Exagen (XGN) risk factors, FY2025 10-K

Risks Related to Our Business and Strategy

1. 01We have a history of losses, we expect to incur net losses in the future and we may not be able to generate sufficient revenue to achieve and maintain profitability30% rewritten
2. 02In the near-term, we expect that our financial results will depend primarily on sales of our testing products, and we will need to generate sufficient revenue from these testing products to grow our business
3. 03Business disruptions could seriously harm our future revenue and financial condition and increase our costs and expenses
4. 04If we fail to maintain proper and effective internal control over financial reporting, our ability to produce accurate and timely financial statements could be impaired, investors may lose confidence in our financial reporting and the trading price of our common stock may decline66% rewritten
5. 05required, our auditors are unable to conclude that our internal control over financial reporting is effective, investors may lose confidence in our financial reporting and the trading price of our common stock may declineNew
6. 06We may be unable to manage our growth effectively, which could make it difficult to execute our business strategy
7. 07Our commercial success depends upon attaining and maintaining significant market acceptance of our testing products among rheumatologists, patients, third-party payors and others in the medical community25% rewritten
8. 08We may experience limits on our revenue if healthcare providers decide not to order our testing products or if we are otherwise unable to create or maintain demand for our testing products28% rewritten
9. 09The sizes of the markets for our testing products have not been established with precision and may be smaller than we estimate
10. 10We may expend our limited resources to pursue a particular testing product and fail to capitalize on other testing products that may be more profitable or for which there is a greater likelihood of success84% rewritten
11. 11We rely on sole suppliers for some of the reagents, equipment and other materials used in our testing products, and we may not be able to find replacements or transition to alternative suppliersNew
12. 12If we are unable to support demand for our current testing products or any of our future testing products or solutions, our business could suffer
13. 13Billing for our testing products is complex, and we must dedicate substantial time and resources to the billing process to be paid for our testing products
14. 14As we introduce new testing products, we will need to add new codes to our billing process as well as our financial reporting systems. Failure or delays in effecting these changes in external billing and internal systems and processes could negatively affect our collection rates, revenue and cost of collecting23% rewritten
15. 15Our reliance on third parties requires us to share our trade secrets, which increases the possibility that a competitor will discover them or that our trade secrets will be misappropriated or disclosed
16. 16If we are unable to maintain or expand our sales and marketing force, as needed, to adequately address our customers’ and future partners’ needs, our business may be adversely affected24% rewritten
17. 17If we are unable to compete successfully, we may be unable to increase or sustain our revenue or achieve profitability
18. 18Developing new testing products involves a lengthy and complex process, and we may not be able to commercialize on a timely basis, or at all, other testing products we are developing46% rewritten
19. 19If we cannot enter into new clinical study collaborations, our product development and subsequent commercialization could be delayed
20. 20We may acquire businesses or assets, form joint ventures or make investments in other companies or technologies that could harm our operating results, dilute our stockholders’ ownership, increase our debt or cause us to incur significant expense25% rewritten
21. 21The diagnostic industry is subject to rapidly changing technology, which could make our current and future testing products obsolete
22. 22Our failure to maintain relationships or build new relationships with key opinion leaders could materially adversely impact our business and prospects
23. 23If we are sued for errors and omissions or professional liability, we could face substantial liabilities that exceed our resources
24. 24The loss of members of our senior management team or our inability to attract and retain highly skilled scientists, technicians and salespeople could adversely affect our business
25. 25If our sole clinical laboratory facility becomes damaged or inoperable, we are required to vacate our existing facility or we are unable to expand our existing facility as needed, we will be unable to perform our testing services and our business will be harmed23% rewritten
26. 26We believe we have the capacity to meet our expected business needs for at least the next 12 months, although we may grow at a rate that is faster than we expect. We may need to further expand our laboratory space in the futureNew
27. 27Our testing process involves the use of sophisticated state-of-the-art equipment that requires precise calibration, and issues affecting such equipment may delay delivery or impact the quality of the test results to rheumatologists or otherwise adversely affect our operations
28. 28Failure in our information technology, telephone or other systems could significantly disrupt our operations and adversely affect our business and financial condition
29. 29Our financial condition, commercialization efforts and results of operations have been and may again in the future be adversely affected by outbreaks of contagious diseases25% rewritten
30. 30Performance issues, service interruptions or price increases by our shipping carrier could adversely affect our business, results of operations and financial condition, and harm our reputation and ability to provide testing services on a timely basis
31. 31Inflation could adversely affect our business and financial results
32. 32Changes in U.S. trade policy and the impact of tariffs may have a material adverse effect on our business, results of operations and financial conditionNew
33. 33We maintain cash deposits in excess of federally insured limits. Adverse developments affecting financial institutions, including bank failures, could adversely affect our liquidity and financial performance
34. 34Our ability to utilize our net operating loss carryforwards and certain other tax attributes may be limited
35. 35Our term loan contains restrictions that limit our flexibility in operating our business, and if we fail to comply with the covenants and other obligations under our loan agreement, the lenders may be able to accelerate amounts owed under the facility and may foreclose upon the assets securing our obligations82% rewritten
36. 36government payors, or other risks described in this “Risk Factors” section, we may seek to raise additional capital through equity offerings, debt financings, collaborations or licensing arrangementsNew
37. 37We are a smaller reporting company and the reduced disclosure requirements applicable to smaller reporting companies may make our common stock less attractive to investors

Risks Related to Regulatory and Compliance Matters

1. 38Healthcare policy changes could cause significant harm to our business, operations and financial condition
2. 39Complying with numerous regulations pertaining to our business is an expensive and time-consuming process, and any failure to comply could result in substantial penalties66% rewritten
3. 40termination and, if so, whether these were addressed to the satisfaction of the surveyors for the CLIA program (or another accrediting organization)New
4. 41We conduct business in a heavily regulated industry. Complying with the numerous statutes and regulations pertaining to our business is expensive and time-consuming, and any failure by us, our consultants or commercial partners to comply could result in substantial penalties
5. 42If we use hazardous materials in a manner that causes contamination or injury, we could be liable for resulting damages
6. 43We have previously and may again in the future be required to modify our business practices, pay fines, incur significant expenses or experience losses due to litigation or governmental investigations
7. 44Any of these circumstances may adversely affect our business, prospects, reputation and results of operations
8. 45The FDA may disagree with our assessment that our AVISE® test products and any other tests we may develop are LDTs eligible for enforcement discretion and determine that such test products are fully subject to active compliance enforcement under the FDCA and FDA regulations22% rewritten
9. 46The FTC and/or state enforcement or regulatory agencies may object to the methods and materials we use to promote our tests and initiate enforcement against us, which could adversely affect our business and financial condition
10. 47Actual or perceived failures to comply with applicable data protection, privacy and security laws, regulations, standards and other requirements could materially and adversely affect our business, results of operations and financial condition
11. 48Failure to comply with HIPAA, the HITECH Act, their implementing regulations and similar comparable state laws and regulations affecting the transmission, security and privacy of health information could result in significant penalties or private litigation
12. 49Our future growth may depend, in part, on our ability to operate in foreign markets, where we would be subject to additional regulatory burdens and other risks and uncertainties

Risks Related to our Intellectual Property

1. 50If we are unable to maintain or obtain intellectual property protection, our competitive position could be harmed49% rewritten
2. 51Certain of our testing products utilize unpatented technology that is publicly available and can be used by our competitors
3. 52Changes in U.S. patent law could diminish the value of patents in general, thereby impairing our ability to protect our testing products
4. 53We may not be able to protect our intellectual property rights throughout the world
5. 54The patent protection and patent prosecution for some of our testing products may be dependent on third parties78% rewritten
6. 55If 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
7. 56Obtaining 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
8. 57We may not be successful in obtaining or maintaining necessary rights to product components and processes for our development pipeline through acquisitions and in-licenses
9. 58Third-party claims alleging intellectual property infringement may prevent or delay our development efforts
10. 59We may be involved in proceedings to protect or enforce our patents or the patents of our licensors, which could be expensive, time-consuming and unsuccessful
11. 60Because of the expense and uncertainty of litigation, we may not be in a position to enforce our intellectual property rights against third parties
12. 61We may be subject to claims that our employees, consultants or independent contractors have wrongfully used or disclosed confidential information of third parties

Risks Related to Our Common Stock

1. 62Our stock price may be volatile, and you may not be able to sell shares of our common stock at or above the price you paid
2. 63Sales of a substantial number of shares of our common stock in the public market or the perception that these sales might occur could significantly reduce the trading price of our common stock and impair our ability to raise adequate capital through the sale of additional equity securities
3. 64We have incurred and will continue to incur increased costs and demands upon management as a result of complying with the laws and regulations affecting public companies in the United States, which may adversely affect our results of operationsNew
4. 65Provisions in our charter documents and under Delaware law could discourage a takeover that stockholders may consider favorable and may lead to entrenchment of management
5. 66Our executive officers, directors and principal stockholders, if they choose to act together, have the ability to control or significantly influence all matters submitted to stockholders for approval
6. 67We have never paid dividends on our capital stock, and we do not anticipate paying dividends in the foreseeable future. Your ability to achieve a return on your investment will depend on appreciation, if any, in the price of our common stock
7. 68An active, liquid trading market for our common stock may not be maintained
8. 69Our failure to meet the continued listing requirements of Nasdaq or the Nasdaq Stock Market LLC could result in a delisting of our common stock
9. 70If securities or industry analysts downgrade our common stock or otherwise issue adverse opinions or commentary regarding our stock or do not publish research or reports about our company, our stock price and trading volume could decline
10. 71We could be subject to securities class action litigation