Item 1A. Risk Factors
You should carefully consider the following risks and other information in this Annual Report on Form 10-K in evaluating GRAIL and GRAIL common stock. Any of the following risks and uncertainties could materially adversely affect our business, financial condition, and results of operations. The following risks have generally been separated into five groups: risks relating to our business and industry, risks relating to regulation and legal compliance, risks relating to intellectual property, risks relating to the Spin-Off, and risks relating to our common stock. References to “we,” “our,” “us,” and words of similar import in this section refer to GRAIL and, unless otherwise specified, its consolidated subsidiaries.
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Risks Relating to Our Business and Industry
We operate in a rapidly evolving field and have a limited operating history, which make it difficult to evaluate our current business and predict our future performance.
We operate in a rapidly evolving field and, having commenced operations in January 2016, have a limited operating history. We completed our first sale of our multi-cancer early detection test, Galleri, in mid-2021 and our other products and products in development have an even more limited history, with most still not in commercial distribution. We have funded our operations to date primarily with the proceeds from the sale of equity securities and capital contributions from Illumina and, to a lesser extent, revenue derived from sales of Galleri and biopharmaceutical business revenue. Our short operating history as a company, evolving business strategies, rapid growth and significant events such as our separation from Illumina and the restructuring plan (“Restructuring Plan”) approved by our Board of Directors (the “Board”) designed to reprioritize our resources to focus on our core MCED business and reduce overall spend as we pursue a PMA approval from the FDA for Galleri and broad reimbursement, may make it difficult to evaluate our current business or our future success and the risks and challenges we may encounter, and may increase the risk that we will not continue to grow at or near historical rates. See Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations” for more information about the Restructuring Plan.
If we fail to address the risks and difficulties that we face, including those described elsewhere in this Item 1A. “Risk Factors” section, our business, financial condition, results of operations, and growth prospects could be materially adversely affected. We have encountered in the past, and expect to encounter in the future, risks and difficulties frequently experienced by companies with limited operating histories in new and rapidly evolving fields. If our assumptions regarding these risks and difficulties, which we use to plan and operate our business, are incorrect or change, or if we do not address these risks and difficulties, our results of operations could differ materially from our expectations and our business, financial condition, results of operations, and growth prospects could be adversely affected.
We have incurred significant net losses in each period since our inception and anticipate that we will continue to incur net losses for the coming years.
Since our inception, we have incurred significant net losses. Our net loss was $408.4 million for 2025, $2.0 billion for 2024, and $1.5 billion for 2023. Substantially all of our net losses since inception have resulted from our research and development programs, commercialization efforts, investments in our facilities, payments to licensors, and general and administrative costs associated with our operations, as well as intangible asset amortization and the impairments of $28.0 million, $1.4 billion and $0.7 billion for 2025, 2024 and 2023, respectively, related to the intangible assets and goodwill recorded by Illumina upon the Acquisition of GRAIL. As of December 31, 2025, we had an accumulated deficit of $10.2 billion and intangible assets of $1.9 billion.
We have invested significant financial resources in research and development activities, including developing our methylation platform, and developing our products, such as Galleri and our precision oncology portfolio. We have also invested significant resources to conduct large scale clinical studies to evaluate and improve Galleri and current and future products, and to commercialize Galleri and plan for potential commercial launches of our future and current products in other markets. The amount of our future net losses will depend, in part, on the level of our future expenditures and our ability to generate additional revenue. Moreover, our net losses may fluctuate significantly from quarter to quarter and year to year, such that a period-to-period comparison of our results of operations may not be a good or reliable indication of our future performance.
We expect to continue to incur significant expenses and operating losses as we:
• attract, hire, and retain qualified personnel;
• seek regulatory approvals, clearances, or certifications, or coverage and reimbursement, that may be necessary or desired for our products and future products;
• conduct our ongoing clinical studies and initiate and conduct additional clinical studies to support the development and commercialization of our products and potential future products;
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• continue our research and development activities;
• maintain and potentially expand our laboratory capacity and enhance operating capabilities for greater commercial scale;
• maintain sales, marketing, and distribution infrastructure for purchases of our products;
• acquire or in-license additional intellectual property and technologies;
• make milestone, royalty, or other payments due under any license or collaboration agreements;
• obtain, maintain, protect, and enforce our intellectual property portfolio, including intellectual property obtained through license agreements;
• maintain and potentially expand our facilities and infrastructure to support our continued research and development, operations and any planned commercialization efforts in the future;
• defend against any litigation, including but not limited to any patent disputes, employment matters, product liability claims or other lawsuits related to our products, our marketing, advertising, or labeling, or our clinical research;
• support international commercial expansion of our products;
• continue to engage the medical community and others to drive awareness and adoption of MCED testing; and
• meet the requirements and demands of being a public company.
Our NHS-Galleri Trial did not meet its stated primary endpoint, which may adversely affect our business, stock price, and ability to obtain regulatory approvals, coverage and reimbursement, or achieve commercial adoption.
In February 2026, we announced topline results from our NHS-Galleri Trial, which enrolled approximately 140,000 participants in England between 2021 and 2024, and which did not meet its primary endpoint of statistically significant combined Stage 3 and 4 reduction. Not meeting the stated primary endpoint may negatively impact perceptions of the clinical utility of the Galleri test among healthcare providers, payors, regulators, potential commercial partners, and the investment community. This could adversely affect our ability to obtain coverage and reimbursement from Medicare, Medicaid, and commercial third-party payors, secure implementation of Galleri screening in the NHS in England or other international single-payor healthcare systems, achieve broad commercial adoption of Galleri among healthcare providers and patients in the United States, or enter into partnerships or collaborations on favorable terms. Additionally, although the submission package submitted for our PMA includes only the NHS-Galleri Prevalent Round Results, data from the PATHFINDER 2 Initial Results and the Bridging Analysis, nevertheless it is possible that not meeting the stated primary endpoint in the NHS-Galleri Trial could impact our ability to achieve FDA approval of our pending PMA application, or result in approval with more limited indications or labeling than we seek.
We are undertaking additional analyses and plan to extend the trial's follow-up period by 6-12 months to further understand the data and other endpoints. However, there can be no assurance that such analyses will produce more favorable conclusions or that any additional data will change perceptions of the trial results among the groups identified above. Any adverse impact from the primary endpoint results could materially harm our business, results of operations, financial condition, and stock price.
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Our products or future products may not perform as expected, and the results of our clinical studies may not be replicated in the post-market or real-world setting.
Our success depends on our ability to provide reliable, high-quality products that perform as indicated in our product labeling, marketing, and advertising material, as well as our ability to complete clinical studies. Our commercial product, Galleri, which we have launched as a laboratory developed test (“LDT”) in the United States and for which we are pursuing approval of a PMA from the FDA and our precision oncology portfolio, which we currently offer on a research-use-only basis, and any future products in development, may not perform as expected. Results from our ongoing or future studies, or from the post-market or real-world setting, involving current or future products or our methylation platform may be inconsistent with certain results obtained from our previous studies, or from interim results initially reported on those studies.
For example, in February 2026, we announced topline results from the NHS-Galleri Trial, which did not achieve its primary endpoint of statistically significant combined Stage 3 and 4 cancer reduction. Not meeting the stated primary endpoint may lead healthcare providers, payors, regulators, and the investment community to question the clinical utility of Galleri. Any perception that our products do not perform as expected, even if clinically meaningful benefits were demonstrated, could materially harm our ability to obtain regulatory approvals, secure reimbursement, achieve commercial adoption, and maintain the market price of our common stock.
Our products require a number of complex and sophisticated biochemical and bioinformatics processes, which could be adversely impacted by a number of different factors. An operational or technological failure in one of these complex processes or fluctuations in external variables may result in performance characteristics, such as sensitivity or specificity rates, that are lower than we anticipate or that vary between test runs or in a higher than anticipated number of tests that fail to produce results.
Our clinical trials to date have been conducted on an earlier version of Galleri. We have in the past improved, and intend in the future to improve, our products to enhance performance, offerings, scalability, and/or cost of sales, including through the launches of new versions. However, we may not be successful in transitioning our products to a new or enhanced version or iteration. These improvements may be made through evaluation, refinement or enhancement of our laboratory process or our algorithms and other processes. Before implementing a new version, we conduct a non-inferiority or bridging study (for example, using clinical data and/or real-world evidence data obtained through Galleri’s commercial use as an LDT) to establish performance, safety and concordance between the new version and the existing version. Even if determined to be non-inferior or concordant, these refinements and improvements may inadvertently result in unanticipated issues that may reduce our performance characteristics, such as sensitivity or specificity rates, increase our turnaround time or rate or otherwise affect the performance of our tests and their results. For example, in 2024, we began use of an updated commercial version of Galleri in commercial channels. This version incorporates an industrial scale platform with significant automation and is intended to us to scale more with future demand. In connection with implementation of this new version of Galleri, we initially experienced and may continue to experience increased turnaround times, re-processing costs and sample . We continually monitor and evaluate laboratory operations and performance in an effort to our intended sample processing metrics and costs; however from time to time, processing issues may arise that could impact our operations.
If we are unable to adequately prevent these issues from occurring, or to adequately identify and remedy these issues, we may experience reputational harm, lose customers and revenue, need to offer discounts, require additional expenditures, delay or prevent PMA approval, or suffer other negative consequences. Our failure to successfully develop new and/or improved products (including new versions of existing products) on a timely basis could have a material adverse effect on our results of operations and business.
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The clinical study process is lengthy and expensive with uncertain outcomes. We have encountered delays and may encounter future delays in, or unexpected, uncertain or negative data from, our clinical studies, and may therefore be unable to complete our clinical studies on the timelines we expect, if at all, which could materially and adversely impact our ability to launch our products and seek regulatory clearance or approval, or coverage and reimbursement.
Clinical testing is expensive, time-consuming, and subject to uncertainty. Initiating and completing clinical studies necessary to validate and market our products, and to support regulatory authorizations or certifications and coverage and reimbursement, will be time-consuming and expensive and the outcomes are inherently uncertain. Clinical studies must be conducted in accordance with the laws and regulations of the FDA and other applicable regulatory authorities’ legal requirements and regulations, and are subject to oversight by governmental agencies and institutional review boards (“IRBs”) or ethics committees at the medical institutions where the clinical studies are conducted.
The results of our development efforts and clinical studies of our products conducted to date and ongoing or future studies of our current or future products may not be predictive of the results of later clinical studies, and interim results of a clinical study do not necessarily predict final results. Our interpretation of data and results from our clinical studies do not ensure that we will achieve similar or favorable results in future clinical studies. In addition, clinical data are often susceptible to various interpretations, analyses, and methodological limitations, and many companies that have believed their products performed satisfactorily in earlier clinical studies have nonetheless failed to replicate results in later clinical studies. Products in later future clinical studies may fail to show the desired safety and efficacy despite having success in previous clinical studies. For example, in May 2025 we disclosed top-line results from the NHS-Galleri Trial prevalent screening round (the first round of blood draws from a total of three blood draws with one year follow up each), which is included in our PMA submission to the FDA. The NHS will evaluate the final results from the NHS-Galleri Trial before determining whether to implement the Galleri test in the NHS. Under our agreement with the NHS, these results have met certain criteria and others. As a result, we and NHS England will convene meetings of our joint steering committee to discuss how to proceed with deployment to the UK population, if at all, considering deployment approaches and which population groups would most . We believe the decision will include considerations such as NHS budget, political priorities, cost-effectiveness and implementation constraints in addition to an evaluation of the final results. Various factors are likely to cause the final results to differ from a review of the first round results only. For example, cancer screening trials designed to show clinical utility are commonly conducted over three years with an annual screening period, because data from the first screening round only can be influenced by the fact that screening detects many prevalent -stage asymptomatic cancers that have not yet been diagnosed. It is possible that the final results will be or , which could have a significant impact on the of our commercial efforts for Galleri, our ability to FDA authorization at all or within our anticipated timelines, our brand and reputation, our business, and our growth prospects. Furthermore, other studies have been or may be conducted in populations (such as our SUMMIT study which was conducted in a population of tobacco users) or under other circumstances which make their results more to interpret or result in data that is more to compare. In addition, as Galleri and our research-use-only offering are currently available to customers and others, any analyses or studies, including those conducted by third parties, that use our current or future products, or that examine elements of our methylation platform, may produce results that are to evaluate independently or comparatively from our own studies. If any such results were to be produced, either before or after launch of a product or future product, our reputation, business, financial condition, results of operations, and growth prospects would .
In addition, we cannot guarantee that any clinical studies will be conducted as planned or completed on schedule, if at all, or within the anticipated budget. The timely completion of clinical studies in accordance with their protocols and applicable requirements depends, among other things, on our ability to enroll a sufficient number of participants who remain in the study until its conclusion. Many of our clinical studies require enrolling a large number of asymptomatic participants (i.e., individuals without symptoms of cancer) who may not see value in enrollment. Additionally, we may encounter delays as a result of the administrative complexities in managing and recruiting for studies of this scope and size. If we are unable to recruit sufficient participants for our clinical studies, including our Real-world Evidence to Advance Multi-Cancer Early Detection Health Equity (“REACH” or “Galleri-Medicare”) study, or if we are unable to maintain sufficient participation of enrolled participants to maintain
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statistical power for our endpoints, our product development, commercialization activities, and our ability to seek regulatory clearance or approval for our products could be delayed, require modification, or be prevented.
Further, the FDA may require that we conduct additional studies or expand the enrollment or follow-up of completed or ongoing studies to support our PMA, which would delay potential approval of our PMA submission, which would negatively impact our business, financial condition, results of operations, and growth prospects.
The initiation and completion of clinical studies may be prevented, delayed, or halted for numerous reasons, including as a result of the following:
• the inability to generate sufficient data to support the initiation or continuation of clinical studies;
• the inability to rely on previously-collected data on earlier versions of our products, such as Galleri, in support of the launch or submission for marketing authorization (or certification) of the later or enhanced versions of our products, including Galleri, or our other products and future products;
• the requirement to submit an Investigational Device Exemption (“IDE”) or comparable foreign application to the FDA or comparable foreign regulatory authorities, which must become effective prior to commencing certain human clinical studies of medical devices, and which the FDA or comparable foreign regulatory authorities may disapprove;
• delays caused by participants withdrawing from clinical studies or failing to return for follow-up or by institutions failing to submit data, including follow-up data, to us;
• delays or failure in reaching a consensus or agreement, if required, with regulatory agencies on study design or feedback from regulatory agencies necessitating changes to ongoing or planned clinical study design;
• delays or failure in reaching agreement on acceptable terms with contract research organizations (“CROs”), service providers, and clinical study sites, the terms of which can be subject to extensive negotiation and may vary significantly among different CROs and clinical study sites;
• delays or failure in obtaining any required IRB approval or ethics committee approval for our clinical study sites;
• delays in amending, or the inability to amend, our IRB- or ethics committee-approved protocols at clinical study sites when necessary or desired;
• difficulty or delays in collaborating with sites, institutions, and investigators;
• failure by us, investigators, sites, or participants to comply with the applicable study protocol or applicable regulatory requirements and standards for data collection, reporting, records maintenance, or data integrity;
• failure by us or any CROs or other third parties to adhere to clinical study requirements, including the applicable protocol;
• failure to perform in accordance with good clinical practice (“GCP”) and good laboratory practice (“GLP”) requirements, and/or other applicable regulations and requirements of the FDA or other applicable governmental authorities; failure to comply with applicable data privacy and security laws, including laws related to processing of special categories of personal data clinical studies such as the EU GDPR or UK GDPR;
• challenges caused by transferring personal information or biological samples from the EU, United Kingdom, or other countries to our systems or facilities in the United States for processing or to regulatory authorities;
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• failure of our products and future products to achieve acceptable performance metrics, such as sensitivity, specificity, positive predictive value, and/or safety endpoints;
• unacceptable safety findings, including findings related to the risk, such as higher likelihood, of false positive test results (which could lead to unnecessary confirmatory testing, such as biopsy, or anxiety) or false negative test results (which could lead to foregoing standard of care screening, a delay in diagnosis or disease progression);
• termination or suspension of a study or site by us or the data safety monitoring board (or independent data monitoring committee), suspension or termination of a study or site by an IRB, ethics committee, or institution, or clinical hold or termination of a study or site by a regulatory authority, including the FDA;
• our inability to collaborate with clinical investigators, including if they are disqualified, terminated, suspended, or change affiliated institutions;
• adverse inspections of our clinical study sites or results by any applicable regulatory authority, including the FDA, NHS, or United Kingdom Medicines and Healthcare products Regulatory Agency;
• changes in statutory or regulatory requirements or guidance, or clinical guidelines, that require amending existing or designing new clinical protocols, obtaining new IRB or ethics committee approvals, modifying our clinical studies, modifying our consent process or obtaining additional consent from study participants, or altering the pathway to clearance, approval, or certification of our products and future products;
• changes in the standard of care on which a clinical development plan was based, which may require new or additional clinical studies;
• the cost of clinical studies of our products and future products being greater than we anticipate;
• destruction or compromise of, or other inability to access or receive, clinical study samples processed, stored, managed, or otherwise in the control of a clinical site or other third party;
• determination that data from research conducted outside the United States, including the NHS-Galleri Trial, does not meet the FDA’s requirements for submission and support of a marketing authorization or future clinical study IDE application, for example because the foreign data are not applicable to the U.S. population and U.S. medical practice, the studies have been performed by clinical investigators of unsuitable competence, or the FDA cannot validate the data through an on-site inspection or other appropriate means;
• clinical studies of our products and future products producing negative or inconclusive results, which may result in our deciding, or regulators requiring us, to conduct additional clinical studies or abandon development programs; and
• lack of adequate funding.
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Any such delays could adversely affect the costs, timing, or successful completion of our clinical studies. Moreover, we depend on our collaborators and on medical and clinical institutions and CROs to conduct our clinical studies in compliance with applicable GCP and other regulatory requirements, and while we have agreements governing their committed activities, we have limited influence over their actual performance. To the extent we, our collaborators or the CROs fail to enroll participants for our clinical studies, fail to conduct the study according to applicable GCP or other regulatory requirements, or are delayed for a significant time in the execution of studies, including achieving full enrollment, we may be affected by increased costs, program delays, enforcement actions, or a determination that the data are unusable for regulatory or product development purposes. In addition, clinical studies that are conducted in countries outside the United States may subject us to further and expenses. In addition, our precision oncology offering is highly dependent on with select, biopharmaceutical companies. For example, in 2025, one of our pharmaceutical partners its phase 3 trial due to low enrollment, for which our methylation technology was used as a potential companion diagnostic for enrolling participants. To the extent our experience any of , halts, data or other issues in the trials they on with us, we may be similarly or in validating or generating revenue from our precision oncology offering, and we could experience reputational or other .
Any inability to initiate or complete clinical studies successfully could result in additional costs to us, slow down or prevent our product development and receipt of positive reimbursement coverage decisions, or impair our ability to generate revenue. Delays in initiating or completing our planned clinical studies could also allow third parties to bring products to market sooner than expected, which could impair our ability to successfully commercialize our products and future products, if launched, and may harm our business, financial condition, results of operations, and growth prospects. In addition, many of the factors that may cause, or lead to, a delay in initiation or completion of clinical studies may also ultimately lead to the delay or the narrowing or denial of any regulatory clearance, approval, or certification we may seek with respect to our products and future products. in the initiation or completion of any clinical study of our products or future products in development, such as Galleri or our precision oncology portfolio, or seeking broad coverage and reimbursement, will increase our costs, down or our product development and regulatory clearance, approval, or certification process, and or potentially broad adoption of our products and future products and their ability to generate revenue.
A substantial majority of our revenue is generated from sales of Galleri and we are highly dependent on it for our success.
We began selling Galleri in the United States in mid-2021. Sales of Galleri accounted for a substantial majority of our revenue to date and we expect that such sales will continue to account for the substantial majority of our revenue for the foreseeable future. Our ability to execute our growth strategy and become profitable will therefore depend upon the adoption of Galleri as a widely used MCED test. Continued adoption and use of Galleri will depend on several factors discussed in these risk factors and in the section titled Management’s Discussion and Analysis, including, among others, our ability to successfully fulfill test orders, the prices we charge for our tests, the scope of coverage and amount of reimbursement available from third-party payors, including managed care organizations, private health insurers, and government healthcare programs, such as Medicare and Medicaid in the United States and similar programs in other countries, the availability of clinical and real-world data that supports the value and impact of our tests, and the extent to which our tests receive FDA authorization or a USPSTF grade A or B recommendation. We cannot assure you that Galleri will continue to maintain or gain market acceptance, and any failure to do so would harm our business and results of operations.
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If our products do not receive adequate coverage and reimbursement, if at all, from third-party payors, our ability to expand access to our products and our overall commercial success beyond our existing sales channels will be limited.
We have established coverage and reimbursement for Galleri from a number of self-insured employers and other third-party payors in the United States, but do not currently have broader coverage and reimbursement by government healthcare programs, such as Medicare. A key element of our strategy is to expand access to our tests by pursuing broad coverage and reimbursement by third-party payors, including government payors. Coverage and reimbursement by third-party payors, including managed care organizations, private health insurers, and government healthcare programs, such as Medicare and Medicaid in the United States and similar programs in other countries, for early detection tests we offer or are planning to offer, can be limited and uncertain. Healthcare providers may not order our products unless third-party payors cover and provide adequate reimbursement rates for a substantial portion of the price of our products. If we are not able to obtain adequate coverage and an acceptable level of reimbursement for our products from third-party payors, there could be a greater co-insurance or co-payment obligation for any individual for whom a test is ordered. The individual may be forced to pay the entire cost of a test out-of-pocket, which could dissuade physicians from ordering our products and, if ordered, could result in delay in or decreased likelihood of our collection of payment. We believe our revenue and revenue growth will depend on our in coverage and adequate reimbursement for our products from third-party payors.
Medicare is the single largest U.S. payor and a particularly important payor for many cancer-related laboratory services given the demographics of the Medicare population. Traditional fee-for-service Medicare generally does not cover screening tests, which are considered preventive services, that are performed in the absence of signs or symptoms of illness or injury, unless there is a statutory provision that explicitly authorizes coverage of the test.
In February 2026, the Nancy Gardner Sewell Medicare MCED Coverage Act became law and created a Medicare coverage benefit category for multi-cancer early detection tests. The law included certain standards, including that CMS would establish coverage through a national coverage determination (“NCD”) process under “reasonable and necessary” evidentiary requirements. An NCD typically involves a multi-step review that can include evidence assessment by CMS staff, consultation with external technology assessment organizations, a Medicare Evidence Development & Coverage Advisory Committee (MEDCAC) meeting, and opportunities for public comment. CMS may issue an NCD to provide coverage for MCED tests that are cleared under 510(k), classified under 513(f)(2) or approved by the FDA, with authority to initiate coverage as early as January 1, 2029. Coverage eligibility is phased in, with those aged 50-65 eligible under the law in 2029, expanding by one age-year annually. The payment rate for covered MCED tests would be in alignment with methodologies under the Protecting Access to Medicare Act (PAMA), which incorporates private market rates. The NCD process can be lengthy and resource-intensive, and its timing, outcome, and scope are inherently uncertain, which may affect the availability, extent, and conditions of Medicare reimbursement for applicable products or services. Because of the novelty of the statutory authority and of MCED technology, it is uncertain what evidence will be required in order to achieve an NCD, or if the evidence we have collected through our completed, ongoing or planned clinical studies and commercial practice will be sufficient to support such determination.
Additionally, the Medicare Improvements for Patients and Providers Act of 2008 authorizes the CMS to cover additional preventive services that are not expressly covered by the statute if the service is (a) reasonable and necessary for the prevention or early detection of an illness or disability, (b) recommended with a grade of A or B by the USPSTF, and (c) appropriate for Medicare beneficiaries under Part A or Part B. CMS establishes coverage through an NCD process, which generally requires, or is significantly more likely following, FDA approval of specific screening products. In its discretion, the USPSTF generally waits for FDA authorization before it considers undertaking reviews of novel technology. Galleri and certain other future products could be considered screening tests under Medicare and, accordingly, are and may not be eligible for traditional Medicare fee-for-service coverage and reimbursement unless we pursue substantial additional measures, including, but not limited to, securing FDA authorization of Galleri and other future products, followed by obtaining a grade A or B recommendation from the USPSTF, in an effort to enable CMS to issue an NCD. Historically, USPSTF has only provided grade A or B recommendations on the basis of evidence packages that include mortality data, which would require significant long-term follow up. However, even if we are successful in obtaining an NCD on the basis of the new MCED category, the coverage would only apply to a relatively small portion of the overall
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Medicare population due to the age restriction and annual phase in requirement. Accordingly, we would intend to seek a USPSTF grade for Galleri and, potentially, an NCD as additional preventative services. If we receive an NCD for Galleri or our other products and subsequently receive a USPSTF grade lower than A or B, it is possible that CMS would rescind the NCD.
If the USPSTF does not recommend any of our products with a grade of A or B, CMS declines to initiate an NCD, CMS decides to rescind a prior NCD, or the decision regarding an NCD is negative, the impacted product would not be eligible for fee-for-service Medicare coverage in the absence of a new statutory provision providing for coverage. Even if the USPSTF were to recommend Galleri or other products we are developing, the USPSTF review process and the ensuing NCD process by CMS could take several years to complete, and coverage for our products would be delayed while review is ongoing. The Affordable Care Act (“ACA”) mandates that many private insurance plans cover, among other preventive health services, evidence-based items or services recommended by USPSTF with a grade of A or B, with certain prohibitions on cost-sharing requirements. Accordingly, if USPSTF does not recommend use of Galleri or other products we are developing or requires a substantial amount of time to review such products, our business and results of our operations would be harmed. Coverage and adequate reimbursement under Medicare are also uncertain as discussed further in “Business— Government Regulations—Coverage and Reimbursement” in this Annual Report on Form 10-K.
If eligible for reimbursement, laboratory tests including ours are generally classified for reimbursement purposes under CMS’s Healthcare Common Procedure Coding System (“HCPCS”) and the American Medical Association’s (“AMA”) Current Procedural Terminology (“CPT”) coding systems. We and payors must use those coding systems to bill and pay for our diagnostic tests, respectively. These HCPCS and CPT codes are associated with the particular product or service that is provided to the individual. Accordingly, without a HCPCS or CPT code applicable to our products, the submission of claims would be a significant challenge. Once CMS creates an HCPCS code or the AMA establishes a CPT code, CMS establishes payment rates and coverage rules under traditional Medicare, and private payors establish rates and coverage rules independently. Under Medicare, payment for laboratory tests is generally made under the Clinical Laboratory Fee Schedule (“CLFS”) with payment amounts assigned to specific HCPCS and CPT codes. In addition, effective January 1, 2018, a new Medicare payment methodology went into effect for clinical laboratory tests, under which laboratory-reported private payor rates are used to establish Medicare payment rates for tests reimbursed via the Medicare Clinical Laboratory Fee Schedule. The new methodology implements Section 216 of the Protecting Access to Medicare Act of 2014 (“PAMA”) and requires laboratories that meet certain requirements related to volume and type of Medicare revenues to report to CMS their private payor payment rates for each test they perform, the volume of tests paid at each rate, and the HCPCS code associated with the test. CMS uses the reported information to set the payment rate for each test at the weighted median private payor rate. Most affected tests are reevaluated every three years. A series of legislative amendments the next PAMA reporting period to February 1, 2026 through April 30, 2026, which will cover the original data collection period of January 1, 2019 through June 30, 2019. New CLFS rates for clinical diagnostic laboratory tests (“CDLTs”) will be established based on that data, January 1, 2027, subject to phase-in limits. In addition, under PAMA, as amended, the payment reduction cap is 15% per test per year from January 31, 2026 through 2028. PAMA also authorized the adoption of new, temporary billing codes and unique test identifiers for FDA-cleared or approved tests, as well as advanced diagnostic laboratory tests (“ADLTs”). The AMA’s CPT Editorial Panel approved a proposal to create a new section of billing codes called Proprietary Laboratory Analyses (“PLA”) codes, to facilitate implementation of this section of PAMA. Congress is currently considering additional reforms to the PAMA reporting system. The full impact of the PAMA rate-setting methodology and its applicability to our products, including interactions with potential establishment of a Medicare MCED category under consideration in Congress, remains uncertain at this time.
Coverage and reimbursement by a third-party payor may depend on a number of factors, including a payor’s determination that a product is appropriate, medically necessary, and cost-effective. Each payor will make its own decision as to whether to establish a policy or enter into a contract to cover our products and the amount it will reimburse for such products. Any determination by a payor to cover and the amount for which it will reimburse our products would likely be made on an indication-by-indication basis. For example, we may face additional scrutiny in obtaining coverage and reimbursement from third-party payors given the additional costs of further diagnostic workup in the event the test is deployed at scale, including as a result of the false positive rate. As a result, obtaining approvals from third-party payors to cover our products and establishing adequate coding recognition and reimbursement levels is an unpredictable, challenging, time-consuming, and costly process and we may never be successful. If third-party payors do not provide adequate coverage and reimbursement for our products, our ability to commercially will be limited.
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In determining whether to provide coverage and reimbursement for Galleri, payors may consider the results of our clinical studies, including the NHS-Galleri Trial. The NHS-Galleri Trial did not meet its primary endpoint of statistically significant combined Stage 3 and 4 reduction. Even though the trial demonstrated a substantial reduction in stage 4 cancer diagnoses, increased stage 1 and 2 detection of deadly cancers, and four-fold higher cancer detection rate when compared to recommended screenings alone, payors may view the overall trial outcome unfavorably, which could adversely impact coverage decisions or reimbursement rates for Galleri. Any inability to secure favorable coverage and reimbursement decisions as a result of the NHS-Galleri Trial results, or otherwise, could materially harm our revenue and growth prospects.
Even if we establish relationships with payors to provide our products at negotiated rates, such agreements would not obligate any healthcare providers to order our products or guarantee that we would receive reimbursement for our products from these or any other payors at adequate levels. Thus, these payor relationships may not result in revenues for our products in line with our expectations, including for Galleri, any other current or future products or future versions of Galleri. We believe it may take several years to achieve coverage and adequate reimbursement with a majority of third-party payors, including with those payors offering negotiated rates. In addition, we cannot predict whether, under what circumstances, or at what payment levels payors will cover and reimburse our products. Although we do not expect Galleri to have Medicare or other broad third-party coverage or reimbursement in the near term, we will continue to market our product to health systems, large self-insured employers, life insurance providers, physician directed channels, health plans, and additional at-risk groups such as first responders, including firefighters. If we fail to establish and maintain coverage and reimbursement for our products, our ability to expand access to our products, generate increased revenue, and grow our test volume and customer base will be limited and our overall commercial success and growth prospects will be limited.
Our commercial products may fail to achieve the degree of market acceptance necessary for commercial success.
The commercial success of any of our marketed products, including Galleri and our precision oncology portfolio, or future products will depend on the degree of market acceptance by consumers, including self-insured employers, health systems, healthcare providers, life insurance companies, patients, and, over the longer-term, third-party payors. The degree of market acceptance of our products will depend on a number of factors, including:
• the performance, validation, and clinical utility of such products as demonstrated in clinical studies, from real-world use, and published in peer-reviewed journals;
• our ability to demonstrate the clinical validation and utility of our products and their potential advantages to the medical community;
• the ability of our products to demonstrate comparable or non-inferior performance in real-world intended use populations as in clinical studies;
• the willingness of consumers, including self-insured employers, health systems, healthcare providers, life insurance companies, patients, and others in the medical community to utilize our products;
• the willingness of commercial third-party payors and government payors to cover and reimburse our products, the scope and amount of which will affect an individual’s or entity’s willingness or ability to pay for our products and likely heavily influence healthcare providers’ decisions to recommend our products;
• willingness of providers, patients, and others to learn about our products, and establish a sense of understanding and confidence in the use of our products;
• with respect to Galleri, which was launched as an LDT in the United States for use in an asymptomatic population, the concern that the product could lead to unnecessary medical screening procedures or a high false positive rate and the associated costs of unnecessary workups resulting from false positives;
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• the belief of providers, patients, CMS and others that the use of Galleri in its intended use population is clinically appropriate, and not restricting its use to a narrower intended population;
• the introduction or market acceptance of future third-party products, including the expansion of the capabilities of existing products and tests that are reimbursed;
• the ability of our partners and our employees and contractors to ensure the safety and privacy of our patient data;
• publicity (adverse or positive) concerning our products or operations (including third-party partners, patient-facing service providers, vendors, or suppliers) or future third-party products, including adverse publicity resulting from the use of our products or offerings by third parties, including partners;
• our ability to fulfill test orders in a timely manner;
• the strength of our marketing and distribution support and patient-facing service providers;
• the perception among healthcare providers, payors, regulators, and the investment community regarding the clinical significance of clinical trial results, including instances where a trial does not meet its primary endpoint, even if clinically meaningful secondary endpoints are achieved, as occurred in our NHS-Galleri Trial; and
• the willingness of healthcare providers and payors to prescribe or cover Galleri in light of the NHS-Galleri Trial not meeting its primary endpoint of statistically significant combined Stage 3 and 4 reduction, notwithstanding favorable secondary endpoint data.
The failure of our products, once introduced, to be listed in physician guidelines or of our studies to produce favorable and consistent results or to be published in peer-reviewed journals could limit the adoption of our products. In addition, healthcare providers and third-party payors, including the Centers for Medicare and Medicaid Services (“CMS”), may rely on physician guidelines issued by industry groups, medical societies, and other key organizations, such as the United States Preventive Services Task Force (“USPSTF”), an independent, volunteer panel of experts in the field of prevention, evidence-based medicine and primary care, before utilizing or reimbursing the cost of any diagnostic or screening test. Although we have completed our PATHFINDER study, PATHFINDER 2 study and NHS-Galleri Trial, and have additional clinical studies underway designed to evaluate the clinical validity of Galleri, our product is not yet, and may never be, listed in any such guidelines, even if approved by the FDA.
Further, if our products or the technology underlying them do not receive sufficient favorable exposure in peer-reviewed publications, the rate of physician and market acceptance of our products and positive reimbursement coverage decisions for our products could be negatively affected. The publication of clinical data in peer-reviewed journals is a crucial step in commercializing and helping obtain reimbursement for products, and our inability to control when, if ever, results are published, if positive, may delay or limit our ability to derive sufficient revenues from any product that is developed using data from a clinical study.
Additionally, we believe that FDA approval for Galleri may provide clinical and regulatory credibility and validation in the view of providers, third-party payors, and others, and our failure to achieve FDA approval, at all or within our anticipated timelines or with an adequate approved label, could limit adoption of Galleri, even if we continue to publish data on its clinical validity and utility in peer-reviewed journals. Potential rejection or material delay of our PMA submission, including a requirement by the FDA to conduct additional studies or expand the enrollment of completed or ongoing studies, may reflect negatively on Galleri and the clinical studies used to support our PMA submission, which could lead healthcare providers, payors, and others to lose confidence in the utility or benefit of Galleri and our other products and future products.
Failure to achieve broad market acceptance of our products would materially harm our business, financial condition, and results of operations.
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We may not be able to generate sufficient revenue to offset our ongoing operating expenses and achieve and maintain profitability, and it may be difficult for us to offset the costs of our royalties, including the high single-digit royalty that we will be required to pay to Illumina in perpetuity or our royalties payable to the Chinese University of Hong Kong.
Our ability to generate future revenue growth from product sales and achieve profitability depends on our ability to continue commercializing our products. We may not be able to generate sufficient revenues to offset our costs of developing and offering our products or achieve or maintain profitability on any products, and revenues from precision oncology may not be a significant source of our overall revenue in the future. Further, we cannot assure you that we will successfully be able to launch any future products as planned, if at all, and our failure to do so may prevent us from generating increased revenue. Even if we are able to launch future products in a timely manner, we may not be able to generate sufficient revenue to offset our costs and achieve profitability. Our ability to generate future revenue growth from product sales depends heavily on our in:
• continuing clinical development, validation, and demonstration of the clinical utility of our products and future products and continuing to improve product performance and expand product features over time;
• seeking, obtaining, and maintaining marketing authorizations or certifications that may be necessary or desired for any versions of Galleri and any future products that we develop;
• launching and commercializing our products by maintaining and expanding our sales force, marketing, medical affairs, and distribution infrastructure, and collaborating with commercialization partners;
• investing in and enhancing our proprietary methylation platform, and enhancing later versions of our existing and future products and offerings;
• obtaining market acceptance by consumers, including self-insured employers, health systems, healthcare providers, life insurance companies, patients, and third-party payors;
• establishing and maintaining supply and manufacturing relationships with third parties that can timely and consistently provide adequate, in both amount and quality, products and services to support clinical development and the market demand for Galleri, our precision oncology portfolio, and, if launched, future versions of Galleri or other future products;
• achieving adequate coverage and reimbursement from government healthcare programs, health insurance organizations, and other third-party payors for products that we launch;
• achieving sufficient efficiencies and cost management strategies in our laboratory, supply chain, and elsewhere to maintain an appropriate cost of goods sold to offer our products at an acceptable price in a pre-reimbursement environment;
• addressing any technological and market developments;
• negotiating favorable terms in any collaboration, licensing, or other arrangements into which we may enter and maintaining such existing or future arrangements;
• maintaining, protecting, and expanding our portfolio of intellectual property rights, including patents, trade secrets, know-how, and trademarks;
• the potential cost of and delays in product development as a result of any regulatory oversight applicable to our existing and future products and offerings;
• defending against third-party interference, invalidation, or infringement claims, if any; and
• attracting, hiring, and retaining qualified personnel.
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We anticipate incurring significant costs to continue commercializing our products. Our expenses could increase beyond expectations if we are required by the FDA or other regulatory agencies, or notified bodies to delay the launch of any new products, narrow or change our intended use or product claims, and modify or expand our clinical studies or to perform additional clinical studies, either pre- or post-approval (or certification), in addition to those that we currently anticipate. Additionally, it may be difficult for us to offset the costs of the high-single-digit royalty that we will be required to pay under our agreement with Illumina in perpetuity. For more information, see “Business—Operations—Supply Chain and Agreement” in this Annual Report on Form 10-K.
Under the terms of our license agreements with the Chinese University of Hong Kong, we are also required to pay a low single-digit royalty on net sales of our products that use the technology we license from Chinese University of Hong Kong, subject to minimum annual guarantees. Our payment obligations with respect to each license from the Chinese University of Hong Kong for each product containing any licensed technology extends until the expiration or termination of such license, which shall be the later of a low double-digit number of years from our payment of the license issue fee or expiration of the last-to-expire licensed patent. Although certain provisions in our agreement with Illumina allow us to reduce our royalty to Illumina by up to a low single-digit percentage due to third party royalties actually paid, such as our royalty payment to Chinese University of Hong Kong, our obligation to pay this royalty on our net sales could reduce our gross margins and increase our expenses. See the section titled “Business—Intellectual Property—License Agreements with the Chinese University of Hong Kong” in this Annual Report on Form 10-K.
We will need to generate significant additional revenue to achieve and maintain profitability and will need to obtain additional funding to continue operations. Even if we achieve profitability, we cannot be sure that we will remain profitable for any substantial period of time. We may never be able to generate sufficient revenue to achieve or maintain profitability and our recent and historical growth should not be considered indicative of our future performance. If we do not achieve or maintain profitability, it will be more difficult for us to finance our business and accomplish our strategic objectives, either of which could have a material adverse effect on our business, financial condition, results of operations, and growth prospects.
We may be unable to develop and commercialize new products, including enhanced versions of current products.
Although we reduced investment in the development of products beyond Galleri as part of the Restructuring Plan, including in a diagnostic aid product for cancer and our precision oncology portfolio, we are continuing research and development of our proprietary methylation platform and our large clinical and genomic datasets to develop enhanced versions of Galleri. In the future, we may determine to invest further in new product development. The commercialization of any new products, including enhanced versions of current products, will require the completion of certain clinical development activities, regulatory activities, and the expenditure of additional cash resources. However, we may not be successful in transitioning our products to a new or enhanced version or iteration, or achieving the required characteristics in a new product. Product development involves a lengthy and complex process and we may be unable to commercialize, validate, or improve performance of any of our products on a timely basis, or at all. For example, to the extent an enhanced version of an existing product is developed, we intend to undertake one or more bridging studies to measure and evaluate concordance, performance and safety of the subsequent, version of our product versus the existing product, using previously collected clinical study data and other samples. Any such bridging study will need to be agreed upon with the FDA or other regulatory authorities, in particular where we are modifying an FDA approved product or seeking FDA approval of a new product, and may be or to support approval of any such subsequent, version of our products.
If unsuccessful or insufficient, we would be required to revert to a prior version of the test and forgo, or be delayed in, implementing any perceived or potential updates, including enhancements, or further enhance, modify or update to a new version of the test and run additional bridging studies. Reverting to a prior version of the test or running additional bridging studies may cause delays in our efforts to obtain PMA approval for Galleri or any new product. Additionally, planned improvements to our products may cause unintentional technical, logistical or other issues. In late 2024, we began use of an updated commercial version of Galleri in commercial channels. This version incorporates an industrial scale platform with significant automation and is intended to enable us to scale more efficiently with future demand. In connection with implementation of this new version of Galleri, we initially experienced and may continue to experience increased turnaround times, re-processing costs and sample
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failures. We continually monitor and evaluate laboratory operations and performance in an effort to achieve our intended sample processing metrics and costs; however from time to time, processing issues may arise that could impact our operations. If we are unable to adequately prevent these issues from occurring, or to adequately identify and remedy these issues, we may experience reputational harm, lose customers and revenue, need to offer discounts, require additional expenditures, delay or prevent PMA approval, or suffer other negative consequences.
We are pursuing a PMA with the FDA for a further updated version of Galleri, and, in January 2026, we submitted a PMA to the FDA including the full prevalent screening round analysis from the NHS-Galleri Trial, together with performance and safety data focused on the first approximately 25,000 participants in the PATHFINDER 2 study. While we have announced positive topline NHS-Galleri Prevalent Round Results and presented positive results from our PATHFINDER 2 study at ESMO in October 2025, each of these studies was conducted on an earlier version of Galleri. Our PMA submission to the FDA also includes a bridging analysis comparing and measuring concordance of the version of Galleri used in the NHS-Galleri Trial and PATHFINDER 2 study with the updated version of the Galleri test submitted to the FDA for premarket approval. The version that has been submitted to the FDA for approval may have different performance, safety, operational or other characteristics, and the FDA’s approval, if at all, will depend on the results of the bridging study, which could result in different labelling than our commercially available product.
We cannot ensure that we will generate sufficient revenue from products that we successfully commercialize or otherwise mitigate the risks associated with our business to raise enough capital to develop and commercialize new products. In addition, once our development efforts for a product are completed, commercialization efforts, including allocation of resources necessary to comply with applicable laws and regulations, will require significant expenditures. Any failure to develop, obtain necessary marketing authorizations for, or commercialize new products, and meet and continue compliance with applicable laws and regulations, could have a material adverse effect on our ability to implement our strategy and grow our business.
If similar third-party products are developed and do not perform as intended or cause harm or injury to patients, the market for our products could be impaired.
Many companies have recently launched or are attempting to develop competing cancer detection tests and technologies focused on improving cancer care with early cancer detection tests and post-diagnostic products. If any of these tests do not perform to expectations or cause harm or injury to patients, it may result in lower clinical and consumer confidence in early cancer detection and precision medicine in general, which could potentially adversely affect confidence in our products. In particular, to-date other MCED tests on the market have been launched based on case-controlled data only, and have not been tested in an intended use population or in an interventional trial. Case controlled studies do not always translate into an intended use population, for example because case controlled studies often have a higher number of cancer cases, a different mix of types of cancer and stronger cancer signal in the cancer samples as compared to a prospective study in an intended use population. As a result, the failure of any competing products to perform as expected could significantly adversely affect public perception about cancer detection tests generally, including our products, and could significantly our reputation and operating results.
If we fail to obtain additional financing, we may be unable to expand our commercialization efforts or to develop and commercialize additional products.
Our operations have required substantial amounts of cash since inception. To date, we have financed our operations primarily through the sale of equity securities, including in our recent private placement transaction and at-the-market sales, and capital contributions from Illumina and, to a lesser extent, revenue derived from Galleri sales and precision oncology portfolio revenue. Our product development, commercialization and clinical study activities are expensive, and we expect to continue to spend substantial amounts as we expand our commercialization efforts with respect to Galleri, including pursuing broader coverage and reimbursement, continue to enhance our core technology platform, broaden the applications of our technology platform, and develop new products in the future. In addition, obtaining any necessary or desirable regulatory approvals, clearances, or certifications, as well as coverage and reimbursement, for our products will require substantial additional funding.
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As of December 31, 2025, we had $249.7 million in cash and cash equivalents and short-term marketable securities of $654.7 million. We believe that our existing cash and cash equivalents, and short-term marketable securities will be sufficient to fund our projected operations for at least the next 12 months. Our estimate as to how long we expect our existing cash, cash equivalents, and short-term marketable securities to be available to fund our operations is based on assumptions that may prove to be inaccurate, and we could use our available capital resources sooner than we currently expect. In addition, changing circumstances may cause us to increase our spending significantly faster than we currently anticipate, and we may need to spend more money than currently expected because of circumstances beyond our control. We may need to raise additional funds sooner than we anticipate.
We will require additional capital to expand the commercialization of Galleri and our precision oncology portfolio, and for the development and commercialization of future products. Our future capital requirements depend on many additional factors, including:
• the cost of development and commercialization activities for our products, including Galleri and our precision oncology portfolio and our future products, including marketing, sales, and distribution costs;
• the cost related to continued scaling operations to support demand for our products, including the cost of operating our laboratory in Durham, North Carolina;
• the timing of, and the costs involved in, obtaining any required or desired regulatory approvals, clearances, or certifications for our products;
• the timing, scope, progress, results, and costs of developing additional products and conducting clinical studies;
• the costs involved in preparing, filing, prosecuting, maintaining, expanding, defending, and enforcing patent and other intellectual property rights and claims, including litigation costs and the outcome of such litigation;
• the timing and amount of sales of our products and collection of related receivables;
• the extent to which our products are eligible for coverage and reimbursement from third-party payors;
• the emergence of new technologies, products, or services and other adverse market developments; and
• costs associated with extending the NHS-Galleri Trial follow-up period by 6-12 months, and any additional clinical studies or analyses that may be required to further demonstrate clinical utility following the trial’s failure to meet its primary endpoint;
• potential increased costs of development and commercialization activities if the NHS-Galleri Trial results adversely impact our ability to obtain regulatory approval, coverage and reimbursement, or commercial partnerships on favorable terms; and
• other potential adverse developments.
Additional capital may not be available when we need it, on terms acceptable to us or at all. We have no committed source of additional capital, other than the funds to be committed by Illumina as described above. Furthermore, any additional capital raised through the sale of equity or equity-linked securities will dilute stockholders’ ownership interests in us, may require stockholder approval, may have an adverse effect on the price of our common stock, and holders of these securities may have rights, preferences or privileges senior to those of our then-existing stockholders. Debt financing, if available, may include restrictive covenants that could limit how we conduct our business and limit our ability to further raise capital, and if available, may be available only on undesirable terms, particularly as we would borrow as an independent company and not a subsidiary of Illumina. If adequate capital is not available to us on a timely basis, we may be required to significantly delay, scale back, or discontinue the commercialization of our products or research and development programs, or be unable to continue or expand our operations or otherwise capitalize on our business opportunities, as desired,
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which could materially affect our business, financial condition, results of operations, and growth prospects and cause the price of our common stock to decline.
As a result of the Spin-Off, we are subject to a number of limitations and risks that may impact our ability to obtain additional financing. For example, certain restrictions under the Tax Matters Agreement limit our ability to obtain additional financing, including offerings of common stock, or otherwise require that we undertake certain procedures with Illumina. In addition, certain terms of the Spin-Off may impact our ability to successfully obtain financing on favorable terms or at all. These restrictions under these agreements may impact our ability to obtain additional financing when needed, if at all, and, if we are required to repay any disposal funds to Illumina under the clawback provision, our cash balance will be reduced and we may have greater need for additional financing.
The Samsung Investment is subject to closing conditions, including conditions beyond our control, and no assurance can be given that closing will take place on the timeline currently anticipated, or at all, or that we will achieve our goals under the collaboration agreements to be entered into with Samsung C&T and/or Samsung Electronics. Any failure to close the Samsung Investment or achieve such goals could adversely impact our business, financial conditions, results of operations and liquidity.
On October 16, 2025, we entered into a stock purchase agreement (the “Samsung Stock Purchase Agreement”) with Samsung C&T Corporation (“Samsung C&T”), Samsung Electronics Singapore Pte. Ltd. (together with Samsung C&T, the “Samsung Investors”) and Samsung Electronics Co., Ltd. (“Samsung Electronics”), providing for the issuance and sale by us to the Samsung Investors in a private placement of an aggregate of 1,570,308 shares of our common stock, at a purchase price of $70.05 per share, upon the terms and conditions set forth in the Samsung Stock Purchase Agreement (the “Samsung Investment”). The Samsung Investment is subject to the satisfaction of certain closing conditions set forth in the Samsung Stock Purchase Agreement, including, but not limited to the satisfaction of certain regulatory approvals or clearances, including with respect to the Committee on Foreign Investment in the United States (“CFIUS”). Additionally, we have entered into a Business Collaboration Agreement with Samsung C&T and a Strategic Opportunities Collaboration Agreement with Samsung Electronics in satisfaction of certain closing conditions under the Samsung Stock Purchase Agreement, which will become automatically upon the of the Samsung Stock Purchase Agreement.
We have experienced delays, and may experience further delays and difficulties in satisfying the conditions for closing of the Samsung Investment, and no assurance can be given that closing will take place on the timeline currently anticipated or at all. Some of the closing conditions are outside of our control and it is possible that not all of the closing conditions for the Samsung Investment will be satisfied or that we will not receive the expected proceeds on the timeline currently anticipated or at all. For example, the Samsung Investment is subject to, among others, certain regulatory approvals and clearances, including with respect to CFIUS. In October 2025, we and the Samsung Investors filed a declaration for CFIUS clearance of the Samsung Investment. In January 2026, CFIUS requested that we and the Samsung Investors file a joint voluntary notice, which provides CFIUS up to an additional 90 days to review the Samsung Investment. Government funding shortfalls may this timing. While we remain that we can obtain CFIUS clearance for the Samsung Investment, there can be no assurance of this, nor that we will receive clearance within the 90-day review and periods.
In addition, even though we have executed the Business Collaboration Agreement with Samsung C&T and the Strategic Opportunities Collaboration Agreement with Samsung Electronics, there is no assurance that these agreements or the collaborations they govern will achieve our goals or be on terms that prove to be economically or strategically beneficial to us. For example, we may not recognize or accomplish our strategic objectives under the Business Collaboration Agreement or Strategic Opportunities Collaboration Agreement and we may ultimately find ourselves restricted by the terms that we have negotiated under such agreements.
Any such adverse developments, including any failure to close the Samsung Investment, could adversely impact our business, financial condition, results of operations and liquidity.
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If our products result in direct or indirect participant or patient harm or injury, we could be subject to significant reputational and liability risks.
Our success will depend on the market’s confidence that our products, including Galleri and, if successfully developed and launched, further enhanced versions of Galleri, and our precision oncology portfolio can provide reliable, high-quality results. We believe that participants, patients, customers, physicians, and regulators are likely to be sensitive to errors in the use of our products or failure of our products to perform as described, and there can be no guarantee that our products will meet expectations. Galleri is intended to be used to detect a cancer signal in individuals, but its results are not intended to be diagnostic. If a cancer signal is detected, the product is used to localize the origin of the cancer signal; a “cancer signal detected” test result must be followed up by appropriate diagnostic workup. Because the product cannot detect all cancer signals, and may not detect signals for all cancer types, a negative test does not rule out the presence of cancer. Additionally, an individual undergoing unnecessary diagnostic tests on the basis of a false positive result or an CSO result could us to reputational risks and potential liability. Similarly, an individual who receives a cancer diagnosis shortly following a “no cancer signal detected” test result may create publicity about our product, which would adoption. Performance could establish a perception of our products among physicians, patients, customers, and regulators, our ability to commercialize our products, our ability to obtain marketing authorizations or secure coverage and reimbursement, or otherwise result in reputational or enforcement action or by a regulatory body. These risks may be more pronounced for certain applications in our precision oncology portfolio, such as companion diagnostic development, as our products would be directly involved with the choice to use certain treatments in a particular case. In addition, we may be subject to legal arising from any in the use, manufacture, design, labeling, marketing, or performance of our products, including or results. If our products result in direct or indirect participant or patient or , we could be subject to significant reputational and liability risks, and our reputation, business, financial condition, results of operations, and growth prospects could be materially affected.
We rely on Illumina as a sole supplier for our next-generation sequencers and associated reagents, Madison Industries (“Madison”) as a sole supplier of blood collection tubes, and Twist Bioscience Corporation (“Twist”) as a sole supplier of DNA panels. Additionally, we rely on a limited number of suppliers for some of our laboratory instruments and reagents, and we may not be able to immediately find replacements if necessary.
We rely on Illumina as the sole supplier of the next-generation sequencers and associated Illumina-supplied reagents we use to perform our genomic tests and as the sole provider of servicing, including maintenance and repair services for these sequencers. Additionally, as a part of the Spin-Off, Illumina distributed 85.5% of its holdings of the Company to its shareholders but remained a significant shareholder through its retention of 14.5% of our outstanding shares immediately following the Spin-Off and we are party to a number of agreements with Illumina entered into in connection with the Spin-Off. Any disruption or interruption in Illumina’s operations, Illumina’s breach of our supply-related agreements or disputes arising between the parties would impact our supply chain and laboratory operations. We also rely on Madison as the sole supplier of our blood collection tubes and Twist as the sole supplier of our DNA panels. We rely on other vendors as sole suppliers, including for machinery, reagents, magnetic beads, tubes and other supplies used in our laboratory workflows although we believe we are less reliant on their offerings than the vendors named above. A disruption or interruption in supply from these vendors could our ability to continue laboratory operations, and develop and commercialize any other future products. Any such or in supply, quality, or servicing would affect our commercial partnerships, our ability to continue supporting clinical studies and conduct new studies, our reputation, and could impact our timing for regulatory authorization and coverage and reimbursement.
Further, we have submitted a PMA for Galleri to the FDA, and we may similarly seek FDA authorization for future products. For RUO products or components supplied to us by any supplier, including Illumina, we would be required to validate for IVD purposes and submit to FDA as part of our marketing authorization. We are cooperating with Madison to obtain FDA authorization as part of our PMA application for their blood collection tubes to be used with our Galleri test. In some cases, use of these third-party products in any FDA-cleared or approved product we may seek to commercialize will be conditioned on these suppliers having obtained FDA clearance or approval for their products for the uses of those third-party products as intended with ours. Before we pursue approval for our products that incorporate or use materials supplied to us by these suppliers, we will need
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to negotiate and execute agreements with these parties and in some cases may need to ensure these products have obtained the requisite clearances or approvals for the intended uses with our products. Any failures or delays in negotiating agreements with our suppliers on reasonable terms, or their inability to obtain any required clearances or approvals, may increase our costs or delay or prevent us from obtaining approval of, and thus successfully commercializing, our products. For example, any changes to the material used in our laboratory workflow may require us to supplement or revise the information contained in any PMA or other application, which could increase our costs and delay our efforts to obtain approval for Galleri, and could delay our implementation of the material into our workflow.
Moreover, products supplied to us for use in our LDT products may be currently available to us as RUO products, which means, among other things, that the third-party supplier intends for the products not to be used for clinical use and that the products must be labeled “For Research Use Only. Not for use in diagnostic procedures.” If the FDA were to take enforcement action against us or our suppliers for our use of RUO products in connection with our products and future products that we intend to use for clinical purposes, including our launch of LDTs, such action could require us to seek alternative suppliers and thus materially and adversely affect our ability to provide such products to our customers and could significantly increase our costs of conducting business. Products for FDA-approved or cleared in vitro diagnostic use generally have significantly higher costs than LDT uses, which, in turn, are more costly than products intended for RUO.
Our current suppliers, including Illumina, Madison, or Twist, may also discontinue or substantially change the specification of products that we utilize or intend to utilize in our products and future products. While we believe other suppliers exist that are capable of supplying and servicing the equipment and materials necessary for our products and laboratory operations, including certain instruments, components, consumables, and reagents, qualifying, contracting with, validating, and transitioning to any such new suppliers could temporarily result in interruptions in or otherwise affect our ability to manufacture and commercialize products or the performance specifications of our laboratory operations and sample processing or, if we receive FDA authorization for our current or future products, could require that we revalidate such products or submit such changes for regulatory authorization by the FDA. For example, we have used, currently use and expect to continue to use Madison blood collection tubes for all of our prior, ongoing, and planned clinical studies that support product development and validation. It may be difficult to engage with another supplier who can provide the same products and with the same quality and availability as Madison, which could significantly delay our clinical studies and ability to process tests, and materially adversely impact our business. In addition, we purchase certain products on a purchase order basis and cannot guarantee a consistent source of supply. The use of equipment or materials provided by a replacement supplier could require us to alter our laboratory operations and sample collection and processing and related procedures. In the case of attempting to obtain an alternative supplier for Illumina, Madison, or Twist, replacement instruments and associated reagents, tubes, and panels that meet our quality control and performance requirements may not be immediately available. If we encounter or in securing, reconfiguring or revalidating the equipment, reagents, and other materials that we require for our tests, laboratory operations and sample collection and processing, we would likely face significant in ongoing clinical studies or conducting new studies, commercializing our products and our reputation, business, financial condition, results of operations, and growth prospects would be affected.
Even where we have long term supply agreements in place, these agreements are periodically up for renewal, and may not be renewed or may be terminated. For example, the initial term of the Illumina Supply Agreement is scheduled to expire on February 28, 2027. The Illumina Supply Agreement will automatically renew for two year terms unless we or Illumina provide written notice of nonrenewal at least 120 days prior to the end of the then-current term. If Illumina determined not to renew the Illumina Supply Agreement, we could lose certain preferential pricing under that agreement and other beneficial terms. Even if we were to negotiate a replacement supply agreement with Illumina, it may not provide pricing or other terms that are as beneficial to us. Our royalty obligations under the Illumina Supply Agreement will survive any termination.
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If our facilities become inoperable, our ability to provide our products will be significantly impaired and our business will be harmed.
We currently conduct commercial testing work, for our products, including Galleri, in our laboratory located in Durham, North Carolina and additionally perform certain research and development in our laboratory in Menlo Park, California. We also have offices in Washington D.C. and the United Kingdom, which is important to our international operations. The facilities may be harmed, rendered inoperable by physical damage or otherwise become partially or completely unusable due to fire, floods, earthquakes, power loss, telecommunications failures, break-ins, accidents, pandemics, and similar events, which may render it difficult or impossible for us to provide our products for some period of time. Our laboratories and the equipment we use to perform our research and development or commercial work could be unavailable or costly and time-consuming to repair or replace. It would be difficult, time-consuming, and expensive to rebuild our facilities, particularly in light of the licensure, permits, and accreditation requirements for clinical laboratories like ours. For example, the development and commercial test processing activities for Galleri, and future potential commercial launch of future products, are dependent on the operation of our Durham, North Carolina laboratory, which received Clinical Laboratory Amendments of 1988 (“CLIA”) certification to perform high-complexity training, and College of American Pathologists (“CAP”) accreditation and a New York State Department of Health (“NYSDoH”) clinical laboratory permit, among other important certifications such as ISO 15189:2022. In particular, as part of the Plan, we have consolidated the processing of commercial Galleri tests in this facility and no longer process commercial Galleri tests in our Menlo Park Facility. As a result, any at our North Carolina facility could materially affect our ability to process tests and return results to patients, and our revenue, operations, business and prospects could be materially . Although we carry insurance for to our properties and the of our business, this insurance may not be sufficient to cover all of our potential and may not continue to be available to us on acceptable terms, or at all.
Our operations and business are materially dependent on various third parties, including information technology, sample collection, processing, transfer facilities, and other patient-facing service providers, any of which could experience disruption, failure, or interruption.
We depend on third parties for information technology, telecommunication systems, the collection, processing, transport, and storage of samples, and other patient-facing services. Any disruption in these services or operations could materially adversely harm our business and operations.
We depend on information technology and telecommunications systems, including those provided by third parties and their vendors, for significant elements of our operations, such as our laboratory information management systems, including test validation, specimen tracking, and quality control; personal information collection, storage, maintenance, and transmission; our report production systems; and our billing and reimbursement, research and development, scientific, and medical data analysis; and general administrative activities. As a public company, we continue to work to expand and strengthen a number of enterprise software systems that affect a broad range of business processes and functions, including, for example, systems handling human resources, financial controls and reporting, customer relationship management, regulatory compliance, security controls, and other infrastructure operations. These expansions may prove more difficult than we expect and could cause disruptions in our operations or additional expenses. Information technology and telecommunications systems are vulnerable to damage from a variety of sources, including telecommunications or network failures, malicious human acts, and natural disasters. Moreover, network security and back-up measures, some of our servers are potentially to physical or electronic -ins, computer viruses and similar events, and other cybersecurity . Any or of information technology or telecommunications systems on which aspects of our operations depend could have an effect on our business, reputation, results of operation, financial condition, and growth prospects.
Our business also depends on our ability to reliably sequence blood samples that we collect, which are transported to our Durham facility for analysis. Within the United Kingdom, our samples are initially collected, processed, frozen, and stored at several off-site facilities. Any disruption to the operations of these facilities could compromise the integrity of our samples and impede our ability to access and accurately sequence the data. We maintain samples from our clinical studies for several years. It is possible that the long-term stability of these samples may not be maintained with the passage of time, or could be damaged or lost through a natural or man-made disaster, accident, or break-in, which could negatively impact our ability to use such samples to validate our
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products. Further, interruptions in collection, processing, freezing, or transportation of samples performed by patient-facing service providers and other third parties, whether due to labor disruptions, bad weather, natural disaster, terrorist acts, threats, or for other reasons could adversely affect the samples and our ability to process the samples in a timely manner, which could negatively affect our ongoing research studies and harm our business. This is particularly true for the transport of our samples, which generally must be delivered to our facilities for processing within seven days of blood draw.
We also depend on third-party telemedicine providers for certain referrals and follow up services with patients. Third-party phlebotomists also provide patient-facing services in collecting samples and shipping samples to our facilities for processing. If these telemedicine or phlebotomist vendors fail to perform services, or if services are performed poorly or perceived to be performed poorly, we may suffer reputational harm, need to replace a provider, limit our ability to reach patients, result in loss of samples, failure to receive samples in a timely manner, insufficient quality of samples, or other harms.
Finally, the facilities of any of our third-party collaborators, consultants, contractors, vendors, suppliers, and service providers could be subject to earthquakes, power shortages, telecommunications failures, water shortages, floods, tornadoes, hurricanes, fires, extreme weather conditions, medical epidemics, pandemics, and other natural or man-made disasters or business interruptions. In addition, they may be affected by government shutdowns, changes to applicable laws, regulations, and policies, or funding shortages. The occurrence of any of these business disruptions could seriously harm their ability to complete their contracted services to us, which may adversely impact our operations and financial condition.
Failure of, or defects in, our machine learning algorithms, artificial intelligence, and cloud-based computing infrastructure, including interruptions of service through our key provider, Amazon Web Services, or increased regulation in the machine learning or artificial intelligence space, could impair our ability to process our data, develop products, or provide test results, and harm our business and results of operations.
We depend on technology systems for significant elements of our business operations. These technology systems support a variety of functions, including manufacturing operations, laboratory operations, data analysis, quality control, partner service and support, billing, research and development activities, and scientific and general administrative activities. The design, development, maintenance, and operation of our technology over time is expensive and complex, and may involve unforeseen difficulties including performance problems, undetected defects, or errors. Overcoming technical obstacles and correcting defects or errors could prove to be impossible or impracticable, and the costs incurred may be substantial and adversely affect our results of operations. Additionally, regulation in the machine learning and artificial intelligence space is constantly evolving and placed on the use of data, including personal information, health data, or genetic/ genomic data in such systems may make it for us to continue using our machine learning algorithms. If our technology does not function reliably, to meet expectations in terms of performance, or cannot be fully utilized due to increasing regulation, including regulation by the FDA or comparable regulatory authorities of artificial intelligence or medical device software, we may be to provide, or our customers may stop using, our products. We expect that increased investment will be required in the future to continuously our use of AI technologies. As with many technological , there are significant risks involved in developing, maintaining and deploying these technologies and there can be no assurance that the usage of or our investments in such technologies will always our products or services or be to our business, including our or .
In Europe, on August 1, 2024, the EU Artificial Intelligence Act (the “EU AI Act”) entered into force, and establishes a comprehensive, risk-based governance framework for AI in the EU market. The majority of the substantive requirements will apply from August 2, 2026 at the earliest (although this deadline may be further extended). The EU AI Act applies to companies that develop, use and/or provide AI in the EU and, depending on the use case, includes requirements around transparency, conformity assessments and monitoring, risk assessments, human oversight, security, accuracy, general purpose AI and foundation models, and fines for breaches up to 7% of an undertaking’s worldwide annual turnover. In addition, the revised EU Product Liability Directive came into force in December 2024, to be implemented into EU member state national law by December 2026. This Directive extends the EU’s existing strict product liability regime to AI technologies and AI-enabled products, and facilitates civil claims in respect of harm caused by AI. Once fully applicable, the EU AI Act and the EU Product Liability Directive will have a material impact on the way AI is regulated in the EU. The EU AI Act and its future interpretation and application may affect our use of AI technologies and our ability to provide, or
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commercialize our services, require additional compliance measures and changes to our operations and processes, result in increased compliance costs and potential increases in civil claims against us, and could adversely affect our business, operations and financial condition. It is also possible that further laws and regulations will be adopted in the United States and in other non-U.S. jurisdictions, or that existing laws and regulations, including competition and antitrust laws, may be interpreted in ways that would limit our ability to use AI technologies for our business, or require us to change the way we use AI technologies. For example, a number of U.S. states have or are considering new legislation relating to AI, including the Colorado Artificial Intelligence Act in Colorado and the Utah Artificial Intelligence Policy Act in Utah, all of which will have implications on the ways that businesses can use AI technologies.
We currently host all of our data on, and conduct a significant portion of our data analysis through, Amazon Web Services (“AWS”) cloud-based hosting facilities. In addition, certain functions of our laboratory operations and business functions use or leverage AWS. Any technical problems or outages that may arise in connection with AWS, including its data center hosting facilities, could result in operational disruption, loss of data or delayed or ineffective data processing. A variety of factors, including infrastructure changes, human or software errors, viruses, malware, cybersecurity incidents or attacks, fraud, spikes in customer usage, or denial of service issues could cause interruptions in our service. Such service interruptions may reduce or inhibit our ability to provide our products, process tests, operate our laboratory, delay our clinical studies, and our relationships with our customers. We could also be to potential lawsuits, liability , reputational impact, or regulatory actions, for example if AWS experienced a data privacy or cybersecurity . If we were required to transfer to another service provider, including the transfer of data to an alternative hosting provider, the transfer and acclimation to the new provider could result in significant business and require additional resources.
If we are unable to scale our operations successfully to support demand for our products, our business could suffer.
As and to the extent test volumes grow, we may need to ramp up laboratory capacity, including expanding the processing of Galleri in our Durham, North Carolina facility by increased operations. While we have heavily invested in our scalability, including by expanding our Durham facility laboratory capacity, further buildout of our Durham facility may be needed, as well as further new infrastructure, data processing capabilities, customer service, billing and systems processes, and expanding our internal quality assurance program and cybersecurity and information technology to support testing on a larger scale. We will also need additional equipment, and certified and licensed laboratory personnel to process higher volumes of tests. Our ability to hire personnel to scale would be more challenging if 24/7 operations are implemented and we will require night shift work. We may face difficulties increasing the scale of our operations, including implementing changes in infrastructure or programs or acquiring additional equipment or personnel, as well as any additional regulatory, licensing, permitting, or certificate obligations that need to be met at the local, state, or federal level. As we refine our products, develop additional products, and enhance existing products, we may need to bring new equipment on-line, comply with additional applicable laws and regulations, implement new systems, technology, controls and procedures, and hire personnel with different qualifications, licenses, or certifications.
The value of Galleri, our precision oncology portfolio, and any future products will depend, in part, on our ability to perform tests and return results to providers on a timely basis and at an appropriate quality standard, and on our reputation for such timeliness and quality. Failure to implement necessary procedures, to transition to new equipment or processes, or to hire the appropriate, qualified personnel could result in higher costs of processing, longer turnaround times or an inability to meet market demand. There can be no assurance that we will be able to perform tests on a timely basis at a level consistent with demand, that we will be able to maintain the quality of our test results as we scale our commercial operations, or that we will be successful in responding to the growing complexity of our laboratory operations, including the related data analysis requirements.
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We may also experience difficulties scaling in international markets in which we are required under law or contract, or decide to, construct and operate a laboratory in that market. For example, we may be required or decide to build and operate a laboratory in the United Kingdom if and when we have a commercial presence in that country. This may be challenging due to significant startup costs, difficulty recruiting, and lack of familiarity with the local jurisdiction, among other reasons. If we are unable to build and operate laboratories internationally, or ship samples in or out of international jurisdictions due to privacy, export/import controls, or other applicable laws, our ability to expand internationally may be limited, and have a negative impact on our business and results of operations.
In addition, our growth may place a significant strain on our management, operating and financial systems, research and development, and our sales, marketing, and administrative resources. As a result of our growth, our operating costs may escalate even faster than planned, and some of our internal systems may need to be enhanced or replaced. If we cannot effectively manage our expanding operations and our costs, we may not be able to grow successfully or we may grow at a slower pace, and our business could be adversely affected.
Our business and results of operations will suffer if we fail to perform effectively.
There are market participants in the cancer detection space both in the United States and abroad, including Exact Sciences Corporation (recently announced to be acquired by Abbott Laboratories) and Guardant Health, Inc., who have each introduced MCED products into the market in 2025. In addition, Adela, Inc., Caris Life Sciences, ClearNote Health, DELFI Diagnostics, Inc., Exai Bio, Inc., Freenome Inc. and Harbinger Health and Natera, Inc. within the United States and AnchorDx, Anpac Bio-Medical Science Co., Ltd., Burning Rock Biotech Limited, Datar Cancer Genetics, Elypta AB, Gene Solutions JSC, Insighta, Singlera Genomics, Inc. and Seekin, Inc. outside of the United States, among others, have stated that they are attempting to develop tests designed to detect certain types of cancer, including some that will use cell free DNA (“cfDNA”) analyses. The precision oncology market includes companies such as Exact Sciences Corporation (recently announced to be acquired by Abbott Laboratories), Roche/Foundation Medicine, Inc., Natera, Inc., Guardant, Inc., Tempus AI, Inc., Clearnote Health, NeoGenomics Laboratories, Personalis, Inc., Twist Bioscience Corp. and Adaptive Biotechnologies Corp., among others. These companies have or may have greater financial, technical, and other resources, such as larger research and development staff, well-established marketing and sales forces, existing integrated systems connected to health practices’ electronic health or medical records to facilitate product ordering and results delivery, may have different strategies to obtain reimbursement for their products, may deploy more effective sales and marketing campaigns or may operate in jurisdictions where lower standards of evidence are required to bring products to market. These companies may in developing, acquiring, or licensing, on an basis or otherwise, or providers, payers, patients and other stakeholders may believe that these companies or other new market entrants may have tests or services that are more , have higher performance, or are less than our products. In addition, established medical technology, biotechnology, or pharmaceutical companies may invest to accelerate discovery and development of tests that could make our products less than we anticipate. For example, large and long-tenured healthcare, life sciences, or technology companies may initiate research and development of MCED and bring significant resources and to the cancer detection space.
Our ability to perform successfully will depend largely on our ability to:
• demonstrate compelling advantages in the performance and convenience of our products, including on a cost efficient basis;
• achieve market acceptance of our products by healthcare providers and patients, including through our reputation;
• achieve adequate coverage and reimbursement by third-party payors for our products;
• differentiate our product from future tests and products of third parties;
• attract qualified scientific, data science, clinical development, product development, and commercial personnel;
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• obtain, maintain, defend, and enforce patent and other proprietary protection as necessary for our products;
• obtain and maintain any necessary or desirable marketing authorizations or certifications from regulators in the United States and other jurisdictions, and notified bodies;
• integrate product ordering and results delivery into practices’ electronic health or medical records systems;
• successfully collaborate with institutions in the discovery, development, and commercialization of our products; and
• successfully expand our operations and implement a successful sales and marketing strategy to support commercialization.
We may not be able to perform effectively if we are unable to accomplish one or more of these or similar objectives.
If we cannot maintain our current collaborations or partnerships and enter into new collaborations or partnerships in a timely manner and on acceptable terms, our efforts to develop and commercialize our products could be delayed or adversely affected.
We rely, and expect to continue to rely, on collaborative partners to help us develop our products and enhance our research and development efforts. For example, we have collaborated with research institutions, and academic centers. Additionally, our RUO offering has formed the basis of biopharmaceutical partnerships with several leading oncology companies. These partnerships leverage our RUO offering to test applications of biomarkers with the goal of optimizing the use of therapeutic interventions. Partnerships may also include development of customized applications to support clinical studies and companion diagnostic development and commercialization. Our reliance on certain of these third parties reduces our control over our product development activities.
If any of our collaborators or partners were to breach or terminate their agreements with us or otherwise fail to conduct the contracted activities successfully and in a timely manner, the research and development activities of certain of our products could be delayed or terminated. For example, in late 2025, AstraZeneca terminated its phase 3 TROPION-Lung12 trial due to low enrollment, for which our methylation technology was used as a potential companion diagnostic for enrolling participants. Further, our collaborators or partners may fail to properly protect our intellectual property rights, may infringe the intellectual property rights of third parties, may misappropriate our trade secrets, or may use our proprietary information or others’ in such a way as to expose us to and potential liability. or with our or partners, including over proprietary rights, funding, or contract interpretation, might cause or of the research, development or commercialization of our products, might lead to additional responsibilities for us with respect to these products or activities or might result in or arbitration, any of which would management attention and resources and be time-consuming and expensive. We may not be to renew our current agreements with or partners or negotiate additional or partnership agreements on acceptable terms, if at all, and these and partnerships may not be . Any transition from a current to a new could be and result in significant product development .
From time to time, we expect to engage in discussions with potential development and/or commercial collaborators that may or may not lead to collaborations. However, we cannot guarantee that any discussions will result in development or commercial collaborations. Further, once news of discussions regarding possible collaborations are known in the general public, regardless of whether the news is accurate, failure to announce a collaboration agreement, or the entity’s announcement of a collaboration with an entity other than us, could result in adverse speculation about us, our products, or our technology, resulting in harm to our reputation and our business. In addition, establishing collaborations is difficult, time-consuming and may require our significant financial investment. Potential collaborators may elect not to work with us based on their assessment of our
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financial, regulatory, or intellectual property position. Even if we establish new collaborations, they may not result in the successful development or commercialization of our products or technology.
We will need to grow the size and capabilities of our organization to support scale over time, and we may experience difficulties in managing this growth. If we are unable to maintain and expand sales and marketing capabilities in particular, we may not be successful in increasing sales of Galleri or commercializing new products over the long term.
As of December 31, 2025, we had approximately 910 employees, substantially all of whom were full-time. Our headcount was reduced in 2024 following the implementation of the Restructuring Plan. As our development plans and strategies develop, and as we continue our operation as a public company, we may require a significant number of additional managerial, operational, financial, and other personnel. Moreover, despite our progress made in driving commercial implementation to date, we may not be able to market, sell, or distribute Galleri, or any future products that we may develop and commercialize, effectively enough to support our planned growth. Although we have focused our business on Galleri-related activities and our work with biopharmaceutical companies as part of the Restructuring Plan resulting in a lower number of employees as of December 31, 2025, we may nevertheless need to continue to grow our operations to achieve our goals.
Factors that may inhibit our efforts to commercialize any of our products include:
• our inability to recruit and retain adequate numbers of effective sales, marketing, reimbursement, customer service, medical affairs, and other support personnel;
• the inability of sales personnel to generate an adequate number of customers, including healthcare systems and healthcare providers, to use our products;
• the inability to price our products at a sufficient price point to ensure an adequate and attractive level of gross margin and profitability;
• our inability to effectively market to, collaborate with, and secure coverage and reimbursement from third-party payors;
• our failure to comply with applicable regulatory requirements governing the sale, marketing, reimbursement, and commercialization of our products; and
• unforeseen costs and expenses associated with maintaining a commercialization organization.
Future growth will impose significant added responsibilities on members of management besides those related to our efforts to commercialize, which will include: managing our internal development efforts effectively, including creating compliant programs and processes, such as a compliant laboratory and manufacturing quality system, and managing the regulatory requirements for our products, while complying with our contractual obligations to contractors and other third parties, including patient-facing service providers; expanding our operational, financial and management controls, reporting systems, and procedures; and managing the increasing complexity associated with a larger organization and expanded operations.
Our future financial performance and our ability to commercialize our products will depend, in part, on our ability to effectively manage any future growth. Our management may also have to divert a disproportionate amount of its attention away from day-to-day activities in order to manage these growth activities. Our ability to successfully manage our expected growth is uncertain given the fact that we have been in operation as a company only since 2016, and have grown significantly in recent years.
If we are not able to effectively expand our organization by hiring new employees, we may not be able to successfully implement the tasks necessary to commercialize our products, which would have a negative impact on our business and results of operations.
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If we are not successful in attracting, motivating, and retaining highly qualified personnel, we may not be able to successfully implement our business strategy.
Our ability to perform in the biotechnology industry depends upon our ability to attract, motivate, and retain highly qualified personnel. We are highly dependent on our executive management team and our scientific, medical, technological, and engineering personnel. The loss of the services provided by any of our executive officers, other key employees, and other scientific and medical advisors, and our inability to find suitable replacements in a timely manner, could result in delays in commercialization of our products and harm our business. The risk of losing our executive officers, key employees and scientific and medical advisors may increase in connection with the Restructuring Plan.
We are headquartered in Menlo Park, California, a region in which many other healthcare companies, technology companies, and academic and research institutions are headquartered. In addition, we operate a laboratory facility in Durham, North Carolina, where there is also demand for skilled personnel, especially engineering and laboratory personnel. Competition for personnel is intense and the turnover rate can be high, which may limit our ability to hire and retain highly qualified personnel on acceptable terms or at all. We expect that we may need to recruit talent from outside of these regions, and doing so may be costly and difficult.
To induce valuable employees to join and remain at our company, we have generally granted incentive awards that vest over time-based continued service, in addition to salary and periodic cash incentives. Prior to the Spin-Off, these awards generally consisted of Cash-Based Equity Awards (defined below) and, since the Spin-Off, these awards have consisted of grants of restricted stock units covering GRAIL common stock (“RSUs”), in each case, vesting over set time periods based on continued service. In connection with the Spin-Off, the outstanding Cash-Based Equity Awards converted into RSUs (the “RSU Conversion”) in accordance with the Employee Matters Agreement, dated June 24, 2024, by and between us and Illumina (the “Employee Matters Agreement”). As a result of the applicable RSU conversion mechanic under the Employee Matters Agreement, the fair market value of each employee’s RSU award after the RSU Conversion was substantially lower than the face value of the Cash-Based Equity Awards prior to the RSU Conversion, particularly for award tranches vesting after 2024. In October 2024, we granted 2.4 million RSUs to our employees, including special retention grants made to certain members of our executive team. These RSU grants represented a smaller aggregate number of RSUs than we would ideally have issued for retention purposes in 2024, primarily due to available share constraints under our shareholder-approved incentive equity plan. As a result of the RSU Conversion mechanics and limitations our 2024 RSU grants, the perceived value to employees of these awards may be to retain certain key executives and other employees, who may receive more offers from other companies. Although we have employment agreements with certain key employees, these employment agreements provide for at-will employment, which means that any of our employees could leave our employment at any time, with or without notice. If we are to attract and incentivize highly qualified personnel on acceptable terms in a timely manner, or at all, our business and results of operations may .
For additional information, see - “Our business is subject to economic, political, regulatory, and other risks associated with international operations.”
Our business is subject to economic, political, regulatory, and other risks associated with international operations.
Our business is subject to risks associated with conducting business internationally. For example, some parties with whom we have collaborative relationships are located outside the United States, including in the United Kingdom, Canada, South Korea and Israel. Additionally, while a significant majority of our supplier spend is with vendors located within the United States, whose products are produced in the United States, we also rely on suppliers and vendors located outside of the United States or who produce the products that we use outside the United States, including in China, Mexico, South Africa and various European Union member states. We expect to continue to increase our international presence over time, which could increase these risks or introduce new risks. Accordingly, our future results could be harmed by a variety of factors, including:
• economic weakness, including inflation, or political instability, in particular non-U.S. economies and markets;
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• challenges enforcing our contractual and intellectual property rights, especially in those foreign jurisdictions that do not respect and protect intellectual property rights to the same extent as the United States;
• trade protection measures, import or export controls and licensing requirements (including possible restrictions on licensing intellectual property to certain non-U.S. persons) or other restrictive actions by U.S. or non-U.S. governments;
• changes in non-U.S. laws, regulations and customs, tariffs, and trade barriers;
• changes in non-U.S. laws, regulations, and policies related to data privacy, data protection, and cybersecurity in the transfer or transmittal of data across boundaries and geographies;
• exchange rate risk we may face from denominating a portion of our transactions in currencies other than the U.S. dollar;
• changes in a specific country’s or region’s political or economic environment;
• negative consequences from changes in tax laws;
• negative consequences from changes in U.S. national security laws, including those governing non-U.S. investors’ ownership of U.S. biotech and other technology companies and U.S. companies’ ability to enter into joint ventures with non-U.S. entities;
• compliance with tax, employment, immigration, and labor laws for employees living or traveling abroad, or for non-U.S. employees in the United States;
• workforce uncertainty in countries where labor unrest is more common than in the United States;
• difficulties associated with staffing and managing international operations, including differing labor relations;
• potential liability under the Foreign Corrupt Practices Act (“FCPA”) or comparable foreign laws; and
• business interruptions resulting from geopolitical actions, including war and terrorism, such as recent conflicts in the Middle East like the war involving the United States, Israel and Iran, pandemics, or natural disasters more common in certain regions, including earthquakes, typhoons, floods, and fires; and
• negative consequences to our relationships with our customers, partners, and other collaborators in the event of impact to suppliers or our business internationally due to restrictive actions by U.S. or non-U.S. governments or changes in U.S. or non-U.S. laws.
In addition, in recent years, U.S. administrations, including the current administration, have publicly announced or adopted trade proposals that may affect U.S. trade relations with other countries. While we have not experienced significant impact from tariffs to date and do not have significant sensitivity to tariffs, it is uncertain at this point how, if at all, such actions or other potential actions, may impact our business or operations, in particular if there are changes in our supply chain, or tariffs if rates are increased or are more targeted at countries where our suppliers are located. Policy changes or legal challenges could lead to further volatility in rates, coverage, and enforcement. Such actions could increase our expenses, reduce our margins or increase our prices, make it difficult to obtain inputs we need for our products or have a material adverse effect on the broader economy. These risks and impacts may be exacerbated by retaliatory tariffs imposed by governments in response to any initial tariff policy.
Our success depends in part on our ability to attract and retain the best available personnel with the necessary qualifications, which in a competitive global market means that our recruitment efforts should not be limited entirely to the United States. To the extent U.S. immigration-related policies, laws, rules, proclamations or orders restrict our ability to attract, or increase the cost of attracting, international talent, this could adversely impact our business and results of operations. For example, on September 19, 2025, the H-1B visa process in the
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United States was changed to require a payment of $100,000 for new petitions, which could hamper our recruitment efforts for any new personnel who require such a visa or require significant additional employment costs for those individuals. Additional changes in U.S. immigration policies, rules, laws or orders could further increase our recruitment costs or delay key projects that require specialized expertise. In addition, restrictions or delays in the issuance of other visas or in immigration processing could adversely affect our ability to collaborate effectively with our employees outside the United States and to retain the qualified personnel needed for our operations.
Moreover, future operational expansion into other geographies will subject us to additional political and regulatory regimes that will require us to invest further in compliance efforts and may result in additional risks, including, among others, exposure to various and potentially conflicting regulations, international sanctions and compliance rules, country-specific requirements for testing, approval, and processing of patient information and biological samples, as well as the risks associated with political and macroeconomic climates in any such geographies. For example, the potential commercialization of Galleri with the NHS, subject to the full results of the NHS-Galleri Trial which we expect to report in mid-2026, will be considered by the government of the United Kingdom and may be delayed or otherwise impacted depending on the circumstances and the composition of the government at the time of consideration. These and other risks associated with our planned international operations may materially and adversely affect our business, costs and growth prospects.
We also face risks from our international operations for Galleri, our precision oncology portfolio and other products we may develop. Our clinical trials to date have been conducted in the United States and the United Kingdom, and use of our tests in populations outside of these regions could result in differences in performance. Any performance differences experienced in screening populations outside of the United States or United Kingdom could result in customer dissatisfaction, reputational harm, real world data or adverse events that would be reportable to the FDA or other regulators, regulatory actions by regulators in international jurisdictions and other risks, all of which could have a material and adverse impact on our business, regulatory pathway, results of operations and growth prospects.
Our ability to successfully and efficiently conduct any required in-country studies in other countries or regions in which we seek to expand may also be impacted, or may be impossible, due to the regulatory requirements of such countries. Some countries may require that we carry out testing of our products or future products through government partnerships, which may be difficult to navigate or which may limit our ability to deliver the results we intend. Moreover, the demographics in other countries or regions may differ vastly, such that study results may not appear as successful, due to, for example, a lower incidence of cancer in the local population. Such outcomes may adversely impact demand for our products in other countries. Finally, our ability to expand internationally may be limited by the availability of international laboratory space or requirements that will permit us to store, collect, and analyze biological samples required for current or future products, including space that could be made available through potential partners in such countries or regions. These and other unknown risks make it difficult for us to assess the potential of our international expansion and the costs associated therewith. For additional information, see “—Risks Relating to Regulation and Legal Compliance.”
Our information technology systems, or those used by our third-party collaborators or other contractors or consultants, may fail or suffer cybersecurity incidents or cyberattacks.
We collect and maintain information in digital form that is necessary to conduct our business, and we are increasingly dependent on information technology systems and infrastructure to operate our business. In the ordinary course of our business, we collect, store, and transmit large amounts of confidential information, including intellectual property, proprietary business information, personal, financial, and health information of patients and personal and financial information of our employees and contractors (“Confidential Information”). As we expand our direct engagement with patients, our data collection, processing, and storage activities may increase in volume and complexity, including the creation of additional copies of patient data across systems and platforms, heightening the risk of unauthorized access, disclosure, or misuse of patient information. It is critical that we do so in a secure manner to maintain the confidentiality and integrity of such Confidential Information.
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Despite the implementation of security and back-up measures, our information technology systems as well as those of our third-party collaborators, consultants, contractors, suppliers, and service providers, may be vulnerable to attack, damage, or interruption from physical or electronic break-ins, computer viruses, malware, malicious code, ransomware, misconfigurations, “bugs” or other vulnerabilities, denial or degradation of service attacks, hacking, phishing attacks, and other cyber-attacks, natural disasters, terrorism, war, telecommunication and electrical failures, instructions and attacks from sophisticated nation-state and nation-state-supported actors (including advanced persistent threat intrusions), or other disruptive that could result in access to, use or disclosure of, of, or of sensitive, and/ or proprietary data, including personal information, protected health information, and other sensitive information, and could subject us to significant liabilities and regulatory and enforcement actions, and reputational . We have also outsourced elements of our information technology infrastructure, and as a result a number of third-party vendors may or could have access to our confidential information. As we increasingly leverage third-party digital health platforms and service providers to support our operations and patient-facing capabilities, we may become subject to cybersecurity risks outside of our direct control. As a part of these relationships, these third parties may store or process certain types of confidential or patient data. These third parties may not maintain cybersecurity practices, expertise, certifications, or controls that are equivalent to our own, which could increase the risk of security , data , or service that could affect our business, operations, or reputation.
The risk of a cybersecurity incident or disruption, particularly through cyberattacks or cyber intrusion, including by computer hackers, foreign governments, and cyber terrorists, has generally increased as the number, intensity and sophistication of attempted attacks and intrusions from around the world have increased and evolved. If we or our third-party vendors were to experience a significant cybersecurity incident affecting our or their information technology systems or data, the costs associated with the investigation, remediation, and potential notification of the incident to counterparties and data subjects could be material, in addition to any money required to resolve a ransomware attack. For example, laws in the European Economic Area (“EEA”), the United Kingdom, and all 50 U.S. states may require businesses to notify regulators within specific timeframes that an incident affecting personal information has occurred and/or to provide notice and, in some circumstances, one year of credit monitoring services to individuals whose personal information has been impacted as a result of such . As part of our growth strategy, we have expanded into multiple jurisdictions outside of the United States, including the United Kingdom, Canada, and Israel, and intend to continue expansions in 2026 and beyond, including through our partnership with Samsung. This growth will subject us to additional regulatory regimes and increase the amount of cybersecurity requirements for compliance in multiple geographies. Complying with such numerous and complex regulations in the event of a cybersecurity would be expensive and , and to comply could subject us to regulatory and additional liability. In addition, our remediation efforts may not be . Data protection laws and regulations often require appropriate, reasonable or adequate technical and organizational security measures, and the interpretation and application of those laws and regulations are often uncertain and evolving. There can be no assurance that our security measures will be deemed adequate, appropriate or reasonable by a regulator or court. Moreover, even security measures that are deemed appropriate, reasonable, or otherwise in accordance with applicable legal requirements may not be to protect the information we maintain.
Due to the technical nature of cybersecurity work, it is important for GRAIL to employ highly skilled cybersecurity professionals. If we fail to identify and retain qualified key personnel in these areas or fail to appropriately allocate responsibilities or dedicate sufficient headcount or resources to these areas, the quality of our cybersecurity efforts may be compromised. Even if we do allocate and effectively manage the resources necessary to build and sustain the proper technology and cybersecurity infrastructure, we could nevertheless suffer significant business disruption, including transaction errors, supply chain or manufacturing interruptions, processing inefficiencies, data loss, or the loss of or damage to intellectual property or other confidential or proprietary information.
As a part of our cybersecurity program, we conduct a number of internal evaluations and independent, external third-party audits and reviews, including under the NIST CSF 2.0 and NIST Privacy Frameworks, along with our annual reviews under ISO 27001, SOC2 Type 2, PCI DSS, HIPAA, and other standards, in order to identify capabilities, gaps, and recommendations for improvement, and to compare our cybersecurity program to applicable requirements. These assessments generate findings and opportunities that we integrate into a formal remediation roadmap designed to mature our security posture and drive continuous improvement. However, these improvements and maturation efforts require sustained resource allocation and may span multiple reporting
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cycles. Failure to execute remediations effectively or within established timelines could result in persistent control deficiencies, increasing our exposure to regulatory sanctions, cybersecurity incidents, or data breaches, which would amplify the risks otherwise described.
We, along with companies with whom we engage in data sharing, including our service providers, are from time to time subject to cyberattacks and other cybersecurity incidents. While we do not believe that we have experienced any significant system failure, or cybersecurity incident to date, we may nonetheless be a target of such an attack, and if such an event were to occur and cause interruptions in our operations, or any of our third-party collaborators’ operations, it could result in a material disruption of our development programs, reputation, and business operations whether due to a loss, corruption, or unauthorized disclosure of our trade secrets, personal information, financial information, health information, or other proprietary or sensitive information, or other similar disruptions. For example, the loss of clinical study data from completed or ongoing clinical studies could result in in any regulatory clearance, approval, or certification efforts and significantly increase our costs to recover or reproduce the data, and subsequently commercialize our products. If we or our third-party , consultants, contractors, suppliers, or service providers were to a cybersecurity or attack, for example, that resulted in the access to or use or disclosure of personal or health information, we may have to notify physicians, patients, partners, , government authorities, and the media, and may be subject to , civil , administrative and enforcement actions, and , any of which could our business and reputation. Likewise, we rely on our third-party research institution and other third parties to conduct clinical studies, and similar events relating to their computer systems could also have a material effect on our business. It could also us to risks, including an to provide our services and fulfill contractual demands, and could cause management and the obligation to devote significant financial and other resources to mitigate such , which would increase our future information security costs, including through organizational changes, deploying additional personnel, reinforcing administrative, physical, and technical safeguards, further training of employees, changing third-party vendor control practices, and engaging third-party subject matter experts and consultants and reduce the demand for our technology and services. Further, there can also be no assurance that our and our third-party service providers’, strategic partners’, contractors’, consultants’, CROs’ and ’ cybersecurity risk management program and processes, including policies, controls or procedures, will be fully implemented, complied with or in protecting our systems, networks and Confidential Information. To the extent that any or cybersecurity were to result in a of, or to, our data or systems, or or access to or disclosure or use of confidential, proprietary, or other sensitive, personal, or health information, we could incur liability, we could be to the risk of , our market position could be , we could reputational , and the development and commercialization of our products could be . Furthermore, federal, state, and international laws and regulations can us to enforcement actions and by regulatory authorities, and potentially result in regulatory , , and significant legal liability, if our information technology security efforts or if there are material findings regarding data security or data by us or our partners, vendors, or suppliers. While we may be entitled to if our third-party partners, vendors, or suppliers to their security-related obligations, any award may be to cover our , or we may be to recover such award. Attacks on information technology systems are increasing in their frequency, levels of , sophistication, and intensity, and are being conducted by sophisticated and organized groups and individuals with a wide range of motives and expertise. Furthermore, because the techniques used to obtain access to, or to , systems change frequently and often are not recognized until launched a target, we may be to anticipate these techniques or implement adequate preventative measures. In particular, developments in artificial intelligence tools and computing power are likely to increase the frequency and effectiveness of attacks. We may also experience cybersecurity that may remain for an extended period. Even if identified, we may be to or remediate cybersecurity due to attackers increasingly using tools and techniques – including artificial intelligence – that are designed to controls, to avoid detection, and to remove or obfuscate forensic evidence.
While we maintain cybersecurity insurance, our insurance policies may not be adequate to compensate us for the potential losses arising from such disruptions, failure, or cybersecurity incidents. In addition, such insurance may not be available to us in the future on economically reasonable terms, or at all. Further, our insurance may not cover all claims made against us and defending a suit, regardless of its merit, could be costly, divert management attention, and harm our reputation.
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If we are sued for product or professional liability, we could face substantial liabilities that exceed our resources and insurance coverage.
Actual or perceived errors resulting from laboratory or reporting errors, false positive or false negative test results, or the manufacture, design, marketing, or labeling of our products, could subject us to product liability or professional liability claims. A product liability or professional liability claim against us could result in substantial damages and be costly and time-consuming to defend. These risks may be more pronounced for certain applications in our precision oncology portfolio, such as companion diagnostic development, as our products would be directly involved with the choice to use certain treatments in a particular case. Although we maintain liability insurance, including for errors and omissions, our insurance may not fully protect us from the financial impact of these types of or any judgments, , or settlement costs arising out of any such . Any liability claim brought us, with or without merit, could increase our insurance rates or prevent us from securing insurance coverage in the future. Additionally, any liability lawsuit could our reputation or us to sales of our products. The occurrence of any of these events could have a material effect on our business, financial condition, results of operations, and growth prospects.
Our quarterly results of operations may fluctuate significantly or may fall below the expectations of investors or securities analysts, each of which may cause our stock price to fluctuate or decline.
We expect our results of operations to be subject to quarterly fluctuations. Our net loss and other operating results will be affected by numerous factors, including:
• our ability to successfully develop, market, and sell our products, including Galleri, our precision oncology portfolio and any of our future products if and when launched;
• changes in strategic focus or priorities;
• the prices at which we are able to sell our products;
• the impact of market developments or our response thereto;
• disruptions in our business due to manufacturing, supply, cybersecurity breaches, outages, or other issues;
• the cost of performing next-generation sequencing;
• the timing and amount of royalty payments, including the expected end of the suspension period of the Illumina royalty on December 24, 2026;
• the extent to which our products are deemed eligible or ineligible for coverage and reimbursement from third-party payors;
• changes in coverage and reimbursement or in reimbursement-related laws directly affecting our business;
• our ability to obtain regulatory approval for our products, and the degree of impact of those approvals on perceptions of our products and market demand;
• regulatory developments affecting our products or any future competing products;
• timing of investments in our laboratories and other infrastructure;
• timing of expenditures in connection with our clinical studies;
• the success of our international expansion efforts; and
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• non-routine cash and non-cash expenses and write-offs, whether associated with acquisitions, restructuring activities, litigation, investigations, or otherwise.
If our quarterly results of operations fall below the expectations of investors or securities analysts, the price of our common stock could decline substantially. Furthermore, any quarterly fluctuations in our results of operations, which could be caused by any number of factors including seasonality of prescribing our products, may, in turn, cause the price of our stock to fluctuate substantially. We may experience this seasonality in particular in the third quarter due to primary care physician and patient summer vacation periods. We believe that quarterly comparisons of our financial results are not necessarily meaningful and should not be relied upon as an indication of our future performance.
Acquisitions or other strategic transactions may increase our capital requirements, dilute our stockholders, cause us to incur debt or assume contingent liabilities, and subject us to other risks.
We have in the past engaged in and may in the future engage in acquisitions and strategic partnerships, including licensing or acquiring complementary intellectual property rights, technologies, or businesses. Any acquisition or strategic partnership may entail numerous risks, including:
• increased operating expenses and cash requirements;
• the assumption of indebtedness or contingent liabilities;
• the issuance of our equity securities that would result in dilution to our stockholders;
• assimilation of operations, intellectual property, and products of an acquired company;
• difficulties associated with integrating new personnel;
• retention of key employees, the loss of key personnel, and uncertainties in our ability to maintain key business relationships;
• the diversion of our management’s attention from our existing product programs and initiatives in pursuing such an acquisition or strategic partnership;
• risks and uncertainties associated with the other party to such a transaction, including the prospects of that party and their existing or future products and regulatory approvals or certifications, and the validity and enforceability of their intellectual property;
• inability to consummate acquisitions on which we spend a significant amount of time and resources;
• possible write-offs or impairment charges relating to acquired businesses; and
• our inability to generate revenue from acquired intellectual property, technology, or tests sufficient to meet our objectives or offset the associated transaction costs.
In addition, as our strategy evolves, we may opt to discontinue, deprioritize, or dispose of assets, technologies, or acquired businesses.
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We have and may continue to become subject to securities class action lawsuits, investigations initiated by regulators and law firms, and derivative or other similar litigation, any or all of which, individually or in the aggregate, could have a material adverse effect on our business, financial condition and results of operations.
We have and may continue to become subject to securities class action lawsuits, investigations initiated by regulators and law firms, and derivative or other similar litigation that can be expensive, divert management attention and human and financial capital to less productive uses and result in potential reputational damage. These lawsuits, claims and investigations may be related to regulatory or other matters, privacy, intellectual property, and/or employment matters, or any other aspect of our business.
For example, since the Acquisition of our business by Illumina in 2021, the Acquisition has been subject to various legal challenges, including by the FTC and the European Commission. As a result, we have been a party, together with Illumina and as a separate party, to a number of regulatory and administrative proceedings regarding the Acquisition, including ongoing proceedings and proceedings in which we have filed separate appeals. In addition, we have intervened in certain procedures in support of Illumina. Following completion of the Spin-Off we and Illumina sought dismissal of the FTC’s complaint on July 30, 2024, and on August 15, 2024, the FTC dismissed without prejudice the complaint on the basis that the Spin-Off effectively abandoned the transaction giving rise to the complaint. On September 3, 2024, the European Court of Justice annulled the European Commission’s decision to review Illumina’s acquisition of Grail on the basis the European Commission did not have the jurisdiction to do so. With the completion of the Spin-Off, the by the FTC and the of the European Court of Justice, the Company believes these matters are substantially concluded. However, we may continue to be involved in proceedings related to the FTC’s or the European Commission’s actions related to the Acquisition. We may also be a party or otherwise involved in new proceedings regarding the Acquisition. For example, in July 2023, Illumina was informed that the staff of the SEC was conducting an relating to Illumina and was requesting documents and communications primarily related to Illumina’s acquisition of GRAIL and certain statements and disclosures concerning GRAIL, our products and the Acquisition, and related to the conduct and compensation of certain members of Illumina and GRAIL management, among other things. On May 9, 2025, the Company confirmed with the SEC that the SEC has its into this matter.
In addition, our acquisition by Illumina and subsequent litigation resulted in the filing of three securities class actions in the United States District Court for the Southern District of California: Kangas v. Illumina, Inc. et al., Roy v. Illumina, Inc. et al., and Louisiana Sheriffs’ Pension & Relief Fund v. Illumina, Inc. et al. (collectively, the “Actions”). The complaints generally allege, among other things, that defendants made materially false and misleading statements and omitted material facts relating to Illumina’s acquisition of GRAIL. The complaints seek unspecified damages, interest, fees, and costs. On January 9, 2024, four movants filed motions to consolidate the Actions and to appoint a lead plaintiff (“Lead Plaintiff Motions”). On April 11, 2024, the Court issued an order consolidating the Actions into a single action (captioned in re Illumina, Inc. Securities Litigation No. 23-cv-2082-LL-MMP), and appointed Universal-Investment-Gesellschaft mbH, UI BVK Kapitalverwaltungsgesellschaft mbH, and ACATIS Investment Kapitalverwaltungsgesellschaft mbH as lead . (the "Lead ). On June 21, 2024, the Lead filed their consolidated amended . The amended that GRAIL, in addition to Illumina, and certain of their respective current and former directors and others sections 10(b) and 20(a) of the Exchange Act and SEC Rule 10b-5 in connection with Illumina's acquisition of GRAIL. On September 13, 2024 the further amended the . On November 12, 2024, we moved to Lead ’ second amended for to state a claim under Sections 10(b) and 20(a) of the Exchange Act. Lead filed their to the motion to on December 20, 2024, and we filed our reply in support of its motion to on February 3, 2025. On September 26, 2025, the court granted the motion to for to state a claim with leave to amend, and ordered the to file an amended . On October 27, 2025, the Lead filed their third amended and on December 12, 2025, we filed a motion to Lead ’ third amended . We the in the and intend to vigorously the . See Note 11 — Legal And Regulatory Proceedings in Item 8. Financial Statements of this Annual Report on Form 10-K for additional details. In the event that any of the matters described above result in one or more judgments or settlements, we may experience an impact on our financial condition, results of operations or stock price.
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Lawsuits and other proceedings have in the past and may in the future result in us incurring significant expenses in settlement and litigation costs. Any negative outcome from any such lawsuits or claims could result in payments of substantial monetary damages or fines, or undesirable changes to our products or business practices and, accordingly, our business, results of operations, financial condition, or prospects could be adversely affected. There can be no assurances that a favorable final outcome will be obtained in any or all instances, and defending any lawsuit, even unmerited claims, is costly and can impose a significant burden on management and employees. Any litigation to which we are a party may result in an onerous or judgment that may not be reversed upon appeal or in payments of substantial monetary or , or we may decide to settle lawsuits on similarly terms, which could affect our business, results of operations, financial condition, and prospects.
Risks Relating to Regulation and Legal Compliance
We have launched Galleri as an LDT in the United States. In 2024, the FDA finalized a regulation that has been successfully challenged in federal court, pursuant to which the FDA planned to subject LDTs to medical device requirements through a phase-out of its historical policy of enforcement discretion over LDTs over a period of four years. A federal court recently vacated this rule.
While we recently submitted our PMA seeking regulatory approval from the FDA for Galleri, we initially launched Galleri in the United States as an LDT in 2021. LDTs are in vitro diagnostic (“IVD”) tests that are intended for clinical use and are designed, manufactured, and used within a single laboratory certified for high complexity testing under CLIA. The FDA historically exercised enforcement discretion with respect to LDTs, pursuant to which it did not seek to enforce certain potentially applicable FDA requirements, including premarket review, with certain exceptions.
Even under that enforcement discretion policy, the FDA has issued warning letters to and safety communications about IVD device manufacturers for commercializing laboratory tests that were purported to be LDTs but that the FDA alleged failed to meet the definition of an LDT or otherwise were not subject to the FDA’s prior enforcement discretion policy.
Even for those LDTs that were subject to the historical enforcement discretion policy, the FDA for a number of years stated its intention to modify this policy and impose applicable medical device requirements to LDTs more broadly. To this end, on May 6, 2024, the FDA issued a final rule in an effort to clarify the FDA’s historical view that LDTs are medical devices subject to the requirements applicable to other IVDs (the “LDT Final Rule”), and to phase out its enforcement discretion policy over a period of four years from issuance of the LDT Final Rule.
However, on March 31, 2025, the United States District Court for the Eastern District of Texas vacated the LDT Final Rule, reasoning that LDTs are not medical devices, and remanded the matter to the FDA for further consideration. The decision was not appealed, and in September 2025, the FDA rescinded the LDT Final Rule. Accordingly, it is uncertain whether or when the FDA may be able to otherwise exercise its medical device authority with respect to LDTs. This uncertainty could adversely affect the FDA’s ability to apply and enforce its medical device requirements with respect to any LDTs for which a sponsor may plan to obtain a PMA. Such uncertainty and the FDA’s actions in response could have a material adverse effect on our business and operations.
In light of this uncertainty, we do not know if or when our offerings could become or will remain subject to FDA medical device requirements, including the need to seek and obtain marketing authorization. If we were unable to comply with any medical device requirements applicable to LDTs if and when any such requirements become applicable, we could be required to cease marketing any solutions that we market as LDTs. In addition, further efforts by the FDA or Congress to impose more regulation on LDTs could create a negative public perception about the validity, safety, effectiveness, or performance of LDTs, including our solutions, which could adversely affect patient, provider, and customer perception about, and confidence in, our solutions.
Notwithstanding the withdrawal of the LDT Final Rule, the FDA may assert that we are improperly marketing our tests, including Galleri, as LDTs and may assert we do not comply with applicable medical device requirements, and in such cases may take enforcement action against us and/or require us to seek premarket review and obtain marketing authorizations, which may require that we cease marketing any LDT products until
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such marketing authorizations are obtained or the relevant applications are submitted. There can be no assurance that we will be able to obtain any required marketing authorization for our tests or that any labeling claims will be consistent with the claims we have made or intend to make for such products when launched as LDTs, or that such claims would be adequate to support continued adoption of and reimbursement for our products. In the event we are required to seek FDA marketing authorization for any current or planned products, the FDA may request that we provide additional analyses and information beyond that which we intend to produce based on the designs of our current and planned clinical studies, or that we modify or narrow our intended use or product claims. It is possible that the FDA, among other things, could disagree with our interpretation of data we have relied on to support our LDT launches for our intended uses. If we are required to provide additional analyses or additional data or perform additional clinical studies beyond those we currently contemplate to support the intended uses of our products or future products, our planned commercial launches may be delayed and we may be required to commercialization of any products we currently market as LDTs. A in the launch of our products or new versions of existing products, or significantly narrowing their intended uses, could impact our financial condition and results of operations.
In addition, Congress has, for over the past decade, considered a number of proposals, which if enacted, would subject LDTs to additional regulatory requirements. For example, in recent years, Congress has worked on legislation to create a novel regulatory framework governing a new category of FDA-regulated products, referred to as in vitro clinical tests (“IVCTs”), which would govern LDTs and would be separate and distinct from the existing medical device regulatory framework. For example, most recently, in March 2023, the Verifying Accurate Leading-edge IVCT Development Act of 2023 (the “VALID Act”) was introduced. The bill would have established a risk-based approach to imposing requirements related to premarket review, quality systems, and labeling requirements on all IVCTs, including LDTs, but would grandfather certain LDTs marketed before the effective date of the bill and exempt them from certain requirements. It is unclear whether legislative proposals such as the VALID Act (including any proposals that would, in contrast, reduce FDA oversight of LDTs) will be introduced or passed by Congress or signed into law by the President. Depending on the approach adopted under any potential legislation or regulation, certain LDTs (likely those of higher risk) may be required to undergo some form of premarket review, potentially with a transition period for compliance and a grandfathering provision. Any such legislation could substantially alter our commercial offering and marketing of LDTs and negatively impact our financial condition and results of operations. Additionally, as a result of the District Court decision the regulatory environment around LDTs could be significantly relaxed, which could increase competition and reduce the effectiveness of our regulatory and reimbursement strategy.
The regulatory clearance, approval, or certification processes of the FDA and comparable foreign regulatory authorities or notified bodies are lengthy, time-consuming, and unpredictable. If we are ultimately unable to obtain any necessary or desirable regulatory approvals, clearances, or certifications, or if such approvals, clearances, or certifications are significantly delayed, our business will be substantially harmed.
While we have submitted a PMA to the FDA for approval of Galleri, we have not yet obtained FDA clearance or approval for any of our products or products in development and we currently market Galleri as an LDT. We may also seek FDA approval or clearance for other products in the future. The time required and ability to obtain clearance or approval by the FDA and comparable foreign regulatory authorities is unpredictable, typically takes several years following the commencement of clinical studies, and depends upon numerous factors, including the type, complexity, and novelty of our products and future products. In addition, policies, laws, regulations, or the type and amount of clinical data necessary to gain clearance or approval may change during the course of a test’s clinical development and may vary among jurisdictions, which may cause delays in the clearance or approval of, or the decision not to approve, an application. Regulatory authorities have substantial discretion in the premarket review process and may refuse to accept any application, decide that all or part of our data are unusable or insufficient for clearance or approval, require additional clinical or other data, including analytical validation data, determine that our manufacturing and quality systems are or in of applicable requirements, or determine that our clinical research program is or in of applicable clinical practice or other requirements related to research compliance, human subject protections, or data . Even if we believe our data are sufficient to support marketing authorization, regulatory authorities may , or may require the generation and submission of additional data or analyses, which could significantly or marketing authorization.
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Before a new medical device can be marketed in the United States, a company must first submit an application for and receive 510(k) clearance pursuant to a premarket notification submitted under Section 510(k) of the FDCA, approval of a PMA, or grant of a de novo classification request from the FDA, unless an exemption applies. In the process of obtaining PMA approval, which we are pursuing for Galleri, the FDA must determine that a proposed device is safe and effective for its intended use based, in part, on extensive data, including, but not limited to, technical, analytical validation, preclinical, clinical trial, manufacturing, and labeling data. The PMA process is typically required for devices that are deemed to pose the greatest risk, such as life-sustaining, life-supporting or implantable devices.
The PMA approval process can be expensive, lengthy and uncertain. The process of obtaining a PMA is costly and uncertain and generally takes from one to three years, or even longer, from the time the application is submitted to the FDA, including if an Advisory Committee is needed to evaluate a novel technology, which could occur for the review of a PMA for Galleri. In addition, a PMA generally requires the performance of one or more clinical trials. Despite the time, effort and cost, a device may not obtain marketing authorization by the FDA. Any delay or failure to obtain necessary regulatory marketing authorizations could harm our business. Furthermore, even if we are granted such marketing authorizations, they may include significant limitations on the indicated uses for the test, which may limit the potential commercial market for the test.
In the United States, any modification to a product for which we receive marketing authorization may require us to submit a PMA and obtain FDA approval prior to implementing the change. For example, certain modifications to a PMA-approved device may require approval of a new PMA or a PMA supplement, or alternatively a notification or other submission to the FDA. If we obtain PMA approvals from the FDA, we may make modifications or add additional features in the future that we believe do not require approval of a PMA or supplement or other regulatory submission. If the FDA disagrees with our determination and requires us to seek new marketing authorizations for the modifications for which we have concluded that new marketing authorizations are unnecessary, we may be required to cease marketing and/or to recall the modified product until we obtain such marketing authorization, and we may be subject to significant regulatory fines or penalties. If the FDA requires us to go through a lengthier, more rigorous examination for future products or modifications to existing products than we had expected, product introductions or modifications could be delayed or , which could affect our business.
In addition, we are or may become subject to new laws, regulations, and industry standards concerning medical devices proposed and enacted in various foreign jurisdictions. The EU regulatory landscape concerning IVDs evolved and continues to undergo legislative change. On May 26, 2022, the EU In Vitro Diagnostic Medical Devices Regulation (“EU IVDR”) entered into force, which repeals and replaces the EU In Vitro Diagnostic Medical Devices Directive (“EU IVDD”). Subject to the transitional provisions (i.e., a tiered system extending the grace period for many devices (depending on their risk classification) before they have to be fully compliant with the EU IVDR) and in order to sell our products in the EU member states, our products must comply with the general safety and performance requirements of the EU IVDR. Compliance with these requirements is a prerequisite to be able to affix the European Conformity (“CE”) mark to our products, without which they cannot be sold or marketed in the EU. All medical devices placed on the market in the EU must meet the general safety and performance requirements laid down in Annex I to the EU IVDR including the requirement that a medical device must be designed and manufactured in such a way that, during normal conditions of use, it is suitable for its intended purpose. Medical devices must be safe and effective and must not compromise the clinical condition or safety of patients, or the safety and health of users and - where applicable - other persons, provided that any risks which may be associated with their use constitute acceptable risks when weighed the benefits to the patient and are compatible with a high level of protection of health and safety, taking into account the generally acknowledged state of the art. To demonstrate compliance with the general safety and performance requirements, manufacturers must undergo a conformity assessment procedure, which varies according to the type of in vitro diagnostic medical device and its (risk) classification. A conformity assessment procedure generally requires the intervention of a notified body. The notified body would typically audit and examine the technical file and the quality system for the manufacture, design and final inspection of our devices. If that the relevant product conforms to the relevant general safety and performance requirements, the notified body issues a certificate of conformity, which the manufacturer uses as a basis for its own declaration of conformity. The manufacturer may then apply the CE mark to the device, which allows the device to be placed on the market throughout the EU.
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If we fail to comply with applicable laws and regulations, we would be unable to affix the CE mark to our products, which would prevent us from selling them within the EU, and any delays in coming into compliance with these laws and regulations could prevent or delay our ability to launch Galleri in Europe. The aforementioned EU rules are generally applicable in the EEA (which consists of the 27 EU member states plus Iceland, Norway and Liechtenstein, and also generally applicable in Türkiye). Non-compliance with the above requirements would also prevent us from selling our products in these three countries.
Following Brexit, EU laws such as the EU IVDR do not apply directly in Great Britain, however under the terms of the Protocol on Ireland/Northern Ireland, the EU IVDR does apply in Northern Ireland. Consequently, there are currently different regulations in place in Great Britain as compared to both Northern Ireland and the EU, respectively. Ongoing compliance with both sets of regulatory requirements may result in increased costs for our business. Furthermore, on December 16, 2024, the UK government passed an amendment to the UK MDR to clarify and strengthen the post-market surveillance requirements for medical devices (including IVDs) in Great Britain. This amendment became applicable on June 16, 2025. In addition, the MHRA launched a consultation from November 14, 2024 to January 5, 2025 on proposed changes to the pre-market requirements for medical devices in Great Britain. On July 22, 2025, the MHRA published a response to the consultation confirming that it will incorporate feedback to this consultation into new UK legislation on pre-market requirements for medical devices in Great Britain. A draft of the new legislation is expected to be published in 2026. Under the UK MDR, in order to be lawfully placed on the Great Britain market, Class A (non-sterile) IVDs need to be United Kingdom Conformity Assessment (“UKCA”) certified by a UK approved body. However, certain IVDs in compliance with: (a) the EU IVDD can continue to be placed on the Britain market until the sooner of certificate expiration or June 30, 2030; and (b) the EU IVDR can continue to be placed on the Britain market until June 30, 2030. IVDs also need to bear a physical UKCA mark in order to be lawfully placed on the Britain market. We have UKCA self-certified our Galleri test and it bears a UKCA mark. However, the MHRA has confirmed in its response to the consultation on pre-market requirements for medical devices in Britain that it intends to remove the requirement for a medical device or an IVD and their labelling (i.e. packaging and instructions for use) in Britain to bear a physical UKCA mark. Instead of requiring a medical device or an IVD and their labelling to bear a UKCA mark, manufacturers would be required to assign a unique design identification (“UDI”) to such devices and register the UDI in a publicly accessible database before they are placed on the Britain market. If this change is implemented, we may no longer be required to affix the physical UKCA mark to our devices, but we may need to assign and affix a UDI and register the UDI in a publicly accessible database. Understanding and ensuring compliance with any new requirements is likely to lead to further complexity and increased costs to our business.
It is currently unclear to what extent the UK government will seek to align new UK legislation on pre-market requirements for medical devices in Great Britain with the EU. The EU laws that have been transposed into UK law through secondary legislation remain applicable in Great Britain, however the full extent of the new UK legislation on pre-market requirements for medical devices in Great Britain remains uncertain and may cause additional cost to our business.
The FDA, other regulators or notified bodies can delay, limit, or deny clearance, approval, or certification of a product for many reasons, including but not limited to the following:
• disagreement with the design, implementation, or results of, or interpretation of the data from, our clinical studies;
• determination that our product has not been shown to be safe and effective or substantially equivalent to a predicate device, or has other characteristics that preclude us from obtaining marketing authorization or certification, or prevent or limit its commercial use (for example, a narrowed indication for use claim);
• the population studied in the clinical program may not be sufficiently broad, generalizable, or representative of the intended target population of our product to assure effectiveness and safety in the population for which we seek approval, clearance, or certification;
• disagreement with our interpretation of data from clinical studies or may fail to accept data from clinical studies (or clinical sites), including if we fail to establish the integrity of our data;
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• determination that our clinical studies otherwise fail to comply with applicable regulations, including good clinical practice requirements;
• serious or unexpected adverse effects or other performance issues are identified with our existing or future products;
• determination that our manufacturing or quality system fails to comply with applicable regulations or otherwise fails to meet the standards necessary to support approval or certification; and
• the approval (or certification) policies or regulations of the FDA or comparable foreign regulatory authorities may significantly change in a manner rendering our clinical data insufficient for approval or certification.
We engaged in discussions with the FDA regarding the clinical studies and data that would be needed to support a successful PMA for a multi-cancer test for our targeted indications, based on the designs of our current and planned clinical studies. Notwithstanding any FDA feedback, there can be no assurance that our existing or future products for which we may seek clearance, approval, or certification will be approved, cleared, or certified by the FDA, a comparable foreign regulatory authority or a notified body on a timely basis, if at all. If our products or future products receive clearance, approval, or certification but there is uncertainty about such products among providers or payors, reimbursement may be adversely affected and we may not be able to sell our products. Compliance with FDA or comparable foreign regulations will require substantial costs, and subject us to heightened scrutiny by regulators and substantial penalties for failure to comply with such requirements or the inability to market our products, if and when cleared, approved, or certified. The lengthy and unpredictable clearance, approval, and certification processes, as well as the of the results of our clinical studies, may result in our to obtain regulatory clearance, approval, or certification to market our products, which would significantly our business, results of operations, reputation, and prospects.
Regulatory approval by the FDA or other regulatory authorities is limited to those specific indications and conditions for which approval has been granted, and we may be subject to substantial fines, criminal penalties, injunctions or other enforcement actions if we are determined to be promoting the use of our products for unapproved or “off-label” uses, or in a manner inconsistent with the approved labeling, resulting in damage to our reputation and business.
We must comply with requirements concerning advertising and promotion for any product candidates for which we obtain marketing approval from the FDA. When the FDA or other regulatory authorities issue regulatory approval for a product, the regulatory approval is limited to those specific uses and indications for which a product is approved.
There can be no assurance that labeling claims will be consistent with our anticipated claims or current claims or marketing statements, including with respect to Galleri as an LDT and its current marketing as an MCED test in its intended use population, or adequate to support adoption of, or reimbursement for, our products. If the approved, cleared, or certified indication or other labeling claims the FDA or a comparable foreign regulatory authority or notified body allows us to make are more limited than we expect, or are more limited than current claims made with respect to Galleri, our business, prospects, and growth may be adversely affected and we may be limited in our ability to sell, or unable to sell, our products. As part of our PMA submission to the FDA for Galleri, we included a bridging analysis between the version of Galleri used in the PATHFINDER 2 study and NHS-Galleri Trial and the version we have submitted to the FDA for PMA approval. The results of this bridging analysis will likely impact any labeling claims, and may differ from previously reported performance results from those studies. If we are not to obtain FDA approval for uses or indications for our current and future products, we may not market or promote them for those indications and uses, and our business, financial condition, results of operations, stock price and prospects could be materially . We also must sufficiently substantiate any that we make for any products, including comparing those products to other companies’ products, and must abide by the FDA’s strict requirements regarding the content of promotion and advertising.
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Our multi-cancer detection tests are a new approach to cancer screening, which present a number of novel and complex issues for FDA review. Because the FDA has never cleared or approved a multi-cancer detection test, we cannot provide assurances regarding what information we will need to submit to obtain approval of a PMA from the FDA for a proposed intended use, or if we will be able to obtain such approval on a timely basis or at all.
Our multi-cancer detection tests represent a new approach to cancer screening, and obtaining FDA approval for Galleri presents a number of novel issues. The FDA has never granted marketing authorization for a multi-cancer detection test. Additionally, in March 2020, the FDA held a public workshop to discuss the clinical, scientific, and regulatory challenges associated with circulating tumor DNA cancer screening tests, and we expect the FDA to continue to gather input from a variety of industry, academic, and clinical stakeholders to inform its thinking on how to assess these types of tests, including potentially convening an Advisory Committee meeting during review of a PMA for Galleri (or another company’s PMA for a multi-cancer early detection test, should it precede ours). In fact, on November 29, 2023, the FDA held a meeting of the Molecular and Clinical Genetics Panel of the Medical Devices Advisory Committee to discuss and make recommendations on the design of multi-cancer detection in vitro diagnostic devices (tests) as well as potential study designs and study outcomes of interest that could inform the assessment of the probable benefits and risks of multi-cancer detection screening tests. The FDA stated that the committee’s discussion and recommendations from this meeting will help inform future FDA regulatory efforts for these novel tests. As such, the FDA requirements that will govern multi-cancer detection tests, as well as the breadth and nature of data we must provide the FDA, to support the proposed intended use, may be subject to change, and as such we cannot provide assurances what information we will need to submit to obtain approval of a PMA from the FDA for a proposed intended use. Similarly, other companies seeking to develop a multi-cancer early detection test would need to these requirements in order to obtain approval of a PMA from the FDA, and to the extent the requirements that the FDA adopts are less than we expect, it may be for potential competitors to enter this market.
Given the novel nature and complexity of our multi-cancer detection tests, and the fact that the FDA has never granted marketing authorization for a multi-cancer detection test, we cannot be certain whether we will receive FDA approval for Galleri and we cannot provide assurances that the studies we have conducted, are currently conducting, or plan to conduct, will be sufficient to provide the data that the FDA requires to support a proposed intended use. For example, we provided results from our PATHFINDER 2 study and NHS-Galleri Trial to support our PMA, as well as supplemental data from other clinical studies, and certain clinical data in the post-approval setting. We may be required to conduct additional studies or expand the enrollment of completed or ongoing studies to support approval of a PMA, as study design and enrollment continue to be discussed with the FDA. The FDA may require us to perform new analyses of our clinical data. These and other efforts that we may be required to undertake could delay the review of our PMA or delay or prevent approval, lead to a more limited intended use statement or approved labeling, and/or lead to significant post-approval limitations or restrictions, if approval is obtained at all. If the FDA determines that the data we submitted in our PMA are insufficient to support approval of our proposed intended use, the FDA’s review of the application could be and we need to generate more data from additional participants, in which case we may not receive approval or may receive an approved label, and may need to resubmit a PMA or supplement following completion of additional new or expanded clinical studies.
Our use and disclosure of personal information, including individually identifiable health information, and biological samples and related data are subject to federal, state and foreign privacy and security regulations. Data privacy rules are evolving and new legislation concerning privacy and data use may limit our ability to use such data and specimens. Our actual or perceived failure to comply with privacy and security requirements or to adequately secure such information could result in significant liability, administrative or governmental penalties, and/or reputational harm and, in turn, substantial harm to our business, financial condition and results of operations.
The global data protection landscape is rapidly evolving and we and our partners are or may be subject to federal, state, and foreign data protection laws and regulations (i.e., laws and regulations that address data privacy and security). Implementation standards and enforcement practices are likely to remain uncertain for the foreseeable future, and we cannot yet determine the impact future laws, regulations, standards, or perception of their requirements may have on our business. This evolution may create uncertainty in our business, affect our ability to operate in certain jurisdictions or to collect, store, transfer, use and disclose personal information,
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necessitate the acceptance of more onerous obligations in our contracts, result in liability or impose additional costs on us. The cost of compliance with these laws, regulations and standards is high and is likely to increase in the future. Any failure or perceived failure by us to comply with federal, state or foreign laws or regulations, consents and authorizations, our internal or publicly facing policies and procedures or our contracts governing our processing of personal information could result in negative publicity, government investigations and enforcement actions, claims by third parties and damage to our reputation, any of which could have a material adverse effect on our business, results of operation, and financial condition.
We receive, store, process and disclose personal information as part of our business and as our operations and business grow, we may become subject to or affected by new or additional data protection laws and regulations and face increased scrutiny or attention from regulatory authorities. In the United States, numerous state and federal laws and regulations govern the collection, dissemination, use, disclosure, privacy, confidentiality, security, availability and integrity of personal information, including health-related information. We are a covered entity under the Health Insurance Portability and Accountability Act of 1996, as amended by the Health Information Technology for Economic and Clinical Health Act, and the regulations implemented thereunder (collectively, “HIPAA”). HIPAA establishes, among other things, a set of national privacy and security standards relating to the privacy, security, transmission, and breach reporting of individually identifiable health information, by health plans, healthcare clearinghouses and certain healthcare providers, referred to as covered entities, the business associates with whom such covered entities contract for services that involve creating, receiving, maintaining, or transmitting protected health information (“PHI”), and the subcontractors of such business associates. In addition, we may obtain health information from third parties (including research institutions from which we obtain clinical trial data) that are subject to privacy and security requirements under HIPAA.
HIPAA requires covered entities and business associates to develop and maintain policies with respect to the protection of, use and disclosure of PHI, including the adoption of administrative, physical and technical safeguards to protect such information, and certain notification requirements in the event of a breach of unsecured PHI. Additionally, under HIPAA, covered entities must report breaches of unsecured PHI to affected individuals without unreasonable delay, not to exceed 60 days following discovery of the breach by a covered entity or its agents. Notification also must be made to the U.S. Department of Health and Human Services Office for Civil Rights (“OCR”) and, in certain circumstances involving large breaches, to the media. Business associates must report breaches of unsecured PHI to covered entities within 60 days of discovery of the breach by the business associate or its agents. A non-permitted use or disclosure of PHI is presumed to be a breach under HIPAA unless the covered entity or business associate establishes that there is a low probability the information has been compromised consistent with requirements enumerated in HIPAA.
Entities that are found to be in violation of HIPAA as the result of a breach of unsecured PHI, a complaint about privacy practices or an audit by the U.S. Department of Health and Human Services (“HHS”), may be subject to significant civil, criminal and administrative fines and penalties and/or additional reporting and oversight obligations if required to enter into a resolution agreement and corrective action plan with HHS to settle allegations of HIPAA non-compliance. HIPAA also authorizes state Attorneys General to file suit on behalf of their residents. Courts may award damages, costs and attorneys’ fees related to violations of HIPAA in such cases. While HIPAA does not create a private right of action allowing individuals to sue us in civil court for violations of HIPAA, its standards have been used as the basis for duty of care in state civil suits such as those for or in the or of PHI.
Certain states have also adopted comparable privacy and security laws and regulations which govern the privacy, processing and protection of health-related and other personal information, such as the California Confidentiality of Medical Information Act; these laws are not preempted by HIPAA to the extent that they are more stringent than HIPAA. Such laws and regulations are and will continue to be subject to interpretation by various courts and other governmental authorities, thus creating potentially complex compliance issues for us and our future customers and strategic partners. For example, the California Consumer Privacy Act, as amended by the California Privacy Rights Act (collectively, the “CCPA”) requires covered businesses that process the personal information of California residents to, among other things: (i) provide certain disclosures to California residents regarding the business’s collection, use, and disclosure of their personal information; (ii) receive and respond to requests from California residents to access, delete, and correct their personal information, or to opt out of certain disclosures of their personal information; and (iii) enter into specific contractual provisions with service providers that process California resident personal information on the business’s behalf. Additional compliance investment
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and potential business process changes may also be required as the statute and regulations continue to evolve. Although there are limited exemptions for certain health-related data, including clinical trial data and PHI subject to HIPAA, the CCPA may increase our compliance costs and potential liability. Other states have passed or are considering similar privacy laws and the federal government may seek to enact a similar federal privacy law, reflecting a trend toward more stringent privacy legislation in the United States.
We also expect that there will continue to be new laws, regulations and industry standards concerning privacy, data protection and information security proposed and enacted in various jurisdictions. For example, Washington State has enacted a broadly applicable law to protect the privacy of personal health information known as the “My Health My Data Act,” which broadly defines “consumer health data”, creates a private right of action to allow individuals to sue for violations of the law, imposes stringent consent requirements, and grants consumers certain rights with respect to their health data, including to request deletion of their information. Consumer health data is defined to include personal information that is linked or reasonably linkable to a consumer and that identifies a consumer’s past, present, or future physical or mental health status; consumer health data also includes information that is derived or extrapolated from non-health information, such as algorithms and machine learning. Other states, including, but not limited to, Connecticut, Virginia and Nevada, have also passed laws governing the privacy of consumer health data, and given the increased focus on the use of health data by entities that are not subject to HIPAA, additional states are expected to pass consumer health privacy laws. The enactment of such laws could have potentially conflicting requirements that would make compliance . We could be affected if HIPAA, the CCPA and other state or federal legislation or regulations applicable to GRAIL require changes in our business practices, our use, receipt, or transfer of health information, or our privacy policies, or if governing jurisdictions interpret or implement their legislation or regulations in ways that affect our business, financial condition and results of operations.
The Federal Trade Commission (“FTC”) also has authority to initiate enforcement actions against entities that mislead customers about HIPAA compliance, make deceptive statements about privacy and data sharing in privacy policies, fail to limit third-party use of health information, fail to implement policies to protect personal health information or engage in other unfair practices that harm customers or that may violate Section 5 of the Federal Trade Commission Act (“FTC Act”). Even when HIPAA does not apply, according to the FTC, violating consumers’ privacy rights or failing to take appropriate steps to keep consumers’ personal information secure may constitute unfair acts or practices in or affecting commerce in violation of the FTC Act. The FTC also expects a company’s data security measures to be reasonable and appropriate in light of the sensitivity and volume of consumer information it holds, the size and complexity of its business, and the cost of available tools to security and reduce . Additionally, federal and state consumer protection laws are increasingly being applied by FTC and states’ attorneys general to regulate the collection, use, storage, and disclosure of health-related and other personal information through websites or otherwise, and to regulate the presentation of website content.
We strive to comply with applicable laws, regulations, policies and other legal obligations relating to privacy, data protection and information security. However, the various regulatory frameworks for privacy and data protection are, and are likely to remain, uncertain for the foreseeable future, and it is possible that these or other actual or alleged obligations may be interpreted and applied in a manner that is inconsistent from one jurisdiction to another and may conflict with other rules and subject our business practices to uncertainty.
In addition, the actual or perceived compromise of, lax oversight of, irresponsible or unauthorized use of, or unauthorized access to or release of, patient data or information by GRAIL, our partners, suppliers, contractors, consultants, or vendors, could erode provider, patient, and customer confidence, which could impact our business, financial condition, and results of operations.
In the conduct of clinical research, we seek to utilize biological samples and data from participants in accordance with applicable law, IRB stipulations, and participant permissions (through consent forms and HIPAA authorizations) or IRB approved waivers thereof. If we are unable or significantly restricted in using participant samples and data for secondary research purposes, our ability to develop additional products and/or improve or refine existing products will be limited, which may impact our business and prospects.
In addition, we are or may in the future be subject to a range of laws, regulations, and industry standards concerning privacy, data protection, and information security proposed and enacted in various foreign jurisdictions. In Europe, we are subject to the UK GDPR and EU GDPR. The GDPR imposes a comprehensive data privacy compliance regime including: maintaining a record of data processing; providing detailed disclosures
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about how personal information is collected and processed (in a concise, intelligible and easily accessible form); demonstrating that appropriate legal bases are in place to justify data processing activities; complying with rights for data subjects in regard to their personal information (including data access, erasure (the right to be “forgotten”) and portability); ensuring appropriate safeguards are in place where personal information is transferred out of the EEA and the UK; and complying with the principal of accountability and the obligation to demonstrate compliance through policies, procedures, training and audit. The applicability of the specific requirements depends on whether an organization acts as controller or processor.
Some of the personal information we process, for example in respect of clinical trial participants, is special category data under the GDPR, and subject to additional compliance obligations and to local law derogations. We may be subject to diverging requirements under national UK laws and EU member state laws, such as the legal basis we can rely on when processing health data of clinical trial participants as controller or the roles, responsibilities and liabilities as between CROs. As these laws develop, we may need to make operational changes to adapt to these diverging rules, which could increase our costs and adversely affect our business. Further, the regulatory landscape of data and digital laws in the UK and EU is under constant development, and in the future we may be required to adapt our processes, or change the way we engage with health data.
Among other requirements, the GDPR regulates the transfer of personal information outside of the EEA and the UK and we expect the existing legal complexity and uncertainty regarding international personal data transfers to continue, and international transfers to the United States, China, and to other jurisdictions more generally to continue to be subject to enhanced scrutiny by regulators. As the regulatory guidance and enforcement landscape in relation to data transfers continue to develop, we could suffer additional costs, complaints and/or regulatory investigations or fines; we may have to stop using certain tools and vendors and make certain operational changes, we may have to implement alternative data transfer mechanisms under the GDPR and/ or take additional compliance and operational measures; and/or it could otherwise affect the manner in which we provide our services, and could adversely affect our business, operations and financial condition.
Penalties and fines for failure to comply with the GDPR are significant, including fines of up to €20 million/ £17.5 million or 4% of a noncompliant company’s global turnover for the preceding year, whichever is higher. Since we are subject to the supervision of relevant data protection authorities under both the UK GDPR and the EU GDPR, we could be fined under those regimes independently and in respect of the same non-compliance. As we continue to expand into other foreign countries and jurisdictions, we may be subject to additional laws and regulations that may affect how we conduct business. In addition to potential fines, noncompliance with applicable foreign privacy laws, such as the GDPR, may result in regulatory investigations, orders to cease/ change our data processing activities, enforcement notices, assessment notices (for a compulsory audit), civil claims (including class actions) and/or damage to the public perception of GRAIL’s data stewardship practices and policies, which could our business and prospects with other foreign health systems and governments.
Our business may be affected by the evolving regulatory framework for AI Technologies.
The regulatory framework for artificial intelligence (“AI”), machine learning, and automated decision-making technologies (collectively, “AI Technologies”) is rapidly evolving as many federal, state, and foreign government bodies and agencies have introduced or are currently considering additional laws and regulations. Additionally, existing laws and regulations may be interpreted in ways that would affect the operation of our AI Technologies.
It is possible that new laws and regulations will be adopted in the United States and in other non-U.S. jurisdictions, or that existing laws and regulations, including competition and antitrust laws, may be interpreted in ways that would limit our ability to use AI Technologies for our business, or require us to change the way we use AI Technologies in a manner that negatively affects the performance of our products, services, and business and the way in which we use AI Technologies. We may need to expend resources to adjust our products or services in certain jurisdictions if the laws, regulations, or decisions are not consistent across jurisdictions. Further, the cost to comply with such laws, regulations, or decisions and/or guidance interpreting existing laws, could be significant and would increase our operating expenses (such as by imposing additional reporting obligations regarding our use of AI Technologies). Such an increase in operating expenses, as well as any actual or perceived failure to comply with such laws and regulations, could adversely affect our business, financial condition and results of operations.
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If we or our partners fail to comply with federal, state, and foreign laboratory and other applicable licensing and registration requirements, we could be prevented from performing our tests or experience disruptions to our business.
CLIA is a federal law that regulates clinical laboratories that perform testing on specimens derived from humans for the purpose of providing information for the diagnosis, prevention, or treatment of disease, or impairment of, or the assessment of the health of, human beings. CLIA regulations require, among other things, clinical laboratories to obtain a certificate and mandate specific standards in the areas of personnel qualifications, administration, participation in proficiency testing, test management, and quality assurance. CLIA certification is also required for us to be eligible to bill state and federal healthcare programs, if such reimbursement is otherwise available, as well as many third-party payors, for our products. To renew these certifications, we are and will be subject to routine surveys and inspections. Moreover, CLIA inspectors may make random or “for cause” inspections of our clinical laboratory.
We hold a CLIA certificate from CMS for our laboratory in Durham, North Carolina to conduct high complexity testing, subject to inspection to determine compliance with the CLIA regulations. We also hold a CAP accreditation for our Durham facility. Certain product additions to our test menu require notification to the regulatory and accrediting bodies that regulate our laboratory (e.g., CMS, the California Department of Public Health Laboratory Field Services (“CALFS”) and CAP) that we are adding a new specialty to our assay offerings. At their discretion, any regulatory or accrediting body may come on-site to inspect our laboratory at any time. Any failure to pass inspections, maintain our CLIA certificate, CAP accreditation, or state licenses, or add new validated products to our laboratory assay offerings could significantly harm our business, results of operations, and prospects.
In addition to obtaining federal certification for a laboratory under CLIA, we are also required to obtain and maintain state licenses to conduct testing in our laboratory. We have obtained a Clinical Laboratory Certificate of Deemed Status from the State of California Department of Public Health for our Durham, North Carolina facility. The California licensure law establishes standards for the day-to-day operation of a clinical laboratory, including the training and skills required of personnel and quality control. In addition, California law mandates proficiency testing, which involves testing of specimens that have been specifically prepared for the laboratory. Further, if we test specimens originating from other states and return patient-specific results, our clinical laboratory must satisfy such states’ licensure laws as well to the extent that such laws regulate out-of-state laboratories that test specimens originating in such states. For example, to be able to receive specimens originating from New York, we must maintain a NYSDoH clinical laboratory permit and obtain approval of Galleri, which we achieved. Research testing, however, does not require licensure if patient-specific results are not generated and/or returned for diagnostic purposes. We have obtained NYSDoH clinical laboratory permits for our Durham facility for our initial commercial version of Galleri and approval for our new version of Galleri, which authorize us to accept and generate for diagnosis or treatment purposes patient-specific results on specimens originating from New York at the applicable facility, as well as having obtained NYSDoH approval (or, with respect to the new version of Galleri, conditional approval) to offer Galleri to residents of the State of New York. Applicable New York laws and regulations establish standards for day-to-day operation of a clinical laboratory, including training and skill levels required of laboratory personnel, physical requirements of a facility, equipment, and validation and quality control. There can be no assurance that we will be to maintain New York clinical laboratory permits or approval of Galleri, or maintain licenses or permits from any other states where we are required to be licensed or hold a permit. to maintain such licenses or permits could us to and other , or limit our potential testing population.
In connection with CLIA certification and state laboratory licensing and permitting, we remain subject to a number of risks in the event of noncompliance. Any sanction imposed under CLIA, its implementing regulations, or state or foreign laws or regulations governing licensure or permitting, or our failure to renew or maintain a CLIA certificate, a state license or permit, or accreditation (including CAP), could have a material adverse effect on our business and reputation as certain actions are public. CMS also has the authority to impose a wide range of sanctions, including suspension, limitation, or revocation of the CLIA certification, termination of Medicare and Medicaid participation, civil money penalties, and a bar on the ownership or operation of a CLIA-certified laboratory by any owners or operators of the deficient laboratory. If we fail to obtain any required state licensure, or lose CLIA certification, CAP accreditation, or licensure, we would not be to operate our clinical laboratory and offer our products in full or in particular states, which would impact our business and results of
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operations. Even if we were able to bring our laboratory back into compliance, we could incur significant expenses and potentially lose revenue in doing so.
In addition to state laboratory licensing laws, we may also be subject to state registration and/or licensing requirements that apply to companies that manufacture medical devices. Certain states require such registrations or licenses before the products are commercialized, including while manufacturers are evaluating the devices in clinical studies. Violations of these laws may result in the denial, suspension, or revocation of the registration or license, as well as other fines and penalties, including imprisonment.
Data from our clinical trials that we announce or publish from time to time before our trials are complete may change as more patient data become available and are subject to audit and verification procedures that could result in material changes in the final data.
From time to time, we may publicly disclose preliminary or topline data from our clinical studies, which is based on a preliminary analysis of then-available data, and the results and related findings and conclusions are subject to change following a more comprehensive review of the data related to the particular study. We also make assumptions, estimations, calculations and conclusions as part of our analyses of data, and we may not have received or had the opportunity to fully and carefully evaluate all data. As a result, the topline or preliminary results that we report may differ from future results of the same studies, or different conclusions or considerations may qualify such results, once additional data have been received and fully evaluated. Topline and preliminary data also remain subject to audit and verification procedures that may result in the final data being materially different from the topline or preliminary data we previously published. As a result, topline and preliminary data should be viewed with caution until the final data are available.
From time to time, we may also disclose interim data from our clinical studies. Interim data from these studies that we may complete are subject to the risk that one or more of the clinical outcomes may materially change as subject enrollment continues and more data become available. Adverse differences between interim data and top-line, preliminary, or final data could significantly harm our business prospects. Further, disclosure of interim data by us or by third parties could result in volatility in the price of our common stock.
For example, we recently announced the topline results of our NHS-Galleri Trial in the United. In May 2024, the NHS determined, based on data from an early analysis of Galleri test performance results in the intervention arm from the prevalent screening round of the NHS-Galleri Trial, not to initiate an implementation pilot in England prior to the final trial results. We submitted to NHS England and to the FDA information from the prevalent screening round. Various factors are likely to cause the final results to differ from the prevalent screening round results. Further, it is possible that the early preliminary, interim or final data may not be as we expect, may be inconsistent with prior NHS-Galleri Trial data, or with other studies we have conducted, or may be unsuitable to the NHS or the FDA. Importantly, preliminary or interim data may be focused on different endpoints than the overall study. The prevalent screening round results that we announced and provided to the NHS and FDA were predominantly focused on performance characteristics of the Galleri test, whereas the primary endpoint and a number of secondary endpoints of the trial were focused on clinical utility measures like cancer stage shift that can only be measured through annual testing over a number of years. Similarly, in October 2025, performance and safety results from the first approximately 25,000 participants of the PATHFINDER 2 study were presented at the ESMO Congress 2025. PATHFINDER 2 was initiated in 2021 to evaluate the safety and performance of the Galleri test when added to standard of care single cancer screening in 35,878 adults aged 50 years and older with no clinical of cancer. Results from the full approximately 35,000 participants in the PATHFINDER 2 study were generally consistent with the results presented at ESMO. While we did not include full performance and safety data from the additional 10,000 patients in our initial PMA submission, it is possible that the FDA could require these data to confirm study performance. Any , , or results could have a significant impact on the of our commercial efforts for Galleri, our ability to FDA authorization at all or within our anticipated timelines, our ability to CMS or private payor reimbursement or coverage, our brand and reputation, our business, and our growth prospects.
Further, others, including regulatory agencies, may not accept or agree with our assumptions, estimates, calculations, conclusions or analyses or may interpret or weigh the importance of data differently, which could impact the value of the particular program, and our ability to receive regulatory clearance or approval or commercialize a particular product and our company in general. In addition, the information we choose to publicly
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disclose regarding a particular study or clinical study is based on what is typically extensive information, and you or others may not agree with what we determine is the material or otherwise appropriate information to include in our disclosure, and any information we determine not to disclose may ultimately be deemed significant with respect to future decisions, conclusions, views, activities or otherwise regarding our business. If the data that we report differ from final results, or if others, including regulatory authorities, disagree with the conclusions reached, our ability to commercialize or obtain regulatory clearance or approval for our products may be harmed, which could harm our reputation, business, operating results, prospects or financial condition.
Any product for which we obtain a regulatory certificate, permit, license, clearance, or approval will be subject to extensive ongoing regulatory requirements, and we may be subject to penalties if we or our partners fail to comply with regulatory requirements or if we experience unanticipated problems with our products.
Any product for which we obtain a regulatory certificate, permit or license from a local, state, federal, or foreign regulatory authority, or notified body, or clearance or approval from the FDA or other comparable regulators, along with the manufacturing processes, post-market surveillance, labeling, packaging, advertising, and promotion, distribution, storage, import, export, reporting, and recordkeeping for such product, will be subject to continued regulatory review, oversight, requirements, and periodic inspections by the FDA and comparable foreign regulatory authorities, as well as our laboratory processes and practices will be subject to continued review, oversight, requirements, and inspections by CMS, CALFS, and CAP. These requirements include submissions of safety and other post-marketing information and reports; registration and listing requirements; requirements relating to quality control, quality assurance, and corresponding maintenance of records and documents; requirements relating to recalls, removals, and corrections; and requirements relating to product labeling, advertising and promotion, and recordkeeping. The regulations to which we are subject are complex and have tended to become more stringent over time. Regulatory changes could result in restrictions on our ability to carry on or expand our operations, higher than anticipated costs or lower than anticipated sales. The FDA and comparable foreign regulatory authorities enforce regulatory requirements through, among other means, periodic unannounced inspections. We do not know whether we will be found compliant in connection with any future regulatory inspections.
Regulatory clearance, approval, or certification of a test or device may be subject to limitations by the regulatory body or notified body as to the indicated uses for which the product may be marketed or to other conditions of clearance, approval, or certification. In addition, clearance, approval, or certification may contain requirements for costly post-marketing testing and surveillance to monitor the safety or efficacy of the test or device. After clearance, approval, or certification, discovery of problems with our product, suppliers, vendors, or contract manufacturers, or manufacturing processes (including software validation), and/or failure to comply with regulatory requirements, may result in actions such as:
• restrictions on operations of our laboratories;
• restrictions on manufacturing processes;
• restrictions on marketing of a product;
• Untitled or Warning letters;
• withdrawal or recall of the product from the market or seizure of the product;
• refusal to approve applications or supplements to approved applications that we may submit;
• fines, restitution or disgorgement of profits or revenue;
• suspension, limitation or withdrawal of regulatory approvals, clearances, or certifications;
• exclusion from participation in U.S. federal or state healthcare programs, such as Medicare and Medicaid;
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• safety communications;
• refusal to permit the import or export of our product;
• injunctions; or
• imposition of civil or criminal penalties.
Any of these sanctions could result in higher than anticipated costs or lower than anticipated sales and have a material adverse effect on our reputation, business, financial condition and results of operations.
In addition, the FDA may change its clearance or approval policies, adopt additional regulations or revise existing regulations, or take other actions. For example on February 2, 2026, the FDA’s final rule implementing the FDA’s Quality Management System Regulation (“QMSR”) became effective. The QMSR, which replaced the FDA’s former Quality System Regulation (“QSR”), sets forth the FDA’s cGMP requirements for medical devices, and among other things, incorporates by reference certain elements of the quality management system requirements of ISO 13485:2016. Although the FDA has stated that the standards contained in ISO 13485:2016 are substantially similar to those set forth in the QSR, and although our quality management system is designed to comply with ISO:13485, the FDA has indicated that ISO:13485 certification alone will not ensure compliance under the QMSR, nor will ISO certification exempt manufacturers from FDA inspection. The QMSR also includes certain compliance obligations, such as those relating to unique device identification, product traceability, and maintenance of complaint and service records, that align more closely with the FDA’s existing medical device requirements than with ISO standards. Accordingly, it remains unclear the extent to which the QMSR may impose additional or different regulatory requirements on us that could increase the costs of compliance or otherwise negatively affect our business.
Such changes may also occur in foreign jurisdictions where we intend to market our products or future products. Such policy or regulatory changes could impose additional requirements upon us that could delay our ability to obtain clearances or approvals, increase the costs of compliance or restrict our ability to maintain any clearances or approvals we have obtained.
In addition, we are or may become subject to new laws, regulations, and industry standards concerning medical devices proposed and enacted in various foreign jurisdictions. The EU regulatory landscape concerning IVDs recently evolved and continues to undergo legislative changes. On May 26, 2022, the EU IVDR became applicable, and repealed and replaced the EU IVDD. Unlike directives, which must be implemented into the national laws of the EU member states, regulations are directly applicable (i.e., without the need for adoption of EU member state laws implementing them) in all EU member states and are intended to eliminate current differences in the regulation of medical devices among EU member states. The EU IVDR, among other things, is intended to establish a uniform, transparent, predictable and sustainable regulatory framework across the EU for in vitro diagnostic medical devices and ensure a high level of safety and health while supporting innovation.
The EU IVDR requirements are in active implementation and may change as the European Commission adopts additional implementing acts and considers targeted revisions to related IVD rules.
These modifications may have an effect on the way we intend to develop our business in the EU and the EEA. For example, as a result of the transition towards the new regime, notified body review times have lengthened, and product introductions could be delayed or canceled, which could adversely affect our ability to grow our business.
For any of our products that are approved or cleared by the FDA, we will be required to report to the FDA certain information about adverse medical events or malfunctions, and if we fail to do so, we would be subject to sanctions that could harm our reputation, business, financial condition, results of operations, and growth prospects. The discovery of serious safety issues with our products, or a recall of our products either voluntarily or at the direction of the FDA or another governmental authority, could have a negative impact on us.
For products for which we obtain FDA clearance or approval or that are otherwise subject to affirmative FDA oversight, we will be subject to the FDA’s medical device reporting regulations and similar foreign regulations,
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which require us to report to the FDA when we receive or become aware of information that reasonably suggests that one or more of our products may have caused or contributed to a death or serious injury or malfunctioned in a way that, if the malfunction were to recur, it could cause or contribute to a death or serious injury. The timing of our obligation to report is triggered by the date we become aware of the adverse event as well as the nature of the event. We may fail to report adverse events of which we become aware within the prescribed timeframe. We may also fail to recognize that we have become aware of a reportable adverse event, especially if it is not reported to us as an adverse event or if it is an adverse event that is or removed in time from the use of the product. If we to comply with our reporting obligations, the FDA could take action, including letters, untitled letters, administrative actions, , imposition of civil monetary , of our device clearance or approval, seizure of our products or in clearance or approval of future products. Similar risks exist in foreign jurisdictions.
The FDA and foreign regulatory bodies have the authority to require the recall of commercialized products in the event of material deficiencies or defects in design or manufacture of a product or in the event that a product poses an unacceptable risk to health. The FDA’s authority to require a recall must be based on a finding that there is reasonable probability that the device could cause serious injury or death. We may also choose to voluntarily recall a product if any material deficiency is found. A government-mandated or voluntary recall by us could occur as a result of an unacceptable risk to health, component failures, malfunctions, manufacturing defects, labeling or design , packaging or other or to comply with applicable regulations. Product or other may occur in the future.
Depending on the corrective action we take to redress a product’s deficiencies or defects, the FDA or comparable foreign regulatory authorities may require, or we may decide, that we will need to obtain new clearances, approvals, or certifications for the device before we may market or distribute the corrected device. Seeking such clearances, approvals, or certifications may delay our ability to replace the recalled devices in a timely manner. Moreover, if we do not adequately address problems associated with our devices, we may face additional regulatory enforcement action, including FDA or comparable foreign regulatory authorities warning letters, product seizure, injunctions, administrative penalties or civil or criminal fines.
Companies are required to maintain certain records of recalls and corrections, even if they are not reportable to the FDA. We may initiate voluntary withdrawals or corrections for our products in the future that we determine do not require notification of the FDA. If the FDA disagrees with our determinations, it could require us to report those actions as recalls and we may be subject to enforcement action. A future recall announcement could harm our reputation with customers, potentially lead to product liability claims against us and negatively affect our sales. Any corrective action, whether voluntary or involuntary, as well as defending ourselves in a lawsuit, will require the dedication of our time and capital, distract management from operating our business and may our reputation and financial results.
To obtain and maintain FDA approvals or clearances, our products will need to be manufactured in accordance with federal and state regulations, and we could be forced to recall our devices or terminate production if we or our partners fail to comply with these regulations.
For the FDA to approve or clear a medical device marketing application, the methods used in, and the facilities used for, the manufacture of our products must comply with the FDA’s QMSR, which is a complex regulatory scheme that covers the procedures and documentation of the design, testing, production, process controls, quality assurance, labeling, packaging, handling, storage, distribution, installation, servicing and shipping of medical devices. Furthermore, to obtain FDA clearance or approval, we are required to verify that our suppliers maintain facilities, procedures and operations that comply with our quality standards and applicable regulatory requirements. The FDA enforces the QMSR through periodic announced or unannounced inspections of medical device manufacturing facilities, which may include the facilities of subcontractors. Similar state regulations and various laws and regulations of foreign countries governing manufacturing also apply to our products.
Our third-party manufacturers may not take the necessary steps to comply with applicable regulations, which could cause delays in the availability of our products or a delay in obtaining FDA authorization of our marketing application. In addition, on February 2, 2026, the FDA’s final rule implementing the QMSR became effective. The QMSR, which replaced the FDA’s former Quality System Regulation, sets forth the FDA’s cGMP requirements for medical devices, and among other things, incorporates by reference certain elements of the quality management
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system requirements of ISO 13485:2016. Although the FDA has stated that the standards contained in ISO 13485:2016 are substantially similar to those set forth in the QSR, and although our quality management system is designed to comply with ISO:13485 the FDA has indicated that ISO:13485 certification alone will not ensure compliance under the QMSR, nor will ISO certification exempt manufacturers from FDA inspection. The QMSR also includes certain compliance obligations, such as those relating to unique device identification, product traceability, and maintenance of complaint and service records, that align more closely with the FDA’s existing medical device requirements than with ISO standards. Accordingly, it remains unclear the extent to which the QMSR may impose additional or different regulatory requirements on us that could increase the costs of compliance or otherwise negatively affect our business. If we or our third party manufacturers are unable to comply with the QMSR, once effective, or with any other applicable FDA requirements or if we or a third party manufacturer discovers previously unknown problems with our products or manufacturing processes, these could result in, among other things: warning letters or untitled letters; fines, or civil ; or withdrawal of approvals; seizures or of our products; total or partial of production or distribution; administrative or judicially imposed sanctions; the FDA’s to grant pending or future clearances or approvals for our products; clinical holds; to permit the import or export of our products; and of us, our suppliers, or our employees.
Any of these actions could significantly and negatively affect the supply of our products. If any of these events occurs, our reputation could be harmed, we could be exposed to product liability claims and we could lose customers and experience reduced sales and increased costs.
The misuse or off-label use of our products may harm our reputation in the marketplace, result in injuries that lead to product liability suits or result in costly investigations, fines or sanctions by regulatory bodies if we are deemed to have engaged in the promotion of these uses, any of which could be costly to our business.
Any marketing authorization or certification we may receive or obtain for our products by the FDA, comparable foreign regulatory authorities, or notified bodies will include specified indications for use and approved (or certified) labeling. Upon receipt of FDA authorization, or certification, we will continue to train our marketing personnel and direct sales force to not promote our authorized (or certified) tests for uses outside of FDA-authorized (or certified) indications for use, known as “off-label uses.” However, we are reliant on physicians and other providers to accurately provide information about our products to patients, including purposes, limitations, risks benefits, and interpretation of results, and we cannot, prevent a provider from using our products off-label, when in the provider’s independent professional medical judgment he or she deems it appropriate. There may be increased risk of injury to patients if physicians attempt to use our products off-label, which could harm our reputation in the marketplace among physicians and patients.
If, after FDA authorization or certification, the FDA or any foreign regulatory body determines that our promotional materials or training constitute promotion of an off-label use, it could request that we modify our training or promotional materials or subject us to regulatory or enforcement actions, including the issuance or imposition of an untitled letter, which is used for violators that do not necessitate a warning letter, injunction, seizure, civil fine or criminal penalties. It is also possible that other federal, state or foreign enforcement authorities might take action under other regulatory authority, such as false claims laws, if they consider our business activities to constitute promotion of an off-label use, which could result in significant penalties, including, but not limited to, criminal, civil and administrative penalties, damages, fines, , exclusion from participation in government healthcare programs and the of our operations.
In addition, physicians may misuse our products if they are not adequately trained, potentially leading to injury and an increased risk of product liability. If our devices are misused or used with improper technique, we may become subject to costly litigation by our customers or their patients. As described above, product liability claims could divert management’s attention from our core business, be expensive to defend and result in sizeable damage awards against us that may not be covered by insurance.
Misleading, untruthful, or unsubstantiated labeling, advertising, marketing, or promotional practices could cause significant harm to our business, operations, and financial conditions. The FTC has instituted enforcement actions against certain healthcare testing companies for making false or misleading advertising claims and for failing to adequately substantiate claims made in advertising. These enforcement actions may result in warning
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letters, consent decrees, and the payment of civil penalties and/or restitution by the companies involved. Should the FTC determine that our claims are false or misleading or unsubstantiated, we could be subject to FTC enforcement action and may face significant penalties which may result in a material adverse effect on our reputation, business, financial condition, results of operations, and growth prospects.
The labeling, advertising, marketing, and promotional practices of GRAIL related to our products is governed by numerous state and federal regulators, including the FDA and the FTC, as well as subject to third-party claims. Any statements related to our products that could be construed as misleading, untruthful, or unsubstantiated, could subject GRAIL to regulatory enforcement action, third-party lawsuits, or plaintiffs’ complaints. Any of these actions could significantly and negatively affect our reputation, expose us to liability claims, and we could lose customers and experience reduced sales and increased costs.
Healthcare reform and data protection measures, including legislation reforming the U.S. healthcare system, could cause significant harm to our business, operations and financial condition.
Healthcare systems are subject to ongoing reform in the United States and abroad. For example, in the United States, the Affordable Care Act (“ACA”) made a number of substantial changes to the way healthcare is financed both by governmental and private insurers. The ACA, among other things, included provisions governing enrollment in federal and state healthcare programs, reimbursement matters, and fraud and abuse. Since its enactment, there have been executive, judicial and Congressional challenges to certain aspects of the ACA. Most recently, on June 17, 2021 the U.S. Supreme Court dismissed a challenge on procedural grounds that argued the ACA is unconstitutional in its entirety because the “individual mandate” was repealed by Congress. Other legislative changes have also been proposed and adopted in the United States since the ACA. For example, through the process created by the Budget Control Act of 2011, there are automatic reductions of Medicare payments to providers, which went into effect in April 2013 and will remain in effect until 2032 unless additional Congressional action is taken. In January 2013, the American Taxpayer Relief Act of 2012 was signed into law, which, among other things, further reduced Medicare payments to several types of providers, and increased the statute of period for the government to recover to providers from three to five years.
In April 2014, Congress passed PAMA, which included substantial changes to the way in which clinical laboratory services are paid under the CLFS. Under PAMA, certain clinical laboratories are required to periodically report to CMS private payor payment rates and volumes for their tests, and laboratories that fail to report the required payment information may be subject to substantial civil monetary penalties. Medicare reimbursement for CDLTs is based on the weighted-median of the payments made by private payors for these tests, rendering private payor payment levels even more significant than in the past. As a result, future Medicare payments may fluctuate more often and become subject to the willingness of private payors to recognize the value of diagnostic tests generally and any given test individually. The impact of this payment system on rates for our tests, including any current or future tests we may develop, is uncertain. For more information, see above and the section entitled “Risks Relating to Our Business and Industry. If our products do not receive adequate coverage and reimbursement, if at all, from third-party payors, our ability to expand access to our products and our overall commercial success beyond our existing sales channels will be limited.”
More recently, the One Big Beautiful Bill Act (the “OBBBA”) included significant reforms to Medicaid, including an estimated $1 trillion in reduced federal Medicaid spending from 2025 through 2034, the imposition of work requirements for certain adult enrollees, more frequent eligibility redeterminations, and increased cost-sharing for beneficiaries. These changes are expected to reduce overall Medicaid enrollment and access to care. Although the effect on our business is currently unknown, any decrease in the number of insured patients or reimbursement levels for our tests could adversely affect our revenue and commercial prospects.
We cannot predict whether or when these or other recently enacted healthcare initiatives will be implemented at the federal or state level or in foreign jurisdictions or how any such legislation or regulation may affect us. For instance, the payment reductions imposed by the ACA and the changes to reimbursement amounts paid by Medicare for tests based on the procedure set forth in PAMA, could limit the prices we will be able to charge or the amount of available reimbursement for our tests, which would reduce our revenue. Additionally, these healthcare policy changes could be amended or additional healthcare initiatives could be implemented in the future.
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Similar developments may occur in the EU. For instance, on December 13, 2021, Regulation No 2021/2282 on Health Technology Assessment (“HTA”) amending Directive 2011/24/EU. While the Regulation entered into force in January 2022 and has been applicable since January 2025, with phased implementation based on the type of product (i.e., certain high-risk medical devices as of 2026). This Regulation intends to boost cooperation among EU member states in assessing health technologies, including certain high-risk medical devices, and provide the basis for cooperation at the EU level for joint clinical assessments in these areas. It will permit EU member states to use common HTA tools, methodologies, and procedures across the EU, working together in four main areas, including joint clinical assessment of the innovative health technologies with the highest potential impact for patients, joint scientific consultations whereby developers can seek advice from HTA authorities, identification of emerging health technologies to identify promising technologies early, and continuing voluntary cooperation in other areas. Individual EU member states will continue to be responsible for assessing non-clinical (e.g., economic, social, ethical) aspects of health technology, and making decisions on pricing and reimbursement.
Further, the impact on our business of the expansion of the federal and state governments’ role in the U.S. healthcare industry generally, including the social, governmental and other pressures to reduce healthcare costs while expanding individual benefits, is uncertain. Any future changes or initiatives could have a materially adverse effect on our business, financial condition, results of operations and cash flows.
Obtaining and maintaining regulatory authorization of our products in one jurisdiction does not mean that we will be successful in obtaining regulatory authorization of our products in other jurisdictions.
Obtaining and maintaining regulatory authorization or certification of products in one jurisdiction does not guarantee that we will be able to obtain or maintain regulatory authorization or certification in any other jurisdiction, but a failure or delay in obtaining regulatory authorization or certification in one jurisdiction may have a negative effect on the regulatory authorization or certification process in others. For example, even if the FDA or a comparable foreign regulatory authority grants clearance or approval for our products, comparable regulatory authorities or notified bodies in foreign jurisdictions may also need to authorize or certify the products in those countries. Premarket authorization and certification processes vary among jurisdictions and can involve requirements and administrative review periods different from those in the United States, including additional clinical studies, because clinical studies conducted in one jurisdiction may not be accepted by regulatory authorities or notified bodies in other jurisdictions or the data may not be considered applicable to the jurisdiction’s intended patient population based on demographic, medical practice, genetic, or other differences. In some cases, the price that we intend to charge for our products may also be subject to approval.
Obtaining foreign regulatory authorization or certification and maintaining compliance with foreign regulatory requirements could result in significant delays, difficulties, and costs for us and could delay or prevent the introduction of our products in certain countries. If we fail to comply with the regulatory requirements in other jurisdictions, or we fail to receive necessary or desirable marketing authorizations or certification in other jurisdictions, our target market will be reduced and our ability to realize the full market potential of our products will be harmed.
Our employees, independent contractors, consultants, commercial partners, and vendors may engage in misconduct or other improper activities, including noncompliance with regulatory standards and requirements.
We are exposed to the risk of fraud, misconduct, or other illegal activity by our employees, independent contractors, consultants, commercial partners, and vendors. Misconduct by these parties could include intentional, reckless and negligent conduct that fails to: comply with applicable rules and regulations of the CMS, the FDA, and other comparable foreign regulatory authorities; provide true, complete and accurate information to such regulatory authorities; comply with manufacturing and clinical laboratory standards; comply with healthcare fraud and abuse laws in the United States and similar foreign fraudulent misconduct laws; follow our processes and procedures resulting in implementation gaps, poor organization structure or culture, of appropriate internal reporting and decision making or substantive , for example, in building and maintaining cybersecurity defenses; or report financial information or data accurately or to activities to us. For example, in June 2023, our third- party telemedicine provider experienced a software issue that resulted in
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erroneous test reports being delivered to patients. And as we continue to partner with digital health partners, we will face increased risk where Galleri is offered through third party telemedicine platforms, related to, for example, reputational considerations, promotional and marketing considerations, cybersecurity considerations, and compliance with applicable laws. Since we began commercializing Galleri in the United States, our potential exposure under such laws has increased significantly, and our costs associated with compliance with such laws have, and will likely continue to, increase. In particular, research, sales, marketing, education, and other business arrangements in the healthcare industry are subject to extensive laws designed to prevent fraud, kickbacks, self-dealing, and other abusive practices, as well as off-label product promotion. These laws and regulations may restrict or prohibit a wide range of pricing, discounting, educating, marketing and promotion, sales and commission, certain customer incentive programs, and other business arrangements generally. Activities subject to these laws also involve the improper use of information obtained in the course of participant recruitment for clinical studies, which could result in regulatory sanctions and cause serious harm to our reputation. It is not always possible to identify and by employees and third parties, and the precautions we take to detect and prevent this activity may not be in controlling unknown or unmanaged risks or or in protecting us from governmental or other actions or lawsuits stemming from a to be in compliance with such laws. If any such actions are instituted us, and we are not in ourselves or asserting our rights, those actions could have a significant impact on our business, including the imposition of significant or other sanctions. Even if it is later determined after an action is instituted us that we were not in of these laws, we may be faced with publicity, incur significant expenses our actions, and have to significant management resources from other matters. We expect our exposure to and costs associated with compliance with healthcare and laws to increase significantly if we commercialize additional products in the future.
If we fail to comply with healthcare and other applicable laws and regulations, we could face substantial penalties and our business, reputation, and operations and financial condition could be adversely affected.
Our operations are subject to various U.S. federal and state fraud and abuse laws. In addition, the commercialization of our products outside the United States would also subject us to foreign equivalents of the healthcare laws described below, among other foreign laws. The laws that may, currently or in the future, impact our operations include:
• the federal Anti-Kickback Statute, which prohibits, among other things, persons from knowingly and willfully soliciting, receiving, offering, or paying any remuneration (including any kickback, bribe, or rebate), directly or indirectly, overtly or covertly, in cash or in kind, to induce, or in return for, either the referral of an individual, or the purchase, lease, order or recommendation of any good, facility, item, or service for which payment may be made, in whole or in part, under a federal healthcare program, such as the Medicare and Medicaid programs. A person or entity does not need to have actual knowledge of the statute or specific intent to violate it in order to have committed a violation, and many courts have interpreted that statute as being violated if merely one purpose of any arrangement is to induce referrals or purchases.
• the Eliminating Kickbacks in Recovery Act of 2018 (“EKRA”), which establishes an all-payor anti-kickback prohibition for, among other things, knowingly and willfully paying or offering any remuneration directly or indirectly to induce a referral of an individual to a clinical laboratory. Violations of EKRA may result in fines, imprisonment, or both, for each occurrence. The law includes a limited number of exceptions, some of which closely align with corresponding Anti-Kickback Statute exceptions and safe harbors, and others that materially differ. Certain sales-based incentive compensation models may present risk while others may fall outside the scope of EKRA, depending on the facts and circumstances. Accordingly, we cannot guarantee that our relationships with providers, sales representatives, or customers will not be subject to scrutiny or will withstand regulatory challenge under EKRA;
• the federal physician self-referral prohibition, commonly known as the Stark Law, which, in the absence of an applicable exception, prohibits a physician from making a referral for certain designated health services covered by the Medicare or Medicaid program, including clinical laboratory services, if the physician or an immediate family member of the physician has a financial relationship with the entity
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providing the designated health services. The Stark Law also prohibits the entity furnishing the designated health services from billing, presenting or causing to be presented a claim for the designated health services furnished pursuant to the prohibited referral;
• federal civil and criminal false claims laws, including the False Claims Act, which impose criminal and civil penalties, including through civil “qui tam” or “whistleblower” actions, against individuals or entities from knowingly presenting, or causing to be presented, claims for payment or approval from Medicare, Medicaid, or other third-party payors that are false or fraudulent. In addition, the government may assert that a claim including items or services resulting from a violation of the federal Anti-Kickback Statute or Stark Law constitutes a false or fraudulent claim for purposes of the Act;
• healthcare fraud and false statements laws, which prohibit, among other things, knowingly making a false statement to improperly avoid, decrease, or conceal an obligation to pay money to the federal government. Similar to the federal Anti-Kickback Statute, a person or entity does not need to have actual knowledge of these statutes or specific intent to violate them in order to have committed a violation;
• the federal Civil Monetary Penalties Law, which, subject to certain exceptions, prohibits, among other things, the offer or transfer of remuneration, including waivers of copayments and deductible amounts (or any part thereof), 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;
• the federal Physician Payment Sunshine Act, created under the ACA, and its implementing regulations, which require manufacturers of drugs, devices, biologicals, and medical supplies for which payment is available under Medicare, Medicaid, or the Children’s Health Insurance Program to report annually to the U.S. Department of Health and Human Services under the Open Payments Program, information related to payments or other transfers of value made to physicians (as defined by statute), teaching hospitals, and other healthcare practitioners, as well as ownership and investment interests held by such physicians and their immediate family members;
• federal consumer protection and unfair competition laws, which broadly regulate marketplace activities and activities that potentially harm consumers; and
• analogous state and foreign laws and regulations, such as state and foreign anti-kickback, false claims, consumer protection, and unfair competition laws that may apply to our business practices, including, but not limited to, research, distribution, sales and marketing arrangement, as well as submitting claims involving healthcare items or services reimbursed by any third-party payor, including commercial insurers; state laws that require healthcare companies to comply with the medical device industry’s voluntary compliance guidelines, the relevant compliance guidance promulgated by the federal government that otherwise restricts payments that may be made to healthcare providers, and other potential referral sources or state-specific standards on financial interactions with healthcare providers; and state laws that require healthcare companies to file reports with states regarding pricing and marketing information, such as the tracking and reporting of gifts, compensation, and other remuneration and items of value provided to healthcare professionals and entities.
Because of the breadth of these laws and the narrowness of the statutory exceptions and safe harbors available and lack of clear guidance, it is possible that some of our business activities could, despite our efforts to comply, be subject to challenge under one or more of such laws. Efforts to ensure that our business arrangements will comply with applicable healthcare and other applicable laws may involve substantial costs. In the future, it is possible that governmental and enforcement authorities will conclude that our business practices may not comply with current or then-existing statutes, regulations, or case law interpreting applicable fraud and abuse or other healthcare or applicable laws and regulations. If any such actions are instituted against us, and we are not successful in defending ourselves or asserting our rights, those actions could have a significant impact on our business, including the imposition of civil, criminal, and administrative penalties, damages, , monetary , possible exclusion from participation in Medicare, Medicaid, and other federal healthcare programs, contractual , reputational , profits and future earnings, and of our operations, any of which could affect our ability to operate our business and our results of operations.
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If we or any contract manufacturers and suppliers we engage fail to comply with environmental, health, and safety laws and regulations, we could become subject to fines or penalties or incur costs that could have a material adverse effect on the success of our business.
We and any contract manufacturers and suppliers we engage are subject to numerous federal, state, and local environmental, health, and safety laws, regulations, and permitting requirements, including those governing laboratory procedures; the generation, labeling, handling, use, storage, transport, treatment, and disposal of hazardous and regulated materials and wastes; the emission and discharge of hazardous materials into the ground, air, and water; and employee health and safety. We generally contract with third parties for the disposal of these materials and wastes. We cannot eliminate the risk of contamination or injury from these materials. In the event of contamination or injury resulting from our use of hazardous materials, we could be held liable for any resulting damages, and any liability could exceed our resources or insurance coverage. Under certain environmental laws, we could be held responsible for costs relating to any contamination at our current or past facilities and at third-party facilities. We also could incur significant costs associated with civil or criminal fines and penalties. If the handling, use, labeling, storage, or transport of or biohazardous materials by us or our contract manufacturers or suppliers to comply with applicable requirements, we could incur significant costs, be subject to civil or and , experience and in our operations, and face of any non-compliant materials, which could include clinical and biological samples.
Compliance with applicable environmental laws and regulations may be expensive, and current or future environmental laws and regulations may impair our research, product development, and manufacturing efforts. In addition, we cannot entirely eliminate the risk of accidental injury or contamination from these materials or wastes. Although we maintain workers’ compensation insurance to cover us for costs and expenses we may incur due to injuries to our employees resulting from the use of hazardous materials, this insurance may not provide adequate coverage against potential liabilities. We do not carry specific biological or hazardous waste insurance coverage. Accordingly, in the event of contamination or injury, we could be held liable for damages or be penalized with fines in an amount exceeding our resources, and our clinical studies or regulatory approvals or certifications could be suspended, which could have a material effect on our business, financial condition, results of operations, and prospects.
In addition to environmental, health, and safety laws and regulations, environmental and social governance (“ESG), diversity, equity and inclusion (“DEI”), “anti-ESG” and “anti-DEI” sentiment has gained momentum in some parts of the United States. Increasingly, different stakeholder groups have divergent views on ESG and DEI matters, which increases the risk that any action or lack thereof with respect to ESG or DEI matters will be perceived negatively by at least some stakeholders and adversely impact our reputation and business. If we do not successfully manage ESG or DEI-related expectations and requirements across stakeholders, it could erode stakeholder trust, impact our reputation, subject us to shareholder activism or litigation, and adversely affect our business, financial condition, results of operations and cash flows. Several state and federal governmental authorities have filed suit alleging that ESG or DEI measures or initiatives violate the law. We or those in our industry could face for our ESG or diversity policies and/or programs and if we were under any of these , our financial condition, reputation or business could be impacted.
Changes in funding, leadership, resources or prioritization, or other disruptions, in the U.S. or international government, including at the FDA, other government agencies, and notified bodies, could hinder our ability to develop, approve, certify, commercialize or receive reimbursement for our test.
Our ability to develop, approve, certify, commercialize or receive reimbursement for our test depends on interactions with, decisions of and approvals and payments by the U.S. and other governments. The ability of the FDA, foreign regulatory agencies, and notified bodies to review and clear, approve, or certify new products or changes to existing products can be affected by a variety of factors, including government budget and funding levels, statutory, regulatory, and policy changes, the FDA’s, foreign regulatory agencies’, and notified bodies’ ability to hire and retain key personnel and accept the payment of user fees, government shutdowns, and other events that may otherwise affect the FDA’s, foreign regulatory agencies’ and notified bodies’ ability to perform routine functions. 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. Disruptions at the FDA, notified bodies and other agencies may also slow the time necessary for new medical devices or modifications to approved, cleared, or certified medical devices to be reviewed and cleared, approved, or certified
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by necessary government agencies, which would adversely affect our business. For example, the current U.S. administration has issued certain policies and Executive Orders directed towards reducing the employee headcount and costs associated with U.S. administrative agencies, including the FDA, and it remains unclear the degree to which these efforts may limit or otherwise adversely affect the FDA’s ability to conduct routine activities.
In addition, in recent years, the U.S. government has shut down several times, and certain regulatory agencies, such as the FDA, have had to furlough critical FDA employees and stop critical activities, including during an extended shutdown between October 1, 2025 and November 12, 2025. Similar shutdowns could have a broad range of negative effects on our business. Disruptions at the FDA, other agencies, and notified bodies caused by these or other shutdowns, may also slow the time necessary for new medical devices or modifications to be cleared and approved, or certified medical devices to be reviewed and/or approved, or certified by necessary government agencies or notified bodies, or delay payment for currently reimbursed research, such as our REACH study, or reimbursed products in the future, which would adversely affect our business.
We also receive certain government reimbursement payments for tests provided to patients in our REACH clinical trial, and these payments may be delayed or not provided if the government remains shutdown, or they are not budgeted for as part of any continuing resolution. In the future, this risk could be amplified as we continue to seek, and hope to achieve, additional government reimbursement for our test.
If a prolonged government shutdown occurs, or if funding shortages, staffing limitations or similar factors hinder or prevent the FDA or other regulatory authorities from conducting their regular inspections, reviews, or other regulatory activities, such events could significantly impact the ability of the FDA or other such regulatory authorities to timely review and process our regulatory submissions, which could have a material adverse effect on our business.
In the EU, for example, notified bodies must be officially designated to certify products and services in accordance with the EU IVDR. Their designation process, which is significantly stricter under the new Regulation, has experienced considerable delays in the past. Despite a recent increase in designations, the current number of notified bodies designated under the new Regulation remains significantly lower than the number of notified bodies designated under the previous regime. The current designated notified bodies are therefore facing a backlog of requests as a consequence of which review times have lengthened. This has been one of the reasons for the recent extension of the transitional provisions under the EU IVDR. Despite these recent developments, the way we are conducting or intend to conduct our business in the EU and the EEA and the ability of the applicable notified body to timely review and process our regulatory submissions and perform its audits may still be impacted, and our ability to commercially launch Galleri in the EU and EEA could be delayed.
Our business activities are subject to the FCPA and similar anti-bribery and anti-corruption laws.
Our business activities are subject to the FCPA and similar anti-bribery or anti-corruption laws, regulations, or rules of other countries in which we operate, including the UK Bribery Act. The FCPA generally prohibits offering, promising, giving, or authorizing others to give anything of value, either directly or indirectly, to a non-U.S. government official in order to influence official action, or otherwise obtain or retain business. The FCPA also requires public companies to make and keep books and records that accurately and fairly reflect the transactions of the corporation and to devise and maintain an adequate system of internal accounting controls. Our business is heavily regulated and therefore involves significant interaction with public officials, including officials of non-U.S. governments. Additionally, in many other countries, the healthcare providers who administer diagnostic tests are employed by their government, and the purchasers of diagnostics tests are government entities; therefore, our dealings with these providers and purchasers are subject to regulation under the FCPA. There is significant uncertainty whether the current U.S. administration, including as a result of the recent executive order pausing all investigations and prosecutions under the FCPA, will continue robust anti-corruption enforcement in our industry. In any case, there is no certainty that all of our employees, agents, contractors, or , or those of our affiliates, will comply with all applicable laws and regulations, particularly given the high level of complexity of these laws. of these laws and regulations could result in , sanctions us, our officers, or our employees, the down of our facilities, requirements to obtain export licenses, cessation of business activities in sanctioned countries, implementation of compliance programs, and prohibitions on the conduct of our business. Any such could include prohibitions on our ability to offer our products in one or more countries and could materially our reputation, our brand, our international expansion efforts, our ability to attract and retain employees, and our business, prospects, operating results, and financial condition.
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The biopharmaceutical and medical device industries are subject to extensive regulatory obligations and policies that may be subject to significant and abrupt change, including due to judicial challenges, election cycles, and resulting regulatory updates and changes in policy priorities.
On June 28, 2024, the U.S. Supreme Court issued an opinion holding that courts reviewing agency action pursuant to the Administrative Procedure Act (APA) “must exercise their independent judgment” and “may not defer to an agency interpretation of the law simply because a statute is ambiguous.” The decision will have a significant impact on how lower courts evaluate challenges to agency interpretations of law, including those by HHS, CMS, FDA and other agencies with significant oversight of the biopharmaceutical and medical device industries. The new framework is likely to increase both the frequency of such challenges and their odds of success by eliminating one way in which the government previously prevailed in such cases. As a result, significant regulatory policies will be subject to increased litigation and judicial scrutiny.
In addition, federal agency priorities, leadership, policies, rulemaking, communications, spending, and staffing may be significantly impacted by election cycles. For example, there have been recent reductions in government spending and reductions in the workforces of certain government agencies, such as HHS, FDA, and CMS. Further limitations may result in reductions to agency budgets, employees, and operations, which may lead to slower response times and longer review periods, potentially affecting our ability to progress development of our product candidates or obtain regulatory approval for our product candidates. Similarly, the current political climate could impact regulation affecting our business could lead to abrupt changes in regulation of our industry and the effectiveness of our regulatory and reimbursement strategy.
Risks Relating to Intellectual Property
If we are unable to obtain and maintain intellectual property protection for our technology, or if the scope of the intellectual property protection we obtain is not sufficiently broad, third parties could in the future develop and commercialize technology and tests similar or identical to ours, and our ability to successfully commercialize our products may be impaired.
Our ability to perform successfully will depend in part on our ability to obtain and enforce patent protection for our products, preserve our trade secrets, and operate without infringing the proprietary rights of third parties. Filing, prosecuting, and defending patents on our products and other technologies in all countries throughout the world would be prohibitively expensive and time-consuming, and the laws of some foreign countries may not protect our rights to the same extent as the laws of the United States. We may not be able to file, prosecute, maintain, enforce, or license all necessary or desirable patents or patent applications at a reasonable cost or in a timely manner, or in all jurisdictions. Furthermore, in some cases, we have only filed provisional patent applications on certain aspects of our products and technologies and each of these provisional patent applications, or any future provisional patent application on certain aspects of our products and technologies, is not eligible to become an issued patent until, among other things, we file a non-provisional patent application within 12 months of the filing date of the applicable provisional patent application. In cases where we have not obtained, or decided not to obtain, patent protection for certain of our , we may not be to prevent third parties from practicing our or from selling or importing tests made using our in and into the United States or other jurisdictions. As a result of our Plan, we have determined to strategically focus our patent portfolio, which we expect to result in filing and maintaining fewer patents in fewer jurisdictions, which could amplify these risks.
Moreover, while we have applied for patents that protect aspects of our technology in the United States and numerous other countries, we cannot assure you that our intellectual property position, including our owned and exclusively licensed pending and issued patents, will not be challenged or that all patents for which we have applied will be issued on a timely basis or at all, or that such patents will protect our technology, in whole or in part, or be issued in a form that will provide us with meaningful protection.
Although patents are presumed valid and enforceable upon issuance, a patent may be challenged as to its inventorship, scope, validity, or enforceability, and certain of our owned or exclusively in-licensed patents have been, and others in the future may be, challenged in the courts or patent offices in the United States or abroad. For example, certain of our in-licensed and owned European patents have been subject to oppositions in Europe, as described below. As a result of such challenges, our pending or future patent applications may not result in
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issued patents, or the scope of existing or future patents may not provide us with sufficient rights to exclude others from commercializing products similar or identical to ours, or our issued patents may be held invalid or unenforceable. It is also possible that we may fail to identify patentable technologies in a timely fashion, which could impair our ability to obtain patent protection on such technology at all. Third parties may be able to circumvent our owned or exclusively in-licensed patents by developing similar or alternative technologies or tests in a non-infringing manner. Third parties could in the future also set up laboratories outside the countries in which we have filed patent applications in order to compete without infringing upon our intellectual property, even if they process samples from countries in which we do have patent protection. In addition, to the extent we have granted, or may grant in the future, licenses or sublicenses of our intellectual property rights to third parties, we cannot provide any assurance that such intellectual property rights will not be used by those third parties in a manner that could compete with our business or otherwise impact any competitive provided by such intellectual property rights.
Publications of discoveries in scientific literature often lag behind the actual discoveries, and patent applications in the United States and other jurisdictions are typically not published until 18 months after filing, or in some cases not at all. Therefore, we cannot know with certainty whether we were the first to make the inventions claimed in our owned or licensed patents or pending patent applications, or that we were the first to file for patent protection of such inventions. As a result, the issuance, scope, validity, enforceability, and commercial value of our patent rights are uncertain. Given the amount of time required for the development, testing, and regulatory review of new tests, patents protecting such tests might expire before or shortly after such products are commercialized. As a result, our owned or exclusively in-licensed patent portfolio may not provide us with sufficient rights to exclude others from commercializing products similar or identical to ours.
If a third party obtains an issued patent on inventions we use in our products, that party could prevent us from using those inventions, and we may not be able to design around the third party’s patents or obtain a license on commercially reasonable terms, if at all. Third-party patents or other intellectual property may exist that our current technology, manufacturing methods, products, or future methods or tests infringe or will infringe, which could result in litigation, the imposition of injunctions preventing our use of the foregoing, or require us to obtain licenses or pay royalties and/or other forms of compensation to third parties, which could be significant and could harm our results of operations.
For example, while we believe our patent portfolio, including our in-licensed patents such as those from the Chinese University of Hong Kong, provide coverage of various aspects of Galleri and our precision oncology portfolio, including on methylation analysis, identification of cancer signal of origin and assay chemistry and techniques for preparing and optimizing patient samples, recently other screening companies have announced tissue-free monitoring of residual disease and intention to offer early cancer detection products using blood-based methylation analysis. Other market participants operating commercially using purportedly similar technologies will increase the likelihood of intellectual property disputes and associated risks.
Periodic maintenance fees, renewal fees, annuity fees, and various other government fees on patents and applications will be due to be paid to the U.S. Patent and Trademark Office (“USPTO”) and various government patent agencies outside of the United States over the lifetime of our owned or in-licensed patents and applications. In certain circumstances, we rely on our licensing partners to pay these fees due to U.S. and non-U.S. patent agencies and to take the necessary actions to comply with other requirements to maintain such in-licensed patents during their term. In some cases, non-compliance can result in abandonment or lapse of the patent or patent application, resulting in a partial or complete loss of patent rights in the relevant jurisdiction. In such an event, potential competitors might be able to enter the market with similar or identical tests or technology, which could have a material adverse effect on our market position.
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If we fail to comply with our obligations in the agreements under which we license intellectual property rights from third parties or otherwise experience disruptions to our business relationships with our licensors, we could lose license rights that are important to our business.
We have entered into license agreements that provide rights to certain technologies related to assays used in our products. We may need to obtain additional licenses from others to advance our research or allow commercialization of our products or technology, either globally or in certain geographies, without infringing the intellectual property of third parties. It is possible that we may be unable to obtain such additional licenses at a reasonable cost or on reasonable terms, if at all. In that event, we may be required to expend significant time and resources to redesign our technology or to develop or license replacement technology, any of which may not be feasible on a technical or commercial basis. If we are unable to obtain or maintain applicable licenses, we may be unable to commercialize certain of our products, either globally or in certain geographies, or continue to utilize our technology, which could harm our business, financial condition, results of operations, and growth prospects.
In addition, our in-licenses impose various development, diligence, commercialization, and other obligations on us, and we expect that our future license or development agreements will contain similar types of obligations. Certain of our license agreements also require us to meet development timelines, or to exercise commercially reasonable efforts to develop and commercialize licensed products. Despite our efforts, our licensors might conclude that we have materially breached our obligations under such license agreements or our sublicensees may fail to fulfill their obligations to us or materially breach our related sublicense agreements, and our licensors might therefore terminate the license agreements or otherwise modify our rights under those agreements, thereby removing or limiting our ability to develop and commercialize products and technology covered by these license agreements or resulting in litigation. If these in-licenses are terminated, or if the underlying patents fail to provide the anticipated market exclusivity, other third parties may have the freedom to seek regulatory approval of, and to market, tests highly similar to ours or we may be required to commercialization of our products or use of our technology. Any of the foregoing could have a material effect on our position, business, financial condition, results of operations, and growth prospects.
In addition, the agreements under which we currently license or otherwise obtain rights to intellectual property or technology from third parties are complex, and certain provisions in such agreements may be susceptible to multiple interpretations, which may lead to disputes between us and our licensor, including:
• the scope of rights granted under the license agreement;
• the extent to which our product and technology infringe on intellectual property of the licensor that is not subject to the license agreement;
• the right to sublicense patent and other rights under our collaborative development relationships;
• our diligence and other obligations under the license agreement; and
• the ownership and use of inventions and know-how resulting from the joint invention of intellectual property by us and our licensors and our partners.
The resolution of any contract disagreement that may arise could narrow what we believe to be the scope of our rights to the relevant intellectual property or technology, or increase what we believe to be our financial or other obligations under the relevant agreement, either of which could have a material adverse effect on our business, financial condition, results of operations, and growth prospects. If we are required to engage in litigation to enforce or defend our rights under our license or development agreements, even if we are successful, such litigation could require significant financial resources, divert the attention of management and harm our business. Moreover, if disputes over intellectual property that we have licensed or otherwise obtained rights to prevent or impair our ability to maintain our current arrangements on commercially acceptable terms, or at all, we may be unable to commercialize the affected product or technology, which could have a material effect on our business, financial condition, results of operations, and growth prospects.
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Our use of open-source software could subject our proprietary technology to unwanted open-source license conditions that could negatively impact our business.
A portion of our technology capabilities incorporates open-source software, and we may incorporate open-source software into other offerings or products in the future. If an author or other third party that distributed such open-source software to us were to allege that we had not complied with the conditions of one or more of these licenses, we could be required to remediate our open source vulnerabilities or defend against such allegations. In addition, if we combine our proprietary software with open-source software in a certain manner and make it available to others, under some open-source licenses, we could be required to license or make available the source code of our proprietary software, which could help our third parties develop products that are similar to ours and harm our business; thus, we could be required to remediate any such open source vulnerabilities.
Developments in patent law could have a negative impact on our business.
From time to time, the U.S. Supreme Court, other federal courts, the U.S. Congress, the USPTO, or applicable authorities in other jurisdictions may change the standards of patentability and any such changes could have a negative impact on our business. The scope of patent coverage available for medical diagnostics continues to evolve and uncertainty remains around the patentability of certain diagnostic-based method claims. U.S. Supreme Court and Federal Circuit decisions interpreting and/or limiting the scope of patentable subject matter under 35 U.S.C. § 101, in addition to examination guidelines from the USPTO, have made it more difficult for patentees to obtain and/or maintain patent claims in the United States that are directed to medical diagnostics, as claims to that subject matter are sometimes perceived to recite or involve laws of nature, natural phenomena, and/or natural products.
Several precedential decisions regarding patentable subject matter are of particular relevance to patents in the medical diagnostics and computer-implemented applications space. The 2012 decision in Mayo Collaborative v. Prometheus Laboratories (Prometheus) concerns patent claims directed to optimizing the amount of drug administered to a specific patient based on certain diagnostic measurements. The U.S. Supreme Court held that the applicable patent’s claims were directed to a law of nature (i.e., a natural correlation between drug levels and efficacy or toxicity) and failed to incorporate a sufficiently inventive concept above and beyond routine and conventional method steps to allow the claimed methods of treatment to qualify as patent eligible. The 2013 decision in Association for Molecular Pathology v. Myriad Genetics (Myriad) concerns the patentability of isolated DNA sequences that were related to methods of diagnosing genetic predisposition to cancer. The U.S. Supreme Court held that isolated fragments of naturally occurring genetic material are not patent eligible, but non-naturally occurring fragments can be patented. The 2014 decision in Alice Corporation Pty. Ltd. v. CLS Bank International (Alice) concerns computer-implemented . The U.S. Supreme Court held that an abstract idea could not be patented just because it is implemented on a computer, thus providing guidance on the patentability of computer-implemented applications. The 2015 decision in Ariosa v. Sequenom ( Sequenom ) the patentability of directed to a method of detecting fetal DNA in a mother’s serum or plasma samples. Although the U.S. Supreme Court recognized that the discovery of cell-free fetal DNA present in a mother’s bloodstream was a scientific , it held that the were not patent eligible since they were primarily directed to a natural phenomenon. The Federal Circuit’s 2020 decision in Illumina v. Ariosa the patentability of directed to preparing a fraction of DNA enriched in cell-free fetal DNA. The Federal Circuit held the were patent eligible and distinguished them from the in Sequenom as method of preparation , rather than diagnostic . The court further explained that the claimed DNA fragment size thresholds were human-engineered parameters, suggesting that based on natural phenomena, but not directed to such phenomena, may be patent eligible. In short, our efforts to seek patent protection for our technologies and products may be impacted by the evolving case law and guidelines/ procedures issued by the USPTO, or authorities in other jurisdictions based on such changes in the law.
We cannot fully predict the impact that the evolving case law on patentable subject matter will have on the ability to obtain or enforce patents relating to DNA, genes, genomic-related discoveries, or computer- implemented tests, including such tests that use machine learning or rely on software pipelines, in the future, as the contours of whether claims are patent eligible (or instead recite laws of nature, natural phenomena, natural products, or abstract ideas) are not clear and may take years to develop via interpretation at the USPTO and in the courts. There are many patents claiming nucleic acids and diagnostic methods based on natural correlations that issued before the court decisions summarized above and, although some of these patents may be invalid
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under the standards set forth in these decisions, these patents are presumed valid and enforceable until they are successfully challenged. Thus, third parties holding these patents could allege that we infringe, or request that we obtain a license under, these patents, even if these patents are not likely enforceable under current U.S. laws. Whether based on patents issued prior to or after these precedential decisions, we could be forced to defend against claims of patent infringement or obtain license rights, if available on commercially reasonable terms or at all, under these patents. In jurisdictions other than the United States, gene-related patent claims may remain valid and may be enforced against us.
Additionally, on June 1, 2023, the European Union Patent Package (“EU Patent Package”) regulations were implemented with the goal of providing a single pan-European Unitary Patent and a new European Unified Patent Court (“UPC”) for litigation involving European patents. As a result, European patents, including those issued prior to ratification of the EU Patent Package, now by default automatically fall under the jurisdiction of the UPC. It is uncertain how the UPC will impact granted European patents in the biotechnology and pharmaceutical industries. Our European patent applications, if issued, could be challenged in the UPC. During the first seven years of the UPC’s existence, the UPC legislation allows a patent owner to opt its European patents out of the jurisdiction of the UPC. We can elect to opt out from the UPC in some of our future European patents, but doing so may preclude us from realizing the potential benefits of the UPC. Moreover, if we do not meet all of the formalities and requirements for opting out under the UPC, our future European could remain under the jurisdiction of the UPC. The UPC could provide our third parties with a new forum to centrally revoke our European patents, and allow for the possibility of a third party to obtain a pan-European —such a of patent protection could have a material impact on our business and our ability to commercialize our technology and future products and, resultantly, on our business, financial condition, prospects, and results of operations.
Further, the U.S. Congress has periodically sought to pass bills concerning subject matter eligible for patent protection, including the Patent Eligibility Restoration Act (PERA) pending in the U.S. Senate. We cannot fully predict the impact that such new laws may have on our ability to obtain patent protection for our products and technologies, and our ability to operate in view of the patents controlled by third parties. These and other substantive changes to U.S. or foreign patent law could affect our susceptibility to patent infringement claims and our ability to obtain patents and, if obtained, to enforce or defend them, any of which could have a material adverse effect on our business.
Patent terms may be inadequate to protect our position on our products for an adequate amount of time.
Patents have a limited lifespan in all jurisdictions around the world. In the United States, if all maintenance fees are timely paid, the natural expiration of a patent is generally 20 years from its earliest U.S. non-provisional filing date. Various extensions may be available, but the life of a patent, and the protection it affords, is limited. Even if patents covering our product are obtained, once the patent life has expired for a product, we may be open to competition. Given the amount of time required for the development, testing and regulatory review of new products, patents protecting such products might expire before or shortly after such products are commercialized. As a result, our patent portfolio may not provide us with sufficient rights to exclude others from commercializing future products similar or identical to ours for a meaningful amount of time, or at all. Such an inability to exclude third parties from commercializing similar or identical products could have a material adverse impact on our reputation, business, financial condition, results of operations, and growth prospects.
Issued patents covering our products and other technologies could be found invalid or unenforceable if challenged in court or before administrative bodies in the United States and abroad.
Third parties may challenge the validity or enforceability of our owned or in-licensed patents in court or before administrative bodies in the United States or abroad. If we or one of our licensors initiated legal proceedings against a third party to enforce a patent, the defendant could counterclaim that our asserted patent is invalid or unenforceable. In patent litigation in the United States, defendant counterclaims alleging invalidity or unenforceability are commonplace. Grounds for a validity challenge could be an alleged failure to meet any of several statutory requirements, including lack of novelty, obviousness, lack of subject matter eligibility, of written description, and non-enablement. Grounds for an unenforceability assertion could be an that someone connected with of the patent withheld relevant information from the USPTO, or made a material statement, during . Third parties have raised, and in the future may raise,
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challenging the validity or enforceability of our owned or in-licensed patents before administrative bodies in the United States or abroad, even outside the context of litigation. Such mechanisms include re-examination, post- grant review, inter partes review, interference proceedings, derivation proceedings, and equivalent proceedings in foreign jurisdictions (such as opposition proceedings). Such proceedings could result in the revocation of, cancellation of, or amendment to our patents in such a way that they no longer cover Galleri or our other technologies or products.
For example, in 2021, we faced an opposition in Europe with respect to European patent number EP 3 363 901 B1 in-licensed from the Fred Hutchinson Cancer Center. The opposition proceeding filed against EP 3 363 901 B1 concluded with the claims being maintained in amended form and corresponds to technology that is not currently being used in Galleri or our precision oncology portfolio. The opponents have filed an appeal, which is currently pending. An additional opposition was filed on another of our in-licensed European patents relating to Galleri by an anonymous opponent, and this opposition is currently pending. These opposition proceedings do not affect our patents outside Europe.
If a third party were to prevail on a legal assertion of invalidity or unenforceability, we would lose at least part, and perhaps all, of the patent protection on our products or other technologies. Such a loss of patent protection could have a material adverse impact on our business, financial condition, results of operations, and growth prospects.
We may not be able to protect our intellectual property rights throughout the world.
Various companies have encountered significant problems in protecting and defending intellectual property rights in foreign jurisdictions. The legal systems of some countries do not favor the enforcement of patents and other intellectual property protection, particularly those relating to biotechnology and pharmaceutical products, which could make it difficult for us to stop the infringement of our or any future licensors’ patents or marketing of products in violation of our proprietary rights. Certain countries outside the United States have compulsory licensing laws under which a patent owner may be compelled to grant licenses to third parties. In addition, many countries limit the enforceability of patents against government agencies or government contractors. As a result, patent owners may have limited remedies in certain circumstances, which could materially diminish the value of such patents. If we or any future licensors are forced to grant a license to third parties with respect to any patents relevant to our business, our position may be impaired, and our business, financial condition, results of operations, and growth prospects may be affected. Accordingly, our efforts to enforce our intellectual property rights around the world may be to obtain a significant commercial from the intellectual property that we develop or license.
Certain countries outside the United States also have laws that may impact a patent owner’s right to claim priority or require a patent applicant to obtain a foreign filing license or first file patent applications in a foreign jurisdiction to the extent foreign nationals are involved in the development of the claimed subject matter of the resulting patent. Our pending and future patent applications may not result in patents being issued that comply with the law of each foreign jurisdiction. Pending applications and issued patents may be challenged in various jurisdictions for failure to comply with local laws, which could result in the rejection of pending applications or invalidation of issued patents. Further, the standards applied by foreign patent offices in granting patents are not always applied uniformly or predictably. As such, we do not know the degree of future protection that we will have on our future products. While we will endeavor to try to protect our existing products and products in development with intellectual property rights, such as patents, as appropriate, the process of obtaining patents is time consuming, expensive, and unpredictable.
In addition, geopolitical actions in the United States and in foreign countries could increase the uncertainties and costs surrounding the prosecution or maintenance of our patent applications or those of any current or future licensors and the maintenance, enforcement, or defense of our issued patents or those of any current or future licensors. For example, the United States and foreign government actions related to Russia’s conflict in Ukraine may limit or prevent filing, prosecution, and maintenance of patent applications in Russia. Government actions may also prevent maintenance of issued patents in Russia. These actions could result in abandonment or lapse of our patents or patent applications, resulting in partial or complete loss of patent rights in Russia. If such an event were to occur, it could have a material adverse effect on our business. In addition, a decree was adopted by the Russian government in March 2022, allowing Russian companies and individuals to exploit inventions owned by
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patentees from the United States without consent or compensation. Consequently, we would not be able to prevent third parties from practicing our inventions in Russia or from selling or importing products made using our inventions in and into Russia. If we are not able to protect our intellectual property rights throughout the world, our position may be impaired, and our business, financial condition, results of operations, and growth prospects may be adversely affected.
We may be subject to claims by third parties asserting that our employees or we have infringed or misappropriated intellectual property rights, or to assertions by third parties or employees claiming ownership of what we regard as our own intellectual property.
Our former, current, and future employees may have been previously employed at universities or other biotechnology, diagnostic, laboratory, technology, or pharmaceutical companies, including, for example, potential competitors and strategic partners. We train our employees not to bring or use proprietary information or technology from former employers to us or use it in their work. Although we try through such training and other measures to ensure that our employees do not use the proprietary information or know-how of others in their work for us, we have been in the past, and in the future may be, subject to claims that an employee or we have used or disclosed intellectual property, including trade secrets or other proprietary information, of such employee’s former employer. Litigation, which would be expensive, time-consuming, a distraction to management, and uncertain of outcome, may be necessary to defend against these claims.
In addition, while it is our policy to require our employees and contractors who may be involved in the development of intellectual property to execute agreements assigning such intellectual property to us, we may be unsuccessful in executing or enforcing such an agreement with each party who in fact develops intellectual property that we regard as our own. Our and their assignment agreements may be breached, and we may be forced to bring claims against third parties or current or former employees, or defend claims they may bring against us, to determine the ownership of what we regard as our intellectual property.
If we fail to prevail on any such claims, in addition to paying monetary damages, we may lose valuable intellectual property rights or personnel, or be required to obtain a license, which may not be available to us on commercially reasonable terms or at all. Even if we are successful in prosecuting or defending against such claims, litigation could result in substantial costs and be a distraction to management, which could harm our business.
If we are unable to protect the confidentiality of our trade secrets, our business and market position would be harmed.
In addition to seeking patents for our products and other technologies, we also rely on trade secrets and confidentiality agreements to protect our unpatented know-how, technology, data, and other proprietary information, and to maintain our market position. Trade secrets and know-how can be difficult to protect. We expect some of our trade secrets and know-how to over time be disseminated within the industry through independent development, the publication of journal articles describing the methodology, and the movement of personnel. This risk may be heightened when employee attrition is higher, for example in connection with the Restructuring Plan.
We seek to protect these trade secrets and other proprietary technology, in part, by entering into non-disclosure and confidentiality agreements with parties who have access to them, such as our employees, directors, corporate collaborators, outside scientific collaborators, CROs, contract manufacturers, suppliers, service providers, consultants, advisors, and other third parties. We also enter into confidentiality and invention or patent assignment agreements with our employees and consultants, and remind departing employees when they leave their employment of their continuing confidentiality obligations. We cannot guarantee that we have entered into such agreements with each party that may have or have had access to our trade secrets or proprietary technology and processes. Despite our efforts, any of these parties may breach the agreements and disclose our proprietary information, including our trade secrets, and we may not be able to obtain adequate remedies for such breaches. Enforcing a claim that a party illegally disclosed or a trade secret is , expensive, and time-consuming, and the outcome is . Some courts outside the United States are less willing or to protect trade secrets, and the laws of some foreign countries do not protect proprietary rights to the same extent or in the same manner as the laws within the United States. For example, in China, regarding
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infringement or misappropriation of trade secrets are more difficult to prove, and consequently plaintiffs are rarely successful in bringing these claims. If any of our trade secrets were to be lawfully obtained or independently developed by a third party, we would have no right to prevent them from using that technology or information. If any of our trade secrets were to be misappropriated by, disclosed to, or independently developed by a third party, our market position could be materially and adversely harmed.
We have and may enter into collaboration, license, contract research, and/or manufacturing relationships with contract organizations that operate in certain countries that are at heightened risk of theft of technology, data, and intellectual property through direct intrusion by private parties or foreign actors, including those affiliated with or controlled by state actors. Accordingly, our efforts to protect and enforce our intellectual property rights around the world may be inadequate to obtain a significant commercial advantage from the intellectual property that we develop or license, and we may be at heightened risk of losing our proprietary intellectual property rights around the world, including outside of such countries, to the extent such theft or intrusion destroys the proprietary nature of our intellectual property.
Our success depends on our ability to develop and commercialize our technology without infringing, misappropriating, or otherwise violating the intellectual property of third parties. Third parties may initiate legal proceedings alleging that we are infringing their intellectual property rights, and if they prevail, could block sales of our products and force us to make large damages and/or royalty payments, which could have a material adverse effect on the success of our business.
Our commercial success in part depends upon our ability, and the ability of our collaborators, to market, sell, and distribute our products and use our proprietary technologies without infringing, misappropriating, or otherwise violating the proprietary rights of third parties. There is considerable intellectual property litigation in the medical technology, biotechnology, diagnostic, and pharmaceutical industries. In addition, there is ongoing intellectual property litigation in the circulating nucleic acid analysis and cancer nucleic acid space, the outcome of which could also impact potential future litigation involving our intellectual property or our ability to commercialize our products. We may become party to, or threatened with, future adversarial proceedings or litigation regarding intellectual property rights with respect to our products, including interference proceedings before the USPTO and similar bodies in other jurisdictions. Third parties may assert us based on existing patents or patents that may be issued in the future.
If we are found to infringe, misappropriate, or otherwise violate a third party’s intellectual property rights, we could be required to obtain a license from such third party to continue developing, marketing, selling, and distributing our products, or to cease using the infringing technology. However, we may not be able to obtain any required license on commercially reasonable terms or at all. Even if we were able to obtain a license, it could be non-exclusive, thereby giving third parties access to the same technologies licensed to us. In addition, we could be found liable for monetary damages, including treble damages if we are found to have willfully infringed a patent and attorneys’ fees if the court finds the case to be exceptional. A finding of , , or other could prevent us from commercializing our products or us to some of our operations, which could materially our business. that we have the confidential information or trade secrets of third parties could have a similar impact on our business.
Even if resolved in our favor, litigation, or other legal proceedings relating to intellectual property claims may cause us to incur significant expenses and could distract our personnel from their normal responsibilities. Such litigation or proceedings could substantially increase our operating losses and reduce the resources available for development activities or any future sales, marketing, or distribution activities. We may not have sufficient financial or other resources to conduct such litigation or proceedings adequately. Some third parties may be able to sustain the costs of such litigation or proceedings more effectively than we can because of their greater financial resources and more mature and developed intellectual property portfolios. Uncertainties resulting from the initiation and continuation of patent litigation or other proceedings could have a material adverse effect on our ability to perform in the marketplace.
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Intellectual property litigation may lead to unfavorable publicity that harms our reputation and causes the market price of our common stock to decline.
During the course of any intellectual property litigation, there could be public announcements of the initiation of the litigation as well as results of hearings, rulings on motions, and other interim proceedings in the litigation. If securities analysts or investors regard these announcements as negative, the perceived value of our existing products, programs, or intellectual property could be diminished. Accordingly, the market price of shares of our common stock may decline. Such announcements could also harm our reputation or the market for our future products, which could have a material adverse effect on our business.
We may become involved in lawsuits to protect or enforce or defend our patents, which could be expensive, time-consuming, and unsuccessful.
Third parties may infringe our patents or trademarks or misappropriate or violate our other intellectual property rights. To counter infringement, misappropriation, or unauthorized use of our intellectual property, we or any future licensors may be required to file infringement or misappropriation claims, which can be expensive and time-consuming and divert the time and attention of our management and scientific personnel. Our or any future licensors’ pending patent applications cannot be enforced against third parties practicing the technology claimed in such applications unless and until a patent issues from such applications. Any claims we assert against perceived infringers could provoke these parties to assert counterclaims us that we their patents, in addition to asserting that our patents or any future licensors’ patents are or unenforceable, or both.
Our patents and any patents that we in-license may be challenged, narrowed, invalidated, or circumvented. If our patents are invalidated or otherwise limited or will expire prior to the commercialization of our products, other companies may be better able to develop products that could adversely affect our market position, business, financial condition, results of operations, and growth prospects.
The following are examples of litigation and other adversarial proceedings or disputes that we could become a party to involving our patents or patents licensed to us:
• we or our collaborators may initiate litigation or other proceedings against third parties to enforce our patent rights;
• third parties may initiate litigation or other proceedings seeking to invalidate patents owned by us or that are licensed to us or to obtain a declaratory judgment that their product or technology does not infringe our patents or patents licensed to us or that such patents are invalid or unenforceable;
• third parties have initiated, and in the future may initiate, oppositions, inter partes review, post-grant review, or reexamination proceedings challenging the validity or scope of our patent rights, requiring us or our collaborators and/or licensors to participate in such proceedings to defend the validity and scope of our patents;
• there may be a challenge or dispute regarding inventorship or ownership of patents currently identified as being owned by or licensed to us;
• at our initiation or at the initiation of a third party, the USPTO may initiate an interference between patents or patent applications owned by or licensed to us and those of third parties, requiring us or our collaborators and/or licensors to participate in an interference proceeding to determine the priority of invention, which could jeopardize our patent rights; or
• third parties may seek approval to market products similar to our future approved products prior to expiration of relevant patents owned by or licensed to us, requiring us to defend our patents, including by filing lawsuits alleging patent infringement.
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These lawsuits and proceedings would be costly and could affect our results of operations and divert the attention of our managerial, legal, and scientific personnel. There is a risk that a court or administrative body would decide that our owned or exclusively in-licensed patents are invalid or not infringed by a third party’s activities, or that the scope of certain issued claims must be limited. An adverse outcome in a litigation or proceeding involving our owned or exclusively in-licensed patents could limit our ability to assert our patents against third parties, affect our ability to receive royalties or other licensing consideration from our licensees or sublicensees, and may curtail or preclude our ability to exclude third parties from making, using and selling similar products. We may become more susceptible to these types of lawsuits and proceedings given the proliferation of organizations pursuing intellectual property protections in the cancer detection and cfDNA space. Any of these occurrences could affect our business position, business, financial condition, results of operations, and growth prospects.
If our trademarks and trade names are not adequately protected, then we may not be able to build name recognition in our markets of interest and our business may be adversely affected.
In addition, our registered or unregistered trademarks or trade names may be challenged, infringed or declared generic or determined to be infringing on other marks. We may not be able to protect our rights to these trademarks and trade names, which we view as valuable to building name recognition among potential partners and customers in our markets of interest. At times, other third parties have adopted or may adopt trade names or trademarks similar to ours, thereby impeding our ability to build brand identity and possibly leading to market confusion and/or litigation. In addition, there could be potential trade name or trademark infringement claims brought by owners of other registered trademarks or trademarks that incorporate variations of our registered or unregistered trademarks or trade names. We may also license our trademarks and trade names to third parties, such as distributors, or may partner with distributors to market our test under different names. Though these license agreements may provide guidelines for how our trademarks and trade names may be used, a of these agreements or of our trademarks and trade names by our licensees may our rights in or the goodwill associated with our trademarks and trade names. Over the long term, if we are to establish name recognition based on our trademarks and trade names, then we may not be to perform effectively and our business may be affected. Our efforts to enforce, protect, or our proprietary rights related to trademarks may be and could result in substantial costs and of resources and could affect our business, financial condition, results of operations, and growth prospects.
Risks Relating to the Spin-Off
We could have an indemnification obligation to Illumina if the Distribution were determined not to qualify for non-recognition treatment for U.S. federal tax purposes.
Illumina received a private letter ruling from the IRS and a written opinion of Cravath, Swaine & Moore LLP that, subject to the limitations specified therein and the accuracy of and compliance with certain representations, warranties, and covenants, the Spin-Off will qualify for non-recognition of gain and loss under Sections 355 and 368 of the Code. Notwithstanding this ruling and opinion, if the Spin-Off were determined not to qualify for non-recognition of gain and loss under Sections 355 and 368 of the Code, we could be required, under certain circumstances, to indemnify Illumina for certain taxes and related expenses. In addition, current tax law generally creates a presumption that the Spin-Off would be taxable to Illumina, but not to holders, if we or our shareholders were to engage in transactions that result in a 50% or greater change by vote or value in the ownership of our stock during the four-year period ending on June 24, 2026, unless it were established that such transactions and the Distribution were not part of a plan or series of related transactions giving effect to such a change in ownership. If the Distribution were taxable to Illumina due to such a 50% or greater change in ownership of our stock, we could, under certain circumstances, be required under the Tax Matters Agreement to indemnify Illumina for some or all of the tax on such and related expenses. Any such indemnification obligation could materially affect our business, financial condition, and results of operations.
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We have agreed to numerous restrictions to preserve the non-recognition treatment of the Spin-Off, which may reduce our strategic and operating flexibility.
We agreed in the Tax Matters Agreement to certain covenants and indemnification obligations (including restrictions on share issuances, redemptions or repurchases, business combinations, sales of assets, and similar transactions) that address compliance with the intended tax treatment of the Spin-Off. Certain of these restrictions will apply for the two-year period after the Spin-Off unless Illumina obtains an opinion from counsel or a ruling from the IRS generally to the effect that a restricted action will not cause the Spin-Off or certain related transactions to fail to qualify for its intended tax treatment, or Illumina gives its consent for us to take a restricted action. These covenants and indemnification obligations may limit our ability to pursue strategic transactions or engage in new businesses or other transactions that may otherwise maximize the value of our business, and might discourage or delay a strategic transaction that our shareholders may consider favorable. These covenants may also inhibit our ability to obtain financing through public offerings of our common stock or private financings with certain parties, which may materially and adversely affect our ability to raise capital and satisfy our cash needs. These covenants may continue to apply, and continue to require either opinion of counsel or waiver from or approval by Illumina in order to conduct a strategic transaction or public offering, whether or not an actual tax liability may be incurred by our proposed strategic transaction or public offering. If we are restricted from participating in strategic or financing activities by such contractual restrictions, our business, financial condition, results of operations, and growth prospects would be affected.
Our historical financial data is not necessarily representative of the results that we would have achieved if we had been a separate, publicly traded company and may not be a reliable indicator of our future results.
From August 18, 2021 until June 24, 2024, we operated as a wholly owned subsidiary of Illumina. In connection with the legal and regulatory involvement of the Federal Trade Commission and European Commission, our business was held and operated separately and independently from Illumina and Illumina was required to fund our operations and development. We derived the historical financial data included in this Annual Report on Form 10-K, in part, from our consolidated financial statements and accounting records prepared as a wholly owned subsidiary of Illumina, and this data does not necessarily reflect the financial condition, results of operations, or cash flows that we would have achieved as a separate, publicly traded company during the periods presented or those that we will achieve in the future. This is primarily because of the following factors:
• the historical financial data may not fully reflect the costs associated with the Spin-Off, including the costs related to being an independent public company;
• our historical financial data does not reflect our obligations under the various transitional and other agreements we will enter into with Illumina in connection with the Spin-Off;
• since Illumina acquired us in August 2021, our working capital requirements and capital for our general corporate purposes, including capital expenditures, have been satisfied by Illumina. Following the Spin-Off, we will need to rely on our cash on hand or obtain additional financing from banks, through public offerings or private placements of debt or equity securities, strategic relationships, or other arrangements, which may or may not be available or may be available only on less attractive terms than we may have received as a part of Illumina; and
• following the Spin-Off, we expect that the cost of capital for our business is higher than Illumina’s cost of capital prior to the Spin-Off.
Other significant changes may occur in our cost structure, management, financing, and business operations as a result of operating as a separate, publicly traded company. As such, our historical financial data may not be indicative of our future performance as a separate, publicly traded company. For additional information about our past financial performance and the basis of presentation of our financial statements, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations” of this Annual Report on Form 10-K and our Consolidated Financial Statements and the notes thereto included in this Annual Report on Form 10-K.
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Risks Relating to Our Common Stock
Prior to June 24, 2024, no market for our common stock existed and an active trading market may not be sustained after the Spin-Off. Our stock price has fluctuated and may fluctuate significantly.
Prior to June 24, 2024, there was no public market for our common stock. Although our common stock is listed on Nasdaq, an active trading market for our common stock may not be sustained in the future. The lack of an active market may make it more difficult for shareholders to sell our shares and could lead to our share price being depressed or volatile.
The market price of our common stock has been highly volatile since the Spin-Off. We cannot predict the prices at which our common stock may trade in the future. The market price of our common stock may fluctuate widely, depending on many factors, some of which may be beyond our control, including:
• the commercial success of Galleri;
• the timing of launch of any future products;
• the timing and results of clinical studies for our products and the failure or discontinuation of any of our product development and research programs;
• the success of future third-party tests, services, or technologies and the results of clinical studies, or regulatory approvals (or certifications) of tests of third parties;
• developments or disputes concerning patent applications, issued patents, or other proprietary rights;
• whether our financial results, forecasts, and development timelines meet the expectations of securities analysts or investors, and changes in estimates or recommendations by securities analysts, if any, that cover our stock;
• announcement or expectation of additional financing efforts;
• sales of our common stock by us, our insiders, Illumina, or other stockholders;
• regulatory or legal developments in the United States, including under the new presidential administration, changes in the structure of healthcare payment systems, such as changes that would affect coverage and reimbursement by third-party payors, and other countries
• general economic, industry, and market conditions; and
• the other factors described in this Item 1A. “Risk Factors” section.
Additionally, in recent years, stock markets in general, and the market for healthcare companies in particular (including companies in the biotechnology, diagnostics, and related sectors), have experienced significant price and volume fluctuations that have often been unrelated or disproportionate to changes in the operating performance of the companies whose stock is experiencing those price and volume fluctuations. Broad market and industry factors may seriously affect the market price of our common stock, regardless of our actual operating performance. Following periods of such volatility in the market price of a company’s securities, securities class action litigation has often been brought against that company. See “—We could be subject to securities class action litigation.”
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If securities analysts publish negative evaluations of our stock, the price of our stock could decline.
The trading market for our common stock relies in part on the research and reports that industry or securities analysts publish about us or our business. If no or few analysts cover us, the trading price of our stock could decrease. If one or more of the analysts covering our business downgrade their evaluations of our stock, the price of our stock could decline. If one or more of these analysts cease to cover our stock, we could lose visibility in the market for our stock, which in turn could cause our stock price to decline.
Raising additional capital may cause dilution to our existing stockholders, restrict our operations, or require us to relinquish rights to our technologies or our products.
We expect to seek additional capital, and may pursue fundraising paths that could include public and private equity offerings, debt financings, strategic partnerships, and alliances and licensing arrangements. We, and indirectly, our stockholders, will bear the cost of issuing and servicing securities issued in any such transactions. Because our decision to issue debt or equity securities will depend on market conditions and other factors beyond our control, we cannot predict or estimate the amount, timing or nature of any future financings. To the extent that we raise additional capital through the sale of equity or convertible debt securities, your ownership interest will be diluted, and the terms may include liquidation or other preferences that adversely affect your rights as a stockholder. The incurrence of indebtedness would result in increased fixed payment obligations and could involve restrictive covenants, such as limitations on our ability to incur additional debt, limitations on our ability to acquire, sell, or license intellectual property rights and other operating restrictions that could adversely impact our ability to conduct our business. Additionally, we may pursue collaborations with third parties that could provide capital in the near term but limit our potential revenues or cash flows in the future. If we raise additional funds through strategic partnerships, , or licensing arrangements with third parties, we may have to trade rights to our technologies or our products. Certain of the foregoing transactions may require us to obtain stockholder approval, which we may not be to obtain.
In addition, your ownership interest may be diluted in the future because of the settlement or exercise of outstanding or future equity-based awards that we expect to grant to our directors, officers, and other employees, including pursuant to our 2024 Equity Incentive Plan. We also make equity grants to certain new employees joining the Company pursuant to an inducement plan, and our compensation committee may elect to increase the number of shares available for future grant under the inducement plan without stockholder approval. We also have an Employee Stock Purchase Plan and any shares of common stock purchased pursuant to that plan will also cause dilution.
We are an emerging growth company and the information we provide shareholders may be different from information provided by other public companies, which may result in a less active trading market for our common stock and higher volatility in our stock price.
We are an “emerging growth company” as defined by the Jumpstart Our Business Startups Act of 2012. We will continue to be an emerging growth company until the earliest to occur of the following:
• the last day of the fiscal year in which our total annual gross revenues first meet or exceed $1.235 billion (as adjusted for inflation);
• the date on which we have, during the prior three-year period, issued more than $1.0 billion in non-convertible debt;
• the last day of the fiscal year in which we (i) have an aggregate worldwide market value of common stock held by non-affiliates of $700 million or more (measured at the end of each fiscal year) as of the last business day of our most recently completed second fiscal quarter and (ii) have been a reporting company under the Exchange Act for at least one year (and filed at least one annual report under the Exchange Act and are no longer a smaller reporting company); or
• the last day of the fiscal year following the fifth anniversary of the date of the first sale of our common stock pursuant to an effective registration statement under the Securities Act of 1933 (the “Securities Act”).
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For as long as we are an emerging growth company, we may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies, including, but not limited to:
• not being required to comply with the auditor attestation requirements of the assessment of our internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act of 2002 (“SOX”);
• exemption from new or revised financial accounting standards applicable to public companies until such standards are also applicable to private companies;
• reduced disclosure obligations regarding executive compensation in our periodic reports, proxy statements, and registration statements; and
• exemptions from the requirement of holding a nonbinding advisory vote on executive compensation and shareholder approval on golden parachute compensation not previously approved.
We have chosen to take advantage of some or all of these reduced burdens. For as long as we take advantage of the reduced reporting obligations, the information we provide shareholders may be different from information provided by other public companies. In addition, it is possible that some investors will find our common stock less attractive as a result of these elections, which may result in a less active trading market for our common stock and higher volatility in our stock price.
In addition, we have elected to not take advantage of the extended transition period that allows an emerging growth company to delay the adoption of certain accounting standards until those standards would otherwise apply to private companies, which means that the financial statements we file in the future, will be subject to all new or revised accounting standards generally applicable to public companies. Our election not to take advantage of the extended transition period is irrevocable. We expect to cease to be an “emerging growth company” effective December 31, 2026.
Substantial sales of our common stock by Illumina or other significant shareholders could cause our stock price to decline.
Immediately following the Spin-Off on June 24, 2024, Illumina retained a 14.5% ownership interest of our common stock. In connection with the Spin-Off, we have entered into a Stockholder and Registration Rights Agreement with Illumina, pursuant to which we provide Illumina registration rights with respect to the shares of our common stock it retained following the Spin-Off. In addition, Illumina has agreed to vote any shares of our common stock that it retains in proportion to the votes cast by our other stockholders and to grant us a proxy to vote its shares of our common stock in such proportion. Pursuant to the IRS private letter ruling, Illumina is required to dispose of any such shares of our common stock that it retains as soon as warranted consistent with the business reasons for the retention of such shares, but in no event later than five years after the Spin-Off. Illumina is not required to hold any retained shares for any minimum period following the Spin-Off. During the fourth quarter of 2025, Illumina sold 2,000,000 shares of the Company’s common stock, reducing its ownership to 2,502,126 shares, which represented approximately 6.0% of the Company’s outstanding common stock as of December 31, 2025. On February 17, 2026, Illumina filed a Schedule 13G reporting beneficial ownership of 1,302,126 shares of our common stock. We are unable to predict with certainty when Illumina will dispose of additional substantial numbers of shares of common stock. The sales of significant amounts of our common stock by Illumina or any other significant shareholders, or the perception in the market that this will occur, may decrease the market price of our common stock.
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We do not expect to pay any dividends for the foreseeable future.
You should not rely on our common stock to provide dividend income. We do not anticipate that we will pay any dividends to holders of our common stock in the foreseeable future. Instead, we plan to retain any earnings to maintain and expand our existing operations. In addition, any future credit facility or debt securities may contain terms prohibiting or limiting the amount of dividends that may be declared or paid on our common stock, and the terms of our Separation and Distribution Agreement with Illumina entered into in connection with the Spin-Off require us to repay portions of the disposal funding we received from Illumina in connection with the Spin-Off in the event we pay dividends.
We will incur increased costs as a result of operating as a public company. Our management will be required to devote substantial time to new compliance initiatives and corporate governance practices.
As a public company, and particularly after we are no longer an emerging growth company, we will incur significant legal, accounting, and other expenses that we did not incur as a private company. SOX Section 404, the Dodd-Frank Wall Street Reform and Consumer Protection Act, the Listing Rules, and other applicable U.S. rules and regulations impose various requirements on public companies, including establishment and maintenance of effective disclosure and financial controls and corporate governance practices. We expect that we will need to hire additional accounting, finance, and other personnel in connection with our becoming, and our efforts to comply with the requirements of being, a public company, and our management and other personnel will need to devote a substantial amount of time towards maintaining compliance with these requirements. These requirements will increase our legal and financial compliance costs and will make some activities more time- consuming and costly. For example, we expect that the rules and regulations applicable to us as a public company may make it more difficult and more expensive for us to obtain director and officer liability insurance, which could make it more difficult for us to attract and retain qualified members of our board of directors. We cannot predict or estimate the amount of additional costs we may incur or the timing of such costs. These rules and regulations are often subject to varying interpretations, in many cases due to their of specificity, and, as a result, their application in practice may evolve over time as new guidance is provided by regulatory and governing bodies. This could result in continuing uncertainty regarding compliance matters and higher costs necessitated by ongoing revisions to disclosure and governance practices.
Pursuant to SOX Section 404, we are required to furnish a report by our management on our internal control over financial reporting beginning with this filing of our Annual Report on Form 10-K. However, while we remain an emerging growth company, we will not be required to include an attestation report on internal control over financial reporting issued by our independent registered public accounting firm. To achieve compliance with SOX Section 404 within the prescribed period, we are engaged in a process to document and evaluate our internal control over financial reporting, which is both costly and challenging. In this regard, we have and will need to continue to dedicate internal resources, engage outside consultants, adopt a detailed work plan to assess and document the adequacy of internal control over financial reporting, continue steps to improve control processes as appropriate, validate through testing that controls are functioning as documented, and implement a continuous reporting and improvement process for internal control over financial reporting. Despite our efforts, there is a risk that we will not be able to continuously conclude that our internal control over financial reporting is as required by SOX Section 404. If we identify one or more material , it could result in an reaction in the financial markets due to a of confidence in the reliability of our financial statements.
Certain provisions in our Certificate of Incorporation and Bylaws and Delaware law may discourage, delay, or prevent a change in control of our company or changes in our management and, therefore, depress the trading price of our common stock.
Several provisions of our Certificate of Incorporation and Bylaws may discourage, delay or prevent a merger, acquisition, or other change in control that stockholders may consider favorable, including transactions in which you might otherwise receive a premium for your shares of our common stock. These provisions may also prevent or frustrate attempts by our stockholders to replace or remove our management. Therefore, these provisions could adversely affect the price of our common stock. Among other things, our organizational documents:
• establish that our board of directors is divided into three classes: Class I, Class II, and Class III, with each class serving staggered three-year terms;
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• provide that our directors may be removed only for cause;
• provide that vacancies on our board of directors may be filled only by a majority of directors then in office, even though less than a quorum;
• eliminate cumulative voting in the election of directors;
• authorize our board of directors to issue shares of preferred stock and determine the price and other terms of those shares, including preferences and voting rights, without stockholder approval;
• permit stockholders to take actions only at a duly called annual or special meeting and not by unanimous written consent;
• prohibit stockholders from calling a special meeting of stockholders;
• require that stockholders give advance notice to nominate directors or submit proposals for consideration at stockholder meetings;
• authorize our board of directors, by a majority vote, to amend certain provisions of the Bylaws; and
• require the affirmative vote of at least 66 2/3% or more of the outstanding shares of common stock to amend many of the provisions described above.
In addition, Section 203 of the Delaware General Corporation Law (“DGCL”) prohibits a Delaware corporation from engaging in a business combination with any interested stockholder for a period of three years following the date the person became an interested stockholder, subject to certain exceptions. In general, Section 203 of the DGCL defines an “interested stockholder” as an entity or person who, together with the entity’s or person’s affiliates, beneficially owns, or is an affiliate of the corporation and within three years prior to the time of determination of interested stockholder status did own, 15% or more of the outstanding voting stock of the corporation. A Delaware corporation may “opt out” of these provisions with an express provision in its certificate of incorporation. We have not opted out of Section 203 of the DGCL in our Certificate of Incorporation.
These and other provisions of our Certificate of Incorporation, Bylaws and Delaware law may discourage, delay, or prevent certain types of transactions involving an actual or a threatened acquisition or change in control of us including unsolicited takeover attempts, even though the transaction may offer our shareholders the opportunity to sell their shares of our common stock at a price above the prevailing market price.
Our Certificate of Incorporation designates the Court of Chancery of the State of Delaware as the sole and exclusive forum for substantially all disputes between us and our stockholders, which could limit our stockholders’ ability to obtain a favorable judicial forum for disputes with us or our directors, officers, or other employees.
Our Certificate of Incorporation provides that, unless we consent in writing to the selection of an alternative forum, the Court of Chancery of the State of Delaware will be the exclusive forum for the following types of actions or proceedings under Delaware statutory or common law:
• any derivative action or proceeding brought on our behalf;
• any action asserting a claim of breach of a fiduciary duty owed by any current of former directors, officers or other employees, or stockholders to us or our stockholders;
• any action asserting a claim arising pursuant to any provision of the DGCL or our amended and restated Certificate of Incorporation and Bylaws; and
• any action asserting a claim governed by the internal affairs doctrine.
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However, this provision would not apply to suits brought to enforce a duty or liability created by the Exchange Act, or any other claim for which the federal courts have exclusive jurisdiction. Furthermore, our Certificate of Incorporation also provides that unless we consent in writing to the selection of an alternative forum, the federal district courts of the United States shall be the exclusive forum for the resolution of any complaint asserting a cause of action arising under the Securities Act. Any person purchasing or otherwise acquiring or holding any interest in shares of our capital stock is deemed to have received notice of and consented to the foregoing provisions. This choice of forum provision may limit a stockholder’s ability to bring a claim in a judicial forum that it finds more favorable for disputes with us or with our directors, officers, other employees or agents, or our other stockholders, which may discourage such lawsuits against us and such other persons. Alternatively, if a court were to find this choice of forum provision inapplicable to, or unenforceable in respect of, one or more of the specified types of actions or proceedings, we may incur additional costs associated with resolving such matters in other jurisdictions, which could affect our business, results of operations, and financial condition.
We could be subject to additional securities class action litigation.
In the past, securities class action litigation has often been brought against a company following a decline in the market price of its securities. This risk is especially relevant for us, because healthcare companies have experienced significant stock price volatility in recent years. Our stock price may be volatile and may decline significantly in response to the announcement of clinical trial results, including results that do not meet their primary endpoints or that are perceived unfavorably by the investment community. For example, in February 2026, we announced that the NHS-Galleri Trial did not meet its primary endpoint of statistically significant combined Stage 3 and 4 reduction and experienced a decline in our stock price on the following day. The announcement of these results, or any future announcements of clinical trial results that do not meet expectations, could cause significant volatility or decline in the market price of our common stock. If we face such , it could result in substantial costs and a of our management’s attention and resources, which could our business.
In addition, any perceived or actual decline in our business prospects or stock price following the NHS-Galleri Trial results or other adverse developments could invite shareholder activism. Responding to shareholder activism can be costly and time-consuming, disrupt our operations, and divert the attention of our management and board of directors. Furthermore, activist shareholders may attempt to influence or change our strategic direction, capital allocation, or governance practices, which could adversely affect our business and stock price.
