchange, or use of electronic health information (“EHI”). As a healthcare provider, our laboratory operations must comply with these regulations or face “appropriate disincentives” from HHS, which became effective in 2024 and 2025. Additionally, the HHS Office of Inspector General has the authority to impose civil monetary penalties of up to $1.0 million per violation on health information networks and developers of certified health IT. We continue to monitor our compliance with the evolving EHI exceptions and enforcement frameworks to mitigate potential regulatory and financial exposure.
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State Privacy and Security Laws
The HIPAA privacy, security, and breach notification regulations establish a uniform federal “floor” for healthcare privacy and security and do not supersede state laws that are more stringent or provide individuals with greater rights with respect to the privacy or security of, and access to, their records containing PHI or, insofar as such state laws apply, categories of personal information that are broader in scope than PHI as defined under HIPAA. Thus, there are a number of state laws regarding the privacy and security of health information and personal data that are applicable to clinical laboratories, and, the compliance requirements and associated penalties for violating such requirements under these state laws vary widely, with more states continuing to consider similar legislation.
For example, California has implemented comprehensive privacy laws and regulations, including the California Confidentiality of Medical Information Act (“CMIA”), which imposes restrictive requirements regulating the use and disclosure of health. In addition to fines and penalties imposed upon violators, some state laws, including the CMIA, provide private rights of action to individuals who believe their personal information has been misused.
California also enacted the California Consumer Privacy Act of 2018 (“CCPA”). The CCPA established a comprehensive privacy framework for covered businesses in the State of California, by creating an expanded definition of personal information, establishing new data privacy rights for consumers imposing special rules on the collection of consumer data from minors, and creating a new and potentially severe statutory damages framework for violations of the CCPA and for businesses that fail to implement reasonable security procedures and practices to prevent data breaches. While data subject to HIPAA and federal regulations governing the conduct of clinical trials is exempt from CCPA, certain of our business activities may be subject to CCPA. The CCPA provides for civil penalties for violations, as well as a private right of action for data breaches that result from a business’ failure to implement and maintain reasonable data security procedures.
State laws regarding the privacy and security of personal information are also evolving. For example, in November 2020, California passed the California Privacy Rights Act (“CPRA”) through a ballot initiative. The CPRA created a new California Privacy Protection Agency, an “independent watchdog” whose mission is both to “vigorously enforce” the CPRA and “ensure that businesses and consumers are well-informed about their rights and obligations.” Among other things, the CPRA created a new category of “sensitive personal information” and offers consumers the right to limit processing of such information, impose purpose limitation, data minimization, data retention, and security compliance obligations on regulated businesses, and add or modify the rights available to consumers, including by providing a right to correct the information a business holds about them. The CPRA’s amendments to the CCPA took effect on January 1, 2023, and generally apply to personal information collected by businesses on or after January 1, 2022. Similarly, Colorado, Connecticut, Utah and Virginia enacted comprehensive state privacy laws that took effect in 2023. Additional states including Delaware, Indiana, Iowa, Montana, New Jersey, Oregon, Tennessee and Texas have enacted similar comprehensive state privacy laws that have either taken effect or will take effect at various points between 2025 and 2026. In addition, every U.S. state has a data breach notification law that requires entities to report certain security breaches to affected consumers and, in some instances, state regulators and consumer reporting agencies. Failure to comply with applicable state laws that impose privacy, security, or breach notification requirements could result in significant civil or criminal penalties, administrative actions, or private causes of action by individuals, and adversely affect our business, results of operations and reputation.
Foreign Privacy and Security Laws
Similar health care and data privacy laws and regulations exist in Europe and other jurisdictions, including reporting requirements detailing interactions with and payments to healthcare providers and requirements regarding the collection, distribution, use, security, and storage of personally identifiable information and other data relating to individuals, including the General Data Protection Regulation (“GDPR”), which went into effect in May 2018. The GDPR applies to any company established in the European Economic Area (“EEA”), as well as to those outside the EEA, if they collect and use personal data in connection with the offering of goods or services to individuals in the EEA or the monitoring of their behavior. Companies that must comply with the GDPR face increased compliance obligations and risk, including more robust regulatory enforcement of data protection requirements and potential fines for noncompliance of up to €20.0 million or 4% of the annual global revenues of the noncompliant company, whichever is greater. The GDPR provides that EU and EEA member states may introduce further conditions, including limitations, to the processing of genetic, biometric or health data, which could limit our ability to collect, use and share personal data, or could cause our compliance costs to increase, ultimately having an adverse impact on our business. Among other requirements, the GDPR regulates transfers of personal data subject to the GDPR to third countries that have not been found to provide adequate protection to such personal data, including the United States, and the efficacy and longevity of current transfer mechanisms between the EU and the United States remains uncertain. For example, in 2016, the EU and United States agreed to a transfer framework for data transferred from the EU to the United States, called the Privacy Shield, but the Privacy Shield was invalidated in July 2020 by the Court of Justice of the EU.
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Further, from January 2021, companies have to comply with the GDPR and also the UK GDPR, which, together with the amended UK Data Protection Act 2018, retains the GDPR in UK national law. The UK GDPR mirrors the fines under the GDPR, e.g. fines up to the greater of €20.0 million (£17.5 million) or 4% of global turnover. In June 2021, the European Commission implemented an adequacy decision enabling data transfers from EU member states to the UK without additional security measures. However, this adequacy decision includes a so-called “sunset-clause” stipulating that it will expire after four years, and providing that the European Commission will monitor the UK’s legal situation and could intervene at any point if it determines the UK has deviated from the level of protections in place at the time of the decision. The revocation or expiration of the European Commission’s adequacy decision for the UK could require additional measures to ensure adequate protection and GDPR compliance and may lead to additional costs and increases our overall risk exposure.
Physician Referral Prohibitions
Under a federal law directed at “self-referral,” commonly known as the Stark Law, there are prohibitions, with certain exceptions, on Medicare and Medicaid payments for laboratory tests referred by physicians who personally, or through a family member, have a “financial relationship”—including an investment or ownership interest or a compensation arrangement—with the clinical laboratory performing the tests. Several Stark Law exceptions are relevant to arrangements involving clinical laboratories, including: (i) fair market value compensation for the provision of items or services; (ii) payments by physicians to a laboratory for clinical laboratory services; (iii) certain space and equipment rental arrangements that satisfy certain requirements, and (iv) personal services arrangements that satisfy certain requirements. The laboratory cannot submit claims to the Medicare Part B program for services furnished in violation of the Stark Law, and Medicaid reimbursements may be at risk as well. Penalties for violating the Stark Law include the return of funds received for all prohibited referrals, fines, civil monetary penalties and possible exclusion from the federal health care programs. Many states have comparable laws that are not limited to Medicare and Medicaid referrals.
In November 2020, CMS issued a final rule to modernize and clarify the regulations that interpret self-referral law. The final rule was issued in conjunction with the CMS Patients over Paperwork initiative and the HHS Regulatory Sprint to Coordinated Care and establishes exceptions to the physician self-referral law for certain value-based compensation arrangements between or among physicians, providers, and suppliers. It also established a new exception for certain arrangements under which a physician receives limited remuneration for items or services actually provided by the physician; established a new exception for donations of cybersecurity technology and related services; and amended the existing exception for electronic health records items and services.
Corporate Practice of Medicine
A number of states, including California, do not allow business corporations to employ physicians to provide professional services. This prohibition against the “corporate practice of medicine” is aimed at preventing corporations such as us from exercising control over the medical judgments or decisions of physicians. The state licensure statutes and regulations and agency and court decisions that enumerate the specific corporate practice rules vary considerably from state to state and are enforced by both the courts and regulatory authorities, each with broad discretion. If regulatory authorities or other parties in any jurisdiction successfully assert that we are engaged in the unauthorized corporate practice of medicine, we could be required to restructure our contractual and other arrangements. In addition, violation of these laws may result in sanctions imposed against us and/or the professional through licensure proceedings, and we could be subject to civil and criminal penalties that could result in exclusion from state and federal health care programs.
Federal and State Fraud and Abuse Laws
A variety of federal and state laws prohibit fraud and abuse. These laws are interpreted broadly and enforced aggressively by various state and federal agencies, including CMS, the Department of Justice, the Office of Inspector General for HHS, and various state agencies. In addition, the Medicare and Medicaid programs increasingly use a variety of contractors to review claims data and to identify improper payments as well as fraud and abuse. These contractors include Recovery Audit Contractors, Medicaid Integrity Contractors and Zone Program Integrity Contractors. In addition, CMS conducts Comprehensive Error Rate Testing audits, the purpose of which is to detect improper Medicare payments. Any overpayments identified must be repaid unless a favorable decision is obtained on appeal. In some cases, these overpayments can be used as the basis for an extrapolation, by which the error rate is applied to a larger universe of claims, and which can result in even higher repayments.
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The federal Anti-Kickback Statute prohibits, among other things, knowingly and willfully offering, paying, soliciting, receiving, or providing remuneration, directly or indirectly, to induce or in return for either the referral of an individual, or the furnishing, recommending, or arranging for the purchase, lease or order of any health care item or service reimbursable, in whole or in part, under a federal health care program. The definition of “remuneration” has been broadly interpreted to include anything of value, including gifts, discounts, credit arrangements, payments of cash, ownership interests and providing anything at less than its fair market value. Recognizing that the Anti-Kickback Statute is broad and may technically prohibit many innocuous or beneficial arrangements within the health care industry, the Office of Inspector General for HHS has issued a series of regulatory “safe harbors.” These safe harbor regulations set forth certain requirements that, if met, will assure immunity from prosecution under the federal Anti-Kickback Statute. Although full compliance with these provisions ensures against prosecution under the federal Anti-Kickback Statute, the failure of a transaction or arrangement to fit within a specific safe harbor does not necessarily mean that the transaction or arrangement is illegal or that prosecution under the federal Anti-Kickback Statute will be pursued.
Federal civil and criminal false claims laws, including the False Claims Act, prohibit any person from knowingly presenting, or causing to be presented, a false claim for payment to the federal government or knowingly making, or causing to be made, a false statement to get a false claim paid. Violations of the False Claims Act can result in very significant monetary penalties and treble damages. Over the past few years, several healthcare companies have been prosecuted under these laws for a variety of alleged promotional and marketing activities, including without limitation, allegedly providing free trips, free goods, sham consulting fees and grants and other monetary benefits to prescribers. In addition, the government may assert that a claim including items or services resulting from a violation of the federal Anti-Kickback Statute constitutes a false or fraudulent claim for purposes of the federal False Claims Act. Most states also have statutes or regulations similar to the federal anti-kickback law and false claims laws, which apply to items and services reimbursed under Medicaid and other state programs, or, in several states, apply regardless of the payer.
Federal civil monetary penalties laws impose civil fines for, 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 Eliminating Kickbacks in Recovery Act (“EKRA”) specifically targets laboratories, clinics, recovery centers, and other clinical treatment centers from accepting or paying kickbacks for referrals. EKRA is broader than the federal Anti-Kickback Statute because it applies to private health insurance plans in addition to the federal health care programs, and it prohibits arrangements that may otherwise be exempt from liability under the Anti-Kickback Statute’s safe harbors, including certain compensation arrangements with laboratory sales and marketing personnel.
HIPAA also created federal crimes, including health care fraud and false statements relating to health care matters. The health care fraud statute prohibits knowingly and willfully executing a scheme to defraud any health care benefit program, including private third-party payers. A violation of this statute is a felony and may result in fines, imprisonment or exclusion from federal health care programs, such as the Medicare and Medicaid programs. The false statements statute prohibits knowingly and willfully falsifying, concealing or covering up a material fact or making any materially false, fictitious or fraudulent statement in connection with the delivery of or payment for health care benefits, items or services. A violation of this statute is a felony and may result in fines, imprisonment or exclusion from federal health care programs.
Many states have laws similar to the federal laws described above, and state laws may be broader in scope and may apply regardless of payer.
Additionally, the U.S. Foreign Corrupt Practices Act (“FCPA”) prohibits U.S. corporations and their representatives from offering, promising, authorizing or making payments to any foreign government official, government staff member, political party or political candidate in an attempt to obtain or retain business abroad. The scope of the FCPA includes interactions with certain healthcare professionals in many countries. Other countries have enacted similar anti-corruption laws and/or regulations.
Other Regulatory Requirements
Our laboratory is subject to federal, state and local regulations relating to the handling and disposal of regulated medical waste, hazardous waste and biohazardous waste, including chemical, biological agents and compounds, blood samples and other human tissue. Typically, we use outside vendors who are contractually obligated to comply with applicable laws and regulations to dispose of such waste. These vendors will be licensed or otherwise qualified to handle and dispose of such waste.
The Occupational Safety and Health Administration has established extensive requirements relating to workplace safety for health care employers, including requirements to develop and implement programs to protect workers from exposure to blood-borne pathogens by preventing or minimizing any exposure through needle stick or similar penetrating injuries.
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Human Capital
As of December 31, 2025, we employed 58 persons, of which 55 were on a full-time basis and 3 were on a part-time basis.
Item 1A. Risk Factors.
Our business is subject to various risks, including those described below. The risks below are those that we believe are the material risks that we currently face but are not the only risks facing us and our business. You should consider the following risk factors, together with all of the other information included in this Report, which could materially adversely affect our proposed operations, our business prospects, our financial condition, and the value of an investment in our business. If any of the following risks, either alone or taken together, or other risks not presently known to us or that we currently believe to not be significant, develop into actual events, then our business, financial condition, results of operations or prospects could be materially adversely affected. If that happens, the market price of our common stock could decline, and stockholders may lose all or part of their investment.
Risks Related to Our Capital Resources
We have incurred operating losses since inception, and we do not know if we will attain profitability.
Since our inception in September 2009, we have incurred operating losses and negative cash flows and we expect to continue to incur losses and negative cash flows in the future. Our net losses for the years ended December 31, 2025 and 2024 were $50.2 million and $60.7 million, respectively, and we had an accumulated deficit of $400.8 million as of December 31, 2025. We finance our operations primarily through sales of our common stock. There is no assurance that we will be able to obtain any additional financing that we may need, or that any such financing that may become available will be on terms that are favorable to us and our shareholders. Ultimately, our ability to generate sufficient operating revenue to earn a profit depends upon our success in developing and marketing or licensing our diagnostic tests and technology.
We have historically been dependent upon outside financing capital to fund our operations and until such time as our revenues are sufficient to finance our operating expenses, we may need to issue additional equity or debt securities to raise the capital needed to pay our operating expenses.
We plan to continue to incur substantial research and development expenses, and we anticipate that we will be incurring significant sales and marketing costs as we develop and commercialize our diagnostic tests. Our research and development expenses may also increase if we work to develop tests for additional types of cancer or for other cancer-related diagnostic purposes. The period of time for which our current cash and marketable securities will be sufficient to finance our operations will depend on the extent to which we expend funds on commercializing our tests and conducting new research and development programs. We will need to raise additional capital to pay operating expenses unless we are able to generate sufficient revenues from diagnostic test sales, royalties, and license fees to meet our operating expenses.
Our ability to raise additional equity or debt capital will depend not only on the successful completion of development of our diagnostic tests and receiving reimbursement approval from Medicare and other third-party payers for those tests, but also will depend on access to capital and conditions in the capital markets. Obtaining Medicare reimbursement approval for our diagnostic tests could take two to three years, and investors may be reluctant to provide us with additional capital until we obtain Medicare reimbursement approval for those tests or until we can demonstrate that private payers such as health insurance companies or HMOs are willing to pay for the use of our diagnostic tests at prices sufficient for us to earn a reasonable return on our investments in our diagnostic test portfolio. There is no assurance that we will be able to raise capital at times and in amounts needed to finance the development and commercialization of our diagnostic tests and general operations. Even if capital is available, it may not be available on terms that we or our shareholders would consider favorable. If we are unable to obtain adequate financing or financing on terms satisfactory to us when and if we require it, our ability to continue to support our business growth and to respond to business challenges could be significantly impaired, and our business may be harmed.
Sales or other issuances of additional equity securities by us could result in the dilution of the interests of our stockholders, and any new equity securities we issue could have rights, preferences and privileges superior to those of holders of our common stock.
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We may incur significant cash payment and common stock issuance obligations under our agreements arising from our investments in IGI and Chronix.
Under the merger agreement pursuant to which we acquired IGI, as described in Note 3 to the consolidated financial statements included elsewhere in this Report, based on current estimates, we agreed to pay contingent consideration of up to $4.5 million in any combination of cash or shares of our common stock if certain milestones related to DetermaIO are achieved, which consist of (i) $3.0 million for an affirmative final LCD from CMS for a specified lung cancer test, and (ii) up to $1.5 million for achieving certain CMS reimbursement milestones.
As additional consideration for the acquisition of Chronix, we agreed to pay to holders of other classes and series of Chronix’s stock earnout consideration of (i) 10% of net collections for sales of specified tests and products, until the expiration of intellectual property related to such tests and products, and (ii) 5% of the gross proceeds received from any sale of all or substantially all of the rights, titles, and interests in and to Chronix’s patents for use in transplantation medicine to such third party.
To meet these various cash payment obligations, we may need to sell additional shares of our common stock or other securities, or we may have to divert cash on hand that we would otherwise use for other business and operational purposes which could cause us to delay or reduce activities in the development and commercialization of our cancer tests. Any shares of common stock or other securities we sell to raise cash to meet our cash payment obligations will dilute the interests of our common stockholders.
Risks Related to Our Business Operations
Our revenues in the near term will depend on our ability to commercialize a small number of diagnostic tests.
Our near-term commercial efforts will focus on maximizing the opportunities for GraftAssureCore, GraftAssureIQ, GraftAssureDx, DetermaIO and DetermaCNI. Our reliance on a small group of diagnostic tests as sources of revenue could limit our future revenue, make it more difficult for us to finance our operations, and impair our prospects for profitability and growth. DetermaIO and GraftAssureCore are currently available only in early access for non-clinical use. We plan to continue development of all five of such products for clinical and research use. However, there is no assurance that our development plans for GraftAssureCore, GraftAssureIQ, GraftAssureDx, DetermaIO or DetermaCNI will be successful or that we will generate sufficient revenues from commercialization of our diagnostic tests to finance our operations and earn a profit.
The research and development work we are doing is costly, time consuming, and uncertain as to its results.
We incurred research and development expenses amounting to approximately $15.9 million and $9.8 million during the years ended December 31, 2025 and 2024, respectively. The current focus of our research and development efforts is the development of GraftAssureCore,GraftAssureIQ and GraftAssureDx, and in 2025, we started a clinical trial in conjunction with our IVD submission for GraftAssureDx. If we are successful in developing a new technology or diagnostic tests for additional types of cancer, refinement of the new technology or diagnostic tests and definition of the practical applications and limitations of the technology or diagnostic tests may take years and require the expenditure of large sums of money. There is no assurance that we will be successful in completing the development of our current diagnostic tests or in developing additional diagnostic tests regardless of the amount of our expenditures.
Increased competition from, and technological advances by, our competitors could negatively affect our operating results.
We face intense competition, and we expect that future competition will become even more intense as new products, services and technologies become available, the use of AI and machine learning expands, and new competitors enter our industry. Our competitors in the diagnostics technology industry in the United States and abroad include companies that develop, manufacture, and sell diagnostic tests; commercial reference laboratories; certain large and well-funded pharmaceutical companies; and corporate hospital chains that operate reference laboratories that serve both their hospitals and unaffiliated hospitals. Consolidation among our competitors and our customers may intensify the competition we face. While we believe that our offerings are competitively differentiated due to our innovative products and services that offer an integrated, comprehensive diagnostic solution, there can be no assurance that increased consolidation among our competitors or customers would not have a negative impact on our ability to compete successfully.
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Competition could negatively affect our sales and profitability in a number of ways. New competitors may emerge through the development of innovative new technology (such as the use of AI and machine learning), the acquisition of rights to use existing technologies or the use of existing technologies when patents protecting such existing technologies expire. New or existing competitors may introduce new, innovative, and competitive products and services more quickly, successfully and effectively, and these products and services could be superior, or be perceived by our customers to be superior, to our products and services or lead to the obsolescence of one or more of our products or services. Business combinations and mergers among our competitors may result in competitors that are better positioned to create, market, and sell more compelling product and service offerings. While an important aspect of our strategy is to continue, on a cost-effective and timely basis, to enhance our existing products and services and to develop and introduce new and innovative products and services, there can be no assurance that we will be able to successfully develop or introduce such products and services or that those products or services will be superior to our competitors’ products or services or otherwise achieve customer acceptance. In addition, our ability to attract and retain customers depends on the effectiveness of our customer marketing and incentive programs, and multiple competitors could bundle product and service offerings through co-marketing or other arrangements, which could enhance their ability to compete with our broad product and service offerings. Certain of our competitors and potential competitors, including large diagnostic and pharmaceutical companies, also have substantially greater financial and managerial resources than us, as well as greater experience in manufacturing, marketing, research and development, and obtaining regulatory approvals than we do.
Sales of our diagnostic tests could be adversely impacted by the reluctance of physicians to adopt the use of our tests and by the availability of competing diagnostic tests.
Physicians and hospitals may be reluctant to try a new diagnostic test due to the high degree of risk associated with the application of new technologies and diagnostic tests in the field of human medicine, especially if the new tests differ from the current standard of care. Competing tests for organ transplant rejection monitoring and the initial diagnosis, reoccurrence diagnosis and optimal treatment of cancer are being manufactured and marketed by established companies and by other smaller biotechnology companies. In order to compete with other diagnostic tests, particularly any that sell at lower prices, our tests will have to provide medically significant advantages or be more cost effective. Even if we are able to overcome physician reluctance and compete with products that are currently on the market, our competitors may succeed in developing new safer, more accurate or more cost-effective diagnostic tests that could render our diagnostic tests and technologies obsolete or noncompetitive.
Defects, failures or quality issues associated with our products could lead to product recalls or safety alerts, adverse regulatory actions, product liability lawsuits and other litigation and negative publicity. If we are unable to obtain or maintain sufficient insurance, a product liability claim against us could adversely affect our business.
Our business exposes us to potential product liability risks that are inherent in the development, testing, manufacturing and marketing of diagnostic test kits and assays. Product liability claims could delay or prevent completion of our clinical development programs. In addition, if any of our collaboration partners face product liability claims, our programs could also be affected, and our business could be harmed. If we succeed in marketing products, such claims could result in an FDA investigation of the safety and effectiveness of our products, our manufacturing processes and facilities or our marketing programs, and potentially a recall of our products or more serious enforcement action, limitations on the approved indications for which they may be used, or suspension or withdrawal of approvals. Regardless of the merits or eventual outcome, liability claims may also result in decreased demand for our products, injury to our reputation, costs to defend the related litigation, a diversion of management’s time and our resources, substantial monetary awards to trial participants or patients and a decline in our share price.
We may not be able to maintain such insurance on acceptable terms or be able to secure increased coverage as commercialization of our products progresses, nor can we be sure that existing or future claims against us will be covered by our product liability insurance. Any insurance we obtain may not provide sufficient coverage against potential liabilities. Product liability insurance for the healthcare industry and for clinical trials may, and have become, become increasingly expensive, to the extent it is available at all. Furthermore, clinical trial and product liability insurance is becoming increasingly expensive. As a result, we may be unable to obtain or maintain sufficient insurance at a reasonable cost or contractual indemnifications to protect us against losses caused by product liability claims that could adversely affect our business.
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We have limited capital, marketing, sales, and regulatory compliance resources for the commercialization of our diagnostic tests.
We are building our own marketing and sales capability for our diagnostic tests and are devoting significant financial and management resources to recruiting, training, and managing our sales force and building a health care regulatory compliance program. However, due to our limited capital resources, we may need to enter into marketing arrangements with other diagnostic companies for one or more of our tests in domestic or foreign markets. Under such marketing arrangements we may license marketing rights to one or more of our diagnostic tests to other diagnostic companies or to one or more joint venture companies that may be formed to market our tests, and we might receive only a royalty on sales or an equity interest in a joint venture company. As a result, our revenues from the sale of our tests through such arrangements may be substantially less than the amount of revenues and gross profits that we might receive if we were to market our tests ourselves.
We may face technology transfer challenges and expenses in adding new tests to our portfolio and in expanding our reach into new geographical areas on new instrument platforms.
Our plan for expanding our business includes developing and acquiring additional tests that can be transferred into our current lab footprint in the United States and/or onto molecular testing instrument platforms for distribution in non-U.S. markets. Due to differences in the hardware and software platforms available at different laboratories for running molecular tests, we may need to make adjustments to the configuration of the reagents that make up our LDTs in our U.S. laboratory or as we convert them to kits, and there may be changes to the related software in order for the tests to be performed on particular hardware platforms. Making any such adjustments could take a considerable amount of time and expense, and there will be no assurance that we will succeed in running our tests on the hardware and software that we may encounter in different laboratories. To manage this issue and to attain uniformity among our laboratory locations, we may license or acquire our own instrument system and software from another company that has a platform that will be compatible with our tests. In addition to acquisition costs, operationally we will have to build out infrastructure for installing a new testing platform across multiple laboratory locations as well as support functions to help maintain these instrument systems in new customer labs, and we may also encounter unexpected technology issues in the process.
If our laboratory facilities become damaged or inoperable, or we are required to vacate any facility, our ability to provide services and pursue our research and development and commercialization efforts may be jeopardized.
We currently have a clinical laboratory facility in Franklin, Tennessee. We also have research and development labs in Nashville, Tennessee and Göttingen, Germany. Our facilities and equipment could be harmed or rendered inoperable by natural or man-made disasters, including earthquakes, power outages, wildfires, flooding, hurricanes, droughts and other extreme weather events and changing weather patterns, which are increasing in frequency due to the impacts of climate change, and may render it difficult or impossible for us to perform our tests for some period of time. The inability to perform our tests or the backlog of tests that could develop if any of our facilities is inoperable for even a short period of time may result in the loss of customers or harm to our reputation or relationships with key researchers, collaborators, and customers, and we may be unable to regain those customers or repair our reputation in the future. Furthermore, our facilities and the equipment we use to perform our research and development work could be costly and time-consuming to repair or replace.
Additionally, a key component of our research and development process involves using biological samples and the resulting data sets and medical histories, as the basis for our diagnostic test development. In some cases, these samples are difficult to obtain. If the parts of our laboratory facilities where we store these biological samples are damaged or compromised, our ability to pursue our research and development projects, commercialization of our diagnostic tests, as well as our reputation, could be jeopardized. We carry insurance for damage to our property and the disruption of our business, but this insurance may not be sufficient to cover all of our potential losses and may not continue to be available to us on acceptable terms, if at all.
Further, if our laboratories become inoperable, we may not be able to license or transfer our proprietary technology to a third-party, with established state licensure and CLIA certification under the scope of which our diagnostic tests could be performed following validation and other required procedures, to perform the tests.
Even if we find a third-party with such qualifications to perform our tests, such party may not be willing to perform the tests for us on commercially reasonable terms. Moreover, we believe our tests are currently subject to enforcement discretion by the FDA because we believe the tests currently qualify as LDTs. If, however, we are required to find a third-party laboratory to conduct our testing services, we believe this would change our status and the FDA would consider such tests offered through a third-party to then be a medical device subject to active FDA regulation and enforcement under its IVD authorities. In that case, we may be required to obtain premarket clearance or approval prior to offering, or continuing to offer, our tests, which would be time-consuming and costly and could result in interruptions and delays in our ability to sell or offer our tests.
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There is a limited number of manufacturers of molecular diagnostic testing equipment and related chemical reagents necessary for the provision of our diagnostic tests.
There is a limited number of manufacturers of molecular testing equipment and related chemical reagents necessary for the provision of our tests. If issues were to arise with our equipment or if reagents we are using cause us to acquire different diagnostic testing equipment, we would need to conduct validation and analytic studies to determine whether our previous test results can be reproduced using the new equipment. As a result, we could experience delays again in developing our diagnostic tests. If similar issues were to arise after commercialization of a diagnostic test, we could experience a disruption in providing the diagnostic tests to patients and we would lose revenues and potentially market share as a result.
If we fail to enter into and maintain successful strategic alliances for diagnostic tests that we elect to co-develop, co-market, or out-license, we may have to reduce or delay our diagnostic test development or increase our expenditures.
In order to facilitate the development, manufacture and commercialization of our diagnostic tests we may enter into strategic alliances with diagnostic, pharmaceutical, or medical device companies to advance our programs and enable us to maintain our financial and operational capacity. We will face significant competition in seeking appropriate alliances. We may not be able to negotiate alliances on acceptable terms, if at all. If we fail to create and maintain suitable alliances, we may have to limit the size or scope of, or delay, one or more of our product development or research programs, or we will have to increase our expenditures and will need to obtain additional funding, which may be unavailable or available only on unfavorable terms.
If we are able to enter into development and marketing arrangements with diagnostic, pharmaceutical or medical device companies for our diagnostic tests, we may license product development, manufacturing, and marketing rights to the diagnostic, pharmaceutical or medical device company or to a joint venture company formed with the diagnostic, pharmaceutical or medical device company. Under such arrangements we might receive only a royalty on sales of the diagnostic tests developed or an equity interest in a joint venture company that develops the diagnostic test. As a result, our revenues from the sale of those diagnostic tests may be substantially less than the amount of revenues and gross profits that we might receive if we were to develop, manufacture, and market the diagnostic tests ourselves.
We are, and may become, dependent on collaborations to develop and commercialize our diagnostic test candidates and to provide the manufacturing, regulatory compliance, sales, marketing and distribution capabilities required for the success of our business.
We have entered into and may in the future enter into various kinds of collaborative research and development, manufacturing, and diagnostic test marketing agreements to develop and commercialize our diagnostic tests. For example, in 2024, we entered into an agreement with Bio-Rad to collaborate in the development and the commercialization of RUO and IVD kitted transplant products using Bio-Rad’s ddPCR instruments and reagents, pursuant to which we are dependent on Bio-Rad with respect to many of our ongoing operations and future target performance.
Any future milestone payments and cost reimbursements from collaboration agreements could provide an important source of financing for our research and development programs, thereby facilitating the application of our technology to the development and commercialization of our diagnostic tests, but there are risks associated with entering into collaboration arrangements.
There is a risk that we could become dependent upon one or more collaborative arrangements, in addition to the Bio-Rad arrangement, for diagnostic test development or manufacturing or as a source of revenues from the sale of any diagnostic tests that may be developed by us alone or through one of the collaborative arrangements. A collaborative arrangement upon which we currently, or might in the future, depend might be terminated by our collaboration partner or they might determine not to actively pursue the development or commercialization of our diagnostic tests, or they may determine to stop supporting technologies, such as instruments or consumables, upon which our diagnostic tests are reliant. A collaboration partner also may not be precluded from independently pursuing competing diagnostic tests or technologies.
There is a risk that a collaboration partner, including Bio-Rad, might fail to perform its obligations under the collaborative arrangements or may be slow in performing its obligations. In addition, a collaboration partner may experience financial difficulties at any time that could prevent it from having available funds to contribute to the collaboration. If a collaboration partner fails to conduct its diagnostic test or instrument-related development, manufacturing, commercialization, regulatory compliance, sales and marketing or distribution activities successfully and in a timely manner, or if it terminates or materially modifies its agreements with us, the development and commercialization of one or more diagnostic test candidates could be delayed, curtailed or terminated because we may not have sufficient financial resources or capabilities to continue diagnostic test development, manufacturing, and commercialization on our own.
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Our business could be adversely affected if we lose the services of the key personnel upon whom we depend.
We presently rely on a small senior management team to direct our diagnostics program and our initial commercial activities. Accordingly, the loss of the services of one or more of the members of that management team could have a material adverse effect on our business.
Our business and operations could suffer in the event of system failures.
We depend on information technology and telecommunications systems, including a combination of on-site systems, managed data center systems, cloud-based systems, and the Internet, for significant elements of our operations, including processing, transmitting, and storing a wide variety of business-critical information. Despite the implementation of security measures, our internal computer systems and those of our contractors and consultants are vulnerable to damage from computer viruses, ransomware, unauthorized access, natural disasters, terrorism, war and telecommunication and electrical failures. Such events could cause interruption of our operations, downtime of our information technology or telecommunications systems or those used by our third-party service providers, and could have an adverse effect on our business and results of operations. For example, the loss of data for our diagnostic test candidates could result in delays in our regulatory filings and development efforts and significantly increase our costs. To the extent that any disruption or security breach results in a loss of or damage to our data, or inappropriate disclosure of confidential or proprietary information, we could incur liability under federal or state laws, be subject to litigation, and the development of our diagnostic test candidates could be delayed.
In addition, in an effort to innovate and optimize operational efficiency, certain third parties with whom we work may integrate AI into various aspects of their work with us. We do not currently utilize AI tools in a significant way. While AI presents opportunities for enhanced productivity and innovation, it also introduces inherent risks, including legal and regulatory, that could adversely impact our business and reputation. Improper use of AI, including algorithmic biases, ethical considerations, data privacy issues, unknown or zero-day software vulnerabilities, and potential regulatory non-compliance, by our employees or third parties with whom we work could result in reputational damage, legal liabilities, and financial losses. The rapidly evolving regulatory landscape surrounding AI also poses a risk, as new laws and regulations could impose additional compliance burdens, resulting in increased operational costs. While we are committed to mitigating these risks, such measures may not adequately prevent or mitigate the adverse effects that the integration and use of AI may have on our business, financial condition, and results of operations.
Security breaches and other disruptions could compromise our information and expose us to liability, and could cause our business and reputation to suffer.
In the ordinary course of business, we collect and store sensitive data, including intellectual property, our proprietary business information and that of our business partners, PHI, and personally identifiable information of patients and employees. We manage and maintain our applications and data utilizing a combination of on-site systems, managed data center systems and cloud-based systems. We also communicate PHI and other sensitive data through our various tools and platforms. In addition to storing and transmitting sensitive data that is subject to legal protections, these applications and data encompass a wide variety of business-critical information, including research and development information, commercial information, and business and financial information. The secure processing, maintenance, and transmission of this information is critical to our operations and business strategy.
We face a number of risks relative to protecting our information, including loss of access, inappropriate disclosure, inappropriate modification, and the risk of our being unable to adequately monitor and modify our controls over our critical information. Despite our security measures, our information technology and infrastructure are also vulnerable to attacks by hackers, viruses, ransomware or breaches due to employee error, technical error, malfeasance, or other disruptions.
These types of problems may be caused by a variety of factors, including infrastructure changes, intentional or accidental human actions or omissions, software errors, malware, security attacks, fraud, spikes in customer usage and denial of service issues. From time to time, large third-party web hosting providers have also experienced outages or other problems that have resulted in their systems being offline and inaccessible. In addition to data security risks, we also face privacy risks. Should we violate, or be perceived to have violated, any privacy promises we make to patients or consumers, we could be subject to a complaint from an affected individual or interested privacy regulator, such as the FTC or a state Attorney General. This risk is heightened given the sensitivity of the data we collect.
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Any problems that may arise in connection with our data and systems, including those that are hosted by third-party providers, could result in interruptions to our business and operations or exposure to security vulnerabilities. Any such breach or interruption, whether of our systems or that of our third-party service providers or their subcontractors, could also compromise our networks, and the information stored there could be accessed, publicly disclosed, lost, or stolen. Any such access, disclosure, theft, or other loss of information or privacy or security compromise could result in legal claims or proceedings or liability under federal or state laws that protect the privacy or security of personal information, including HIPAA, HITECH, and state data security and data breach notification laws. Any data privacy or security event could also disrupt our operations and damage our reputation, any of which could adversely affect our business.
If a privacy or security event occurs, we may be required to comply with state breach notification laws and become subject to mandatory corrective action. Penalties for failure to comply with a requirement of HIPAA or HITECH vary significantly, and, depending on the knowledge and culpability of the HIPAA-regulated entity, may include civil monetary penalties for each provision of HIPAA that is violated. A person who knowingly obtains or discloses individually identifiable health information in violation of HIPAA may face a criminal penalty including fines and potential imprisonment. The criminal penalties increase if the wrongful conduct involves false pretenses or the intent to sell, transfer or use identifiable health information for commercial advantage, personal gain or malicious harm. Penalties for unfair or deceptive acts or practices under the FTC Act or state Unfair and Deceptive Acts and Practices statutes may also vary significantly.
Also, even if we do not incur an interruption of our operations, or fines, penalties, or financial liability to third parties from a security breach, we could suffer a loss of confidence in our services, which could adversely affect our business and competitive position. A security event could also result in the compromise of our trade secrets and other proprietary information, which could adversely affect our competitive position.
Failure of our internal control over financial reporting could harm our business and financial results.
Our management is responsible for establishing and maintaining adequate internal control over financial reporting. Internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting for external purposes in accordance with accounting principles generally accepted in the United States. Internal control over financial reporting includes maintaining records that in reasonable detail accurately and fairly reflect our transactions; providing reasonable assurance that transactions are recorded as necessary for preparation of our consolidated financial statements; providing reasonable assurance that receipts and expenditures of our assets are made in accordance with management authorization; and providing reasonable assurance that unauthorized acquisition, use or disposition of our assets that could have a material effect on the consolidated financial statements would be prevented or detected on a timely basis. Due to its inherent limitations, internal control over financial reporting is not intended to provide absolute assurance that a misstatement of our consolidated financial statements would be prevented or detected. Our growth and entry into new diagnostic tests, technologies and markets will place significant additional pressure on our system of internal control over financial reporting. Any failure to maintain an effective system of internal control over financial reporting could limit our ability to report our financial results accurately and timely or to detect and prevent fraud. Since we are a smaller reporting company, we are exempt from the requirement of having our internal controls over financial reporting audited by our independent registered public accountants, which means that material weaknesses or significant deficiencies in our internal controls that might be detected by an audit may not be detected and remedied.
We are subject to laws and regulations governing corruption, which may require us to develop, maintain, and implement costly compliance programs.
We must comply with a wide range of laws and regulations to prevent corruption, bribery, and other unethical business practices, including the FCPA, anti-bribery and anti-corruption laws in other countries. The creation and implementation of international business practices compliance programs is costly and such programs are difficult to enforce, particularly where reliance on third parties is required.
Anti-bribery laws prohibit us, our employees, and some of our agents or representatives from offering or providing any personal benefit to covered government officials to influence their performance of their duties or induce them to serve interests other than the missions of the public organizations in which they serve. Certain commercial bribery rules also prohibit offering or providing any personal benefit to employees and representatives of commercial companies to influence performance of their duties or induce them to serve interests other than their employers. The FCPA also obligates companies whose securities are listed in the United States to comply with certain accounting provisions requiring us to maintain books and records that accurately and fairly reflect all transactions of the corporation, including international subsidiaries, and devise and maintain an adequate system of internal accounting controls for international operations. The anti-bribery provisions of the FCPA are enforced primarily by the United States Department of Justice. The SEC is involved with enforcement of the books and records provisions of the FCPA.
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Compliance with these anti-bribery laws is expensive and difficult, particularly in countries in which corruption is a recognized problem. In addition, the anti-bribery laws present particular challenges in the medical industry because in many countries including China, hospitals are state-owned or operated by the government, and doctors and other hospital employees are considered foreign government officials. Furthermore, in certain countries (China in particular), hospitals and clinics are permitted to sell pharmaceuticals to their patients and are primary or significant distributors of pharmaceuticals. Certain payments to hospitals in connection with clinical studies, procurement of pharmaceuticals and other work have been deemed to be improper payments to government officials that have led to vigorous anti-bribery law enforcement actions and heavy fines in multiple jurisdictions, particularly in the United States and China.
It is not always possible to identify and deter violations, and the precautions we take to detect and prevent this activity may not be effective in controlling unknown or unmanaged risks or losses or in protecting us from governmental investigations or other actions or lawsuits stemming from a failure to be in compliance with such laws or regulations.
In the medical industry, corrupt practices include, among others, offering or accepting kickbacks, bribes or other illegal gains or benefits by the hospitals and medical practitioners from manufacturers of pharmaceutical or other products, distributors or their third-party agents in connection with the prescription of certain pharmaceuticals or sale of products. If our employees, affiliates, distributors or third-party marketing firms violate these laws or otherwise engage in illegal practices with respect to their sales or marketing of our products or other activities involving our products, we could be required to pay damages or heavy fines by multiple jurisdictions where we operate, which could materially and adversely affect our financial condition and results of operations. There have been recent occurrences in which certain hospitals have denied access to sales representatives from pharmaceutical companies because the hospitals wanted to avoid the perception of corruption. If this attitude becomes widespread among our potential customers, our ability to promote our products to hospitals may be adversely affected.
If we and our subsidiaries further expand operations internationally, we will need to increase the scope of our compliance programs to address the risks relating to the potential for violations of the FCPA and other anti-bribery and anti-corruption laws and data protection laws. Our compliance programs will need to include policies addressing not only the FCPA, but also the provisions of a variety of anti-bribery and anti-corruption laws in multiple foreign jurisdictions, provisions relating to books and records that apply to us as a public company, and include effective training for our personnel throughout our organization. The creation and implementation of anti-corruption compliance programs is costly and such programs are difficult to enforce, particularly where reliance on third parties is required. Violation of the FCPA and other anti-corruption and data privacy laws can result in significant administrative and criminal penalties for us and our employees, including substantial fines, suspension or debarment from government contracting, prison sentences, or even the death penalty in extremely serious cases in certain countries. The SEC also may suspend or bar us from trading securities on U.S. exchanges for violation of the FCPA’s accounting provisions. Even if we are not ultimately punished by government authorities, the costs of investigation and review, distraction of our personnel, legal defense costs, and harm to our reputation could be substantial and could limit our profitability or our ability to develop or commercialize our product candidates. In addition, if any of our competitors are not subject to the FCPA, they may engage in practices that will lead to their receipt of preferential treatment from foreign hospitals and enable them to secure business from foreign hospitals in ways that are unavailable to us.
We may become subject to litigation, which could harm our stock price, business, results of operations and financial condition.
We may be subject to litigation from time to time. In the past, following periods of volatility in the market price of their stock, many companies have been the subjects of securities class action litigation. Any such litigation can result in substantial costs and diversion of management’s attention and resources and could harm our stock price, business, results of operations and financial condition. As a result of these factors, holders of our common stock might be unable to sell their shares at or above the price they paid for such shares.
We may undertake strategic acquisitions in the future, and difficulties integrating such acquisitions could damage our ability to achieve or sustain profitability.
We may acquire businesses or assets that complement or augment our existing business. If we acquire businesses with promising products or technologies, we may not be able to realize the benefit of acquiring such businesses if we are unable to move one or more products through preclinical and/or clinical development to regulatory approval and commercialization. Integrating any newly acquired businesses or technologies could be expensive and time-consuming, resulting in the diversion of resources from our current business. We may not be able to integrate any acquired business successfully, and we may not achieve revenues, specific net income or loss levels that justify the acquisition or that the acquisition will result in increased earnings, or reduced losses, for the combined company in any future period. Moreover, we may need to raise additional funds through public or private debt or equity financing to acquire any businesses, which would result in dilution for stockholders or the incurrence of indebtedness and may not be available on terms which would otherwise be acceptable to us. We may not be able to operate acquired businesses profitably or otherwise implement our growth strategy successfully.
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Our business could be adversely impacted by inflation.
Inflation rates, particularly in the United States, have increased recently. We may experience inflationary pressures, primarily in personnel costs, with certain laboratory supplies, from inventory costs related to certain raw materials, with essential vendors including audit fees and regulatory consultants, and from tariff policies and potential countermeasures. Prices for raw materials may fluctuate based on a number of factors beyond our control, including changes in supply and demand, general economic conditions, labor costs, fuel related delivery costs, competition, import duties, excises and other indirect taxes, currency exchange rates, and government regulation. The extent of any future impacts from inflation on our business and our results of operations will depend upon how long the elevated inflation levels persist and the extent to which the rate of inflation were to further increase, if at all, neither of which we are able to predict. If elevated levels of inflation were to persist or if the rate of inflation were to accelerate, the purchasing power of our cash and cash equivalents may be further diminished, our expenses could increase faster than anticipated and we may utilize our capital resources sooner than expected. Due to the highly competitive nature of the healthcare industry and the cost containment efforts of our customers and third-party payors, we may be unable to pass along cost increases for key components or raw materials through higher prices to our customers. Further, given the complexities of the reimbursement landscape in which we operate, our payers may be unwilling or unable to increase reimbursement rates to compensate for inflationary impacts. As such, the effects of inflation may adversely impact our results of operations, financial condition and cash flows.
Risks Related to Our Industry
Our operations as a clinical laboratory in the United States are subject to oversight by CMS under CLIA, as well as certain state agencies, and our operation of clinical laboratories in any foreign jurisdictions are subject to similar regulatory oversight. Any failure to maintain our CLIA or applicable state or international permits and licenses may affect our ability to commercialize our diagnostic tests.
We are subject to CLIA, a federal law regulating clinical laboratories that perform testing on specimens derived from humans for the purpose of providing information for the diagnosis, prevention or treatment of disease. Our clinical laboratories must be certified under CLIA in order for us to perform testing on human specimens. CLIA is intended to ensure the quality and reliability of clinical laboratories in the United States by mandating specific standards in the areas of personnel qualifications, administration, and participation in proficiency testing, patient test management, quality control, quality assurance and inspections. We have a current certificate under CLIA to perform routine chemistry. To renew these certificates, our diagnostic laboratories are subject to survey and inspection every two years. Moreover, CLIA inspectors may make periodic inspections of our clinical laboratories outside of the renewal process.
The law also requires us to maintain a state laboratory license to conduct testing in the states in which our laboratories are located. State laws establish standards for day-to-day operation of a clinical laboratory, including the training and skills required of personnel and quality control. In addition, several states require that we hold licenses to test specimens from patients in those states. We do not have immediate plans to market our tests for commercial use in the EU and as a result, at this time we do not believe we are subject to EU or EU member state post-market regulations related to our tests.
If we were to lose our CLIA certification or a required state license for a laboratory, whether as a result of a revocation, suspension or limitation, we would no longer be able to offer our tests from the affected laboratory, which would limit our revenue and harm our business. If we were to lose our license in other states where we are required to hold licenses, we would not be able to test specimens from those states. If we perform testing on samples originating in a state where we require a license, but do not currently have one, we could be subject to fines, sanctions, and may be denied permits or licenses in the future.
We also maintain laboratory operations in Germany and could expand our laboratory operations to other foreign jurisdictions. Therefore, we are subject to laboratory quality regulations and accreditation standards in Germany, and will be subject to such regulations and standards in any other jurisdictions where we may operate. These requirements may vary by jurisdiction and differ from those in the United States, and may require us to implement additional compliance measures. If we fail to comply with any foreign jurisdiction’s applicable laboratory regulations and standards it could limit our revenue and harm or business and we could be subject to fines and other sanctions.
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While we believe our LDTs are within the scope of the FDA’s enforcement discretion policy, and therefore not required to obtain clearance or approval before commercialization, the FDA may attempt to regulate LDTs in the future, which could lead to LDT product development delays and increased costs.
The FDA has a long-standing policy of enforcement discretion for LDTs, meaning the tests are not subject to the FDA’s medical device regulations. In May 2024, the FDA published a final rule that proposed to phase out its enforcement discretion policy for LDTs, unless exempt, and proposed to amend the FDA’s regulations to make explicit that IVDs are medical devices under the Federal Food, Drug, and Cosmetic Act, including when the manufacturer of the diagnostic product is a laboratory. This final rule would have subjected LDTs to the same regulatory requirements as medical devices, including, in some cases, requiring pre-market clearance or approval. However, in March 2025, following a legal challenge to the FDA’s authority to regulate LDTs, the Eastern District of Texas vacated the final rule. The FDA did not appeal the decision to vacate the final rule, and, in September 2025, the FDA formally revoked the final rule, retaining the enforcement discretion policy for LDTs.
As a result, we do not believe our LDT products are currently required to receive FDA clearance or approval prior to use or otherwise comply with the FDA’s medical device regulations. However, the FDA may try to regulate LDTs in the future, and we cannot be certain any future attempt to regulate LDTs will be vacated. Any future LDT rule could subject our current or future LDT products to additional regulatory requirements, including pre-market clearance or approval requirements, which could delay or halt commercialization of our tests, increase costs and materially and adversely affect our business, financial condition, and results of operations.
In addition, while we believe our LDTs are within the scope of the FDA’s enforcement discretion policy, the FDA may disagree and consider our LDTs to be IVDs. If so, our tests would be required to obtain FDA clearance or approval to be marketed in the United States, which could interrupt commercialization of our tests pending such clearance or approval. Obtaining FDA clearance or approval can be unpredictable, time-consuming, and costly, and would likely materially and adversely affect our business, financial condition, and results of operations.
We currently market certain IVDs for RUO that have not been cleared by the FDA in reliance on the regulatory exemption for IVDs intended for RUO, but if the FDA determines that our RUO tests do not meet the applicable requirements for exemption or have intended uses that are inconsistent with RUO tests, we may be required to suspend commercialization of such products until we can obtain the requisite FDA clearance and/or subject to FDA warning or untitled letters, seizure, injunction, fines, or other enforcement action.
Some of our tests are marketed for RUO, which allows us to sell such products without the premarket clearance that FDA requires for the marketing of traditional devices. An RUO product may not be marketed for clinical diagnostic use and must be labeled “For Research Use Only. Not for use in diagnostic procedures.” Products that are intended for research use only and are properly labeled as RUO are exempt from compliance with the FDA’s pre- and post-market requirements to which traditional devices are subject, including the requirement that the product be cleared or approved before commercialization and Quality System Regulation requirements. However, merely including the required RUO labeling will not necessarily exempt the device from the FDA's 510(k) clearance, premarket approval, or other requirements if the circumstances surrounding the distribution of the product indicate an objective intent to market the product for clinical diagnostic use.
According to the FDA guidance, circumstances indicating manufacturer intent to market an in vitro device for diagnostic use may include written or verbal marketing claims regarding a product's clinical efficacy or performance in clinical applications, instructions for clinical interpretation, clinical information, product names, or descriptors that claim or suggest that the IVD product may be used for any clinical diagnostic use, including a clinical investigation that is not exempt from the FDA’s investigational device exemption regulations. Other indications include a manufacturer's provision of technical support for clinical validation or clinical applications or solicitation of business from clinical laboratories that do not conduct research activities, all of which could be considered evidence of intended uses that conflict with RUO labeling.
In general, if (i) evidence shows that one or more of our IVDs are inappropriately labeled RUO (but marketed for clinical diagnostic use), such test(s) will not qualify for an IDE exemption and will be deemed misbranded under the Federal Food, Drug, and Cosmetic Act ("FDCA"). Device manufacturers found in violation of the FDCA may be subject to a wide range of enforcement action, including warning letters, seizure, injunction, criminal prosecution, monetary penalties, and others.
We believe that our promotional activities for our RUO products fall within the scope of the applicable premarket exemptions for RUO tests and the FDA’s enforcement discretion, as described in its relevant guidance. However, the FDA could disagree and require us to (i) stop promoting our RUO devices unless/until we obtain FDA clearance or approval (among other possible outcomes). Any adverse determination in relation to our marketing of current or future products for RUO will likely have a material adverse impact on our business.
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We will need to obtain FDA and other regulatory approvals for any IVDs that we may develop in order to market those IVD tests, and we may not be able to obtain those regulatory approvals in a timely manner or at all.
If we decide to develop IVDs, we will need to obtain regulatory clearance or approval to market each IVD test. This means that:
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The IVDs cannot be sold until the CMS or the FDA, and corresponding foreign regulatory authorities approve or authorize the IVDs for medical use;
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We will have to conduct expensive and time-consuming clinical trials of new diagnostic tests. The full cost of conducting and completing clinical trials necessary to obtain FDA clearance or approval of IVD tests or for gaining reimbursement from health insurance companies, health maintenance organizations, Medicare, and other third-party payers cannot be presently determined but could exceed our financial resources;
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Data obtained from preclinical and clinical studies is susceptible to varying interpretations that could delay, limit or prevent regulatory agency clearances or approvals. Delays or denials of the regulatory clearances or approvals may be encountered as a result of changes in regulatory agency policy, regulations, or laws;
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A diagnostic test that is cleared or approved for marketing may be subject to restrictions on use; and
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The FDA can withdraw approval of an FDA regulated product if problems arise.
We have submitted a De Novo request with the FDA to obtain authorization for GraftAssureDx. While we believe our submission will be sufficient to support FDA authorization, we cannot be certain that the FDA will clear or approve GraftAssureDx for commercialization in the United States. If the FDA determines that our submission is insufficient, we may be asked to update our submission with new information, including, but not limited to, new safety and efficacy data generated from additional clinical trials. As a result, the need for additional information could be costly and significantly delay, or prevent, obtaining authorization to commercialize GraftAssureDx in the United States.
In addition, the ability of the FDA to review and approve new products can be affected by a variety of factors, including government budget and funding levels, ability to hire and retain key personnel and accept the payment of user fees, and statutory, regulatory, and policy changes and other events that may otherwise affect the FDA’s ability to perform routine functions. Average review times at the agency have fluctuated in recent years as a result. In addition, government funding of other government agencies that fund research and development activities is subject to the political process, which is inherently fluid and unpredictable. In addition, the U.S. government has shut down multiple times in the past (including the shutdown that started on October 1, 2025 and became the longest government shutdown in history based on data going back to fiscal 1977) and certain regulatory agencies, such as the FDA, had to furlough employees and stop some of their activities. The effects of any prolonged government shutdown (including effects related to the shutdown that began October 2025) or a widespread freeze on federal funding could significantly impact the ability of the FDA to timely review and process our regulatory submissions, or cause other agencies that support the FDA to slow their work. Any such factors could have a material adverse effect on our business.
Further, presidential and congressional seat turnover may result in increased regulatory and economic uncertainty, including the spending priorities of the new U.S. presidential administration and Congress and what challenges budget reductions will present for us and our industry generally. For example, on January 20, 2025, President Trump announced an executive order establishing the “Department of Government Efficiency” to reform federal government processes and reduce expenditures. Changes in federal policy by the executive branch and regulatory agencies may occur over time through the new presidential administration’s and/or Congress’s policy and personnel changes, which could lead to changes involving our industry. However, the nature and timing of such potential changes remain highly uncertain. At this time, it is unclear whether and how any future changes or uncertainty surrounding future changes will adversely affect our business, but material adverse effects are possible.
Our ability to commercialize our products is dependent on availability and sufficiency of third-party payer coverage and our ability to ensure our tests remain reimbursed or attain reimbursement by Medicare, and the loss of, or a significant reduction in, reimbursement from Medicare or the CMS would have a material adverse impact on our business.
Our ability to successfully commercialize our current diagnostic tests and any product candidates we receive regulatory approval to market will depend, in significant part, on the extent to which appropriate reimbursement levels can be obtained for patients. Physicians will be hesitant to order a diagnostic test for a patient when they may be left with a large out-of-pocket fee through co-payments or co-insurance or unreimbursed balances. Third-party payers, including Medicare, Medicaid and private insurers, are increasingly challenging the prices charged for healthcare products and services. In addition, legislative proposals to reform health care or reduce government insurance programs may result in lower prices or the actual inability of prospective customers to purchase our tests. Furthermore, even if reimbursement is available, it may not be available at price levels sufficient for us to realize a positive return on our investment.
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Our primary near-term strategic market is organ transplant. We received a positive coverage decision from MolDx for GraftAssureCore (Kidney) in August of 2023, and it became commercially available for ordering in January 2024. In December 2024, we confirmed Medicare reimbursement for also monitoring certain high-risk patients, that is, those with newly developed donor-specific antibodies. However, we may not be able to ensure our tests remain reimbursed or attain reimbursement by Medicare for a variety of reasons, including changes in reimbursement practices, general policy shifts, or reductions in reimbursement amounts. We cannot predict whether Medicare reimbursements will continue at the same payment amount or with the same breadth of coverage in the future, if at all.