Labcorp · Risk factors

Prior heading: General or macro-economic factors and significant fluctuations in economic conditions in the U.S. and globally may have a material adverse effect upon the Company.

The Company’s operations are dependent upon ongoing business depends on sustained demand for diagnostic testing and biopharma laboratory services by patients, physicians, hospitals, MCOs, CROs, pharmaceutical, biotechnology and biotechnology, medical device companies companies, and others. Significant changes in global economic conditions, and an increase in the costs of goods inflationary pressures, and services, credit market volatility could negatively impact affect testing volumes, the demand for biopharma laboratory services, cash collections, profitability, and the availability and cost of credit. Pressures access to financing. Pressure on and uncertainty surrounding the U.S. federal government’s budget, government budget and potential changes in budgetary priorities, budgeting priorities could adversely affect the funding for government programs that comprise a portion of the Company’s revenues. revenue. In addition, uncertainty in the credit markets and interest rate volatility could reduce the availability and increase the cost of credit and impact the Company’s ability to meet its financing needs in the future.

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Prior heading: Operations may be disrupted and adversely impacted by events beyond the Company’s control, including natural disasters, adverse weather, geopolitical events, public health crises, acts of terrorism, disruption to supply chain, and inaccessibility of natural resources.

Natural disasters, such as adverse disasters (e.g., severe weather, fires, earthquakes, power shortages and outages, earthquakes), geopolitical events, such as events (e.g., terrorism, war, and political instability, or other conflict, instability), public health crises and disease epidemics and pandemics, crises, criminal activities, disruptions to activity, supply chains, inaccessibility of natural resources, chain disruptions, and other disruptions or events beyond the Company’s control could negatively affect the Company’s operations. Any of these events may result in a temporary decline of testing volumes and other work in both segments. In addition, such events These disruptions may temporarily interrupt the Company’s ability reduce testing volumes, delay study progress, hinder specimen transport, limit access to transport specimens, efficiently commence, continue, or complete its work on studies, utilize information technology laboratories and IT systems, utilize certain laboratories, and/or to receive material from its suppliers. Such events can and interrupt supply deliveries. They may also affect customer operations and thereby impact testing volume. Long-term operations, further decreasing demand. Prolonged disruptions in the infrastructure and operations caused by such events (particularly involving locations events, especially in which the Company has operations), key operational locations, could harm the Company’s operating results.results of operations.

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Prior heading: Continued changes in healthcare reimbursement models and products (e.g., health insurance exchanges), changes in government payment and reimbursement systems, or changes in payer mix, including an increase in third-party benefits management and value-based payment models, could have a material adverse effect on the Company’s revenues, profitability and cash flow.

Dx The Company’s diagnostic testing services are primarily billed to third parties, including MCOs, Medicare, Medicaid, physicians and physician groups, hospitals, patients, and employer groups. Most testing services are billed to a party other than the physician or plans, and other authorized person who ordered the test. Increases in the percentage health insurance providers. A shift toward a higher mix of services billed to government and MCOs could have an adverse MCO payers may adversely effect on the Company’s revenues. The Company expects the revenues due to lower reimbursement rates. Ongoing efforts by payers to impose reduced reduce reimbursement, more stringent tighten payment policies, and control utilization and cost controls by government and other payers are expected to continue. If Dx the Company cannot offset additional these reductions in the payments it receives for its services by reducing costs, increasing test volume, and/or introducing through cost efficiencies, increased volume or new services and procedures, it could have a material adverse effect on the Company’s services, its revenues, profitability, and cash flows. In 2014, Congress passed PAMA, requiring flows may be materially impacted. PAMA has already reduced Medicare to change the way payment rates are calculated for tests paid under the CLFS, and to base the payment on the weighted median of rates paid by private payers. Pursuant to PAMA, reimbursement rates for many clinical laboratory tests provided under Medicare were reduced from 2018 through 2020. Enforcement of PAMA was suspended each year from 2021 through 2025, but a long-term resolution through legislation has not yet been achieved, tests, and the next round of PAMA further reductions are currently on track to be implemented in 2026. Unless implementation of PAMA is further delayed or changed, additional expected, although rate reductions in reimbursements of $100.0 million are expected frozen for 2026 from all payers affected by the CLFS. The Company’s ability to attract and retain MCOs is critical given the impact of healthcare reform, changes in coverage and evolving value-based care and risk-based reimbursement delivery models (e.g., accountable care organizations (ACOs) and Independent Physician Associations (IPAs)). A portion of the managed care fee-for-service revenues is collectible from patients in the form of deductibles, coinsurance and copayments. As patient cost-sharing continues to increase, the Company’s collections may be adversely impacted. In addition, Medicare and Medicaid and private insurers have increased their efforts to control the cost, utilization and delivery of healthcare services, including commercial laboratory services. Measures to regulate healthcare delivery in general, and clinical laboratories in particular, have resulted in reduced prices, added costs and decreased test utilization capped at 15% per year for the commercial laboratory industry by increasing complexity and adding new regulatory and administrative requirements. The Company has periodically experienced delays in the pricing and implementation of coding and billing changes among various payers, including Medicaid, Medicare 2027-2029. Delays and commercial carriers. Payer policy changes in coverage, along with coding coding, billing, and billing changes, payer policies have had a negative impact over time on revenue, historically impacted revenue per requisition, and margins and cash flows. In 2024, limited coding and billing changes were implemented. While limited changes are expected to be implemented in 2025, the Company typically expects some delays in pricing and reimbursement as new codes are introduced. The Company expects the efforts to impose reduced reimbursement, more stringent payment policies, and utilization and cost controls by government margins, and other payers to similar disruptions may continue. If Dx cannot offset additional reductions in the payments it receives for its services by reducing costs, increasing test volume, and/or introducing new services Increasing patient cost-sharing and procedures, it could have a material adverse effect on evolving value-based care models also pose collection challenges and may affect the Company’s revenues, profitability ability to attract and cash flows.retain MCOs.

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Prior heading: Changes in government regulation or in practices relating to the pharmaceutical, biotechnology, or medical device industries could decrease the need for certain services that BLS provides.

BLS assists supports pharmaceutical, biotechnology, and medical device companies in navigating the regulatory approval and post-approval compliance requirements process. Changes in government regulations, such as a relaxation in regulatory requirements or the introduction of simplified approval procedures whether easing or an increase in regulatory tightening requirements that BLS may have difficulty satisfying or that may make its services less competitive, and changes in government operations, including staff reductions and reorganization efforts, could eliminate or substantially reduce the demand for its services. Also, if government BLS’s services or make them less competitive. Additionally, efforts to contain control drug and medical product and device costs impact profits from such items, costs, or if health insurers were to change their practices with respect to changes in insurer reimbursement for those items, some of BLS’s customers practices, may spend less, or lead customers to reduce their growth in spending on R&D.R&D spending, which could adversely affect BLS’s business.

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Prior heading: Increased competition, including price competition, could have an adverse effect on the Company’s revenues and profitability.

As further described in Item 1 and Item 1A of Part I of this Annual Report, both Dx and BLS operate in highly competitive industries. industries and selection of a commercial laboratory or a drug development partner is based on a number of competitive factors. The commercial laboratory business is intensely competitive in terms of price, service, specialty offerings, and the type and number of commercial laboratories. Dx and BLS compete against a wide range of businesses, as well as in-house departments of pharmaceutical, biotechnology, medical device, and diagnostic companies, and and, to a lesser extent, selected academic research centers, universities, and teaching hospitals. In addition, BLS’s services periodically experience periods of are subject to increased price competition that may have an adverse effect on the segment’s profitability and consolidated revenues and net earnings.earnings. Dx’s or BLS’s inability to compete effectively with other businesses as it relates to certain competitive factors, including the factors mentioned above, could have an adverse effect on the Company’s revenues and profitability.

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Prior heading: Failure to obtain and retain new customers, the loss of existing customers or material contracts, or a reduction in services or tests ordered or specimens submitted by existing customers, or the inability to retain existing and/or create new relationships with health systems could impact the Company’s ability to successfully grow its business.

To maintain and grow its business, the Company needs to obtain and retain The Company’s growth depends on attracting new customers and business partners. In addition, a reduction in tests ordered or specimens submitted by partners while retaining existing customers, a decrease relationships. A decline in demand for the Company’s services test orders or specimen volume from existing customers, or the loss of existing contracts, contracts without offsetting growth in its customer base, could impact the Company’s ability to successfully grow its business and could have a material adverse effect on the Company’s revenues and profitability. The Company competes primarily on the basis of reputation, efficient and timely performance, and leadership in science, technology technology, and innovation. The Company’s failure to successfully compete in any of these areas could result in the loss of existing customers, an inability to gain new customers, and reduced or stagnant growth of the Company’s business.

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Prior heading: Changes or disruption in services, supplies, or transportation provided by third parties have impacted and could continue to impact or adversely affect the Company’s business.

The Company depends on third parties to provide supplies and services critical to the Company’s business. Although the Company has a significant Despite having proprietary network of ground and air transport capabilities, certain of the Company’s businesses are heavily reliant Company remains dependent on third-party ground and air travel third parties for transport of clinical trial and diagnostic testing critical supplies and specimens, research products, and people. A significant disruption to these travel systems, or the Company’s access to them, could have a material adverse effect on the Company’s business. The Company is also reliant on an extensive network of third-party suppliers and vendors of certain services and products, services, including for certain transportation, laboratory materials, and specialized animal populations. Disruptions to the continued supply, or increases in costs, of these services, products, or animal populations may arise from export/import restrictions or embargoes, political supply chains or economic access to transport—due to factors such as geopolitical instability, pressure from animal rights activists, adverse weather, natural disasters, public health crises, transportation disruptions, cybersecurity incidents, natural disasters, or other causes, as well as vendor noncompliance—have impacted, and could in the future materially impact, the Company’s operations. Furthermore, from termination of relationships with suppliers or vendors for their failure time to follow time, manufacturers discontinue or recall reagents, test kits, or instruments used by the Company’s performance standards and requirements. Disruption of supply and services has impacted and could continue Company to impact perform laboratory testing. Such discontinuations or have a material adverse effect on recalls could adversely impact the Company’s business.costs, testing volume and revenue.

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Prior heading: Continued and increased consolidation of pharmaceutical, biotechnology and medical device companies, health systems, physicians and other customers could adversely affect the Company’s business.

Many Consolidation of healthcare companies and providers, including pharmaceutical, biotechnology biotechnology, and medical device companies, health systems, and physician practices are consolidating through horizontal and vertical mergers, acquisitions, joint ventures, and other types of transactions and collaborations. In addition to these more traditional horizontal mergers that involve entities that previously competed against each other, the healthcare industry partnerships, is experiencing an increase in vertical mergers, which involve entities that previously did not offer competing goods or services. As the healthcare industry consolidates, increasing competition to provide goods and services may become more intense, and vertical mergers may give those giving some combined companies greater control over more aspects of healthcare, including increased bargaining power. This competition and increased customer bargaining power may adversely affect the price pricing and volume of the Company’s services. In addition, as the broader healthcare industry trend of consolidation continues, including the acquisition of physician practices by health systems, systems acquire physician practices, maintaining strong relationships with hospital-based health systems and integrated delivery networks are becoming is increasingly important. Dx has a well-established base of relationships with those systems and networks, including collaborative agreements. important to the Company’s business. Dx’s inability to retain its existing relationships with those physicians as they become part of healthcare systems and networks and/or to create new relationships could impact its ability to successfully grow and maintain its business, which could adversely affect the Company’s business.

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Prior heading: The failure to establish, update, or perform to appropriate quality standards could adversely affect the Company’s business and reputation.

The Company has quality control systems and processes to support the performance and delivery of its services. A failure to establish, update, or perform in accordance with those systems or processes could adversely affect the Company’s business operations, resulting result in the loss of customers, loss or suspension of licensure or certifications, or imposition of sanctions or other penalties, damage to among other things, which could adversely affect the Company’s reputation, or other adverse effects.business and reputation.

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Prior heading: The Company bears financial risk for contracts that, including for reasons beyond the Company’s control, may be underpriced, subject to cost overruns, delayed, or terminated or reduced in scope.

The Company has many contracts that are structured as enters into fixed-price for fixed-contracted services or and capped fee-for-service with a cap. The Company bears the contracts, bearing financial risk if these contracts are underpriced or if contract costs exceed estimates. estimates or pricing is insufficient. Such underpricing or significant cost overruns could have an adverse effect on the Company’s business, results of operations, financial condition, and cash flows. flows. Many of BLS’s BLS contracts may be terminated or reduced in scope either immediately or upon notice. Cancellations may occur scope, including for a variety of reasons, including: •failure of products to satisfy reasons such as safety requirements; •unexpected or issues, undesired results of the products; •insufficient product results, insufficient clinical trial subject enrollment; •insufficient or investigator recruitment; •a customer’s decision enrollment, customer decisions to terminate the development of a product halt development, or to end a particular study; and •BLS’s failure to perform its duties properly under the contract. Although BLS’s contracts typically entitle the Company to receive all fees earned up to the time of termination, and often also the costs of winding down the terminated projects, the loss, reduction in scope contractual obligations. Loss, reduction, or delay of large or multiple contracts could materially adversely affect BLS.BLS’s business, results of operations, financial condition, and cash flows.

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Prior heading: A significant increase in the Company’s days sales outstanding could have an adverse effect on the Company’s business, including its cash flow, by increasing its bad debt or decreasing its cash flow.

Billing for laboratory services is a complex process. Laboratories bill many process due to varying billing requirements across different payers, including doctors, physicians, patients, health plans, Medicare, Medicaid, and employer groups, all of which have different billing requirements. Medicaid. A material increase in Dx’s days sales outstanding level, which could be caused driven by multiple reasons due to the complexity of billing for laboratory services, complexity or otherwise, could have an adverse effect on the Company’s business, including potentially increasing its the Company’s bad debt rate and decreasing its reducing cash flows. Although While BLS does not face the same level of complexity in its faces less billing processes, it could also experience complexity, delays in billing or collection, and a material increase in BLS’s days sales outstanding collections could similarly have an adverse effect on the Company’s business, including potentially decreasing its cash flows.

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Prior heading: BLS’s revenues depend on the pharmaceutical, biotechnology and medical device industries.

BLS’s revenues depend greatly on the expenditures made are closely tied to R&D spending by the pharmaceutical, biotechnology biotechnology, and medical device industries in R&D. In some instances, these companies are reliant companies, which may depend on their ability access to raise capital in order to fund their R&D projects. These companies may be reliant on and reimbursement for their products from government programs and commercial payers. Accordingly, economic factors and Economic conditions, industry trends affecting BLS’s customers in these industries may also affect BLS. If these companies were to reduce the number of R&D projects they conduct trends, or outsource, whether through the inability funding constraints could lead to raise capital, reductions in reimbursement from governmental programs reduced or commercial payers, industry trends, economic conditions delayed R&D activity or otherwise, BLS could be outsourcing, materially adversely affected.impacting BLS’s business and financial performance.

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Prior heading: Foreign currency exchange fluctuations could have an adverse effect on the Company’s business.

The Company has business and operations outside the U.S., operates internationally and BLS derives a significant portion of its revenues from international non-U.S. operations. Since the Company’s Consolidated Financial Statements are denominated in U.S. dollars, USD, fluctuations in foreign currency exchange rates from period to period will have an may impact on reported results. In addition, BLS may incur financial results, especially when costs in one currency related to its services or products for which it is paid and revenues are denominated in a different currency. As a result, currencies. These factors associated with international operations, including changes in foreign currency exchange rates, could significantly affect BLS’s results of operations, financial condition condition, and cash flows.flows, which could have an adverse effect on the Company’s business.

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Prior heading: The Company’s uses of financial instruments to limit its exposure to interest rate and currency exchange fluctuations could expose it to risks and financial losses that may adversely affect the Company’s financial condition, liquidity and results of operations.

To limit the Company’s exposure to interest rate fluctuations and currency exchange fluctuations, it has entered into, and in the future may enter Company enters into for these or other purposes, financial swaps, or swaps and hedging arrangements, with various financial counterparties. In addition to any risks risk related to the counterparties, there can be no assurances assurance that the Company’s this hedging activity strategy will be effective in insulating it the Company from the risks risk associated with the underlying transactions, that the Company would not have been better off without entering into these hedges, transactions or that the Company will not have to pay additional amounts upon settlement.

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Prior heading: The Company’s level of indebtedness and debt service requirements could adversely affect the Company’s liquidity, results of operations and business.

At December 31, 2024, 2025, the indebtedness on the Company’s outstanding senior notes totaled approximately $6.2 $5.2 billion in aggregate principal, of which $1.0 billion $500.0 million is payable within the next 12 months. The Company is also a party to credit agreements relating to a $1.0 billion revolving credit facility. Under the revolving credit facility, the Company is facility subject to negative financial covenants limiting subsidiary indebtedness and certain other covenants typical for investment-grade-rated borrowers, and the Company is required to maintain a leverage ratio within certain limits. The Company’s level of indebtedness and debt service requirements could adversely affect its business. In particular, it such indebtedness could increase the Company’s vulnerability to sustained, adverse macroeconomic weakness, macro-economic downturns, limit its ability to obtain further financing or refinance existing debt at maturity, flexibility, and limit its ability to pursue certain operational and strategic opportunities, including large acquisitions. Additionally, the Company’s cost of funds could increase due to the impact of increases in prevailing Higher interest rates on its variable rate and changes in debt ratings could increase borrowing costs and should the Company refinance existing reduce access to capital. Additional debt at maturity or obtain credit arrangements may further financing. restrict operations and liquidity. The Company may also enter into incur additional transactions or credit facilities, including other long-term debt, which may could further increase its indebtedness obligations and result in additional restrictions upon the business. In addition, business restrictions. Additionally, major debt rating agencies regularly evaluate assess the Company’s debt based on a number of factors. There can be debt, and there is no assurance that the Company will be able to maintain its existing debt ratings, ratings and a failure to do so could adversely affect the Company’s cost of funds, liquidity raise funding costs and limit access to capital markets.capital.

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Prior heading: The Company might not be able to engage in certain desirable capital-raising or strategic transactions.

The Company’s ability to engage in certain transactions could be limited or restricted in order to To preserve, for U.S. federal income tax purposes, the tax-free qualification of the Fortrea spin-off Spin-off and certain related transactions under Sections 355 and 368(a)(1)(D) of the U.S. Internal Revenue Code. Code, the Company may be limited or restricted in pursing certain transactions. Even if the Spin-off and certain related transactions otherwise qualify for tax-free treatment under Section 355 of the Code, they may result in corporate-level taxable gain to the Company if there is a 50% or greater change in ownership, by vote or value, of the shares of the Company’s stock, Fortrea’s stock, or the stock of a successor of either occurring as part of a plan or series of related transactions that includes the Spin-off, which is generally presumed to include any acquisitions or issuances issues of stock within two years of the Spin-off. To avoid realizing such taxable gain, the Company may be restricted or limited in its capital-raising capital raising or in the strategic transactions that it elects to pursue during such time period.period. Additionally, the Spin-off presents risks that could affect the Company’s business, including exposure to unexpected claims, liabilities, or costs under the Company’s agreements with Fortrea in connection with the Spin-off.

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Prior heading: Failure to maintain the security of customer-related information or compliance with security requirements could damage the Company’s reputation with customers, cause it to incur substantial additional costs and become subject to litigation and enforcement actions.

The Company receives, collects, stores, transmits, and processes certain personal and financial information about its customers. In addition, the Company depends upon the secure transmission of confidential information over public networks, including information permitting cashless payments. The Company also information, and works with third-party service providers and vendors that provide technology systems and services that are used in connection with the receipt, storage, transmission, and such data processing of customer personal and financial information. activities. A compromise of the Company’s systems, or those of the Company's third-party service providers and vendors, a vendor’s systems that results in customer personal confidential information being obtained acquired, accessed, or altered changed by unauthorized persons, or the Company’s third party's failure to comply with meet security requirements, including but not limited to standards, such as the HIPAA security standards for payment cards (e.g., regulations and the Payment Card Industry Data Security Standard), Standard, could adversely affect the Company’s reputation with its customers and others, as well as harm the Company’s results of reputation, operations, financial condition condition, and liquidity. It could also liquidity, and may result in litigation against the Company and the imposition of fines and penalties. litigation, fines, or regulatory actions. For example, in connection with the AMCA Incident (as defined below under “Cybersecurity” in Item 1C) the Company has incurred, and expects to continue to incur, costs, and the Company is involved resulted in costs, pending and threatened litigation, as well as various government and regulatory inquiries and processes. inquiries. For additional information about the AMCA Incident, see Note 15 Commitments and Contingencies to the Consolidated Financial Statements of Part III of the Annual Report.

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Prior heading: Failure in the Company’s information technology systems or delays or failures in the development and implementation of new systems or updates or enhancements to existing systems could disrupt the Company’s operations or customer relationships.

The Company’s operations and customer relationships depend, in part, rely on the continued performance and security of its information technology systems. An System failures, cybersecurity incidents, disruptions, or other issues affecting information technology or process failure systems could impede the processing of data, delivery of impair data processing, service delivery, billing, and services, customer orders, communications. The Company also relies on third parties for critical services, including transportation, supplies, and day-to-day management of the business, data processing and could result in the corruption or loss of data. Despite security measures expects them to comply with applicable laws and other precautions the Company has taken, regulations, including the development of contingency environmental, health and disaster recovery plans, its information technology systems are potentially vulnerable to physical break-ins, fire, natural disaster, power loss, telecommunications failures, cybersecurity incidents safety, and similar disruptions, privacy and there may not be adequate protections, mitigation, backups, and/or redundant facilities available in the event data security laws. Failures by these threats are realized. In addition, the Company may experience system failures, providers, whether operational, legal, or interruptions, including cybersecurity incidents, as it integrates the cybersecurity-related, and issues affecting their information technology systems of newly acquired businesses. Failures or interruption of the Company’s systems in one or more of its operations systems, could result in interruptions of service, disrupt the Company’s ability to process laboratory requisitions, perform testing, provide test results services, compromise personal or drug development data in a timely manner, and/or conduct timely billing operations. Such system failures could require other confidential information, expose the Company to transfer operations to an alternative provider of services, which liability and could result in delays in materially impact its business, even if the delivery of offerings to customers and other operations. Additionally, significant delays in Company is not responsible for the planned delivery underlying cause of system enhancements or improvements, any such failure or inadequate performance of the systems once they are complete, could damage the Company's reputation and harm issue. In addition, the business. Furthermore, Company may be subject to regulatory, contractual, or other obligations arising from any such failure of the Company’s or issues. Despite contingency plans, risks remain, and a significant information technology systems system disruption could adversely affect the Company’s business, profitability, reputation, operations, financial condition, and reputation.profitability.

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Prior heading: Cybersecurity incidents and unauthorized access to the Company's or its customers’ data could harm the Company’s reputation and adversely affect its business.

The Company has previously experienced and expects to continue to experience attempts by unauthorized parties continues to compromise the Company’s face cybersecurity controls, like the 2018 threats, including ransomware attack. The Company has also experienced attempts, data breaches, and expects to continue to experience similar phishing and social engineering attempts by threat actors to penetrate the targeting its systems of third-party suppliers and vendors to whom the Company has provided data, like the 2019 AMCA data breach. These attempts, if successful, could result in the misappropriation or compromise of personal information or proprietary or confidential information stored within the Company's systems or within the systems of third parties, create system disruptions or cause shutdowns. Threat actors have a variety its employees, and those of attack third-party vendors. Increasingly sophisticated methods, including without limitation, by developing and deploying viruses, worms, and other malicious software programs that attack the Company’s systems, the systems of third-parties, or otherwise exploit any security vulnerabilities. In addition, the increased use of AI by threat actors is enhancing the scale sophistication and effectiveness of their cyberattacks. Outside parties may also attempt to fraudulently induce employees to take actions, including the release of confidential or sensitive information or to make fraudulent payments through illegal electronic spamming, phishing, spear phishing, and other tactics. actors, heighten these risks. The Company has implemented a formal cybersecurity program; however, because the techniques used by threat actors to obtain unauthorized access, disable or degrade service, or sabotage systems actors’ techniques continue to evolve (and often are and may not recognized be identifiable until launched against a target), deployed, which could limit the Company’s ability to prevent unauthorized access, data compromise, service disruption, or fraudulent activity. The Company may be unable to anticipate and/or implement appropriate controls needed to protect against these evolving threats. In addition, as cyber threats continue to evolve including the use of AI by threat actors to compromise systems, the Company may or be required to expend additional resources to continue to enhance the Company’s cybersecurity measures or to investigate prepare for and remediate respond to any cybersecurity vulnerabilities. The Company’s remediation efforts Evolving threats may not be sufficient and could result outpace defenses, requiring ongoing investment in interruptions, delays, cessation of service, loss of data integrity, loss of confidentiality, and/or loss of data. This could also impact the cost and availability of cyber insurance to the Company. Cybersecurity incidents affecting the Company’s or third parties' security measures measures. Data and the unauthorized dissemination of personal, proprietary or confidential information about the Company or its customers or other cybersecurity incidents, including those involving third parties could expose customers’ private information. Such incidents could expose customers to the risk of financial or medical identity theft or expose parties, such as the Company or other third parties to a risk of loss or misuse of this information, AMCA Incident, could result in litigation and potential liability for the Company, damage the Company’s brand and reputation, or otherwise harm the Company’s business. Any of these incidents could have a material adverse effect on the Company’s business, data loss, service disruption, reputational harm, litigation, regulatory compliance, financial condition, reputation, and/or results of operations. In addition, the Company faces penalties, and increased cybersecurity risks due to the number of employees that continue to insurance costs. Remote work remotely, which remains at levels higher than prior to the COVID-19 pandemic as a result of changes in the workplace and to management and employee expectations. Increased levels of remote access create additional opportunities for cybercriminals to exploit vulnerabilities, and employees may be more susceptible to phishing and social engineering attempts. In addition, technological resources may become strained due arrangements further elevate exposure to the number of remote users.cyber risks.

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Prior heading: The use of AI and machine learning tools in our operations and the services of our third-parties may introduce risks that could adversely affect our business, financial condition, and reputation.

The Company and certain of its third parties leverage third-party vendors use AI and machine learning tools to increase enhance productivity and innovation. The Company innovation, but these technologies also faces potential risks from the introduce risks. Improper use may lead to data leaks of AI and machine learning tools. The Company, or its customers' sensitive, proprietary, or confidential information could be leaked, disclosed, or revealed as a result of or in connection with employees' or vendors' use of generative AI technologies. In addition, the Company may use AI outputs to inform certain decisions, and AI models may create incomplete, inaccurate, or otherwise information, flawed outputs, some of which may appear correct. Due to the potential flaws in the use of AI, the Company could make incorrect biased decisions, including decisions that could bias certain individuals or classes of individuals and adversely impact their rights. The reputational harm. In addition, rapid development of AI tools advancements could render obsolete certain technologies or existing tools we currently use, obsolete or otherwise provide give competitors with a technological edge. New or evolving legislation or an edge, emerging regulations might impose restrictions on how AI and machine learning tools can be used, requiring may subject the Company to adapt its tools new restrictions or face various penalties for non-compliance, including potential disgorgement of data and associated capabilities. As a result, the Company could face adverse consequences, including exposure to reputational and competitive harm, customer loss, penalties, and legal liabilities. The AI tools systems may also be subject vulnerable to additional, and as yet unidentified, new security threats.threats. These risks could result in legal liabilities, customer loss, and reputational damage, each of which could have an adverse impact on the Company’s business and operations.

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Prior heading: Changes in payer regulations or policies, insurance regulations or approvals, or changes in laws, regulations, or policies in the U.S. or globally, including changes in their interpretation, may adversely affect the Company.

U.S. and state government Government payers, such as including Medicare and Medicaid, as well as and private insurers, including such as MCOs, have increased their efforts continue to implement measures to control the cost, utilization and delivery of healthcare services. From time to time, Congress has considered costs, utilization, and implemented delivery. These efforts include changes in Medicare fee schedules in conjunction with budgetary legislation. The first phase of reimbursement rates, coverage criteria, and administrative requirements. Under PAMA, phased reductions pursuant to PAMA came into effect on Medicare reimbursement began in January 1, 2018, and are now frozen for 2026 but will continue subject to certain delays resume in implementation and phase-in limits through 2027, and without limitations for subsequent periods. Further with capped reductions due to changes in policy regarding coverage of tests or other requirements 2027-2029, with potential for payment, further reductions thereafter. Additional changes such as prior authorization, authorization requirements, diagnosis code edits, and other claims edits, processing rules may be implemented from time to time. Medicare reimbursement also impact payment for diagnostic services. Reimbursement for pathology services performed by Dx, which are paid for Dx under the PFS, Medicare PFS is also subject to ongoing statutory and regulatory reduction. Reductions in the reimbursement rates and changes in payment policies of other third-party adjustments. Similar actions by commercial payers may occur as well. Such changes in the past have resulted in reduced payments as well as added costs historically led to lower payments, increased administrative costs, and have decreased reduced test utilization for the commercial laboratory industry by adding more complex new regulatory and administrative requirements. Further utilization. Future changes in third-party payer regulations, policies, or laboratory benefit or utilization management programs may have a material adverse effect on programs, or insurance regulations could materially and adversely affect Dx’s business. Actions by federal business, financial condition, and state agencies regulating insurance, including healthcare exchanges, or changes in other laws, regulations, or policies may also results of operations, which could have a material an adverse effect upon Dx’s on the Company’s business.

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Prior heading: The Company could face significant monetary damages and penalties and/or exclusion from government programs if it violates anti-fraud and abuse laws.

The Company is subject to extensive government comprehensive regulation at the federal, state, and local levels in the U.S. and U.S., as well as in other countries where it operates. The Company’s failure to meet governmental requirements under these regulations, including those relating to Noncompliance with laws governing billing practices and practices, financial relationships with physicians, hospitals, and health systems, biopharmaceutical manufacturers, relationships, and others other healthcare-related activities could lead to result in civil and or criminal penalties, exclusion from participation in Medicare and Medicaid Medicaid, and possible prohibitions or restrictions on the use of its the Company’s laboratories. While Although the Company believes that it is in material compliance with all statutory and regulatory applicable requirements, there is a risk that government authorities might may take a contrary position. This risk includes, but is not limited to, the includes potential that government enforcement authorities may take a contrary position with respect to interpretations of laws such as the Eliminating Kickbacks in Recovery Act, given the lack of associated which currently lacks clarifying regulations to clarify or add exceptions. Such occurrences, Any enforcement action, regardless of their outcome, could damage harm the Company’s reputation and adversely affect important disrupt key business relationships.

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Prior heading: The Company’s business could be harmed from the loss or suspension of a license or imposition of a fine or penalties under, or future changes in, or interpretations of, the law or regulations of CLIA, Medicare, Medicaid or other national, state, or local agencies in the U.S. and other countries where the Company operates laboratories.

The commercial laboratory testing industry is subject to extensive broad regulation in the U.S. regulation, and many of these statutes and regulations have not been interpreted by internationally. In the courts. U.S. CLIA extends federal oversight to requires certification for virtually all clinical laboratories operating in the U.S. by requiring that they be certified by the federal government or by a federally approved accreditation agency. The sanction for failure to comply laboratories. Noncompliance with CLIA requirements may be result in suspension, revocation, or limitation of a laboratory’s CLIA certificate, which is necessary and the ability to conduct business, bill government and other payers, as well as significant fines and/or or criminal penalties. In addition, the The Company is also subject to regulation under state law. State laws may require that laboratories and/or may impose additional requirements on laboratory personnel meet certain qualifications, specify certain quality controls or require maintenance of certain records. The Company also operates laboratories outside of the U.S. operations and is personnel. Outside the U.S., the Company’s laboratories are subject to local laws governing its laboratory operations in the other countries where it operates. Applicable statutes and regulations could regulations, which vary by jurisdiction. Laws and regulations—many of which lack judicial interpretation—could be interpreted or applied by a prosecutorial, regulatory or judicial authority enforcement authorities in a manner ways that would adversely affect the Company’s business. Potential sanctions for violation of these statutes and regulations include significant fines and the suspension or loss of various licenses, certificates, and authorizations, which could have a material adverse effect on the Company’s business. In addition, compliance with licenses or certifications. Additionally, future legislation could impose additional requirements on the Company, which may impose new compliance obligations that could be costly.costly to implement.

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Prior heading: Failure of the Company or its third-party service providers to comply with privacy and data security laws and regulations could result in fines, penalties and damage to the Company’s reputation with customers and have a material adverse effect upon the Company’s business.

If the The Company and its third-party service providers do not comply with existing or new are subject to numerous federal, state, and international laws governing national security, and regulations related to protecting the privacy and security of personal or and health information, it could be subject to monetary information. Noncompliance may result in fines, civil penalties, litigation, or criminal sanctions. In the U.S., the Health Insurance Portability and Accountability Act of 1996, the U.S. Health Information Technology for Economic and Clinical Health (HITECH) Act, and their implementing privacy and security regulations (collectively, HIPAA) establish comprehensive standards with respect to the use and disclosure of protected health information (PHI), by covered entities as well as their “business associates” as defined in HIPAA, in addition to setting standards to protect HIPAA imposes detailed requirements on the confidentiality, integrity use, disclosure, and security safeguarding of PHI. PHI. HIPAA restricts the Company’s ability violations can lead to use or disclose PHI, without patient authorization, for purposes other than payment, treatment or healthcare operations (as defined by HIPAA), except for disclosures for various public policy purposes and other permitted purposes outlined in the privacy regulations. HIPAA provides for significant fines and other penalties for wrongful use or disclosure of PHI in violation of the privacy and security regulations, including potential civil and criminal fines and penalties. The regulations establish a complex framework on a variety of subjects, including: •the circumstances under which the use and disclosure of HIPAA also provides individuals with certain privacy rights regarding their PHI are permitted or required without a specific authorization by and requires the patient, including, but not limited to, treatment purposes, activities Company to obtain payments for the Company’s services, and notify individuals about its healthcare operations activities; •a patient’s rights to access, amend and receive an accounting of certain disclosures of PHI; •the content of notices of privacy practices for PHI; •administrative, technical and physical safeguards required of entities that use or receive PHI; and •the protection of computing systems maintaining electronic PHI. In addition to the existing requirements under HIPAA, HHS issued an NPRM regarding revising the HIPAA Security Rule, which, if adopted, would impose increased requirements on regulated entities such as the Company. practices. The Company has implemented policies and procedures designed to comply with the HIPAA privacy and security requirements as applicable. The privacy and security regulations establish HIPAA, but evolving regulations—including a “floor” and do not supersede state laws that are more stringent. Therefore, the Company is required proposed rule to comply with both additional federal privacy and security regulations and varying state privacy and security laws. To the extent applicable, newer laws like clarify the California Consumer Privacy Act (CCPA) HIPAA Security Rule—may increase compliance obligations. State laws, such as amended by the California Privacy Rights Act (CPRA), CCPA and the Washington My Health My Data Act, and similar consumer privacy laws in other states, may impose additional obligations on the Company. Federal and state laws requirements that protect the privacy and security of patient information may be subject to enforcement and interpretations by various governmental authorities and courts, resulting in complex compliance issues. In addition, laws regulating artificial intelligence and machine learning, including the use of algorithms and automated processing, may impact the Company and lead to increases in the cost of compliance. Noncompliance with these laws could result in the imposition of fines, penalties, or orders to stop certain activities, exceed requirements under HIPAA and potentially expose the Company to actions for the wrongful use or disclosure of health information or other personal information. federal standards. The Company may must also be required to comply with the restrictions on international data privacy and security laws of other countries in which it operates or with which it transfers and receives data. For example, imposed through standards such as the EU’s General DOJ’s Data Protection Regulation (GDPR) includes Security Program, and emerging laws regulating AI, algorithms, and automated processing, which may increase compliance obligations for costs. Internationally, the Company is subject companies and imposes penalties for noncompliance of up to the greater of €20 million or 4% of worldwide revenue for the most serious breaches of data protection obligations, and similar obligations exist under laws, such as the UK GDPR. The Company has established processes EU GDPR and frameworks to manage compliance with the GDPR. Potential fines U.K. GDPR, which impose strict requirements and significant penalties in the event of a violation of the GDPR could have a material adverse effect on the Company’s business and operations. In addition, similar data protection regulations addressing access, use, disclosure and transfer of personal data for noncompliance. Similar laws have been enacted or updated in other regions where the Company does business, operates, including in Asia, Latin America, and other parts of Europe. The Company Compliance with these complex and evolving regulations may be required to make require changes to its the Company’s business practices and result in increased operational costs. Failure to incur additional costs associated with compliance with these evolving comply could materially and complex regulations.adversely affect the Company’s business and reputation, result in the imposition of fines, penalties, or orders to stop certain activities, and potentially expose the Company to actions for the wrongful use or disclosure of personal information.

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Prior heading: The Company’s international operations could subject it to additional risks and expenses that could adversely impact the business or results of operations.

The Company’s international operations expose it to risks from potential failure are subject to comply with foreign laws and regulations that differ from those under which the Company operates in the U.S. In addition, the Company Noncompliance may be adversely affected by other risks of operations result in foreign countries, including, but not limited to: penalties, restrictions, and reputational harm. Risks include changes in reimbursement by foreign governments for services provided by the Company; compliance with governments, export controls and controls, trade regulations; changes in regulations, tax policies or other foreign laws; compliance with foreign policies, labor and employee relations laws laws, and regulations; restrictions on currency repatriation; judicial systems that less strictly enforce contractual rights; countries that do not have repatriation restrictions. Some jurisdictions may lack clear legal frameworks or well-established laws strong enforcement of contractual and regulations concerning issues relating to commercial laboratory testing or drug development services; countries that provide less protection for intellectual property rights; and procedures and actions affecting rights. The Company may also face challenges related to regulatory approval, production, pricing, reimbursement reimbursement, and marketing of its offerings. Further, international operations could subject the Company services abroad. Operating internationally can lead to additional expenses that the Company may not fully anticipate, unanticipated costs, including those related to enhanced time and resources necessary to comply with foreign laws and regulations, difficulty in collecting accounts receivable and longer collection periods, and difficulties and costs of staffing compliance, staffing, collections, and managing foreign local operations. In some certain countries, the Company’s success will may depend in part on its ability to form forming relationships with local partners. The Company’s inability partners, and failure to identify appropriate partners or reach mutually satisfactory arrangements do so could adversely affect the Company’s business and operations.

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Prior heading: Failure to comply with the regulations of pharmaceutical and medical device regulators, such as the FDA, the Medicines and Healthcare products Regulatory Agency in the United Kingdom, the European Union, the European Medicines Agency, the National Medical Products Administration in China, and the Pharmaceuticals and Medical Devices Agency in Japan, could result in fines, penalties, and sanctions against BLS and have a material adverse effect upon the Company.

The operation of BLS’s Company’s preclinical laboratory facilities and central laboratory operations must conform to good laboratory practice (GLP) and good clinical practice (GCP), as applicable, as well as all other comply with applicable standards standards, including GLP, GCP, and regulations, as further described in Item 1 of Part I of this Annual Report. The business for certain services, cGMP. These operations of BLS’s clinical and preclinical laboratories also require involve the import, export export, and use of medical devices, in vitro diagnostic devices, reagents, and human and animal biological products. Such activities products, which are subject to numerous applicable extensive local and international regulations with which BLS must comply. If BLS does not comply, BLS could potentially be subject to civil, criminal or administrative sanctions and/or remedies, including suspension of its ability to conduct preclinical and clinical studies, and to import or export to or from certain countries, which could have a material adverse effect upon the Company. Additionally, certain BLS services and activities must conform to current good manufacturing practice (cGMP), as further described in Item 1 of Part I of this Annual Report. regulations. Failure to maintain compliance comply with GLP, GCP, or cGMP regulations and other applicable these requirements of various regulatory agencies could result in warning or untitled letters, fines, unanticipated compliance expenditures, suspension of manufacturing, and regulatory enforcement, civil, criminal criminal, or administrative sanctions and/or remedies against BLS, sanctions, including fines, suspension of its laboratory operations, which or restrictions on import/export activities. Maintaining compliance may also require significant resources and ongoing investment. Any enforcement action or disruption in laboratory operations could have a material adverse effect upon on the Company.Company’s business and results of operations.

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Prior heading: Animal populations may suffer diseases that can damage BLS’s inventory, harm its reputation, or result in other liability.

It is important that BLS’s preclinical services rely on healthy research products be free of diseases, including infectious diseases. animal populations. The presence of infectious or other diseases can distort or compromise the quality of research results, cause loss of animals in BLS’s inventory, quality, result in harm inventory loss, and pose risks to humans human or outside external animal populations if the disease is not contained to animals in inventory, or result in other losses. populations. Such results could harm BLS’s reputation or have an adverse effect on BLS’s incidents may lead to reputational damage, operational disruption, and increased costs, adversely affecting the Company’s financial condition, condition and results of operations, and cash flows.operations.

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Prior heading: Failure to conduct animal research in compliance with animal welfare laws and regulations could result in sanctions and/or remedies against BLS and have a material adverse effect upon the Company.

The conduct of animal research at BLS’s facilities preclinical research activities must be in compliance comply with applicable animal welfare laws and regulations in the jurisdictions in which those activities are conducted. These laws and regulations include the U.S. Animal Welfare Act (AWA), which governs the care and use of warm-blooded animals for research in the U.S. other than laboratory rats, mice and chickens, and is enforced through periodic inspections by where it operates, including the U.S. Department of Agriculture (USDA). The AWA establishes facility standards regarding several aspects of animal welfare, including housing, ventilation, lighting, feeding and watering, handling, veterinary care, and recordkeeping. Similar laws and similar regulations apply in other jurisdictions in which BLS conducts animal research, including the UK, U.K., the EU, and China. BLS complies with licensing and registration requirement standards set by these These laws and regulations in the jurisdictions in which it conducts animal research. If an enforcement agency determines that BLS’s equipment, facilities, laboratories or processes do not comply with applicable standards, it may issue an inspection report documenting the deficiencies and setting deadlines govern standards for any required corrective actions. For noncompliance, the agency may take action against BLS that housing, care, and oversight of research animals. Failure to meet regulatory requirements may include result in fines, suspension and/or or revocation of animal research licenses, or confiscation of research animals.animals, and reputational harm, any of which could have a material adverse effect on the Company’s operations and financial results.

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Prior heading: U.S. Food and Drug Administration (FDA) regulation of laboratory-developed tests (LDTs) and regulation by other countries of diagnostic offerings could have a material adverse effect upon the Company’s business.

The FDA has regulatory responsibility for Company’s diagnostic instruments, test kits, reagents reagents, and other point-of-care devices used are subject to regulation by clinical laboratories. The FDA enforces laws and regulations that govern the FDA, which oversees their development, testing, manufacturing, performance, labeling, advertising, marketing, distribution, and surveillance of diagnostics, and it performance. The FDA regularly inspects and reviews the manufacturing processes facilities and performance of diagnostics. Dx’s point-of-care testing devices are subject to regulation by the FDA. may take enforcement actions for noncompliance. Historically, LDTs developed offered by high complexity clinical high-complexity laboratories have been generally offered as services to health care providers regulated under the CLIA regulatory framework administered by CMS, without the requirement for FDA clearance or approval. On oversight. However, on April 29, 2024, the FDA released issued a final rule purporting to clarify its asserting authority to regulate LDTs as medical devices under the federal Food, Drug, and Cosmetic Act, under which it will phase out its general enforcement discretion approach for LDTs under devices, initiating a four-year period subject to certain continuing enforcement discretion policies. The final rule was published on May 6, 2024, and became effective on July 5, 2024. In the absence of a successful legal challenge, the first phase phase-out of compliance obligations will begin on May 6, 2025. On May 29, 2024, the American Clinical Laboratory Association (ACLA) and its member company, HealthTrackRx, filed a lawsuit against the FDA in the United States District Court for the Eastern District of Texas, challenging the FDA’s final rule. While the lawsuit may change prior enforcement discretion. Legal challenges to the final rule or delay or prevent led to its enforcement, the issuance of recission, but if the final rule presents an increased risk of FDA enforcement actions for laboratory tests offered by companies without FDA clearance reissues a revised rule or approval that do not fall within the ongoing enforcement discretion policies. However, the outcome and its ultimate impact on the Company’s business remain difficult otherwise seeks to predict at this time. Current FDA regulation of the Company’s diagnostic offerings reassert authority over LDTs, such actions could increase regulatory burdens and the potential enforcement risks for future increased regulation of the Company’s LDTs could not cleared or approved by the FDA. Noncompliance with FDA requirements may result in increased costs and administrative and legal actions for noncompliance, including warning letters, fines, penalties, suspensions, recalls, injunctions, and other civil and or criminal sanctions, and could impair penalties, potentially impacting the development Company’s ability to develop and commercialization of commercialize new tests, which could have a material adverse effect upon the Company. Regulation of diagnostics offerings in jurisdictions outside the U.S. in which tests. Outside the Company operates may impact laboratory testing offered by U.S., the Company in both Dx and BLS. For example, is subject to similar regulations, including the European Union In Vitro Diagnostics Regulation (Regulation (EU) 2017/746 (EU IVDR)) established a new legislative framework for in vitro diagnostic devices that are used in certain circumstances and includes a rule-based classification and quality EU IVDR, which imposes classification, quality, and safety standards. The EU IVDR, where applicable to BLS’s services, could impact BLS’s Compliance with these evolving international frameworks may increase costs and affect the Company’s ability to support trials, result in increased costs and administrative and legal actions, clinical trials and have an adverse effect.offer laboratory services.

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Prior heading: The failure to successfully obtain, maintain, and enforce intellectual property rights and defend against challenges to the Company’s intellectual property rights could adversely affect the Company.

Many of the Company’s offerings and processes rely The Company relies on intellectual property, including property—including patents, copyrights, trademarks, and trade secrets. In some cases, that intellectual property is owned by another party secrets—to support many of its offerings and licensed to the Company, sometimes exclusively. The value processes. Some of the Company’s this intellectual property relies in part is licensed from third parties, including on the an exclusive basis. The Company’s ability to maintain and enforce its proprietary rights rights, prevent infringement, and defend claims of infringement is critical to such intellectual property. its operations. The Company has been in the past faced, and may be unable in the future to obtain or maintain the proprietary rights to its intellectual property, continue to prevent attempted infringement against its intellectual property, or face, challenges relating to defend against claims that it is infringing on another party’s intellectual property, and the Company could be adversely affected. property rights. For example, in October 2020, Ravgen Inc. filed a patent infringement lawsuit against the Company alleging infringement of two Ravgen-owned U.S. patents. In September 2022, a jury rendered a verdict in favor of Ravgen on the remaining patent at issue and awarded damages of $272.0 million. In May 2023, the court awarded Ravgen additional enhanced damages in the amount of $100.0 million, and in January 2025, the court awarded Raygen Ravgen post-verdict supplemental damages of $2.6 million, an ongoing royalty of $100 per test through the life of the patent as issue, pre- and post-judgement interest, and other relief. The Company strongly disagrees with the verdict, based on a number of legal factors, and will vigorously defend the lawsuit through the appeal process. On June 4, 2021, the Company also instituted proceedings before the Patent Trial and Appeal Board of the U.S. Patent and Trademark Office challenging the validity of the Ravgen patent at issue in the trial. In November 2022, the Patent Trial and Appeal Board issued a decision upholding the validity of the Ravgen patent, and that decision was upheld on appeal before the U.S. Court of Appeals for the Federal Circuit in January 2025. Adverse effects resulting from the failure process. Failure to successfully obtain, maintain, and enforce intellectual property rights and enforce, or defend against challenges to the Company’s intellectual property rights could include rights—or adverse outcomes in litigation—could result in the Company having need to abandon, alter and/or delay the deployment of offerings or processes that rely on such intellectual property; having to procure and discontinue offerings, pay for licenses from the holders significant costs, damages or licensing fees, or suffer reputational harm, any of intellectual property rights that which could materially affect the Company seeks to use, having to pay damages, fines, court costs and attorney’s fees in connection with intellectual property litigation, Company’s business, reputational, and reputational damage.results of operations.

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