Caris Life Sciences (CAI) risk factors, FY2025 10-K

Risks Related to Our Business and Industry

1. 01The precision medicine industry is highly competitive and subject to rapid change
2. 02We have incurred significant losses since inception, may incur losses in the future, and may not be able to generate sufficient revenue to achieve and maintain profitability
3. 03Our current or future solutions may not achieve or maintain sufficient commercial market acceptance
4. 04Our current revenue is primarily generated from the continued adoption and use of our tissue-based profiling solution
5. 05If we are unable to support demand for our solutions, including ensuring that we have adequate capacity to meet increased demand, or if we are unable to successfully manage our anticipated growth, our business could suffer
6. 06Our results of operations may fluctuate significantly, which makes our future results of operations difficult to predict and could cause our results of operations to fall below expectations or any guidance we may provide
7. 07If we do not have the support of KOLs or if clinical data using our solutions is not published in peer-reviewed journals or is otherwise not well received, it may be difficult to drive adoption and use of our solutions and establish them as a component of the standard of care for patients with cancer
8. 08If our solutions, or solutions we develop in the future, do not receive coverage and/or adequate reimbursement from third-party payers, including government and commercial payers, our ability to expand access to our solutions beyond our existing sales channels, and thus our overall commercial success, will be limited
9. 09In addition, the coding process used by third-party payers to identify various laboratory tests during the billing process is complex, and may not enable coverage and adequate reimbursement rates. Moreover, changes to the codes used to report our solutions to payers may result in significant changes in reimbursement
10. 10Our MI Tumor Seek Hybrid solution is covered for solid tumor testing as allowable under the NGS NCD and related LCD and are reported to Medicare with unlisted molecular pathology CPT code 81479 and the unique DEX Z-Code identifier issued by MolDX. MI Tumor Seek Hybrid is covered by Medicare as of August 3, 2022
11. 11Immunohistochemical Tests
12. 12Protecting Access to Medicare Act
13. 13Molecular Signature Tests, MRD/Monitoring and Screening and Early Detection Intended Uses for Our Solutions
14. 14Commercial Payers and Other Payers
15. 15Our billing, collections, and claims processing activities are complex and time-consuming, and any delay in transmitting and collecting claims or failure to comply with applicable billing requirements could have an adverse effect on our future revenue
16. 16We rely on a limited number of third-party suppliers or, in many cases, sole suppliers, for some of our next-generation sequencers, lab materials, reagents, and supplies, and we may not be able to find replacements or immediately transition to alternative suppliers if necessary
17. 17If we seek and fail to obtain additional financing, we may be unable to execute on our business strategies and our growth prospects could be harmed
18. 18If our facilities or those of our third-party collaborators are damaged or become inoperable, our ability to provide our solutions will be significantly impaired and our business will be harmed
19. 19If our solutions result in direct or indirect patient harm or injury, we could be subject to significant reputational and liability risks, and our business, financial condition, and results of operations could suffer
20. 20If we were to be sued for product liability or professional liability, we could face substantial liabilities that exceed our resources, including any insurance coverage
21. 21Our business and results of operations will suffer if we fail to compete effectively
22. 22We may not be able to compete effectively or keep pace with the rapid rate of change in our industry. This could render our solutions obsolete or less attractive, result in significant price reductions, result in us not introducing new products, or substantially limit the number of products that we offer
23. 23Regulatory, social and ethical issues relating to our use of new and evolving technologies, such as AI and ML, may result in reputational harm, additional costs, and liability
24. 24We are highly dependent on our key personnel, and if we lose key members of our senior management, scientific or technical teams or are not successful in attracting, motivating, and retaining highly qualified personnel, we may not be successful
25. 25(collectively, “HIPAA”), personally identifiable information, credit card and other financial information, and intellectual property and proprietary business information (collectively “Sensitive Information”)
26. 26We may not be successful in developing and commercializing new solutions or new applications for our current solutions
27. 27We may fail to build a sustainable or growing data licensing business, and our data licensing efforts may result in reputational harm that has an adverse effect on our business, financial condition, and results of operations
28. 28We deploy our proprietary profiling and signature offerings to analyze tissue and blood samples provided by biopharma partners, identify potential drug targets and help biopharma partners develop drug therapeutics through our drug target and therapeutic discovery business, Caris Discovery
29. 29We rely on third-party services to collect, process, transport, and store our samples in a secure and cost-efficient manner. If these services were disrupted, our business would be harmed
30. 30participants for our validation studies or clinical trials, or maintain sufficient participation of enrolled participants, our product development, commercialization activities and our ability to seek marketing authorization for our solutions could be delayed, modified, or prevented

Risks Related to Regulation and Legal Compliance

1. 31If we or our partners fail to comply with healthcare and other applicable laws and regulations, we could face substantial penalties and sanctions, and our business, reputation, financial condition, and results of operations could be adversely affected
2. 32compensation, and other remuneration and items of value provided to healthcare professionals and entities
3. 33Certain states have also implemented genetic testing and privacy laws imposing specific patient consent requirements and protecting test results by strictly limiting the disclosure of those results and laws governing the privacy of consumer health data, including genetic information
4. 34In addition, Congress has, for over the past decade, considered a number of proposals, which if enacted, would subject LDTs to additional regulatory requirements. Any such legislation could substantially alter our marketing of LDTs and negatively impact our business, financial condition, and results of operations
5. 35from the FDA for a proposed intended use of early detection, MRD or monitoring tracking, or if we will be able to obtain such approval on a timely basis or at all
6. 36Our business could be adversely affected by legal challenges to our business model or by actions restricting our ability to provide the full range of our solutions
7. 37Obtaining and maintaining regulatory authorization of our solutions in one jurisdiction does not mean that we will be successful in obtaining regulatory authorization of our solutions in other jurisdictions
8. 38Our employees, independent contractors, consultants, commercial partners, customers, and vendors may engage in misconduct or other improper activities, including noncompliance with regulatory standards and requirements
9. 39Employee use of generative AI tools in business operations may expose us to intellectual property, cybersecurity, and privacy risks
10. 40We use medical and hazardous materials that require considerable expertise and expense for handling, storage, or disposal and may result in claims against us
11. 41We have been, are currently, and in the future may be the subject of government investigations, claims, audits, whistleblower and payer audits, overpayment and recoupment efforts and other litigation in the course of our business that could adversely affect our business and financial results
12. 42Healthcare reform measures or changes in policy or government spending could cause significant harm to our business, financial condition, and results of operations
13. 43Further, 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
14. 44examination for future solutions or modifications than we had expected, solution introductions or modifications could be delayed or canceled, which could adversely affect our business
15. 45Ethical, legal, and social concerns related to the use of genomic information could reduce demand for our solutions
16. 46If we fail to comply with applicable data interoperability and information blocking rules, our business, financial condition, and results of operations could be adversely affected
17. 47If 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 solutions or experience disruptions to our business
18. 48Data from validation studies or 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
19. 49Any solution for which we obtain marketing authorization 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 solutions
20. 50Any of these sanctions could result in higher than anticipated costs or lower than anticipated sales and adversely affect our reputation, business, financial condition, and results of operations
21. 51Our solutions will need to be manufactured and offered in accordance with federal and state regulations, and we could be forced to recall our devices or terminate production or offering our LDTs if we or our partners fail to comply with these regulations
22. 52The misuse or off-label use of our solutions may harm our reputation in the marketplace, 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
23. 53Any 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
24. 54The Federal Policy for the Protection of Human Subjects or related state regulations may be revised or altered in a way that negatively impacts our business
25. 55Our business activities are subject to the FCPA and similar anti-bribery and anti-corruption laws, as well as export and import controls and economic sanctions laws and regulations of the United States and other jurisdictions

Risks Related to Intellectual Property

1. 56Third parties may allege that we infringe, misappropriate, or violate their intellectual property rights, and if they prevail, could block sales of our solutions and force us to pay damages and/or royalties, which could adversely affect the success of our business
2. 57misappropriated the confidential information or trade secrets of third parties could have a similar negative impact on our reputation and business
3. 58Issued patents covering our solutions and other technologies could be found invalid or unenforceable if challenged in court or before administrative bodies in the United States and abroad
4. 59If we fail to comply with our obligations in the agreements under which we license or may license intellectual property rights from third parties or we otherwise experience disruptions to our business relationships with our licensors, we could lose license rights that are important to our business
5. 60Our technology licensed from third parties may be subject to retained rights
6. 61We may become involved in lawsuits to protect or enforce or defend our patents or other intellectual property rights, which could be expensive, time-consuming, and unsuccessful
7. 62Intellectual property litigation may lead to public disclosures and unfavorable publicity that harms our reputation and causes the market price of our common stock to decline
8. 63Patent terms may be inadequate to protect our competitive position on our solutions for an adequate amount of time
9. 64If we do not obtain patent term extension and data or regulatory exclusivity for any solutions we may develop, our business may be materially harmed
10. 65application for the competing product containing the sponsor’s own preclinical data and data from adequate and well-controlled clinical trials to demonstrate the safety, purity and potency of its product
11. 66Obtaining and maintaining our patent protection depends on compliance with various procedural, document submission, fee payment and other requirements imposed by governmental patent agencies, and our patent protection could be reduced or eliminated for non-compliance with these requirements
12. 67Developments in patent law could have a negative impact on our business
13. 68We may not be able to enforce our intellectual property rights throughout the world
14. 69If we are unable to protect the confidentiality of our trade secrets, our business and competitive position could be harmed
15. 70We may be subject to claims by third parties asserting that we or our employees 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
16. 71If our trademarks and trade names are not adequately protected, we may not be able to build name recognition in our markets of interest and our business may be adversely affected
17. 72Our use of open-source software could subject our proprietary technology to unwanted open-source license conditions that could negatively impact our business

Risks Related to Our Indebtedness

1. 73We have incurred substantial indebtedness, and we may not generate sufficient cash flow from operations to meet our debt service requirements, continue our operations, and pursue our growth strategy, and we may be unable to raise capital when needed or on acceptable terms
2. 74The agreements and instruments governing our debt contain restrictions and limitations that could significantly impact our management’s flexibility and our financial and operational flexibility to operate our business
3. 75Our variable rate debt subjects us to interest rate risk, which could cause our debt service obligations to increase significantly and affect our operating results
4. 76Despite our indebtedness level, we and our subsidiaries may incur substantially more debt, including secured debt. This could further exacerbate the risks associated with our substantial indebtedness

Risks Related to Ownership of Our Common Stock

1. 77The market price of our common stock may be volatile, which could result in substantial losses for investors
2. 78If securities analysts do not publish, or cease to publish, research or reports about our business or if they publish negative evaluations of our stock, the price of our stock could decline
3. 79Sales of a substantial number of shares of our common stock in the public market, or the perception that such sales could occur, could cause the price of our common stock to decline
4. 80Raising additional capital may cause dilution to our existing shareholders, restrict our operations, or require us to relinquish rights to our technologies or our solutions
5. 81The material weakness identified pertained to a lack of sufficient qualified accounting resources, including those necessary to account for and disclose accounting transactions that require complex calculations or thorough evaluation of the accounting literature
6. 82We are an emerging growth company and the reduced disclosure requirements applicable to emerging growth companies may make our common stock less attractive to investors
7. 83We have incurred and expect to continue to incur increased costs as a result of operating as a public company, and our management is and will be required to devote substantial time to new compliance initiatives and corporate governance practices
8. 84Our disclosure controls and procedures may not prevent or detect all errors or acts of fraud
9. 85We do not intend to pay dividends for the foreseeable future, and our investors may never obtain a return on their investment
10. 86Texas law and provisions in our amended and restated certificate of formation and bylaws might 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
11. 87The sizes of the markets for our current and future solutions have not been established with precision, and may be smaller than we estimate
12. 88Adverse economic or market conditions may harm our business
13. 89Our business is subject to economic, political, regulatory, and other risks associated with international operations
14. 90Our business is subject to risks arising from public health crises
15. 91Our ability to use our net operating loss carryforwards and certain other tax attributes may be limited
16. 92Changes in tax laws or regulations may have an adverse effect on our business, financial condition, and results of operations
17. 93We may seek acquisitions or other strategic transactions from time to time that could increase our capital requirements, dilute our shareholders, cause us to incur debt or assume contingent liabilities, and subject us to other risks
18. 94Evolving expectations regarding environmental, social, and governance (“ESG”) matters could increase our costs, harm our reputation, and adversely impact our financial results