10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Quarterly Period Ended June 30, 2012

OR

¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission File Number 0-26483

diaDexus, Inc.

(Exact name of Registrant as Specified in its Charter)

Delaware	94-3236309
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
349 Oyster Point Boulevard South San Francisco, California	94080
(Address of principal executive offices)	(Zip Code)

(650) 246-6400

(Registrant’s telephone number, including area code)

Indicate by check mark whether the issuer (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  x    No  ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  x    No  ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one)

Large accelerated filer	¨	Accelerated filer	¨
Non-accelerated filer	¨  (Do not check if a smaller reporting company)	Smaller reporting company	x

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ¨    No  x

The number of shares outstanding of the registrant’s common stock, $0.01 par value per share, was 53,203,039 as of August 2, 2012.

DIADEXUS, INC.

FORM 10-Q FOR THE QUARTER ENDED JUNE 30, 2012

TABLE OF CONTENTS

PART I – FINANCIAL INFORMATION
Item 1.	Financial Statements (Unaudited)
	Condensed Balance Sheets	3
	Condensed Statements of Comprehensive Loss	4
	Condensed Statements of Cash Flows	5
	Notes to Condensed Financial Statements	6
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	17
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	23
Item 4	Controls and Procedures	23
PART II – OTHER INFORMATION
Item 1.	Legal Proceedings	25
Item 1A.	Risk Factors	25
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	34
Item 3.	Defaults Upon Senior Securities	34
Item 4.	Mine Safety Disclosures	34
Item 5.	Other Information	34
Item 6.	Exhibits	35
Signatures		36

2

PART I – FINANCIAL INFORMATION

Item 1. Financial Statements

DIADEXUS, INC.

CONDENSED BALANCE SHEETS

(in thousands, except share data)

	June 30, 2012			December 31, 2011
	(unaudited)			(Note 1)
Assets
Current assets:
Cash and cash equivalents	$	12,378		$	10,484
Short-term investment securities		2,250			6,492
Accounts receivable, net of allowance for doubtful accounts of $4 and rebate reserve of $0 at June 30, 2012 and $4 and $20, respectively, at December 31, 2011		2,387			2,408
Inventories		227			117
Restricted cash		—			400
Assets held for sale		302			304
Prepaid expenses and other current assets		813			975
Total current assets		18,357			21,180
Long-term investments		—			250
Restricted cash		1,400			1,400
Property and equipment, net		1,383			1,350
Other long-term assets		130			175
Total assets	$	21,270		$	24,355
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable	$	586		$	882
Notes payable, current portion		1,209			372
Deferred revenues, current portion		340			331
Unfavorable lease obligations		539			492
Accrued and other current liabilities		1,934			2,469
Total current liabilities		4,608			4,546
Non-current portion of notes payable		3,712			4,526
Non-current portion of deferred revenue		378			530
Non-current portion of deferred rent		314			266
Non-current portion of unfavorable lease obligation		2,776			3,063
Other long term liabilities		318			284
Total liabilities		12,106			13,215
Commitments and contingencies (Note 14)
Stockholders’ equity:
Preferred Stock, $0.01 par value, 19,979,500 shares authorized; none issued and outstanding		—			—
Common stock, $0.01 par value; 100,000,000 shares authorized; 53,101,063 and 53,067,045 shares issued and outstanding at June 30, 2012 and December 31, 2011, respectively		531			531
Additional paid-in capital		205,730			205,557
Accumulated other comprehensive loss		(1	)		(5	)
Accumulated deficit		(197,096	)		(194,943	)
Total stockholders’ equity		9,164			11,140
Total liabilities and stockholders’ equity	$	21,270		$	24,355

See accompanying notes to condensed financial statements.

3

DIADEXUS, INC.

CONDENSED STATEMENTS OF COMPREHENSIVE LOSS

(in thousands, except share data)

	Three Months Ended June 30,						Six Months Ended June 30,
	2012			2011			2012			2011
	(unaudited)						(unaudited)
Revenues:
License revenue	$	77		$	77		$	153		$	153
Royalty revenue		1,037			944			2,074			1,949
Product sales		4,002			2,646			7,832			4,886
Product sales to related party		—			160			—			160
Total revenues		5,116			3,827			10,059			7,148
Operating costs and expenses:
Product costs		1,598			1,205			3,317			2,337
Sales and marketing		1,450			977			2,632			2,084
Research and development		1,093			1,274			2,385			2,766
General and administrative		1,704			2,842			3,680			4,956
Total operating costs and expenses		5,845			6,298			12,014			12,143
Loss from operations		(729	)		(2,471	)		(1,955	)		(4,995	)
Interest income, interest expense and other income (expense), net:
Interest income		4			15			11			32
Interest expense		(102	)		—			(203	)		—
Other income (expense), net		—			—			(3	)		—
Loss before income tax		(827	)		(2,456	)		(2,150	)		(4,963	)
Income tax		—			—			(3	)		(3	)
Net loss	$	(827	)	$	(2,456	)	$	(2,153	)	$	(4,966	)
Basic and diluted net loss per share:	$	(0.02	)	$	(0.05	)	$	(0.04	)	$	(0.09	)
Weighted average shares used in computing basic and diluted net loss per share		53,067,793			53,067,057			53,067,419			53,067,057
Other comprehensive loss, net of tax:
Net change in unrealized gain/(loss) on available-for-sale securities		—			(1	)		4			(2	)
Comprehensive loss	$	(827	)	$	(2,457	)	$	(2,149	)	$	(4,968	)

See accompanying notes to condensed financial statements.

4

DIADEXUS, INC.

CONDENSED STATEMENTS OF CASH FLOWS

(in thousands)

	Six Months Ended June 30,
	2012			2011
	(unaudited)
Operating activities:
Net loss	$	(2,153	)	$	(4,966	)
Adjustments to reconcile net loss to net cash used in operating activities:
Loss on disposal of property and equipment		2			—
Depreciation and amortization		254			262
Stock-based compensation		164			462
Amortization on investments		21			136
Provision for rebate reserve (reversal)		(20	)		62
Noncash other interest expense		14			12
Noncash interest associated with notes payable		68			—
Inventory written off		4			—
Unfavorable lease		(240	)		(177	)
Changes in operating assets and liabilities
Accounts receivable		41			152
Accounts receivable from related party		—			175
Inventory		(114	)		(23	)
Prepaid expenses, other current assets and other long-term assets		191			(216	)
Accounts payable		(239	)		58
Accrued liabilities and other long term liabilities		(335	)		852
Deferred rent		48			46
Deferred revenue		(143	)		(135	)
Net cash used in operating activities		(2,437	)		(3,300	)
Investing activities:
Purchases of property and equipment		(546	)		(147	)
Proceeds from sales of assets		2			—
Restricted cash		400			—
Maturities of available-for-sale investments		5,471			8,357
Purchases of available-for-sale investments		(996	)		(19,221	)
Net cash provided by (used in) investing activities		4,331			(11,011	)
Net increase (decrease) in cash and cash equivalents		1,894			(14,311	)
Cash and cash equivalents, beginning of period		10,484			20,394
Cash and cash equivalents, end of period	$	12,378		$	6,083
Supplemental disclosure:
Cash paid for interest	$	135		$	—
Net change in accounts payable from acquisition of property and equipment	$	(57	)	$	—
Net change in accrued liabilities from acquisition of property and equipment	$	(200	)	$	—
Proceeds from issuance of common stock in other receivables	$	9		$	—

See accompanying notes to condensed financial statements.

5

diaDexus, Inc.

Notes to Condensed Financial Statements

1. Business Overview

diaDexus, Inc., a Delaware corporation (the “Company”), is a life sciences company focused on the development and commercialization of proprietary cardiovascular diagnostic products addressing unmet needs in cardiovascular disease. The Company is the successor to a company initially formed as a joint venture between SmithKlineBeecham Corporation (now GlaxoSmithKline LLC (“GlaxoSmithKline”)) and Incyte Pharmaceuticals, Inc. Upon formation, SmithKlineBeecham Corporation granted the Company an exclusive license to certain diagnostic intellectual property, including Lp-PLA₂, an inflammatory marker of cardiovascular risk.

The Company’s products, PLAC^® Tests, provide new information, over and above traditional risk factors, to help identify individuals at increased risk of suffering a heart attack or stroke. Some of these events may be reduced with earlier detection and more aggressive risk-reducing strategies, including treatment to lower LDL-cholesterol goals with statins. The Company has commercialized two PLAC Tests. One test measures the mass of circulating Lp-PLA₂ in the blood, the PLAC Test ELISA Kit. The PLAC Test ELISA Kit is the only blood test cleared by the U.S. Food and Drug Administration (“the FDA”) to aid in assessing risk for both coronary heart disease and ischemic stroke associated with atherosclerosis. The second test, the PLAC Test for Lp-PLA₂ Activity, is an enzyme assay for the quantitative determination of Lp-PLA₂ activity levels in human plasma and serum on automated clinical chemistry analyzers, to be used in conjunction with clinical evaluation and patient risk assessment as an indicator of atherosclerotic cardiovascular disease. The Company is currently commercializing the PLAC Test ELISA Kit in the United States and Europe and the PLAC Test for Lp-PLA₂ Activity in Europe.

The Company has incurred substantial losses since inception and expects to continue to incur substantial net losses for at least the next few years. To date, the Company has funded its operations primarily through private placements of preferred stock and debt financing, as well as through revenue generated from the sale of products.

In September 2011, the Company entered into a loan and security agreement with Comerica Bank (see Note 9). This loan contains various covenants. If the Company breaches any of these covenants or is unable to make a required payment of principal or interest, or experiences a material adverse change to its business, it could result in a default under the loan. Additionally, the Company is required to achieve revenues equal to at least 80% of monthly projections approved by its Board of Directors and provided to the bank, and failure to do so could result in a default under the loan. Upon the occurrence of an event of default under the loan, the bank could elect to declare all amounts outstanding to be immediately due and payable. If the Company is unable to repay those amounts, the bank could proceed against the collateral granted to them to secure such indebtedness. The Company has pledged substantially all of its assets, other than its intellectual property, as collateral under the loan. The Company’s future liquidity requirements may increase beyond currently expected levels if it fails to maintain compliance with its covenants. In order to meet the future liquidity needs, the Company may become reliant on additional equity and/or debt financing. Additional funding may not be available when needed or on terms acceptable to the Company. Any additional equity financing may be dilutive to stockholders, and debt financing, if available, may involve restrictive covenants. The Company cannot assure you that it will be able to raise any such additional funding.

PLAC Test ELISA Kit

The Company introduced its initial PLAC Test ELISA Kit product in 2004. The PLAC Test ELISA Kit uses microplate technologies to measure levels of Lp-PLA₂. The infrastructure for performing microplate tests typically exists only at large and midsize clinical reference laboratories and large hospitals, which must be certified by the US Department of Health and Human Services (“DHHS”) for high-complexity diagnostics under the Clinical Laboratory Improvement Amendments (“CLIA”). Smaller hospitals and clinics can order the PLAC Test ELISA Kit for their patients from those institutions that are able to perform microplate tests and offer the PLAC Test ELISA Kit. Patients can have their blood drawn at a local laboratory and shipped to the more advanced institutions for analysis. The PLAC Test ELISA Kit is the only product the Company markets in both the United States and Europe.

6

PLAC Test for Lp-PLA₂ Activity

The Company introduced the PLAC Test for Lp-PLA₂ Activity in Europe in March 2012. This PLAC Test for Lp-PLA₂ Activity is an enzyme assay for the quantitative determination of Lp-PLA₂ activity levels in human serum or plasma. The PLAC Test for Lp-PLA₂ Activity allows for the measurement of Lp-PLA₂ using automated clinical chemistry analyzer technology. This clinical chemistry technology is more prevalent than the microplate technology used for the PLAC Test ELISA Kit and is less difficult to operate, such that a broader array of institutions can conduct the test. This group includes clinical laboratories and hospitals of all sizes and physician operated laboratories (“POLs”). In addition, the sample handling requirements are much less stringent for the PLAC Test for Lp-PLA₂ Activity compared to the PLAC Test ELISA Kit, allowing greater ease of use for those facilities processing specimens. The PLAC Test for Lp-PLA₂ Activity is currently available in Europe for use in conjunction with clinical evaluation and patient risk assessment as an indicator of atherosclerotic cardiovascular disease. The Company affixed the CE marking for this intended use by self-certification in January 2012. The PLAC Test for Lp-PLA₂ Activity is available on a commercial basis only in Europe. The Company plans to pursue 510(k) clearance for this test from the FDA and eventually commercialize this assay format in the United States if the Company obtains FDA clearance.

All references in these notes to condensed financial statements to the “Company,” “we,” “us” and “our” refer to diaDexus, Inc. (f/k/a VaxGen, Inc.), a Delaware corporation, unless the context requires otherwise.

Basis of Presentation

The accompanying unaudited condensed financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. The year-end condensed balance sheet data was derived from audited financial statements, but does not include all disclosures required by U.S. GAAP. In the opinion of management, the accompanying unaudited condensed financial statements have been prepared on a consistent basis with December 31, 2011 audited financial statements and includes all adjustments, consisting of normal recurring adjustments, which are necessary to fairly state the Company’s financial position as of June 30, 2012 and results of operations and cash flows for both the three and six months ended June 30, 2012.

2. Summary of Significant Accounting Policies

The Company’s significant accounting policies are disclosed in the Company’s annual report on Form 10-K for the year ended December 31, 2011, filed with the SEC on March 15, 2012, and have not changed as of June 30, 2012.

Recent Accounting Pronouncements

In December 2011, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2011-11, “Disclosure about Offsetting Assets and Liabilities.” ASU 2011-11 will require the Company to disclose information about offsetting and related arrangements to enable users of its financial statements to understand the effect of those arrangements on its financial positions. The new guidance is effective for annual reporting periods beginning on or after January 1, 2013, and interim periods within those annual periods. The disclosures are to be applied retroactively for all comparative periods presented. The Company does not expect that this guidance will have an impact on its financial position, results of operations or cash flows as it is disclosure-only in nature.

In May 2011, the FASB amended its guidance to converge fair value measurement and disclosure guidance about fair value measurement under U.S. GAAP with International Financial Reporting Standards (“IFRS”). IFRS is a comprehensive series of accounting standards published by the International Accounting Standard Board. The amendment changes the wording used to describe many of the requirements in the U.S. GAAP for measuring fair value and for disclosing information about fair value measurements. For many of the requirements, the FASB does not intend for the amendment to result in a change in the application of the requirements in the current authoritative guidance. The amendment became effective prospectively for the Company’s interim period ended March 31, 2012. The Company adopted this guidance and the adoption did not have a material impact on the Company’s financial positions, results of operations or cash flows.

In June 2011, the FASB issued a new standard on the presentation of comprehensive income. The new standard eliminated the alternative to report other comprehensive income and its components in the statement of changes in equity. Under the new standard, companies can elect to present items of net income and other comprehensive income in one continuous statement or in two separate, but consecutive statements. We adopted the provisions of this guidance during the first quarter 2012.

7

3. Cash, Cash Equivalents and Investments

As part of its cash management program, the Company maintains a portfolio of marketable investment securities. The securities are investment grade and generally mature within one year and may include tax exempt securities and certificates of deposit. The fair value of substantially all securities is determined by quoted market prices. The Company maintains its cash in bank accounts, which at times may exceed federally insured limits. The Company has not experienced any losses on such accounts. The Company considers all highly liquid investments purchased with an original maturity of three months or less at the time of purchase to be cash equivalents.

The following is a summary of cash, cash equivalents, and available-for-sale securities at June 30, 2012 and December 31, 2011 (in thousands):

	June 30, 2012
	Cost Basis		Unrealized Gains		Unrealized Losses			Estimated Fair Value
Cash and cash equivalents:
Cash	$	4,102	$	—	$	—		$	4,102
Money market funds		8,276		—		—			8,276
Total cash and cash equivalents	$	12,378	$	—	$	—		$	12,378
Available-for-sale marketable securities:
Corporate notes		1,255		—		(1	)		1,254
Certificates of deposit		996		—		—			996
Total available-for-sale marketable securities	$	2,251	$	—	$	(1	)	$	2,250

	December 31, 2011
	Cost Basis		Unrealized Gains		Unrealized Losses			Estimated Fair Value
Cash and cash equivalents:
Cash	$	3,243	$	—	$	—		$	3,243
Money market funds		7,241		—		—			7,241
Total cash and cash equivalents	$	10,484	$	—	$	—		$	10,484
Available-for-sale marketable securities:
Commercial paper		3,147		—		(1	)		3,146
Corporate notes		2,850		—		(4	)		2,846
US government agency obligations		750		—		—			750
Total available-for-sale marketable securities	$	6,747	$	—	$	(5	)	$	6,742

Fair Value Measurements

In accordance with ASC 820, the Company discloses and recognizes the fair value of its assets and liabilities using a hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The guidance establishes three levels of the fair value hierarchy as follows:

Level 1: Observable inputs, such as quoted prices in active markets for identical assets or liabilities;

Level 2: Observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities, quoted prices in markets that are not active, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities;

Level 3: Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.

8

The following table represents the Company’s fair value hierarchy for its financial assets (cash equivalents and investments) measured at fair value on a recurring basis as of June 30, 2012 and December 31, 2011 (in thousands):

			Fair Value Measurements
	Balance at June 30, 2012		Quoted Prices In Active Markets for Identical Assets Level  1		Significant other Observable Inputs Level 2		Significant Unobservable Inputs Level 3
Assets:
Cash	$	4,102	$	4,102	$	—	$	—
Money market funds		8,276		8,276		—		—
Corporate notes		1,254		—		1,254		—
Certificates of deposit		996		—		996		—
Restricted cash		1,400		—		1,400		—
	$	16,028	$	12,378	$	3,650	$	—

			Fair Value Measurements
	Balance as of December 31, 2011		Quoted Prices In Active Markets for Identical Assets Level  1		Significant other Observable Inputs Level 2		Significant Unobservable Inputs Level 3
Assets:
Cash	$	3,243	$	3,243	$	—	$	—
Money market funds		7,241		7,241		—		—
Commercial paper		3,146		—		3,146		—
Corporate notes		2,846		—		2,846		—
US government agency obligations		750		—		750		—
Restricted cash		1,800		—		1,800		—
	$	19,026	$	10,484	$	8,542	$	—

The fair value of the notes payable is valued based on level 2 inputs and approximates its book value. The fair value of the notes payable is based on the present value of expected future cash flows and assumptions about current interest rates and the credit worthiness of the Company. As of June 30, 2012, the notes payable is carried at face value of $5.0 million less any unamortized debt discount.

The carrying value of other financial instruments, including cash, accounts receivable, accounts payable and other payables, approximates fair value due to their short maturities.

4. Inventory

Inventory consists of the following (in thousands):

	June 30, 2012		December 31, 2011
Finished goods	$	186	$	71
Raw materials		41		46
	$	227	$	117

9

5. Assets Held For Sale

Prior to the period reflected in this report, the Company had committed to a plan to sell the equipment related to its manufacturing facility and had determined that these assets met the criteria for, and had been classified as, “held for sale” in accordance with ASC Topic 360. The market approach was used in determining the fair market value of these assets.

Total assets held for sale as of June 30, 2012 and December 31, 2011 is as follows (in thousands):

			Fair Value Measurements
Description	Carrying Value at June 30, 2012		June 30,     2012		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Six Months   Ended June 30, 2012 Total Gains (Losses)
Assets held for sale	$	302	$	750	$	—	$	—	$	750	$	—

			Fair Value Measurements
Description	December 31, 2011		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Year Ended December 31, 2011 Total Gains (Losses)
Assets held for sale	$	304	$	—	$	—	$	304	$	—

The measurement of the assets held for sale fair value incorporated significant unobservable inputs as a result of a lack of any available observable market information to determine the fair value. The calculation of the fair value of assets held for sale used a market valuation technique that relied on Level 3 inputs, including quoted prices for similar assets. There was no impairment charge for the three and six months ended June 30, 2012. The Company is committed to selling these assets and has received an offer for $750,000. Any resulting gain or loss will be included in the statement of comprehensive loss.

6. Property, Plant and Equipment

Property and equipment are recorded at cost. Expenditures for major additions and improvements are capitalized, and maintenance and repairs are charged to expense as incurred. When property and equipment are retired or otherwise disposed of, the cost and accumulated depreciation are removed from the accounts and any resulting gain or loss is included in the results of operations for the respective period. Depreciation is provided over the estimated useful lives of the related assets using the straight-line method for financial statement purposes. The Company uses other depreciation methods for tax purposes where appropriate. The estimated useful lives for significant property and equipment categories are as follows:

Office and Laboratory equipment	3 years
Computer equipment and software	3 years
Leasehold improvements	Term of lease agreement

The following is a summary of property and equipment at cost less accumulated depreciation as of June 30, 2012 and December 31, 2011 (in thousands):

	June 30, 2012			December 31, 2011
Laboratory equipment	$	3,078		$	5,202
Leasehold improvements		602			8,283
Computer and software		334			1,916
Furniture and fixtures		163			835
		4,177			16,236
Less: Accumulated depreciation and amortization		(2,794	)		(14,886	)
	$	1,383		$	1,350

10

Depreciation and amortization expense was $0.2 million and $0.3 million for the three and six months ended June 30, 2012, respectively, and $0.2 million and $0.3 million, respectively, for the same periods in 2011.

7. Total Accrued and Other Current Liabilities

Total accrued and other current liabilities include the following as of June 30, 2012 and December 31, 2011 (in thousands):

	June 30, 2012		December 31, 2011
Accrued payroll and related expenses	$	1,054	$	1,351
Accrued royalty expense		246		207
Accrued sales tax		139		126
Accrued legal and patent expense		133		35
Accrued consulting expenses		70		69
Property and equipment		—		200
Accrued audit fees		—		120
Accrued collaborative research obligations		—		96
Other current liabilities		292		265
Total accrued and other current liabilities	$	1,934	$	2,469

8. Concentration of Credit Risk

Revenues from the following customers represented a significant portion of total revenue for the three and six months ended June 30, 2012 and 2011 and accounts receivable as of June 30, 2012 and December 31, 2011:

	Revenue												Accounts Receivable
	Three Months Ended June 30,						Six Months Ended June 30,						June 30,			December 31,
	2012			2011			2012			2011			2012			2011
Customer A		42	%		34	%		45	%		18	%		32	%		44	%
Customer B		13	%		10	%		13	%		10	%		19	%		13	%
Customer C		7	%		—	%		6	%		—	%		10	%		—	%
Customer D		6	%		13	%		6	%		14	%		9	%		15	%
Customer E		—	%		23	%		—	%		36	%		—	%		20	%
Total		68	%		80	%		70	%		78	%		70	%		92	%

9. Notes Payable

In September 2011, the Company entered into a loan and security agreement with Comerica Bank to borrow up to $5,000,000, the entire amount of which was borrowed at a rate of 5.25% per annum. The loan is payable in 36 monthly installments which begin in October 2012, with interest only payments being made from October 2011 to September 2012. The Company paid an initial fee of $25,000 for access to this loan and will be required to pay an additional fee of $100,000 following repayment of the loan. The Company may prepay all, but not less than all, of the loaned amount with 30 days advance notice to the bank. If the loan is prepaid prior to September 24, 2012, the Company will be obligated to pay an additional prepayment fee equal to 1% of the principal amount prepaid. In connection with the loan, the Company issued a warrant to the bank to purchase 480,769 shares of the Company’s common stock (Note 13).

The term loan is secured by a first priority security interest on all of the Company’s assets excluding the Company’s intellectual property (except for rights to payment related to the sale, licensing or disposition of such intellectual property rights) and property not assignable without consent by a third party or with respect to which granting a security interest is contrary to law. In addition, the Company has agreed not to sell, assign, transfer, pledge or otherwise encumber its intellectual property to another entity without the bank’s approval or consent, subject to certain exceptions.

The loan and security agreement contains customary representations and warranties, covenants, events of defaults and termination provisions. The affirmative covenants include, among other things, that the Company timely file taxes, maintain good standing and government compliance, achieve at least 80% of specified monthly revenue projections calculated on a trailing three months basis, maintain primary depository and operating accounts with the bank, maintain liability and other insurance, and provide security interests to the bank in the collateral of any subsidiary formed or acquired by the Company in the future. The negative covenants provide, among other things, that without the prior consent of the bank, the Company may not dispose of certain assets, engage in

11

certain business combinations or acquisitions, incur additional indebtedness or encumber any of the Company’s property (subject to certain exceptions), pay dividends on the Company’s capital stock or make prohibited investments. The loan and security agreement provides that an event of default will occur if, among other triggers, (1) the Company defaults in the payment of any amount payable under the agreement when due, (2) there occurs any circumstance or circumstances that could reasonably be expected to result in a material adverse effect on the Company’s business, operations or condition, or on the Company’s ability to perform its obligations under the agreement, (3) the Company becomes insolvent, (4) the Company undergoes a change in control or (5) the Company breaches any negative covenants or certain affirmative covenants in the agreement or, subject to a cure period, otherwise neglects to perform or observe any material item in the agreement. The repayment of the term loan may be accelerated, at the option of the bank, following the occurrence of an event of default, which would require the Company to pay to the bank an amount equal to the sum of: (i) all outstanding principal plus accrued interest, (ii) the final payment, plus (iii) an early payment fee equal to 1% of the principal amount then required to be paid if such repayment is required prior to September 24, 2012, plus (iv) all other sums, that shall have become due and payable but have not been paid, including interest at the default rate with respect to any past due amounts. As of June 30, 2012, the Company was in compliance with all the covenants.

Future minimum payments for the notes payable are as follows (in thousands):

2012 (remainder of year)	$	547
2013		1,870
2014		1,781
2015		1,378
Total minimum payments		5,576
Less: Amount representing interest		(576	)
Present value of minimum payments		5,000
Less: Unamortized debt discount		(79	)
Notes payable, net		4,921
Less: Notes payable, current portion		1,209
Non-current portion of notes payable	$	3,712

10. Common Stock

On July 15, 2011, the Company amended its certificate of incorporation to increase the number of authorized shares of its common stock, par value of $0.01 per share, to 100,000,000. The holders of common stock are entitled to receive dividends, as, when and if declared by the Company’s Board of Directors out of funds legally available for distribution, subject to the restriction on dividends contained in the Company’s loan agreement with a bank (Note 9).

11. Basic and Diluted Net Loss per Share

Basic net loss per common share is based on the weighted average number of common shares outstanding during the period. Diluted net loss per common share is based on the weighted average number of common shares and other dilutive securities outstanding during the period, provided that including these dilutive securities does not increase the net loss per share.

The effect of the options and warrants was anti-dilutive for the three and six months ended June 30, 2012 and 2011. The following table shows the total outstanding securities considered anti-dilutive and therefore, excluded from the computation of diluted net loss per share (in thousands):

	As of June 30,
	2012		2011
Options to purchase common stock		9,763		6,881
Warrants to purchase common stock		481		10
Total		10,244		6,891

12

12. Stock Based Compensation

Stock Option Plans

1996 Stock Option Plan

The 1996 Stock Option Plan (the “1996 Plan”) initially had 4,750,000 shares of common stock authorized for issuance and a provision that automatically increased this number by 3.5% of the issued and outstanding common stock on the last trading day of the December immediately preceding each fiscal year through January 2007. Options granted under the 1996 Plan may be designated as qualified or nonqualified at the discretion of the Compensation Committee of the Board of Directors. Generally, shares issuable upon exercise of options vest ratably over four years, beginning one year from the date of grant; however, options can vest upon grant. All options expire no later than 10 years from the date of grant. Qualified stock options are exercisable at not less than the fair market value of the stock at the date of grant, and nonqualified stock options are exercisable at prices determined at the discretion of the Board of Directors, but not less than 85% of the fair market value of the stock at the date of grant. On May 17, 2012, 6,398,904 shares that are subject to awards under this plan and 1,555,492 shares which are available for issuance under this plan were transferred to the 2012 Equity Incentive Award Plan.

1998 Director Stock Option Plan

The 1998 Director Stock Option Plan (the “Director Plan”) for non-employee directors has 300,000 shares of common stock authorized for issuance. On May 17, 2012, 170,000 shares that are subject to awards under this plan and 130,000 shares which are available for issuance under this plan were transferred to the 2012 Equity Incentive Award Plan on May 17, 2012 upon stockholder approval.

2012 Equity Incentive Award Plan

The Company’s stockholders approved the 2012 Equity Incentive Award Plan (the “2012 Plan”) at the 2012 Annual Meeting of Stockholders on May 17, 2012 and approved 3,000,000 shares of common stock authorized for issuance. On May 17, 2012, all shares of stock options that were issued and issuable in the 1996 Plan, the Director Plan and outside of plans were transferred to the 2012 Plan. Options granted under the 2012 Plan may be designated as qualified or nonqualified at the discretion of the Compensation Committee of the Board of Directors. Generally, shares issuable upon exercise of options vest ratably over four years, beginning one year from the date of grant; however, options can vest upon grant. Option terms expire no later than 10 years from the date of grant, or 5 years from the date the option is granted to a greater than 10% stockholder. The stock options are exercisable at not less than the fair market value of the stock at the date of grant, or not less than 110% of the fair market value of the stock at the date of grant if granted to a greater than 10% stockholder. As of June 30, 2012, options for 9,762,693 were outstanding and 5,207,685 shares were available for grant under the 2012 Plan.

Valuation Assumptions

The compensation expense related to stock options recognized was determined using the Black-Scholes option valuation model. Option valuation models require the input of subjective assumptions and these assumptions can vary over time. The weighted average assumptions used were as follows:

	Three Months Ended June 30,				Six Months Ended June 30,
	2012		2011		2012			2011
Dividend yield		—		—		0.0	%		0.0	%
Risk-free interest rate		—		—		0.49	%		1.56	%
Expected volatility		—		—		96.65	%		90.44	%
Forfeiture rate		—		—		13.24	%		11.57	%
Expected term (years)		—		—		4.12			4.27
Fair value per share at grant date		—		—	$	0.19		$	0.26

The expected stock price volatility assumption was determined by examining the historical volatilities for industry peers, as the Company did not have sufficient trading history for the Company’s common stock. The Company will continue to analyze the historical stock price volatility and expected term assumption as more historical data for the Company’s common stock becomes available. The risk-free interest rate assumption is based on the U.S. Treasury instruments whose term was consistent with the expected term of the Company’s stock options. The expected dividend assumption is based on the Company’s history and expectation of dividend payouts. Different estimates of volatility and expected term could materially change the value of an option and the resulting expense. The expected term of stock option represents the weighted-average period the stock options are expected to remain outstanding and is based on the options vesting terms, contractual terms and historical information to develop reasonable expectations about future exercise patterns and post-vesting employment termination behavior. The Company did not grant stock options during the three months ended June 30, 2012 and 2011.

13

The following table summarizes stock compensation expense related to employee stock options and employee stock based compensation for the three and six months ended June 30, 2012 and 2011, which was incurred as follows (in thousands)

	Three Months Ended June 30,				Six Months Ended June 30,
	2012		2011		2012		2011
Stock compensation expense:
Product costs	$	3	$	3	$	5	$	6
Research and development		14		21		31		43
Sales and marketing		16		13		29		26
General and administrative		54		331		99		387
Total stock compensation expense	$	87	$	368	$	164	$	462

Employee Stock-Based Compensation

The table below presents information related to stock option activity under the 1996 Plan, the Director Plan and certain option grants to employees and a director outside of the Plan, and, as of May 17, 2012, under the 2012 Plan, net of options previously exercised, as follows:

	Number of Options Outstanding			Weighted- Average Exercise Price		Weighted- Average Remaining Contractual Term (In years)		Aggregate Intrinsic Value
Outstanding at December 31, 2011		9,187,589		$	0.48
Options granted		1,141,000			0.28
Options exercised		(34,018	)		0.26
Options cancelled/forfeited/expired		(531,878	)		0.82
Outstanding at June 30, 2012		9,762,693		$	0.44		6.72	$	1,835,746
Exercisable at June 30, 2012		4,781,773		$	0.61		4.13	$	879,331
Vested and expected to vest at June 30, 2012		8,935,141		$	0.45		6.48	$	1,677,120

The aggregate intrinsic value of stock options exercisable at June 30, 2012 was $0.9 million and for in-the-money stock options outstanding was $1.8 million.

The following table summarizes information relating to stock options outstanding as of June 30, 2012:

	Options Outstanding						Options Exercisable
Range of Exercise Price	Number Outstanding		Weighted Average Remaining Contractual Life (In Years)		Weighted Average Exercise Price		Number Exercisable		Weighted Average Exercise Price
$0.14		96,000		9.46	$	0.14		—	$	—
$0.25		1,542,000		9.24		0.25		3,000		0.25
$0.26		5,139,937		4.73		0.26		3,674,896		0.26
$0.28		1,141,000		9.60		0.28		—		—
$0.29		1,218,756		9.04		0.29		700,752		0.29
$0.33 - $4.57		515,000		7.78		0.78		293,125		1.08
$8.74		20,000		1.39		8.74		20,000		8.74
$12.27		30,000		2.31		12.27		30,000		12.27
$14.30		20,000		0.60		14.30		20,000		14.30
$15.71		40,000		1.90		15.71		40,000		15.71
$0.14 - $15.71		9,762,693		6.72	$	0.44		4,781,773	$	0.61

The estimated fair value of grants of stock options to non-employees of the Company is charged to expense in the financial statements. These options generally vest monthly over one year.

14

Stock based compensation expense recognized during the three and six months ended June 30, 2012 and 2011 includes compensation expense for stock based awards granted to employees based on the grant date fair value estimated in accordance with the provisions of ASC 718. As of June 30, 2012, the total remaining unrecognized cost was approximately $0.8 million to be recognized over approximately three years.

Shares Reserved for Future Issuance

The Company had reserved shares of common stock for future issuance at June 30, 2012 and 2011 as follows:

	As of June 30,
	2012		2011
Options to purchase common stock		9,762,693		6,880,609
Warrants to purchase common stock		480,769		10,000
Shares available for option grants		5,207,685		1,403,787
Total		15,451,147		8,294,396

In October 2004, the Company granted stock options for 30,000 shares outside the Company’s stock option plans to a new director with an exercise price of $12.27 per share. These options were granted with terms that are substantially in accordance with the Company’s standard stock option terms. As of June 30, 2012, none of these stock options have been exercised or repurchased.

In September 2011, the Company granted stock options for 1,530,000 shares outside the Company’s stock option plans to the Chief Executive Officer with an exercise price of $0.25 per share. These options were granted with terms that are substantially in accordance with the Company’s standard stock option terms. As of June 30, 2012, none of these stock options have been exercised or repurchased.

In October 2011, the Company granted stock options for 1,130,000 shares outside the Company’s stock option plans to the Chief Business Officer with an exercise price of $0.26 per share. These options were granted with terms that are substantially in accordance with the Company’s standard stock option terms. As of June 30, 2012, none of these stock options have been exercised or repurchased.

On February 1, 2012, the Company granted stock options for 1,060,000 shares outside of the Company’s stock option plans to the Chief Financial Officer with an exercise price of $0.28 per share. These options were granted with terms that are substantially in accordance with the Company’s standard stock option terms. As of June 30, 2012, none of these stock options have been exercised or repurchased.

All shares granted outside the Company’s stock option plans were transferred to the 2012 Plan on May 17, 2012 upon stockholder approval.

13. Stock Warrants

The Company issues warrants to investors as part of its overall financing strategy and to vendors in order to reduce costs. In connection with the loan and security agreement the Company entered into with Comerica bank (Note 9) in September 2011, the Company issued a warrant to purchase 480,769 shares of the Company’s common stock, at an exercise price of $0.26 per share. The warrant expires in September 2018. The initial fair value of the warrant was calculated using the Black-Scholes option pricing model and the following assumptions: volatility of 88.03%, risk-free interest rate of 1.36%, exercise price of $0.26 and an expected life of 7 years. The fair value of the warrant was determined to be $94,000 and was recorded as equity in additional paid-in-capital and a discount to the carrying value of the loan. The discount is being amortized to interest expense using the effective interest rate method over the 48-month term of the loan. As of June 30, 2012, there were warrants outstanding to purchase 480,769 shares of the Company’s common stock, with a weighted-average exercise price of $0.26 per share and an aggregate exercise price of $0.1 million.

The following table summarizes information about all warrants outstanding as of June 30, 2012:

	Warrants Outstanding						Warrants Exercisable
Exercise Price	Number Outstanding		Weighted Average Remaining Contractual Life (In Years)		Weighted Average Exercise Price		Number Exercisable		Weighted Average Exercise Price
$0.26		480,769		6.24	$	0.26		480,769	$	0.26
		480,769		6.24	$	0.26		480,769	$	0.26

15

14. Leases, Commitments and Contingencies

The Company leases an office and laboratory facility (the “349 Facility”) under a long-term, non-cancelable operating lease agreement, which expires in December 2016. The Company also leased another office and laboratory facility (the “343 Facility”), and subleased a portion of that facility, until the Company’s underlying lease for that facility expired on January 1, 2012.

In 2010, the Company recorded a lease obligation associated with the 349 Facility, which contained a lease payment that exceeded current market rates. Accordingly, the Company recognized a $4.1 million unfavorable lease obligation, included in the accompanying balance sheet. The Company amortizes the unfavorable lease obligation using the effective interest rate method.

Rent expense for the Company’s facilities was $449,000 and $1.0 million for the three and six months ended June 30, 2012, respectively, and $761,000 and $1.5 million, respectively, for the same periods in 2011. The terms of the lease for the 349 Facility provides for rental payments on a graduated scale. The Company recognizes rent expense on a straight-line basis over the lease period. Deferred rent of $314,000 and $266,000 as of June 30, 2012 and December 31, 2011, respectively, is included in the accompanying balance sheet.

Rental income from the sublease of the 343 Facility was $0 for both the three and six months ended June 30, 2012 and $293,000 and $658,000, respectively, for the same periods in 2011. This has been included as a reduction to operating expenses for the three and six months ended June 30, 2011 in the statements of comprehensive income.

Future minimum lease payments under non-cancelable operating leases are as follows (in thousands):

	Operating Leases
2012 (remainder of year)	$	1,216
2013		2,505
2014		2,581
2015		2,658
2016		2,738
Total minimum lease payments	$	11,698

15. Income Taxes

Provision for Income Tax

The Company’s effective tax rate is 0% for income tax for both the three and six months ended June 30, 2012 and the Company expects that its effective tax rate for the full year 2012 will be 0%. Based on the weight of available evidence, including cumulative losses since inception and expected future losses, the Company has determined that it is more likely than not that the deferred tax asset amount will not be realized and therefore a valuation allowance has been provided on net deferred tax assets.

Under the provisions of Section 382 and 383 of the Internal Revenue Code (the “Code”), a change of control, as defined in the Code, may impose an annual limitation on the amount of the Company’s net operating loss and tax credit carryforwards, and other tax attributes, that can be used to reduce future tax liabilities. As a result of a merger transaction involving the Company in 2010, certain of the Company’s tax attributes prior to the merger transaction are subject to an annual limitation of $240,000 for federal and state purposes.

The Company files U.S. Federal and multiple state tax returns. The Company is currently not subject to any income tax examinations. Due to the Company’s losses, generally all years remain open.

Uncertain Tax Positions

Effective January 1, 2009, the Company adopted ASC 740-10, which requires that the Company recognize the financial statement effects of a tax position when it becomes more likely than not, based upon the technical merits, that the position will be sustained upon examination.

The gross amount of unrecognized tax benefits as of June 30, 2012 is $1.4 million, related to the reserve on R&D credits, none of which will affect the effective tax rate if recognized due to the valuation allowance. The Company does not expect any material changes in the next 12 months in unrecognized tax benefits.

The Company recognizes interest and/or penalties related to uncertain tax positions. To the extent accrued interest and penalties do not ultimately become payable, amounts accrued will be reduced and reflected in the period that such determination is made. The interest and penalties are recognized as other expense and not tax expense. As of June 30, 2012, the amount of accrued interest and penalties related to uncertain tax positions is $0.

16

16. Subsequent Events

None

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following Management’s Discussion and Analysis of Financial Condition and Results of Operations contains forward-looking statements that involve a number of risks and uncertainties. Our actual results could differ materially from those indicated by forward-looking statements as a result of various factors, including but not limited to, the period for which we estimate our cash resources are sufficient, the availability of additional funds, as well as those set forth under “Risk Factors” and those that may be identified from time to time in our reports and registration statements filed with the Securities and Exchange Commission.

The following discussion and analysis is intended to provide an investor with a narrative of our financial results and an evaluation of our financial condition and results of operations. This discussion should be read in conjunction with the unaudited Condensed Financial Statements and related Notes included in Item 1 of this Quarterly Report and the Consolidated Financial Statements and related Notes and Management’s Discussion and Analysis of Financial Condition and Results of Operations contained in our Annual Report on Form 10-K for the year ended December 31, 2011.

17

Overview

We are a life sciences company focused on the development and commercialization of proprietary cardiovascular diagnostic products addressing unmet needs in cardiovascular disease. We are the successor to a company initially formed as a joint venture between SmithKlineBeecham Corporation (now GlaxoSmithKline LLC (“GlaxoSmithKline”)) and Incyte Pharmaceuticals, Inc. Upon formation, SmithKlineBeecham Corporation granted us an exclusive license to certain diagnostic intellectual property, including

Lp-PLA₂, an inflammatory marker of cardiovascular risk.

Our products, PLAC^® Tests provide new information, over and above traditional risk factors, to help identify individuals at increased risk of suffering a heart attack or stroke. Some of these events may be reduced with earlier detection and more aggressive risk-reducing strategies, including treatment to lower LDL-cholesterol goals with statins. We have commercialized two PLAC Tests. One test measures the mass of circulating Lp-PLA₂ in the blood, the PLAC Test ELISA Kit. The PLAC Test ELISA Kit is the only blood test cleared by the FDA to aid in assessing risk for both coronary heart disease and ischemic stroke associated with atherosclerosis. The second test, the PLAC Test for Lp-PLA₂ Activity, is an enzyme assay for the quantitative determination of Lp-PLA₂ activity levels in human plasma and serum on automated clinical chemistry analyzers, to be used in conjunction with clinical evaluation and patient risk assessment as an indicator of atherosclerotic cardiovascular disease. We are currently commercializing the PLAC Test ELISA Kit in the United States and Europe and the PLAC Test for Lp-PLA₂ Activity in Europe.

We have incurred substantial losses since inception, and expect to continue to incur substantial net losses for at least the next few years. To date, we have funded our operations primarily through private placements of preferred stock and debt financing, as well as through revenue generated from the sale of products.

We entered into a loan agreement with a bank in September 2011. The agreement contains certain financial and non-financial covenants. Our future liquidity requirements may increase beyond currently expected levels if we fail to maintain compliance with such covenants. In order to meet our future liquidity needs, we may become reliant on additional equity and/or debt financing. Additional funding may not be available when needed or on terms acceptable to us. Any additional equity financing may be dilutive to stockholders, and debt financing, if available, may involve restrictive covenants. We cannot assure you that we will be able to raise any such additional funding.

All references in this Quarterly Report on Form 10-Q to the “Company,” “we,” “us” and “our” refer to diaDexus, Inc. (f/k/a VaxGen, Inc.), a Delaware corporation, unless the context requires otherwise.

Critical Accounting Policies and Estimates

The accompanying discussion and analysis of our financial condition and results of operations is based upon our financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”). The preparation of these financial statements requires management to make estimates and judgments that affect the reported amounts of assets, liabilities and expenses, and related disclosures. On an ongoing basis, we evaluate these estimates. Estimates are based on historical experience, information received from third parties and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results could therefore differ materially from those estimates under different assumptions or conditions.

Critical accounting estimates, as defined by the Securities and Exchange Commission (“SEC”), are those that are most important to the portrayal of our financial condition and results of operations and require our management’s most difficult and subjective judgments and estimates of matters that are inherently uncertain. The accounting policies and estimates that we consider to be critical, subjective, and requiring judgment in their application are summarized in “Item 7—Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the year ended December 31, 2011 filed with SEC on March 15, 2012. There have been no significant changes to the accounting policies and estimates disclosed in our Form 10-K.

18

Results of Operations

For the Three and Six Months Ended June 30, 2012 and 2011.

Revenues

	Three Months Ended June 30,				%  Increase (Decrease)			Six Months Ended June 30,				%  Increase (Decrease)
	2012		2011		2011 to 2012			2012		2011		2011 to 2012
	(in thousands)							(in thousands)
Revenues:
License revenue	$	77	$	77		—	%	$	153	$	153		—	%
Royalty revenue		1,037		944		10	%		2,074		1,949		6	%
Product sales		4,002		2,646		48	%		7,832		4,886		60	%
Product sales to related party		—		160		*			—		160		*
Total net revenues	$	5,116	$	3,827		34	%	$	10,059		7,148		41	%

* Result not meaningful

Revenues by geography are based on the billing address of the customer. The following table sets forth revenues by geographic area (in thousands):

	Three months ended				Six months ended
	June 30,				June 30,
	2012		2011		2012		2011
United States	$	5,044	$	3,752	$	9,928	$	7,034
Europe		67		46		94		82
Rest of the world		5		29		37		32
	$	5,116	$	3,827	$	10,059	$	7,148

Over 98% of our revenues were from the US for both the three and six months ended June 30, 2012 and 2011.

Revenues are generated from licensing fees, royalties earned, product sales, and contract arrangements. The accounting classification of product revenue as either royalties or product sales relates to the sales channels used by the Company, and as such, we believe that operating performance is most effectively evaluated by examining total net revenues.

The increase in net revenues of approximately $1.3 million for the three months ended June 30, 2012 and $2.9 million for the six months ended June 30, 2012 as compared to the same periods in 2011 reflects an increased volume demand for our PLAC Test ELISA Kit offset by a decline in average sales price for our product.

Our top four customers accounted for 68% and 70% of our net revenues for the three and six months ended June 30, 2012, respectively, compared to 80% and 78%, respectively, for the same periods in 2011. Because of this customer concentration and the timing of orders from these customers, our quarterly revenue may fluctuate materially. Our largest customers are able to exert greater influence over our product pricing, which has led to a decline in average sales price in the recent quarter. We expect such downward pressure on our pricing will likely continue but should be moderate.

Product Costs

	Three Months Ended June 30,				%  Increase (Decrease)			Six Months Ended June 30,				%  Increase (Decrease)
	2012		2011		2011 to 2012			2012		2011		2011 to 2012
	(in thousands)							(in thousands)
Product costs		1,598		1,205		33	%		3,317		2,337		42	%

Product costs include our expenditures for cost of goods, manufacturing support, product supplies, quality control, personnel expenses and facility costs. Product costs increased $393,000 for the three months ended June 30, 2012 compared to the three months ended June 30, 2011. This increase primarily reflects an increase in product-related materials and supplies costs of approximately $213,000 due to increased demand for our PLAC Tests, an increase in facilities related expense of $104,000 due to our relocation to a larger facility and an increase of $67,000 in equipment depreciation costs used to produce our PLAC Test ELISA Kit.

19

Product costs increased $980,000 for the six months ended June 30, 2012 compared to the six months ended June 30, 2011. This increase primarily reflects an increase in product-related materials and supplies costs of approximately $640,000 due to increased demand for our PLAC Tests, an increase in facilities related expenses of $211,000 due to our relocation to a larger facility, an increase of approximately $105,000 in equipment depreciation costs used to produce our PLAC Test ELISA Kit, and an increase of approximately $16,000 in outside services related to product quality initiatives. We expect product costs to continue to increase due to volume demand growth for our PLAC Tests, partially offset by production economies of scale.

Sales and Marketing Expenses

	Three Months Ended June 30,				%  Increase (Decrease)			Six Months Ended June 30,				%  Increase (Decrease)
	2012		2011		2011 to 2012			2012		2011		2011 to 2012
	(in thousands)							(in thousands)
Sales and marketing expenses		1,450		977		48	%		2,632		2,084		26	%

Sales and marketing expenses include our expenditures on customer support, medical and other consultant fees, marketing programs and materials, and personnel expenses. Sales and marketing expenses increased $473,000 for the three months ended June 30, 2012 compared to the three months ended June 30, 2011. This increase primarily reflects higher personnel expenses of approximately $319,000 due to expansion of our sales and marketing team, an increase in travel expense of approximately $78,000 due to higher personnel and travels related to product launch in Europe, and increase in marketing program expense of approximately $72,000.

Sales and marketing expenses increased $548,000 for the six months ended June 30, 2012 compared to the six months ended June 30, 2011. The increase primarily reflects an increase in personnel costs of approximately $343,000 due to an expansion of our sales and marketing team, an increase in travel expense of approximately $112,000 due to higher personnel and travels related to a product launch in Europe, and increase in marketing program expense of approximately $81,000.

We expect our sales and marketing expenses to increase as we identify and hire additional personnel and as we develop and commercialize new products to maintain and expand our position in the market for diagnostics in cardiovascular disease.

Research and Development Expenses

	Three Months Ended June 30,				%  Increase (Decrease)			Six Months Ended June 30,				%  Increase (Decrease)
	2012		2011		2011 to 2012			2012		2011		2011 to 2012
	(in thousands)							(in thousands)
Research and development expenses		1,093		1,274		(14	)%		2,385		2,766		(14	)%

Research and development expenses include costs related to product development, regulatory support of our technology and other technical support costs, including salaries and consultant fees. Research and development expenses decreased $181,000 for the three months ended June 30, 2012 compared to the three months ended June 30, 2011. This decrease primarily reflects a reduction in personnel costs of approximately $155,000 due partly to the departure of our former Chief Science Officer in October 2011, a reduction in lab and research costs of approximately $105,000 associated with product development and a reduction in expenses related to clinical studies of approximately $85,000, partially offset by an increase in facilities cost of approximately $153,000 due to our relocation to a larger facility.

Research and development expenses decreased $381,000 for the six months ended June 30, 2012 compared to the six months ended June 30, 2011. This decrease primarily reflects a reduction in personnel costs of approximately $318,000 due partly to the departure of our former Chief Science Officer in October 2011, a reduction in expenses related to clinical studies of approximately $216,000 and a reduction in lab and research costs of approximately $128,000 associated with product development, partially offset by an increase in facilities cost of approximately $275,000 due to our relocation to a larger facility.

General and Administrative Expenses

	Three Months Ended June 30,				%  Increase (Decrease)			Six Months Ended June 30,				%  Increase (Decrease)
	2012		2011		2011 to 2012			2012		2011		2011 to 2012
	(in thousands)							(in thousands)
General and administrative expenses		1,704		2,842		(40	)%		3,680		4,956		(26	)%

General and administrative expenses include personnel costs for finance, administration, information systems and professional fees as well as facilities expenses. General and administrative expenses decreased $1.1 million for the three months ended June 30, 2012

20

compared to the three months ended June 30, 2011. This decrease primarily reflects a reduction in severance costs of $861,000 primarily associated with the resignation of the Company’s former Chief Executive Officer in June 2011, reduction in facility costs of approximately $330,000 for the 343 Facility due to the expiration of the associated facility lease in January 2012 and a reduction in facility cost of approximately $217,000, offset by loss of sublease income of approximately $294,000

General and administrative expenses decreased $1.3 million for the six months ended June 30, 2012 compared to the six months ended June 30, 2011. This decrease primarily reflects a reduction in severance costs of approximately $861,000 primarily associated with the resignation of the Company’s former Chief Executive Officer in June 2011, reduction in facility costs of approximately $739,000 for the 343 Facility due to the expiration of the associated facility lease in January 2012 and reduction in facility cost of approximately $459,000, offset by loss of sublease income of approximately $658,000 and an increase in accrued compensation of $142,000. We expect general and administrative expenses to stay relatively unchanged.

Interest Income, Interest Expense and Other Income (Expense), net

	Three Months Ended June 30,					%  Increase (Decrease)			Six Months Ended June 30,					% Increase (Decrease)
	2012			2011		2011 to 2012			2012			2011		2011 to 2012
	(in thousands)								(in thousands)
Interest income, interest expense and other income (expense), net
Interest income	$	4		$	15		(73	)%	$	11		$	32		(66	)%
Interest expense		(102	)		—		*			(203	)		—		*
Other income (expense), net		—			—		—	%		(3	)		—		*
Total Interest and other income (expense)	$	(98	)	$	15		(747	)%	$	(195	)	$	32		(688	)%

* Result not meaningful

Interest income is derived from cash balances, short-term and long-term investments. Interest expense is based on outstanding debt obligations. The increase in net interest and other expense was primarily due to a debt facility we entered into in September 2011. Interest expense will continue as long as the loan is outstanding and would trend down as the loan is repaid.

Income Taxes

	Three Months Ended June 30,				%  Increase (Decrease)		Six Months Ended June 30,						%  Increase (Decrease)
	2012		2011		2011 to 2012		2012			2011			2011 to 2012
	(in thousands)						(in thousands)
Income tax provision		—		—		—		(3	)		(3	)		*

* Result not meaningful

We generated net loss for the three and six months ended June 30, 2012 and had no federal income tax provision. Our effective tax rate was 0% for income tax for the three and six months ended June 30, 2012 and we expect that our effective tax rate for the full year 2012 will be 0%. The $3,000 income tax provision represents minimum state taxes paid during 2012.

In addition, we have substantial net operating loss carry forwards available to offset future taxable income for federal and state income tax purposes. At June 30, 2012, we had unrecognized tax benefits totaling $1.4 million. Our ability to utilize our net operating losses may be limited due to changes in our ownership as defined by Section 382 of the Code.

Under the provisions of Sections 382 and 383 of the Internal Revenue Code (the “Code”), a change of control, as defined in the Code, may impose an annual limitation on the amount of the Company’s net operating loss and tax credit carryforwards, and other tax attributes that can be used to reduce future tax liabilities. As a result of a merger transaction involving us in 2010, certain of the Company’s tax attributes prior to the merger transaction are subject to an annual limitation of $240,000 for federal and state purposes.

Liquidity and Capital Resources

Since our inception, we have incurred losses, and we have relied primarily on private placements of preferred stock and debt financing, as well as on revenue generated from the sale of products, to fund our operations. As of June 30, 2012, we had an

21

accumulated deficit of $197.1 million, working capital of $13.8 million and stockholders’ equity of $9.2 million. Based on our current operating plan, we believe that our existing cash, cash equivalents, and investment securities will be sufficient to cover our cash needs for operating activities and commitments for at least twelve months.

Cash, Cash Equivalents and Investments

As of June 30, 2012, we had cash, cash equivalents and short-term investments of $14.6 million, compared to $17.2 million at December 31, 2011. The decrease of $2.6 million primarily reflects cash used in operations of $2.4 million.

Cash Flows from Operating Activities

Net cash used in operating activities was $2.4 million for the six months ended June 30, 2012, and was primarily related to net loss of $2.2 million, adjusted for non-cash items of $0.3 million in depreciation and amortization, $0.2 million in stock-based compensation, $0.2 million in unfavorable lease amortization and $0.6 million cash outflow related to changes in operating assets and liabilities.

Net cash used in operating activities was $3.3 million for the six months ended June 30, 2011, and was primarily related to net loss of $5.0 million, adjusted for non-cash items of $0.5 million in stock-based compensation, $0.3 million of depreciation and amortization, $0.2 million in unfavorable lease amortization, $0.1 million in amortization on investments, $0.1 million in provision for rebate reserve and $0.9 million cash inflow related to changes in operating assets and liabilities.

Cash Flows from Investing Activities

Net cash provided by investing activities in the six months ended June 30, 2012 was $4.3 million, primarily due to investment maturities of $5.5 million and restricted cash release of $0.4 million. This was partially offset by $1.0 million in purchases of investments and $0.5 million in purchases of property and equipment.

Net cash used in investing activities in the six months ended June 30, 2011 was $11.0 million, primarily due to purchase of available-for-sale investments of $19.2 million. This was partially offset by $8.4 million in maturities of investments and $0.2 million in purchases of property and equipment.

Other Information

Our future capital requirements will depend primarily upon our ability to maintain and grow our current product revenues, to develop and commercialize new products, to manage our obligations under real estate leases, to realize the sale of our assets held for sale, and to improve our reimbursement prospects from third-party payors, including:

• Our ability to obtain regulatory approval for the PLAC Test for Lp-PLA₂ Activity in the United States;

• The rate of product adoption by laboratories and doctors;

• Our ability to expand commercialization of the PLAC Test for Lp-PLA₂ Activity in Europe; and

• The third-party payor community’s acceptance of and reimbursement for the PLAC Tests.

We expect to require additional financing and will seek to raise funds through equity or debt offerings, bank facilities, or other sources of capital. Additional funding may not be available when needed or on terms acceptable to us. Any additional equity financing may be dilutive to stockholders, and debt financing, if available, may involve restrictive covenants. We cannot assure you that we will be able to raise any such additional funding.

We have incurred substantial losses since inception, and expect to continue to incur substantial net losses for at least the next few years. To date, we have funded our operations primarily through private placements of preferred stock and debt financing, as well as through revenue generated from the sale of products.

In September 2011, we entered into a loan and security agreement with Comerica Bank (see Note 9 of the Notes to Condensed Financial Statements included in this Quarterly Report on Form 10-Q). This loan contains various covenants.

If we breach any of these covenants or are unable to make a required payment of principal or interest, or experience a material adverse change to our business, it could result in a default under the loan. Additionally, we are required to achieve revenues equal to at least 80% of monthly projections approved by our Board of Directors and provided to the bank, and failure to do so could result in a default under the loan. Upon the occurrence of an event of default under the loan, the bank could elect to declare all amounts outstanding to be immediately due and payable, which would increase our liquidity requirements beyond the currently expected levels. If we are unable to repay those amounts, the bank could proceed against the collateral granted to them to secure such indebtedness. We have pledged substantially all of our assets, other than our intellectual property, as collateral under the loan. We are in compliance with all the debt covenants as of June 30, 2012.

In order to meet future liquidity needs, we may become reliant on additional equity and/or debt financing.

22

Commitments and Contingencies

Our contractual obligations and future minimum lease payments that are non-cancelable at June 30, 2012 are disclosed in the following table (in thousands):

	Total		2012(1)		2013		2014		2015		2016
Debt obligations	$	5,576	$	547	$	1,870	$	1,781	$	1,378	$	—
Operating lease obligations		11,698		1,216		2,505		2,581		2,658		2,738
Total contractual commitments	$	17,274	$	1,763	$	4,375	$	4,362	$	4,036	$	2,738

(1) Remainder of year.

Off-Balance Sheet Arrangements

As of June 30, 2012, we did not have any off-balance sheet arrangements as defined in Item 303(a)(4)(ii) of SEC Regulation S-K.

Recent Accounting Pronouncements

In December 2011, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2011-11, “Disclosure about Offsetting Assets and Liabilities.” ASU 2011-11 will require the Company to disclose information about offsetting and related arrangements to enable users of its financial statements to understand the effect of those arrangements on its financial positions. The new guidance is effective for annual reporting periods beginning on or after January 1, 2013, and interim periods within those annual periods. The disclosures are to be applied retroactively for all comparative periods presented. We do not expect that this guidance will have an impact on our financial position, results of operations or cash flows.

In May 2011, the FASB amended its guidance to converge fair value measurement and disclosure guidance about fair value measurement under U.S. GAAP with International Financial Reporting Standards (“IFRS”). IFRS is a comprehensive series of accounting standards published by the International Accounting Standard Board. The amendment changes the wording used to describe many of the requirements in the U.S. GAAP for measuring fair value and for disclosing information about fair value measurements. For many of the requirements, the FASB does not intend for the amendment to result in a change in the application of the requirements in the current authoritative guidance. The amendment became effective prospectively for the Company’s interim period ended March 31, 2012. The Company adopted this guidance and the adoption did not have a material impact on the Company’s financial positions, results of operations or cash flows.

In June 2011, the FASB issued a new standard on the presentation of comprehensive income. The new standard eliminated the alternative to report other comprehensive income and its components in the statement of changes in equity. Under the new standard, companies can elect to present items of net income and other comprehensive income in one continuous statement or in two separate, but consecutive statements. The Company adopted the provisions of this guidance during the first quarter 2012.

Item 3. Quantitative and Qualitative Disclosure About Market Risk

In the normal course of business, our financial position is routinely subject to a variety of risks, including market risk associated with interest rate movement. We regularly assess these risks and have established policies and business practices intended to protect against these and other exposures. As a result, we do not anticipate material potential losses in these areas.

As of June 30, 2012, we had cash, cash equivalents and short-term investments of $14.6 million, consisting of cash, cash equivalents and highly liquid short-term investments and certificates of deposit. The values of our short-term investments will likely decline by an immaterial amount if market interest rates increase and, therefore, we believe our exposure to interest rate changes is immaterial. Declines of interest rates over time will, however, reduce our interest income from short-term investments.

During the three and six months ended June 30, 2012, there were no material changes to our market risk disclosures as set forth in Part II Item 7A. “Quantitative and Qualitative Disclosure About Market Risk” in our Annual Report on Form 10-K for the year ended December 31, 2011.

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

We have performed an evaluation under the supervision and with the participation of our management, including our principal executive and principal financial officers, of the effectiveness of our disclosure controls and procedures, as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Based on that evaluation, our management, including our principal executive and principal financial officers, concluded that our disclosure controls and procedures were effective as of June 30, 2012 to provide reasonable assurance that information required to be disclosed by us in the reports filed or submitted by us

23

under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and that such information is accumulated and communicated to management, including our principal executive and principal financial officers, as appropriate to allow timely decisions regarding required disclosures.

Changes in Internal Controls

There were no changes in our internal control over financial reporting during the quarter ended June 30, 2012 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Inherent Limitations on Effectiveness of Controls

Internal control over financial reporting may not prevent or detect all errors and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Projections of any evaluation of effectiveness of internal control to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. Accordingly, our disclosure controls and procedures are designed to provide reasonable, not absolute, assurance that the objectives of our disclosure control system are met.

24

PART II – OTHER INFORMATION

Item 1. Legal Proceedings

The Company is from time to time subject to various claims and legal actions during the ordinary course of business. The Company believes that there are currently no claims or legal actions that would reasonably be expected to have a material adverse effect on its results of operations or financial condition.

Item 1A. Risk Factors

Investing in our securities involves a very high degree of risk. You should carefully consider the risks described below and all of the other information in our filings under the Exchange Act before making any investment decisions regarding our common stock. The risks and uncertainties described below are not the only ones we face. Additional risks and uncertainties that we do not know or that we currently deem immaterial may also negatively affect our business, financial condition, operating results, and prospects. In that case, the market price of our common stock could decline, and you could lose all or part of your investment.

Risks Relating to Our Business Operations

We have withdrawn our 510(k) premarket notification for FDA clearance of our PLAC Test for Lp-PLA₂ Activity, and we may be unable to submit a subsequent 510(k) premarket notification or to obtain clearance with respect to such application.

On June 17, 2011, we submitted a premarket notification to the FDA seeking clearance under Section 510(k) of the FDCA to market our

PLAC Test for Lp-PLA₂ Activity. This new assay measures the activity levels of the Lp-PLA₂ enzyme in the blood, while the PLAC Test

currently marketed in the United States utilizes an ELISA method that measures the concentration of the enzyme. The PLAC Test

for Lp-PLA₂ Activity is capable of running on automated, high throughput clinical chemistry analyzers unlike the current PLAC Test ELISA Kit. Future commercialization of an assay capable of running on automated, high throughput clinical chemistry analyzers may be important for the expansion of the PLAC Tests market and revenue growth. On October 24, 2011, we elected to withdraw this application following discussions with the FDA. We plan to develop a new submission. We are in the process of identifying completed clinical trials acceptable to the FDA from which blood samples of patient cohorts may be obtained and then tested to demonstrate the effectiveness of the PLAC Test for Lp-PLA₂ Activity.

There can be no guarantee that we will identify appropriate clinical trials, or that serum samples can be obtained from such trials to support retesting of PLAC Test for Lp-PLA₂ Activity. We cannot assure you that the results of any such clinical trials will support the proposed clinical claims. There can be no guarantee that the FDA will clear the subsequent 510(k) submission on a timely basis, or at all. We are unable to predict the timing of retesting, submission date or receipt of clearance for the PLAC Test for Lp-PLA₂ Activity, which may result in a loss of potential customers and would have an adverse effect on our financial condition and our ability to maintain or expand our business.

Our future success depends on our ability to retain our Chief Executive Officer and other key employees and to attract, retain and motivate qualified personnel.

We depend on the efforts and abilities of our Chief Executive Officer, along with other senior management, our research and development staff and a number of other key management, sales, support, technical and administrative services personnel. Competition for experienced, high-quality personnel exists, and we cannot assure you that we can continue to recruit and retain such personnel. Our failure to hire, train and retain qualified personnel would impair our ability to develop new products and manage our business effectively.

We are an early stage company and have engaged in only limited sales and marketing activities for our first products, the PLAC Tests.

Our products may never gain significant acceptance in the marketplace and therefore never generate substantial revenue or profits for the Company. As is the case with all novel biomarkers, we must establish a market for our PLAC Tests and build that market through physician education and awareness programs. Publication in peer review journals of results from outcome studies using our products will be an important consideration in the adoption by physicians and in the coverage by insurers of our products. Our ability to commercialize successfully the PLAC Tests and other diagnostic products will depend on many factors, including:

• whether healthcare providers believe our PLAC Tests and any other diagnostic tests that we successfully develop provide sufficient incremental clinical utility;

• whether we are able to demonstrate that treatment of individuals based on their Lp-PLA₂ levels improves clinical outcomes in prospective clinical studies; and

• whether health insurers, government health programs and other third-party payors will cover and pay for our diagnostic tests and the amounts they will reimburse.

25

These factors may present obstacles to commercial acceptance of our products, and we may need to devote substantial time and money to surmount these obstacles, and the result might not be successful.

Our business is characterized by a high degree of customer concentration. Our top four customers accounted for 70% and 91% of our accounts receivable as of June 30, 2012 and 2011, respectively, and 70% and 78% of our revenue for the six months ended June 30, 2012 and 2011, respectively. The loss of one or more of these customers or a decline in revenue from one or more of these customers could have a material adverse effect on our business, financial condition, and results of operations.

Sales to a limited number of customers account for a significant portion of our revenue and accounts receivable. Our dependence on and the identity of our key customers may vary from period to period as a result of competition among our customers, developments related to our products, and changes in individual customers’ purchases of our products. The concentration of revenue from our top four customers was 70% and 78% for the six months ended June 30, 2012 and 2011, respectively. We may experience greater or lesser customer concentration in the future, depending on future commercial agreements and whether we are able to grow our revenue from the PLAC Test for Lp-PLA₂ Activity. However, it is likely that our revenue and profitability will continue to be dependent on a very limited number of customers, and we may experience an even higher degree of customer concentration in the future. The loss of, material reduction in sales volume to, or significant adverse change in our relationship with any of our key customers could have a material adverse effect on our revenue in any given period and may result in significant annual and quarterly revenue variations. Moreover, our largest customers are able to exert greater influence over our product pricing, which has led to a decline in average sales price in recent quarters. Such downward pressure on our pricing has the potential to continue. In addition, we may be unable to collect related accounts receivables when due, which could have a material adverse effect on our business. The concentration of accounts receivable from our top four customers was 70% and 91% as of June 30, 2012 and 2011, respectively.

We rely on two manufacturers to supply materials for our PLAC Test ELISA Kit. If these manufacturers are unable to supply our materials in a timely manner, or at all, we may be unable to meet demand, which would have a material adverse effect on our business.

Prior to June 2012, we depended on a sole source to manufacture our PLAC Test ELISA Kit. In June 2012, we qualified a second manufacturer for our PLAC Test ELISA Kit, and we intend to order regularly from both of these third-party manufacturers in the future. We rely on our third-party manufacturers to maintain their manufacturing facility in compliance with FDA and other federal, state and/or local regulations including health, safety and environmental standards. If they fail to maintain compliance with FDA or other critical regulations, they could be ordered to curtail operations, which would have a material adverse impact on our business. In addition, increases in the prices we pay our manufacturer, or lapses in quality, such as failure to meet our specifications or the requirements of the Quality System Regulations, or QSR, and other regulatory requirements, could materially adversely affect our business. Any manufacturing defect or error discovered after our products have been produced and distributed could result in significant consequences, including costly recall procedures and damage to our reputation. Our ability to replace the existing manufacturers may be difficult, because the number of potential manufacturers is limited.

We currently depend on certain key vendors and suppliers of materials, some of which are sole source or for whom an alternative could be difficult to replace in a timely manner, that are essential for the manufacture of our products. Any interruption in the supply of product, or the inability to obtain materials from alternate sources in a timely manner, could impair our ability to supply the PLAC Test ELISA Kit and to meet the demands of our customers, which would have a material adverse effect on our business.

We manufacture our PLAC Test for Lp-PLA₂ Activity on-site in South San Francisco, California and we could experience process, quality control and shipping problems due to the early stage of manufacturing.

We have developed manufacturing of the PLAC Test for Lp-PLA₂ Activity in house. We are dependent on the expertise of our personnel for this product. We could observe performance deviations that have not been apparent during development, including performance and stability of the PLAC Test for Lp-PLA₂ Activity. The discovery of such performance deviations or of any manufacturing problems may adversely affect our sales in Europe.

If third-party payors do not reimburse our customers for the use of our clinical diagnostic products or if they reduce reimbursement levels, our ability to sell our products will be harmed.

We sell our products primarily through distributors and to laboratory customers, substantially all of which receive reimbursement for the health care services they provide to their patients from third-party payors, such as Medicare, Medicaid and other government programs, private insurance plans and managed care programs. Third-party payors are increasingly attempting to contain health care

26

costs by limiting both coverage and the level of reimbursement for medical products and services. Accordingly, third-party payors are increasingly challenging the prices charged for diagnostic tests. Most of these third-party payors may deny coverage and reimbursement if they determine that a medical product was not medically necessary or not used in accordance with cost-effective treatment methods, or was used for an unapproved indication.

In the United States, third-party payors generally require billing codes on claims for reimbursement that describe the services provided. For laboratory services, the American Medical Association (“AMA”) establishes most of the billing codes using a data code set called Current Procedural Terminology, or CPT, codes. Each third-party payor generally develops payment amounts and coverage policies for their beneficiaries or members that ties to the CPT code established for the laboratory test and, therefore, coverage and reimbursement may differ by payor even if the same billing code is reported for claims filing purposes. For laboratory tests without a specific billing code, payors often review claims on a claim-by-claim basis and there are increased uncertainties as to coverage and eligibility for reimbursement. Currently, the tests performed by our assays are described by existing CPT codes, but we cannot guarantee that the CPT codes will not be revised or new CPT codes will not be established for our future assays. If our customers are not reimbursed for our products, they may reduce or discontinue purchases of our products, which would cause our revenues to decline. Lower-than-expected, or decreases in, reimbursement amounts for tests performed using our products may decrease amounts physicians and other practitioners are able to charge patients, which in turn may adversely affect the willingness of physicians and other practitioners to purchase our products at prices we target, or at all. If we are unable to sell our products at target prices, our revenue and gross margins will suffer and our business could be materially harmed.

Our business, in particular the growth of our business, is dependent on our ability to successfully develop and commercialize novel diagnostic products and services based on biomarkers. If we fail to develop and commercialize or enter into collaborations for new diagnostic products, we may be unable to execute our business plan.

Our long-term ability to generate product revenue will depend in part on our ability to develop additional formats or versions of the PLAC Tests and other new diagnostic products. If internal efforts do not generate sufficient product candidates, we will need to identify third parties that wish to collaborate with us to develop new products and applications. Our ability to enter into third-party relationships will depend in part on our ability to negotiate acceptable license and related agreements. Even if we are successful in establishing collaborative arrangements, they may never result in the successful development or commercialization of any product candidate or the generation of any sales or royalty revenues. In addition, rapid technological developments and innovations characterize the markets for our products and services. Our success will depend in large part on our ability to correctly identify emerging trends, enhance capabilities, and develop and manufacture new products quickly, in a cost-effective manner, and at competitive prices. The development of new and enhanced products is a complex and costly process. We may need to make substantial capital expenditures and incur significant research and development costs to develop and introduce such new products and enhancements. If we fail to timely develop and introduce competitive new products or additional formats of our existing products, our business could be materially adversely affected.

International expansion of our business exposes us to significant risks associated with doing business outside of the United States.

Our business strategy incorporates international expansion, including establishing and maintaining direct sales and physician outreach and education capabilities outside of the United States and expanding our relationship with distributors. Doing business internationally involves a number of risks, including:

• multiple, conflicting and changing laws and regulations such as tax laws, export and import restrictions, employment laws, regulatory requirements and other governmental approvals, permits and licenses;

• failure by us or our distributors to obtain and maintain regulatory approvals for the use of our tests in various countries;

• difficulties in managing foreign operations;

• complexities associated with managing multiple payor reimbursement regimes or patient self-pay systems;

• logistics and regulations associated with shipping, including infrastructure conditions and transportation delays;

• limits in our ability to penetrate international markets if we are not able to process tests locally;

• financial risks, such as longer payment cycles, difficulty collecting accounts receivable and exposure to foreign currency exchange rate fluctuations;

• natural disasters, political and economic instability, including wars, terrorism, and political unrest, outbreak of disease, boycotts, curtailment of trade and other business restrictions; and

• regulatory and compliance risks that relate to maintaining accurate information and control over sales and distributors’ activities that may fall within purview of the Foreign Corrupt Practice Act, its books and records provisions or its anti-bribery provisions.

Any of these factors could significantly harm our future international expansion and operations and, consequently, our revenues and results of operations.

27

Our dependence on distributors for foreign sales of our PLAC Test for Lp-PLA₂ Activity could limit or prevent us from selling our test in Europe and from realizing long-term international revenue growth.

As of June 30, 2012, we had exclusive distribution agreements for our products in 15 European countries, and we may enter into other similar arrangements in other countries in the future. Exclusive distribution arrangements limit our ability to directly, or indirectly through other distributors to address customers in those countries. Distributors may not commit the necessary resources to market and sell our PLAC Tests to the level of our expectations. We intend to grow our business internationally, and to do so we may need to attract additional distributors to expand the territories in which we sell our PLAC Test for Lp-PLA₂ Activity. If current or future distributors do not perform adequately, or we are unable to locate distributors in particular geographic areas, we may not realize long-term international revenue growth.

The requirements of being a public company have required and will continue to require significant resources, increase our costs and occupy our management, and we may be unable to comply with these requirements in a timely or cost-effective manner.

As a company with public reporting responsibilities, we have incurred and will continue to incur significant legal, accounting, and other compliance expenses in meeting the requirements to:

• prepare and file and distribute periodic and current reports under the Exchange Act for a larger operating business and comply with other Exchange Act requirements applicable to public companies;

• formalize old and establish new internal policies, such as those relating to insider trading and disclosure controls and procedures;

• involve and retain to a greater degree outside counsel and accountants in the above activities; and

• establish and maintain an investor relations function, including the provision of certain information on our website.

Compliance with these rules and regulations will cause us to incur significant legal and financial compliance costs. In addition, we are required to implement and maintain effective internal control over financial reporting and disclosure. In particular, we must perform system and process evaluation and testing of our internal control over financial reporting to allow management to report on the effectiveness of our internal control over financial reporting. Our testing may reveal deficiencies in our internal control over financial reporting that are deemed to be material weaknesses. We have incurred and expect to continue to incur significant expense and devote substantial management effort toward ensuring compliance with these requirements. Moreover, if we are not able to comply with these requirements in a timely manner, or if we identify deficiencies in our internal control over financial reporting that are deemed to be material weaknesses, the market price of our common stock could decline and we could be subject to sanctions or investigations by the SEC or other regulatory authorities, which would entail expenditure of additional financial and management resources.

Natural disasters, including earthquakes, may damage our facilities.

Our corporate and manufacturing facilities are located in California. Our facilities in California are in close proximity to known earthquake fault zones. As a result, our corporate, research and manufacturing facilities are susceptible to damage from earthquakes and other natural disasters, such as fires, floods and similar events. Although we maintain general business insurance against fires and some general business interruptions, there can be no assurance that the scope or amount of coverage will be adequate in any particular case. Insurance specifically for earthquake risks is not available on commercially reasonable terms.

Failure in our information technology and storage systems could significantly disrupt the operation of our business.

Our ability to execute our business plan depends, in part, on the continued and uninterrupted performance of our information technology systems, or IT systems. IT systems are vulnerable to damage from a variety of sources, including telecommunications or network failures, malicious human acts and natural disasters. Moreover, despite network security and back-up measures, some of our servers are potentially vulnerable to physical or electronic break-ins, computer viruses and similar disruptive problems. Despite the precautionary measures we have taken to prevent unanticipated problems that could affect our IT systems, sustained or repeated system failures that interrupt our ability to generate and maintain data could adversely affect our ability to operate our business.

Risks Relating to Government Regulations

We are subject to extensive regulation by the FDA and other regulatory agencies and failure to comply with such regulation could have a material adverse effect on our business, financial condition, and results of operations.

Our business and our medical device products, including our PLAC Tests, are subject to extensive regulation by the FDA and other federal, state, and foreign regulatory agencies. These laws and regulations govern many aspects of our products and operations, and the products and operations of our suppliers and distributors, including premarket clearance and approval, design, development and manufacturing, labeling, packaging, safety and adverse event reporting, recalls, storage, advertising, promotion, sales and record keeping. Failure to comply with these laws and regulations could result in, among other things, warning letters, civil or criminal penalties, injunctions, delays in clearance or approval of our products, withdrawal of cleared products, recalls, and other operating restrictions, all of which could cause us to incur significant expenses.

28

Before we can market or sell a new product or a significant modification to an existing product in the United States, we must obtain either clearance under Section 510(k) of the FDCA, or approval of a pre-market approval application, or PMA, from the FDA, unless an exemption applies. In the 510(k) clearance process, the applicant must demonstrate to the FDA’s satisfaction that a proposed device is “substantially equivalent” to a device legally on the market, known as a “predicate” device, with respect to intended use, technology and safety and effectiveness, in order to obtain clearance from the FDA to market the proposed device. Clinical data is sometimes required to support substantial equivalence. The PMA pathway requires an applicant to demonstrate the safety and effectiveness of the device based, in part, on extensive data, including, but not limited to, technical, preclinical, clinical trial, manufacturing, and labeling data. The FDA can delay, limit, or deny clearance or approval of a device for many reasons, including:

• we may not be able to demonstrate to the FDA’s satisfaction that our products are substantially equivalent to lawful predicate device or safe and effective for their intended uses;

• the data from our pre-clinical studies and clinical trials may be insufficient to support clearance or approval, where required;

• the manufacturing process or facilities we use may not meet applicable requirements; and

• changes in FDA clearance or approval policies or the adoption of new regulations may require additional data.

Further, any modification we make to a 510(k)-cleared device that could significantly affect its safety or effectiveness, or that would constitute a major change in its intended use, design, or manufacture, would require us to seek a new 510(k) clearance or, possibly, approval of a PMA. The FDA requires every manufacturer to make this determination in the first instance, but the FDA may review any manufacturer’s decision. The FDA may not agree with our decisions regarding whether new clearances or approvals are necessary for changes to 510(k) cleared devices. If the FDA disagrees with our determination and requires us to submit new 510(k) notifications or PMAs for modifications to our previously cleared products for which we have concluded that new clearances or approvals are unnecessary, we may be required to cease marketing or to recall the modified product until we obtain clearance or approval, and we may be subject to significant regulatory fines or penalties.

Even when a product reaches the market, the subsequent discovery of previously unknown problems, such as material deficiencies or defects in design, labeling, or manufacture, or a potential unacceptable risk to health, with a product may result in restrictions on the product, including recall or withdrawal of the product from the market, and/or a requirement to submit a new 510(k) submission or PMA for the product in order to support continued marketing.

We and our suppliers are subject to inspections by the FDA and other regulatory agencies and deficiencies identified during these audits could have a material adverse effect on our results of operations.

Once regulatory clearance or approval has been granted, the product and its manufacturer are subject to continual review by the FDA and other regulatory authorities. For example, we are also subject to routine inspection by the FDA and certain state agencies for compliance with the QSR, which establishes the good manufacturing practices for medical devices, and Medical Device Reporting regulations, which require us to report to the FDA any incident in which one of our products may have caused or contributed to a death or serious injury or malfunctioned in a way that could cause death or serious injury. Although we believe that we have adequate processes in place to ensure compliance with these and other postmarket requirements, the FDA or other regulatory bodies could disagree and take enforcement action including issuing warning letters, untitled letters, fines, injunctions, consent decrees or civil penalties, or imposing operating restrictions or partial suspension or total shutdown of manufacturing, selling or exporting our products, among other sanctions, if it concludes that we are out of compliance with applicable regulations or if it concludes that our products pose an unacceptable risk to health or are otherwise deficient in design, labeling or manufacture. Further, the ability of our suppliers to supply critical components or materials and of our distributors to sell our products could be adversely affected if their operations are determined to be out of compliance. The FDA and other regulatory bodies could also require us to recall products if we fail to comply with applicable regulations. Such actions by the FDA and other regulatory bodies would adversely affect our revenues and results of operations.

We are and will be subject to new regulations which could have a material adverse effect on our results of operations.

Many national, regional, and local laws and regulations, including the recently-enacted healthcare reform legislation, have not been fully implemented by the regulatory authorities or adjudicated by the courts, and their provisions are open to a variety of interpretations. In the ordinary course of business, we must frequently make judgments with respect to compliance with applicable laws and regulations. If regulators subsequently disagree with the manner in which we have sought to comply with these regulations, we could be subjected to various sanctions, including substantial civil and criminal penalties, as well as product recall, seizure or injunction with respect to the sale of our products. Such sanctions could severely impair our reputation within the industry and any limitation on our ability to manufacture and market our products could have a material adverse effect on our business. In addition, in January 2011, the FDA announced twenty-five action items it intends to take in reforming the 510(k) premarket review program. The FDA issued its recommendations and proposed action items in response to concerns from both within and outside of the FDA about the 510(k) program. Although the FDA has not detailed the specific modifications or clarifications that the Agency intends to make to its guidance, policies, and regulations pertaining to the review and regulation of devices such as ours which seek and receive marketing clearance through the 510(k) process, the FDA’s announced action items signal that additional regulatory requirements are

29

likely. For example, in July 2011, the FDA issued a draft guidance document intended to clarify when changes to a cleared 510(k) warrant submission of a new 510(k), which many observers believe will result in an increase in the number of 510(k)s submitted to the FDA. The FDA intends to issue a variety of additional draft guidance and regulations over the coming months and years which would, among other things, establish a Unique Device Identification System and clarify the FDA’s use and application of several key terms in the 510(k) review process. These reforms, when fully implemented, could impose additional regulatory requirements upon us which could delay our ability to obtain new clearances, increase the cost of compliance, or restrict our ability to maintain our current 510(k) clearances.

Healthcare reform and its restrictions on coverage and reimbursement may adversely affect our profitability.

Legislation both proposed and passed has had an impact on reimbursement levels for diagnostic services, including laboratory tests. For instance, in March 2010, President Barack Obama signed the Patient Protection and Affordable Care Act, as amended by the Health Care and Education Reconciliation Act (collectively, the “PPACA”), which makes a number of substantial changes to the way health care is financed by both governmental and private insurers. Among other things, the PPACA mandates a reduction in payments for clinical laboratory services paid under the Medicare Clinical Laboratory Fee Schedule of 1.75% for the years 2011 through 2015. A productivity adjustment also is made to the fee schedule payment amount. In addition, on February 22, 2012, President Obama signed the Middle Class Tax Relief and Job Creation Act of 2012, which, among other things, mandated an additional change in Medicare reimbursement for clinical laboratory services. This legislation requires a rebasing of the Medicare clinical laboratory fee schedule to effect a 2% reduction in payment rates otherwise determined for 2013, which in turn will serve as a base for 2014 and subsequent years. Further, with respect to the PPACA changes, the legislation establishes an Independent Payment Advisory Board (“IPAB”) to reduce the per capita rate of growth in Medicare spending. The IPAB has broad discretion to propose policies, which may have a negative impact on payment rates for services, including clinical laboratory services, beginning in 2016, and for hospital services beginning in 2020.

Although some of these provisions may negatively impact payment rates for clinical laboratory services, the PPACA also extends coverage to approximately 32 million previously uninsured people, which may result in an increase in the demand for our tests and services. A number of state governors have strenuously opposed the mandatory purchase of insurance, known as the individual mandate, and initiated lawsuits challenging the constitutionality of certain provisions of the PPACA. Many of these challenges are still pending final adjudication in several jurisdictions, including the United States Supreme Court. Congress has also proposed a number of legislative initiatives, including possible repeal of the PPACA. At this time, it remains unclear whether there will be any changes made to the PPACA, whether to certain provisions (including the IPAB) or its entirety.

In addition, other legislative changes have been proposed and adopted since the PPACA was enacted. Most recently, on August 2, 2011, President Obama signed into law the Budget Control Act of 2011, which, among other things, creates the Joint Select Committee on Deficit Reduction to recommend proposals in spending reductions to Congress. The Joint Select Committee did not achieve a targeted deficit reduction of at least $1.2 trillion for the years 2013 through 2021, triggering the legislation’s automatic reduction to several government programs. This includes aggregate reductions to Medicare payments to providers of up to 2% per fiscal year, starting in 2013. The full impact on our business of the PPACA and the new law is uncertain. Levels of reimbursement may decrease in the future, and future legislation, regulation or reimbursement policies of third-party payors may adversely affect the demand for and price levels of our products.

We are subject to healthcare laws, regulation and enforcement, and our failure to comply with those laws could have a material adverse effect on our results of operations and financial conditions.

We are also subject to healthcare fraud and abuse regulation and enforcement by both the federal government and the states in which we conduct our business. The laws that may affect our ability to operate include:

• the federal Health Insurance Portability and Accountability Act of 1996 as amended by the Health Information Technology for Economic and Clinical Health Act, which governs the conduct of certain electronic healthcare transactions and protects the security and privacy of protected health information;

• the federal healthcare programs’ Anti-Kickback Statute, which prohibits, among other things, persons from knowingly and willfully soliciting, receiving, offering or paying remuneration, directly or indirectly, in exchange for or to induce either the referral of an individual for, or the purchase, order or recommendation of, any good or service for which payment may be made under federal healthcare programs such as the Medicare and Medicaid programs;

• federal false claims laws which prohibit, among other things, individuals or entities from knowingly presenting, or causing to be presented, claims for payment from Medicare, Medicaid, or other third-party payors that are false or fraudulent;

• federal criminal laws that prohibit executing a scheme to defraud any healthcare benefit program or making false statements relating to healthcare matters; and

• state law equivalents of each of the above federal laws, such as anti-kickback and false claims laws which may apply to items or services reimbursed by any third-party payor, including commercial insurers. If our operations are found to be in violation of any of the laws described above or any other governmental regulations that apply to us, we may be subject to penalties,

30

including civil and criminal penalties, damages, fines, the curtailment or restructuring of our operations, the exclusion from participation in federal and state healthcare programs and imprisonment, any of which could adversely affect our ability to operate our business and our financial results.

Risks Relating to Liquidity

Our Comerica Bank loan contains restrictions that limit our flexibility in operating our business, and our lender may accelerate repayment of amounts outstanding under certain circumstances.

In September 2011, we entered into a loan and security agreement with Comerica Bank. This loan contains various covenants that limit our ability to engage in specified types of transactions. These covenants limit our ability to, among other things:

• Sell, transfer, lease or dispose of our assets;

• Create, incur or assume additional indebtedness;

• Encumber or permit liens on certain of our assets;

• Pay dividends on, repurchase or make distributions with respect to our common stock;

• Make specified investments;

• Consolidate, merge, sell or otherwise dispose of all or substantially all of our assets; and

• Enter into certain transactions with our affiliates.

If we breach of any of these covenants, are unable to make a required payment of principal or interest, or experience a material adverse change to our business, it could result in a default under the loan. Additionally, we are required to achieve revenues equal to at least 80% of monthly projections approved by our Board of Directors and provided to the bank, and our failure to do so could result in a default under the loan. Upon the occurrence of an event of default under the loan, the bank could elect to declare all amounts outstanding to be immediately due and payable. If we were unable to repay those amounts, the bank could proceed against the collateral granted to them to secure such indebtedness. We have pledged substantially all of our assets, other than our intellectual property, as collateral under the loan.

We will need to raise additional capital to support our operations in the future.

We will require additional funds to commercialize our products and develop new products. Our ability to fund our net losses and to conduct the required development activities related to any new product candidates will be significantly limited if we are unable to obtain the necessary capital. We will seek to raise funds through equity or debt offerings, bank facilities, or other sources of capital. Additional funding may not be available when needed or on terms acceptable to us. Any additional equity financing may be dilutive to stockholders, and debt financing, if available, may involve restrictive covenants. We cannot assure you that we will be able to raise any such additional funding.

We are an early stage company with a history of losses, we expect to incur losses for at least the next few years, and we may never achieve profitability.

We have incurred substantial net losses since our inception. Our accumulated deficit was approximately $197.1 million at June 30, 2012. For the six months ended June 30, 2012 and 2011, we incurred a net loss of $2.2 million and $5.0 million, respectively. We expect to continue to incur substantial net losses for at least the next few years. If we are unable to execute our commercialization strategy to achieve profitability, or if the time required to achieve profitability is longer than we anticipate, we may not be able to continue our business.

We are solely dependent on our product line of PLAC Tests. We expect that the PLAC Tests will account for a substantial portion of our revenue for the foreseeable future. We do not know if our PLAC Tests will be successful over the long-term and it is possible that the demand for the product may decline over time. Any decline in demand or failure of our PLAC Tests to penetrate current or new market significantly could have a material adverse effect on our business, financial condition, and results of operations.

We have liabilities for real estate leases in excess of what is necessary for our current business. We will incur these additional expenses until we are able to sublease a portion of our larger leased facility.

We have a significant real estate lease for a facility of approximately 65,000 square feet with current monthly minimum required expenses of approximately $220,000. The term of the lease continues until December 31, 2016. Until such time that we are able to sublease a portion of the facility, we will incur liabilities for real estate leases significantly in excess of what is necessary for our current business. We may never be able to sublease a portion of the facility.

Risks Relating to Intellectual Property

If the combination of patents, trade secrets, trademarks, and contractual provisions that we rely on to protect our intellectual property proves inadequate, our ability to successfully commercialize our products will be harmed and we may never be able to operate our business profitably.

Our success depends, in large part, on our ability to protect proprietary discoveries, technology, and diagnostic tests that we develop under the patent and other intellectual property laws of the United States and other countries, so that we can seek to prevent others from unlawfully using our inventions and proprietary information.

31

Additionally, we have filed or have license rights to a number of patent applications that are in an early stage of prosecution, and we cannot make any assurances that any of the pending patent applications will result in patents being issued. In addition, due to technological changes that may affect our proposed products or judicial interpretation of the scope of our patents, our proposed products might not, now or in the future, be adequately covered by our patents.

Moreover, the U.S. Leahy-Smith America Invents Act, enacted in September 2011, brings significant changes to the U.S. patent system, which include a change to a “first to file” system from a “first to invent” system and changes to the procedures for challenging issued patents and disputing patent applications during the examination process, among other things. The effects of these changes on our patent portfolio and business have yet to be determined, as the U.S. Patent and Trademark Office must still implement regulations relating to these changes and U.S. courts have yet to address the new provisions, but in any event, these changes could increase the costs and uncertainties surrounding the prosecution of our patent applications and the enforcement or defense of our patent rights.

Furthermore, there have been several cases involving patents claiming genetic materials and information, and diagnostic products and methods based on genetic materials and information, that are pending in U.S. courts or have been decided by the U.S. Supreme Court that may impact our business. On March 20, 2012, in Mayo Collaborative Services, DBA Mayo Medical Laboratories, et al. v. Prometheus Laboratories, Inc., the U.S. Supreme Court issued an opinion holding that the processes claimed by Prometheus’ patent were not patent eligible because these processes—determining the relationships between concentrations of certain metabolites in the blood and the likelihood that a thiopurine drug dosage will prove ineffective or cause harm—merely apply laws of nature and are not themselves patentable. Additionally, a suit brought by multiple plaintiffs, including the American Civil Liberties Union, or ACLU, against Myriad Genetics and the USPTO, could also impact biotechnology patents. The Federal Circuit issued a written decision on July 29, 2011 that reversed the U.S. District Court for the Southern District of New York’s ruling that Myriad’s composition claims to “isolated” DNA molecules cover unpatentable subject matter. However, the Federal Court affirmed the District Court’s decision that Myriad’s method claims directed to simply “comparing” or “analyzing” DNA sequences without a “transformation” step are not patentable. The U.S. Supreme Court granted certiorari in the Myriad case, vacated the Federal Circuit decision and remanded the case back the Federal Circuit for further consideration of patentability in light of the Supreme Court’s decision in Mayo v. Prometheus. It is unknown whether or how pending cases will be decided. It is also unknown what impact, if any, the Prometheus decision or decisions in such pending cases will have on gene patents or diagnostic method patents generally or our ability to obtain or enforce such patents in the future.

We license key intellectual property from GlaxoSmithKline and ICOS, and our contractual relationships have certain limitations.

We have an exclusive license from GlaxoSmithKline and a co-exclusive license from ICOS Corporation (“ICOS”) to practice and commercialize technology covered by several issued and pending United States patents and their foreign counterparts. The issued patents that relate to the Company’s current business have expiration dates ranging from 2013 to 2016.

Several of our collaboration agreements with GlaxoSmithKline and ICOS provide licenses to use intellectual property that is important to our business, and we may enter into additional agreements in the future with GlaxoSmithKline or with other third parties that change licenses of valuable technology. Current licenses impose, and future licenses may impose, various commercialization, milestone and other obligations on us, including the obligation to terminate our use of patented subject matter under certain circumstances. If a licensor becomes entitled to, and exercises, termination rights under a license, we could lose valuable rights and our ability to develop our current and future products. Our business may suffer if any current or future licenses terminate, if the licensors fail to abide by the terms of the license or fail to prevent infringement by third parties, if the licensed patents or other rights are found to be invalid or if we are unable to enter into necessary licenses on acceptable terms.

Any inability to adequately protect our proprietary technologies and product candidates could harm our competitive position.

We will be able to protect our proprietary rights from unauthorized use by third parties only to the extent that our proprietary technologies are covered by valid and enforceable patents or are effectively maintained as trade secrets. We plan to continue to apply for patents covering our technologies and products as we deem appropriate. We cannot make assurances that our pending patent applications will issue as patents and, if they do, whether the scope of such claims will be sufficiently broad to prevent third parties from utilizing our technologies, commercializing our discoveries or developing competing products. Any patents we currently hold, or obtain in the future, may not be sufficiently broad to prevent others from utilizing our technologies, commercializing our discoveries, or developing competing technologies and products. Furthermore, third parties may independently develop similar or alternative technologies or design around our patented technologies. Third parties may challenge or invalidate our patents, or our patents may fail to provide us with any competitive advantage.

We have rights to patents and patent applications owned by GlaxoSmithKline, Human Genome Sciences, Inc. (“Human Genome Sciences”) and ICOS that provide important protection on the composition of matter and utility of our products and product candidates. We do not, however, directly control the prosecution and maintenance of all of these patents. GlaxoSmithKline, Human Genome Sciences, and ICOS may not fulfill their obligations as licensors and may allow these patents to go abandoned or may not pursue meaningful claims for our products. Also, while the United States Patent and Trademark Office has issued diagnostic patents covering utility or methods, we do not know whether or how courts will enforce these patents. If a court finds these types of inventions to be unpatentable or interprets them narrowly, the benefits of our patent strategy may not materialize. If any or all of these events occur, they could diminish the value of our intellectual property.

32

Risks Relating to Our Stock

Our stock price is likely to be volatile.

Currently, our common stock is quoted on the OTC Bulletin Board. Stocks traded “over the counter” typically are subject to greater volatility than stocks traded on stock exchanges, such as the NASDAQ Stock Market, due to the fact that OTC trading volumes are generally significantly lower than those on stock exchanges. This lower volume may allow a relatively few number of stock trades to greatly affect the stock price, particularly where the trading price of the stock price is relatively low. The trading price of our common stock has been and is likely to continue to be extremely volatile. Some of the many factors that may cause the market price of our common stock to fluctuate include, in no particular order:

• Actions taken by regulatory authorities with respect to our products;

• The progress and results of our product development efforts;

• The outcome of legal actions to which we may become a party;

• Our ability to commercialize the products, if any, that we are able to develop;

• Changes in our capital structure, such as future issuances of securities or the incurrence of additional debt; and

• Restatements of our financial results and/or material weaknesses in our internal controls.

The stock markets and the markets for medical diagnostics and biotechnology stocks in particular, have experienced volatility that has often been unrelated to the operating performance of particular companies. These broad market fluctuations may adversely affect the trading price of our common stock. Investors may not be able to sell when they desire due to insufficient buyer demand and may realize less than, or lose all of, their investment.

33

We are not currently listed on a national exchange and there can be no assurance we will ever be listed.

As a result of our failure to make timely filings of financial statements, we were delisted from The NASDAQ Stock Market in 2004. Currently, our common stock is quoted on the OTC Bulletin Board under the symbol DDXS. We have not yet applied for our common stock to be listed on a national exchange, and we do not currently meet all of the requirements for listing or relisting on the NASDAQ Stock Market. We do not know when, if ever, our common stock will be listed on a national stock exchange. In addition, we cannot be certain that The NASDAQ Stock Market will approve our stock for relisting or that any other exchange will approve our stock for listing. In order to be eligible for relisting or listing, we must meet the initial listing criteria for The NASDAQ Stock Market or another national exchange, including a minimum per share price.

Our charter documents and Delaware law may discourage an acquisition of the Company.

Provisions of our certificate of incorporation, bylaws, and Delaware law could make it more difficult for a third-party to acquire us, even if doing so would be beneficial to our stockholders. We may issue shares of preferred stock in the future without stockholder approval and upon such terms as our Board of Directors may determine. Our issuance of this preferred stock could have the effect of making it more difficult for a third-party to acquire, or of discouraging a third-party from acquiring, a majority of our outstanding stock. Our bylaws also provide that special stockholders meetings may be called only by our Board of Directors, Chairperson of the Board of Directors, or by our Chief Executive Officer or President, with the result that any third-party takeover not supported by the Board of Directors could be subject to significant delays and difficulties.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

None

Item 3. Defaults Upon Senior Securities.

None

Item 4. Mine Safety Disclosures.

Not applicable

Item 5. Other Information.

None

34

Item 6. Exhibits

Exhibit No.	Description
3.1	Restated Certificate of Incorporation of the Registrant (incorporated by reference to Exhibit 3.1 to the Registrant’s Quarterly Report on Form 10-Q (file no. 0-26483) for the fiscal quarter ended September 30, 2010, filed on November 15, 2010)
3.2	Certificate of Change of Registered Agent and Registered Office (incorporated by reference to Exhibit 3.1 to the Registrant’s Current Report on Form 8-K (file no. 0-26483), filed on January 25, 2011)
3.3	Amendment to Restated Certificate of Incorporation of the Registrant (incorporated by reference to Exhibit 3.1 to the Registrant’s Current Report on Form 8-K (file no. 0-26483), filed on July 18, 2011)
3.4	Amended and Restated Bylaws of the Registrant (incorporated by reference to Exhibit 3.2 to the Registrant’s Current Report on Form 8-K (file no. 0-26483), filed on November 5, 2010)
10.1*	Purchase Agreement, dated as of May 9, 2012 and effective as of April 24, 2012, by and between diaDexus, Inc. and Boston Heart Diagnostics
31.1	Certification of Chief Executive Officer pursuant to Exchange Act Rule 13a-14(a)
31.2	Certification of Chief Financial Officer pursuant to Exchange Act Rule 13a-14(a)
32.1	Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2	Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101.INS**	XBRL Instance Document
101.SCH**	XBRL Taxonomy Extension Schema Document
101.CAL**	XBRL Taxonomy Extension Calculation Linkbase Document
101.LAB**	XBRL Taxonomy Extension Label Linkbase Document
101.PRE**	XBRL Taxonomy Extension Presentation Linkbase Document

* Certain portions have been omitted pursuant to a confidential treatment request. Omitted information has been filed separately with the SEC.

** Pursuant to Rule 406T of Regulation S-T, these interactive data files are deemed not filed or part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, or Section 18 of the Securities Exchange Act of 1934, as amended, and otherwise are not subject to liability under those sections.

35

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

	diaDexus, Inc.
Date: August 7, 2012	By:	/s/ Brian E. Ward
		Brian E. Ward
		President & Chief Executive Officer
Date: August 7, 2012	By:	/s/ Jean-Frédéric Viret
		Jean-Frédéric Viret
		Chief Financial Officer

36

EXHIBIT INDEX

Exhibit No.	Description
3.1	Restated Certificate of Incorporation of the Registrant (incorporated by reference to Exhibit 3.1 to the Registrant’s Quarterly Report on Form 10-Q (file no. 0-26483) for the fiscal quarter ended September 30, 2010, filed on November 15, 2010)
3.2	Certificate of Change of Registered Agent and Registered Office (incorporated by reference to Exhibit 3.1 to the Registrant’s Current Report on Form 8-K (file no. 0-26483), filed on January 25, 2011)
3.3	Amendment to Restated Certificate of Incorporation of the Registrant (incorporated by reference to Exhibit 3.1 to the Registrant’s Current Report on Form 8-K (file no. 0-26483), filed on July 18, 2011)
3.4	Amended and Restated Bylaws of the Registrant (incorporated by reference to Exhibit 3.2 to the Registrant’s Current Report on Form 8-K (file no. 0-26483), filed on November 5, 2010)
10.1*	Purchase Agreement, dated as of May 9, 2012 and effective as of April 24, 2012, by and between diaDexus, Inc. and Boston Heart Diagnostics
31.1	Certification of Chief Executive Officer pursuant to Exchange Act Rule 13a-14(a)
31.2	Certification of Chief Financial Officer pursuant to Exchange Act Rule 13a-14(a)
32.1	Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2	Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101.INS**	XBRL Instance Document
101.SCH**	XBRL Taxonomy Extension Schema Document
101.CAL**	XBRL Taxonomy Extension Calculation Linkbase Document
101.LAB**	XBRL Taxonomy Extension Label Linkbase Document
101.PRE**	XBRL Taxonomy Extension Presentation Linkbase Document

* Certain portions have been omitted pursuant to a confidential treatment request. Omitted information has been filed separately with the SEC.

** Pursuant to Rule 406T of Regulation S-T, these interactive data files are deemed not filed or part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, or Section 18 of the Securities Exchange Act of 1934, as amended, and otherwise are not subject to liability under those sections.

37

EX-10.1

Exhibit 10.1

[ * ] = Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

PURCHASE AGREEMENT – KIT PURCHASES

This Purchase Agreement between diaDexus, Inc. located at 349 Oyster Point Blvd, South San Francisco, CA 94080 (“diaDexus”) and Boston Heart Diagnostics, located at 175 Crossing Boulevard, Suite 550, Framingham, MA 01702 and any or all of its subsidiaries or affiliates (“Lab”), sets forth the terms and conditions upon which diaDexus will sell to Lab, and Lab will purchase, various products (the “Agreement”). As of April 24, 2012 (“Effective Date”) the parties agree as follows:

A. In consideration of Lab purchasing from diaDexus the products specified in the current diaDexus published Product Catalog and US Price List (“Products”) diaDexus agrees to sell certain Products to Lab for a limited term discount price listed in Table 1. Lab shall use Products solely for performing in vitro clinical diagnostic testing on human blood samples for the purpose of patient clinical management (“Permitted Use”). Lab shall not sell Products or offer to sell Products to other entities.

Table 1:Produt Prices

Product	Product Price	Price Term
PLAC® Test ELISA Kit (Catalog # 90123)	[ * ]	[ * ]

Any discount received by Lab hereunder is a “discount or other reduction in price” under Section 1128B(b)(3)(A) of the Social Security Act. diaDexus shall indicate any such discount on the relevant invoice or by other means that reasonably identifies the discount provided to Lab. Lab shall accurately disclose all discounts received by it to any federal or state health care program which provides reimbursement for the kits and to any regulatory body having oversight over such health care program, as required by 42 C.F.R. § 1001.952(h) and as otherwise required by applicable law.

B. The term of the Agreement shall commence on the Effective Date and expire on December 31, 2013(the “Term”). The parties hereto acknowledge that this Agreement, including any exhibits and addendums attached hereto, sets forth the entire agreement and understanding of the parties as to the subject matter hereof, and supersedes all prior and contemporaneous discussions, agreements, and writings with respect hereto with respect to the subject matter hereof. All previous agreements between diaDexus and Lab and Lab’s subsidiaries will terminate and be null and void effective as of the Effective Date of this Agreement. This Agreement may not be amended or modified except by written agreement of both of the parties. This Agreement may be terminated by either party with or without cause at any time with ninety (90) days written notice.

All obligations pursuant to the terms and conditions of Paragraphs D, E, F, G, H, I, J, K, M and O shall survive expiration or termination of this Agreement and continue in full force and effect for a period of five (5) years after the effective date of such expiration or such termination.

C. diaDexus shall ship Product(s) to the Lab which orders such Product(s) under a purchase order and which is authorized by the parties under this Agreement. diaDexus shall ship Products using a courier and Lab account number for such courier as designated by Lab on Lab’s purchase order so that Lab is billed directly by courier for Product shipping costs. Notwithstanding anything to the contrary, shipments shall be made FOB diaDexus’ supply source in accordance with diaDexus shipping requirements. diaDexus shall have no obligation to accept return of Product(s) or replace any shipment of Product(s) after delivery of such shipment of Product(s) by diaDexus. Products shall be supplied in accordance with a specification for identity and quality of the Product as set forth in the product insert (the “Specification”). The Specifications are considered a performance guaranty and represent the expectation for the Product’s performance by Lab. Unless otherwise specified in the purchase order, diaDexus shall ship Product to the following address:

Boston Heart Diagnostics

Receiving Department

175 Crossing Boulevard, Suite 550

Framingham, MA 01702

Phone: 888-799-8711

D. At the written request of diaDexus received by the Lab [ * ], Lab shall [ * ], provide diaDexus with [ * ]. Lab shall provide diaDexus with [ * ]. Lab shall provide diaDexus with [ * ].

E. Lab shall pay diaDexus net thirty (30) days after the date stated on invoice provided by diaDexus to Lab. All applicable taxes are the responsibility of Lab. In those states where diaDexus collects local/state sales taxes, diaDexus will add these taxes to the invoices and after receipt of payment including such taxes from Lab, remit to the appropriate taxing authority. Any payment due and payable under the terms and conditions of this Agreement made after the date such payment is due and payable shall bear interest as of the day after the date such payment was due and payable and shall continue to accrue such interest until such payment is made at a rate equal to the lesser of the prime rate as reported by JPMorgan Chase & Co., New York, New York, on the date such payment is due, plus an additional two percent (2%), or the maximum rate permitted by law if lower. All payments made under this Agreement shall be made in U.S. dollars, and such payments shall be made by check or wire transfer to one or more bank accounts to be designated in writing by diaDexus. Notwithstanding anything to the contrary, diaDexus shall have no obligation to continue delivering Product pursuant to the terms of this Agreement in the event that Lab fails to make any payment due and payable pursuant to this Agreement.

F. Invoices, notices and other communications permitted or required under this Agreement will be deemed to be properly given if in writing and either delivered by hand or mailed by First Class U.S. Mail, postage prepaid, addressed to the applicable party as follows:

Boston Heart Diagnostics 175 Crossing Blvd, Suite 550 Framingham, MA 01702 Attention: Susan Hertzberg diaDexus, Inc. 349 Oyster Point Boulevard South San Francisco, CA 94080 Attention: CEO

G. Lab shall label Product on its test requisition order forms as set forth in the current diaDexus published Product Catalog and US Price List (e.g. PLAC^® Test for Lp-PLA₂). If Lab wishes to market the diaDexus Product using the associated marks, diaDexus hereby grants to Lab a non-exclusive, non-sublicensable license to use its trademarks solely for the Permitted Use. Under such license, Lab shall comply with diaDexus policy regarding use of diaDexus marks. Lab shall submit all proposed representations of any trademarks to diaDexus for approval in writing, such approval shall not be unreasonably withheld or delayed. Except as expressly set forth in this Paragraph G, nothing in this Agreement shall be deemed to grant or assign to Lab any rights under any patents, patent applications, trade secrets, trademarks, copyrights or other proprietary intellectual property rights of diaDexus.

H. The parties have provided to each other prior to entering into this Agreement, and in connection with this Agreement may in the future provide to each other, confidential information, including but not limited to each party’s know-how, inventions, improvements, discoveries, patent applications, trade secrets, devices, compositions, formulas, ideas, designs, drawings, specifications, techniques, data, computer programs, processes, customer lists, product prices, discounts, sales data, marketing, product development and other business plans, legal affairs and financial and technical information and material embodiments thereof (“Confidential Information”).

Confidential Information may be disclosed orally or in writing. Each receiving party may disclose this Confidential Information only to its employees, agents and consultants on a need to know basis; provided that any such person to whom disclosure is made is bound by obligations of non-disclosure and non-use no less restrictive than those set forth herein. The receiving party shall take the same degree of care that such party uses to protect its own confidential and proprietary information of a similar nature and importance, but in no event shall such care be less than reasonable care. The receiving party shall not disclose such Confidential Information to any third party, and shall not use such Confidential Information for any purpose except as expressly permitted under the terms and conditions of this Agreement. This obligation of confidentiality shall not apply to any information that (a) is in the public domain, (b) comes into the public domain through no fault of the receiving party, (c) is disclosed to the receiving party by a third party having a lawful right to make such disclosure, (d) is in response to a valid order of a court or other governmental body or (e) is required by law or regulation; provided, however, that the receiving party shall first have given reasonable prior notice to the disclosing party and shall have made a reasonable effort to obtain a protective order, or to cooperate with the disclosing party’s efforts, as applicable, to obtain a protective order limiting the extent of such disclosure and requiring that the Confidential Information so disclosed be used only for the purposes for which such order was issued or as required by such law or regulation. The terms and conditions of this Agreement shall be Confidential Information of the parties.

I. diaDexus represents and warrants to Lab that the Products supplied shall (i) not be adulterated or misbranded by diaDexus within the meaning of the U.S. Food, Drug, and Cosmetic Act; and (ii) function in accordance with the documentation supplied by diaDexus in connection with such Products after delivery to Lab in accordance with Paragraph C; provided that Lab maintains and stores such Products in accordance with instructions contained in such documentation. EXCEPT AS SPECIFICALLY SET FORTH IN THIS PARAGRAPH I, DIADEXUS MAKES NO REPRESENTATION OR WARRANTY OF ANY KIND, EXPRESS OR IMPLIED, INCLUDING WITHOUT

[ * ] = Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

LIMITATION, ANY WARRANTY OF MERCHANTABILITY, ANY WARRANTY OF FITNESS FOR A PARTICULAR PURPOSE OR USE, ANY WARRANTY OF NON-INFRINGEMENT, ANY WARRANTY OF SAFETY, OR ANY OTHER STATUTORY WARRANTY.

J. diaDexus’s liability to Lab shall not exceed the aggregate amount (if any) received by diaDexus in exchange for the Products during the Term. EXCEPT IN CONNECTION WITH THE PARTIES’ OBLIGATIONS UNDER PARAGRAPH H, IN NO EVENT SHALL EITHER PARTY BE LIABLE FOR INCIDENTAL, CONSEQUENTIAL, INDIRECT, PUNITIVE, EXEMPLARY, OR SPECIAL DAMAGES INCURRED BY THE OTHER OR ANY AFFILIATE OR SUBSIDIARY ARISING OUT OF OR RELATED TO THIS AGREEMENT, HOWEVER CAUSED, UNDER ANY THEORY OF LIABILITY.

K. diaDexus acknowledges that Lab has a proprietary interest in its legal and business name and reputation. Lab acknowledges that diaDexus has a proprietary interest in its legal and business name and reputation as well as the brand name and trademarks of its products. Therefore, each party agrees that it shall not use the other party’s name nor shall a party mention or describe this Agreement or its relationship with the other party in any press release, advertising, marketing, and promotional materials or other publications or materials without first obtaining the prior written approval of the other party.

L. diaDexus will not be liable for any failure to perform under this Agreement due to strikes, fire, explosion, flood, riot, lock-out, injunction, interruption of transportation, unavoidable accidents, or inability to obtain supplies at reasonable prices. In the event that a Product is unavailable, diaDexus will notify Lab of such unavailability by written or electronic communication, and diaDexus will, within the course of twenty-one (21) working days, notify Lab of an action plan to correct the problem.

M. If any term, condition or provision of this Agreement is held to be unenforceable for any reason, it shall be interpreted to achieve the intent of the parties to this Agreement to the extent possible rather than voided. In any event, all other terms, conditions, and provisions of this Agreement shall be deemed valid and enforceable to the full extent.

N. Each party shall carry out its activities pursuant to this Agreement in compliance with all applicable federal, state, and local laws, rules, regulations, and guidelines.

O. This Agreement shall be governed by and interpreted in accordance with the laws of the State of California, excluding conflicts of laws principles.

P. Except as expressly provided herein, neither this Agreement nor any interest hereunder will be assignable, nor any other obligation delegable, by a party without the prior written consent of the other; provided, however, diaDexus may assign this Agreement without consent to any successor in interest by way of merger or sale of all or substantially all of its assets in a manner such that the assignor will remain liable and responsible for the performance and observance of all such duties and obligations hereunder. Any purported assignments made in violation of this Paragraph P shall be null and void.

Q. To the extent that there is any conflict or inconsistency between this Agreement and any purchase order, the current diaDexus published Product Catalog and US Price List, or any other document pertaining to the supply of Product, the terms of this Agreement shall govern unless specifically acknowledged and agreed to in writing by each of the parties.

Boston Heart Diagnostics		diaDexus, Inc.
By:	/s/ Susan Hertzberg	By:	/s/ Brian E. Ward, Ph.D.
Name:	Susan Hertzberg	Name:	Brian E. Ward, Ph.D.
Title:	CEO	Title:	CEO
Date:	4/26/12	Date:	5/9/12

[ * ] = Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

EX-31.1

Exhibit 31.1

CERTIFICATION

I, Brian E. Ward, certify that:

1. I have reviewed this quarterly report on Form 10-Q of diaDexus, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: August 7, 2012	/s/ Brian E. Ward
	Brian E. Ward
	President and Chief Executive Officer

EX-31.2

Exhibit 31.2

CERTIFICATION

I, Jean-Frédéric Viret, certify that:

1. I have reviewed this quarterly report on Form 10-Q of diaDexus, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: August 7, 2012	/s/ Jean-Frédéric Viret
	Jean-Frédéric Viret
	Chief Financial Officer

EX-32.1

Exhibit 32.1

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of diaDexus, Inc. (the “Company”) on Form 10-Q for the period ended June 30, 2012 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Brian E. Ward, President and Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to my knowledge:

• The Report fully complies with the requirements of Section 13(a) or Section 15(d), as applicable, of the Securities Exchange Act of 1934, and

• The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: August 7, 2012	/s/ Brian E. Ward
	Brian E. Ward
	President and Chief Executive Officer

This certification accompanies the Form 10-Q to which it relates, is not deemed filed with the Securities and Exchange Commission and is not to be incorporated by reference into any filing of the Company under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended (whether made before or after the date of the Form 10-Q), irrespective of any general incorporation language contained in such filing.

EX-32.2

Exhibit 32.2

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of diaDexus, Inc. (the “Company”) on Form 10-Q for the period ended June 30, 2012 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Jean-Frédéric Viret, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to my knowledge:

• The Report fully complies with the requirements of Section 13(a) or Section 15(d), as applicable, of the Securities Exchange Act of 1934, and

• The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: August 7, 2012	/s/ Jean-Frédéric Viret
	Jean-Frédéric Viret
	Chief Financial Officer

This certification accompanies the Form 10-Q to which it relates, is not deemed filed with the Securities and Exchange Commission and is not to be incorporated by reference into any filing of the Company under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended (whether made before or after the date of the Form 10-Q), irrespective of any general incorporation language contained in such filing.

XML

Assets Held For Sale (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended	12 Months Ended
	Mar. 31, 2012	Dec. 22, 2011	Jun. 30, 2012	Dec. 31, 2011
Assets held for sale
Assets held for sale			$ 750	$ 304
Gain (Loss)
Carrying (Reported) Amount, Fair Value Disclosure [Member]
Assets held for sale
Assets held for sale			302
Quoted Prices In Active Markets for Identical Assets Level 1 [Member]
Assets held for sale
Assets held for sale
Significant other Observable Inputs Level 2 [Member]
Assets held for sale
Assets held for sale
Significant Unobservable Inputs Level 3 [Member]
Assets held for sale
Assets held for sale			$ 750	$ 304

XML

Stock Based Compensation (Details 4)	Jun. 30, 2012	Jun. 30, 2011
Reserved shares of common stock for future issuance
Total	15,451,147	8,294,396
Options to purchase common stock [Member]
Reserved shares of common stock for future issuance
Total	9,762,693	6,880,609
Warrants [Member]
Reserved shares of common stock for future issuance
Total	480,769	10,000
Stock Options Shares Available for Grant [Member]
Reserved shares of common stock for future issuance
Total	5,207,685	1,403,787

XML

Common Stock (Details) (USD $)	Jun. 30, 2012	Dec. 31, 2011	Jul. 15, 2011
Common Stock (Textual) [Abstract]
Common stock, shares authorized	100,000,000	100,000,000	100,000,000
Increase in number of authorized shares of common stock, par value	$ 0.01	$ 0.01	$ 0.01

XML

Stock Based Compensation (Details Textual) (USD $)	6 Months Ended			6 Months Ended		6 Months Ended		6 Months Ended		6 Months Ended			6 Months Ended				6 Months Ended
	Jun. 30, 2012	Dec. 31, 2011	Jun. 30, 2012 Director [Member]	Jun. 30, 2012 Director [Member] Employee Stock Option [Member]	Jun. 30, 2012 Chief Executive Officer [Member]	Jun. 30, 2012 Chief Executive Officer [Member] Employee Stock Option [Member]	Jun. 30, 2012 Chief Business Officer [Member]	Jun. 30, 2012 Chief Business Officer [Member] Employee Stock Option [Member]	Jun. 30, 2012 Chief Financial Officer [Member]	Jun. 30, 2012 Chief Financial Officer [Member] Employee Stock Option [Member]	Jun. 30, 2012 1996 Stock Option Plan [Member]	May 17, 2012 1996 Stock Option Plan [Member]	Jun. 30, 2012 1996 Stock Option Plan [Member] Options to purchase common stock [Member]	Jun. 30, 2012 1998 Director Stock Option Plan [Member]	May 17, 2012 1998 Director Stock Option Plan [Member]	Jun. 30, 2012 1998 Director Stock Option Plan [Member] Options to purchase common stock [Member]	Jun. 30, 2012 2012 Equity Incentive Award Plan [Member]	Jun. 30, 2012 2012 Equity Incentive Award Plan [Member] Options to purchase common stock [Member]
Stock Based Compensation (Textual) [Abstract]
Shares of common stock authorized for issuance													4,750,000			300,000		3,000,000
Percentage increased by the number of issued and outstanding common stock													3.50%
Options expire from the date of grant													10 years
Shares available for grant											6,398,904			170,000			5,207,685
Shares transferred form prior plans available for issuance under the plan												1,555,492			130,000
Options outstanding	9,762,693	9,187,589															9,762,693
Deferred Compensation Arrangement with Individual, Shares Issued				30,000		1,530,000		1,130,000		1,060,000
Deferred Compensation Arrangement with Individual, Exercise Price				$ 12.27		$ 0.25		$ 0.26		$ 0.28
Deferred Compensation Arrangement with Individual Stock Options Exercised or Repurchased			0		0		0		0
Determination of Non qualified stock options exercise price fair market value of stock minimum percentage											85.00%
Issuable upon exercise of options vest											4 years		4 years				4 years
Period Between Grant Date and Vesting Period Start Date													1 year
Options granted	1,141,000
Employee Service Share-based Compensation, Nonvested Awards, Total Compensation Cost Not yet Recognized	$ 0
Share Based Compensation (Additional Textual) [Abstract]
Condition for stock option expiry	Option terms expire no later than 10 years from the date of grant, or 5 years from the date the option is granted to a greater than 10% stockholder
Condition for stock option exercisable	stock options are exercisable at not less than the fair market value of the stock at the date of grant, or not less than 110% of the fair market value of the stock at the date of grant if granted to a greater than 10% stockholder
Aggregate Intrinsic Value, Exercisable at June 30, 2012	879,331
Aggregate Intrinsic Value, Outstanding at June 30, 2012	1,835,746
Stock based compensation expense, unrecognized cost	800,000
Stock Option Compensation Expenses	3 years
Total remaining unrecognized cost	$ 0
Non Employee Stock Options Vesting Period	1 year

XML

Notes Payable (Details) (USD $) In Thousands, unless otherwise specified	Jun. 30, 2012	Dec. 31, 2011
Future minimum payments for the notes payable
Notes payable, net	$ 4,921
Less: Notes payable, current portion	1,209	372
Non-current portion of notes payable	3,712	4,526
Notes Payable [Member]
Future minimum payments for the notes payable
2012 (remainder of year)	547
2013	1,870
2014	1,781
2015	1,378
Total minimum payments	5,576
Less: Amount representing interest	(576)
Present value of minimum payments	5,000
Less: Unamortized debt discount	$ (79)

XML

Leases, Commitments and Contingencies (Tables)

6 Months Ended

Jun. 30, 2012

Leases, Commitments and Contingencies [Abstract]

Future minimum lease payments under non-cancelable operating leases

Future minimum lease payments under non-cancelable operating leases are as follows (in thousands):

	Operating Leases
2012 (remainder of year)	$	1,216
2013		2,505
2014		2,581
2015		2,658
2016		2,738
Total minimum lease payments	$	11,698

XML

Stock Warrants (Details Textual) (USD $)	1 Months Ended	3 Months Ended		6 Months Ended
	Sep. 30, 2011	Jun. 30, 2012	Jun. 30, 2011	Jun. 30, 2012	Jun. 30, 2011
Stock Warrants (Textual) [Abstract]
Warrant issued to purchase common stock	480,769			480,769
Exercise Price of the warrants	$ 0.26
Expected volatility				96.65%	90.44%
Risk-free interest rate	1.36%			0.49%	1.56%
Expected Life of Warrants	7 years
Fair value of warrant	$ 94,000
Warrants outstanding, Number		480,769		480,769
Exercise Price, Warrants Outstanding		0.26		0.26
Warrant expiry date				2018-09
Warrants Outstanding [Member]
Stock Warrants (Textual) [Abstract]
Expected volatility	88.03%
Warrants outstanding, Number		480,769		480,769
Exercise Price, Warrants Outstanding		0.26		0.26
Aggregate exercise price		$ 100,000		$ 100,000
Discount being amortized to interest expense				48 months

XML

Assets Held for Sale (Tables)

6 Months Ended

Jun. 30, 2012

Assets Held for Sale [Abstract]

Assets held for sale

Total assets held for sale as of June 30, 2012 and December 31, 2011 is as follows (in thousands):

			Fair Value Measurements
Description	Carrying Value at June 30, 2012		June 30,     2012		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Six Months   Ended June 30, 2012 Total Gains (Losses)
Assets held for sale	$	302	$	750	$	—	$	—	$	750	$	—

			Fair Value Measurements
Description	December 31, 2011		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Year Ended December 31, 2011 Total Gains (Losses)
Assets held for sale	$	304	$	—	$	—	$	304	$	—

XML

Stock Based Compensation (Details) (USD $)	1 Months Ended	3 Months Ended		6 Months Ended
	Sep. 30, 2011	Jun. 30, 2012	Jun. 30, 2011	Jun. 30, 2012	Jun. 30, 2011
Weighted average assumptions used with regard to stock option
Dividend yield				0.00%	0.00%
Risk-free interest rate	1.36%			0.49%	1.56%
Expected volatility				96.65%	90.44%
Forfeiture rate				13.24%	11.57%
Expected term (years)				4 years 1 month 13 days	4 years 3 months 7 days
Fair value per share at grant date				$ 0.19	$ 0.26

XML

Property, Plant and Equipment (Details 1) (USD $) In Thousands, unless otherwise specified	Jun. 30, 2012	Dec. 31, 2011
Property and equipment at cost less accumulated depreciation
Gross property and equipment	$ 4,177	$ 16,236
Less: Accumulated depreciation and amortization	(2,794)	(14,886)
Total Property, Plant and Equipment	1,383	1,350
Laboratory equipment [Member]
Property and equipment at cost less accumulated depreciation
Gross property and equipment	3,078	5,202
Leasehold improvements [Member]
Property and equipment at cost less accumulated depreciation
Gross property and equipment	602	8,283
Computer and software [Member]
Property and equipment at cost less accumulated depreciation
Gross property and equipment	334	1,916
Furniture and fixtures [Member]
Property and equipment at cost less accumulated depreciation
Gross property and equipment	$ 163	$ 835

XML

Cash, Cash Equivalents and Investments (Details Textual) (USD $) In Millions, unless otherwise specified	3 Months Ended
	Jun. 30, 2012
Cash, Cash Equivalents and Investments (Textual) [Abstract]
Note payable face value	$ 5.0
Investment securities maturity period	1 year

XML

Stock Based Compensation (Details 2) (USD $)	6 Months Ended
	Jun. 30, 2012
Stock option activity under the plan, the Director Plan and certain option grants to employees and a director outside of the plan, net of options previously exercised
Number of Options Outstanding at December 31, 2011	9,187,589
Weighted- Average Exercise Price Outstanding at December 31, 2011	$ 0.48
Number of Options Outstanding, Options granted	1,141,000
Weighted- Average Exercise Price, Options granted	$ 0.28
Number of Options Outstanding, Options exercised	(34,018)
Weighted- Average Exercise Price, Options exercised	$ 0.26
Number of options outstanding, Options cancelled/forfeited/expired	(531,878)
Weighted average exercise price, Options cancelled/forfeited/expired	$ 0.82
Number of Options Outstanding at June 30, 2012	9,762,693
Weighted- Average Exercise Price, Outstanding at June 30, 2012	$ 0.44
Weighted- Average Remaining Contractual Term, Outstanding at June 30, 2012	6 years 8 months 19 days
Aggregate Intrinsic Value, Outstanding at June 30, 2012	$ 1,835,746
Number of Options Outstanding, Exercisable at June 30, 2012	4,781,773
Weighted- Average Exercise Price, Exercisable at June 30, 2012	$ 0.61
Weighted- Average Remaining Contractual Term, Exercisable at June 30, 2012	4 years 1 month 17 days
Aggregate Intrinsic Value, Exercisable at June 30, 2012	879,331
Number of Options Outstanding, Vested and expected to vest at June 30, 2012	8,935,141
Weighted- Average Exercise Price, Vested and expected to vest at June 30, 2012	$ 0.45
Weighted- Average Remaining Contractual Term, Vested and expected to vest at June 30. 2012	6 years 5 months 23 days
Aggregate Intrinsic Value, Vested and expected to vest at June 30, 2012	$ 1,677,120

XML

Notes payable (Details Textual) (USD $)	1 Months Ended	6 Months Ended
	Sep. 30, 2011	Jun. 30, 2012 Installment
Notes Payable (Additional Textual) [Abstract]
Period for monthly installment		Monthly
Debt instrument number of installments		36
Loan processing fee		$ 25,000
Additional fee required		100,000
Advance notice period to the bank		30 days
Obligation to pay		1.00%
Warrant issued to purchase common stock	480,769	480,769
Monthly revenue projections		80.00%
Repayment of term loan description		The repayment of the term loan may be accelerated, at the option of the bank, following the occurrence of an event of default, which would require the Company to pay to the bank an amount equal to the sum of: (i) all outstanding principal plus accrued interest, (ii) the final payment, plus (iii) an early payment fee equal to 1% of the principal amount then required to be paid if such repayment is required prior to September 24, 2012, plus (iv) all other sums, that shall have become due and payable but have not been paid, including interest at the default rate with respect to any past due amounts
Notes Payable [Member]
Notes Payable (Textual) [Abstract]
Proceeds from bank debt	5,000,000
Interest rate on loan	5.25%

XML

Inventory

6 Months Ended

Jun. 30, 2012

Inventory [Abstract]

Inventory

4. Inventory

Inventory consists of the following (in thousands):

	June 30, 2012		December 31, 2011
Finished goods	$	186	$	71
Raw materials		41		46
	$	227	$	117

XML

Property, Plant and Equipment (Details Textual) (USD $) In Millions, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2012	Jun. 30, 2011	Jun. 30, 2012	Jun. 30, 2011
Property Plant and Equipment (Textual) [Abstract]
Depreciation and amortization expense	$ 0.2	$ 0.2	$ 0.3	$ 0.3

XML

Notes Payable (Tables)

6 Months Ended

Jun. 30, 2012

Notes Payable [Abstract]

Future minimum payments for the notes payable

Future minimum payments for the notes payable are as follows (in thousands):

2012 (remainder of year)	$	547
2013		1,870
2014		1,781
2015		1,378
Total minimum payments		5,576
Less: Amount representing interest		(576	)
Present value of minimum payments		5,000
Less: Unamortized debt discount		(79	)
Notes payable, net		4,921
Less: Notes payable, current portion		1,209
Non-current portion of notes payable	$	3,712

XML

Concentration of Credit Risk (Tables)

6 Months Ended

Jun. 30, 2012

Concentration of Credit Risk [Abstract]

Revenues from customers

Revenues from the following customers represented a significant portion of total revenue for the three and six months ended June 30, 2012 and 2011 and accounts receivable as of June 30, 2012 and December 31, 2011:

	Revenue												Accounts Receivable
	Three Months Ended June 30,						Six Months Ended June 30,						June 30,			December 31,
	2012			2011			2012			2011			2012			2011
Customer A		42	%		34	%		45	%		18	%		32	%		44	%
Customer B		13	%		10	%		13	%		10	%		19	%		13	%
Customer C		7	%		—	%		6	%		—	%		10	%		—	%
Customer D		6	%		13	%		6	%		14	%		9	%		15	%
Customer E		—	%		23	%		—	%		36	%		—	%		20	%
Total		68	%		80	%		70	%		78	%		70	%		92	%

XML

Stock Warrants (Details) (USD $)	6 Months Ended
	Jun. 30, 2012
Summarizes information about all warrants outstanding
Exercise Price, Warrants Outstanding	0.26
Warrants outstanding, Number	480,769
Warrants Weighted Average Remaining Contractual Life (In Years)	6 years 2 months 27 days
Exercise Price, Warrants Outstanding	0.26
Number of Warrants Exercisable	480,769
Weighted Average Exercise Price, Warrants Exercisable	$ 0.26
Warrants [Member]
Summarizes information about all warrants outstanding
Warrants outstanding, Number	480,769
Warrants Weighted Average Remaining Contractual Life (In Years)	6 years 2 months 27 days
Exercise Price, Warrants Outstanding	0.26
Number of Warrants Exercisable	480,769
Weighted Average Exercise Price, Warrants Exercisable	$ 0.26

XML

Total Accrued and Other Current Liabilities (Details) (USD $) In Thousands, unless otherwise specified	Jun. 30, 2012	Dec. 31, 2011
Accrued and other current liabilities
Accrued payroll and related expenses	$ 1,054	$ 1,351
Accrued royalty expense	246	207
Accrued sales tax	139	126
Accrued legal and patent expense	133	35
Accrued consulting expenses	70	69
Property and equipment		200
Accrued audit fees		120
Accrued collaborative research obligations		96
Other current liabilities	292	265
Total accrued and other current liabilities	$ 1,934	$ 2,469

XML

Basic and Diluted Net Loss per Share (Tables)

6 Months Ended

Jun. 30, 2012

Basic and Diluted Net Loss per Share [Abstract]

Outstanding securities considered anti-dilutive and therefore, excluded from the computation of diluted net loss per share

The following table shows the total outstanding securities considered anti-dilutive and therefore, excluded from the computation of diluted net loss per share (in thousands):

	As of June 30,
	2012		2011
Options to purchase common stock		9,763		6,881
Warrants to purchase common stock		481		10
Total		10,244		6,891

XML

Stock Based Compensation (Tables)

6 Months Ended

Jun. 30, 2012

Stock Based Compensation [Abstract]

Weighted average assumptions used with regard to stock option

The compensation expense related to stock options recognized was determined using the Black-Scholes option valuation model. Option valuation models require the input of subjective assumptions and these assumptions can vary over time. The weighted average assumptions used were as follows:

	Three Months Ended June 30,				Six Months Ended June 30,
	2012		2011		2012			2011
Dividend yield		—		—		0.0	%		0.0	%
Risk-free interest rate		—		—		0.49	%		1.56	%
Expected volatility		—		—		96.65	%		90.44	%
Forfeiture rate		—		—		13.24	%		11.57	%
Expected term (years)		—		—		4.12			4.27
Fair value per share at grant date		—		—	$	0.19		$	0.26

Summary of stock compensation expense related to employee stock options and employee stock based compensation

The following table summarizes stock compensation expense related to employee stock options and employee stock based compensation for the three and six months ended June 30, 2012 and 2011, which was incurred as follows (in thousands)

	Three Months Ended June 30,				Six Months Ended June 30,
	2012		2011		2012		2011
Stock compensation expense:
Product costs	$	3	$	3	$	5	$	6
Research and development		14		21		31		43
Sales and marketing		16		13		29		26
General and administrative		54		331		99		387
Total stock compensation expense	$	87	$	368	$	164	$	462

Stock option activity under the plan, the Director Plan and certain option grants to employees and a director outside of the plan, net of options previously exercised

The table below presents information related to stock option activity under the 1996 Plan, the Director Plan and certain option grants to employees and a director outside of the Plan, and, as of May 17, 2012, under the 2012 Plan, net of options previously exercised, as follows:

	Number of Options Outstanding			Weighted- Average Exercise Price		Weighted- Average Remaining Contractual Term (In years)		Aggregate Intrinsic Value
Outstanding at December 31, 2011		9,187,589		$	0.48
Options granted		1,141,000			0.28
Options exercised		(34,018	)		0.26
Options cancelled/forfeited/expired		(531,878	)		0.82
Outstanding at June 30, 2012		9,762,693		$	0.44		6.72	$	1,835,746
Exercisable at June 30, 2012		4,781,773		$	0.61		4.13	$	879,331
Vested and expected to vest at June 30, 2012		8,935,141		$	0.45		6.48	$	1,677,120

Summary of information relating to stock options outstanding

The following table summarizes information relating to stock options outstanding as of June 30, 2012:

	Options Outstanding						Options Exercisable
Range of Exercise Price	Number Outstanding		Weighted Average Remaining Contractual Life (In Years)		Weighted Average Exercise Price		Number Exercisable		Weighted Average Exercise Price
$0.14		96,000		9.46	$	0.14		—	$	—
$0.25		1,542,000		9.24		0.25		3,000		0.25
$0.26		5,139,937		4.73		0.26		3,674,896		0.26
$0.28		1,141,000		9.60		0.28		—		—
$0.29		1,218,756		9.04		0.29		700,752		0.29
$0.33 - $4.57		515,000		7.78		0.78		293,125		1.08
$8.74		20,000		1.39		8.74		20,000		8.74
$12.27		30,000		2.31		12.27		30,000		12.27
$14.30		20,000		0.60		14.30		20,000		14.30
$15.71		40,000		1.90		15.71		40,000		15.71
$0.14 - $15.71		9,762,693		6.72	$	0.44		4,781,773	$	0.61

Reserved shares of common stock for future issuance

The Company had reserved shares of common stock for future issuance at June 30, 2012 and 2011 as follows:

	As of June 30,
	2012		2011
Options to purchase common stock		9,762,693		6,880,609
Warrants to purchase common stock		480,769		10,000
Shares available for option grants		5,207,685		1,403,787
Total		15,451,147		8,294,396

XML

Cash, Cash Equivalents and Investments

6 Months Ended

Jun. 30, 2012

Cash, Cash Equivalents and Investments [Abstract]

Cash, Cash Equivalents and Investments

3. Cash, Cash Equivalents and Investments

As part of its cash management program, the Company maintains a portfolio of marketable investment securities. The securities are investment grade and generally mature within one year and may include tax exempt securities and certificates of deposit. The fair value of substantially all securities is determined by quoted market prices. The Company maintains its cash in bank accounts, which at times may exceed federally insured limits. The Company has not experienced any losses on such accounts. The Company considers all highly liquid investments purchased with an original maturity of three months or less at the time of purchase to be cash equivalents.

The following is a summary of cash, cash equivalents, and available-for-sale securities at June 30, 2012 and December 31, 2011 (in thousands):

	June 30, 2012
	Cost Basis		Unrealized Gains		Unrealized Losses			Estimated Fair Value
Cash and cash equivalents:
Cash	$	4,102	$	—	$	—		$	4,102
Money market funds		8,276		—		—			8,276
Total cash and cash equivalents	$	12,378	$	—	$	—		$	12,378
Available-for-sale marketable securities:
Corporate notes		1,255		—		(1	)		1,254
Certificates of deposit		996		—		—			996
Total available-for-sale marketable securities	$	2,251	$	—	$	(1	)	$	2,250

	December 31, 2011
	Cost Basis		Unrealized Gains		Unrealized Losses			Estimated Fair Value
Cash and cash equivalents:
Cash	$	3,243	$	—	$	—		$	3,243
Money market funds		7,241		—		—			7,241
Total cash and cash equivalents	$	10,484	$	—	$	—		$	10,484
Available-for-sale marketable securities:
Commercial paper		3,147		—		(1	)		3,146
Corporate notes		2,850		—		(4	)		2,846
US government agency obligations		750		—		—			750
Total available-for-sale marketable securities	$	6,747	$	—	$	(5	)	$	6,742

Fair Value Measurements

In accordance with ASC 820, the Company discloses and recognizes the fair value of its assets and liabilities using a hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The guidance establishes three levels of the fair value hierarchy as follows:

Level 1: Observable inputs, such as quoted prices in active markets for identical assets or liabilities;

Level 2: Observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities, quoted prices in markets that are not active, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities;

Level 3: Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.

The following table represents the Company’s fair value hierarchy for its financial assets (cash equivalents and investments) measured at fair value on a recurring basis as of June 30, 2012 and December 31, 2011 (in thousands):

			Fair Value Measurements
	Balance at June 30, 2012		Quoted Prices In Active Markets for Identical Assets Level  1		Significant other Observable Inputs Level 2		Significant Unobservable Inputs Level 3
Assets:
Cash	$	4,102	$	4,102	$	—	$	—
Money market funds		8,276		8,276		—		—
Corporate notes		1,254		—		1,254		—
Certificates of deposit		996		—		996		—
Restricted cash		1,400		—		1,400		—
	$	16,028	$	12,378	$	3,650	$	—

			Fair Value Measurements
	Balance as of December 31, 2011		Quoted Prices In Active Markets for Identical Assets Level  1		Significant other Observable Inputs Level 2		Significant Unobservable Inputs Level 3
Assets:
Cash	$	3,243	$	3,243	$	—	$	—
Money market funds		7,241		7,241		—		—
Commercial paper		3,146		—		3,146		—
Corporate notes		2,846		—		2,846		—
US government agency obligations		750		—		750		—
Restricted cash		1,800		—		1,800		—
	$	19,026	$	10,484	$	8,542	$	—

The fair value of the notes payable is valued based on level 2 inputs and approximates its book value. The fair value of the notes payable is based on the present value of expected future cash flows and assumptions about current interest rates and the credit worthiness of the Company. As of June 30, 2012, the notes payable is carried at face value of $5.0 million less any unamortized debt discount.

The carrying value of other financial instruments, including cash, accounts receivable, accounts payable and other payables, approximates fair value due to their short maturities.

XML

Stock Warrants (Tables)

6 Months Ended

Jun. 30, 2012

Stock Warrants [Abstract]

Summarizes information about all warrants outstanding

The following table summarizes information about all warrants outstanding as of June 30, 2012:

	Warrants Outstanding						Warrants Exercisable
Exercise Price	Number Outstanding		Weighted Average Remaining Contractual Life (In Years)		Weighted Average Exercise Price		Number Exercisable		Weighted Average Exercise Price
$0.26		480,769		6.24	$	0.26		480,769	$	0.26
		480,769		6.24	$	0.26		480,769	$	0.26

XML

Assets Held For Sale (Details Textual) (USD $)	3 Months Ended	6 Months Ended
	Jun. 30, 2012	Jun. 30, 2012
Assets Held for Sale (Textual) [Abstract]
Impairment charge	$ 0	$ 0
Committed sales price for assets held for sale	$ 750,000	$ 750,000

XML

Stock Based Compensation (Details 3) (USD $)	6 Months Ended
	Jun. 30, 2012
$0.14 [Member]
Summary of information relating to stock options outstanding
Number Outstanding, options outstanding	96,000
Weighted Average Remaining Contractual Life, Options outstanding	9 years 5 months 16 days
Weighted Average Exercise Price, Options outstanding	$ 0.14
Number Exercisable, Options exercisable
Weighted Average Exercise Price, Options Exercisable
$0.25 [Member]
Summary of information relating to stock options outstanding
Number Outstanding, options outstanding	1,542,000
Weighted Average Remaining Contractual Life, Options outstanding	9 years 2 months 27 days
Weighted Average Exercise Price, Options outstanding	$ 0.25
Number Exercisable, Options exercisable	3,000
Weighted Average Exercise Price, Options Exercisable	$ 0.25
$0.26 [Member]
Summary of information relating to stock options outstanding
Number Outstanding, options outstanding	5,139,937
Weighted Average Remaining Contractual Life, Options outstanding	4 years 8 months 23 days
Weighted Average Exercise Price, Options outstanding	$ 0.26
Number Exercisable, Options exercisable	3,674,896
Weighted Average Exercise Price, Options Exercisable	$ 0.26
$0.28 [Member]
Summary of information relating to stock options outstanding
Number Outstanding, options outstanding	1,141,000
Weighted Average Remaining Contractual Life, Options outstanding	9 years 7 months 6 days
Weighted Average Exercise Price, Options outstanding	$ 0.28
Number Exercisable, Options exercisable
Weighted Average Exercise Price, Options Exercisable
$0.29 [Member]
Summary of information relating to stock options outstanding
Number Outstanding, options outstanding	1,218,756
Weighted Average Remaining Contractual Life, Options outstanding	9 years 15 days
Weighted Average Exercise Price, Options outstanding	$ 0.29
Number Exercisable, Options exercisable	700,752
Weighted Average Exercise Price, Options Exercisable	$ 0.29
$0.33 - $4.57 [Member]
Summary of information relating to stock options outstanding
Number Outstanding, options outstanding	515,000
Weighted Average Remaining Contractual Life, Options outstanding	7 years 9 months 11 days
Weighted Average Exercise Price, Options outstanding	$ 0.78
Number Exercisable, Options exercisable	293,125
Weighted Average Exercise Price, Options Exercisable	$ 1.08
$8.74 [Member]
Summary of information relating to stock options outstanding
Number Outstanding, options outstanding	20,000
Weighted Average Remaining Contractual Life, Options outstanding	1 year 4 months 21 days
Weighted Average Exercise Price, Options outstanding	$ 8.74
Number Exercisable, Options exercisable	20,000
Weighted Average Exercise Price, Options Exercisable	$ 8.74
$12.27 [Member]
Summary of information relating to stock options outstanding
Number Outstanding, options outstanding	30,000
Weighted Average Remaining Contractual Life, Options outstanding	2 years 3 months 22 days
Weighted Average Exercise Price, Options outstanding	$ 12.27
Number Exercisable, Options exercisable	30,000
Weighted Average Exercise Price, Options Exercisable	$ 12.27
$14.30 [Member]
Summary of information relating to stock options outstanding
Number Outstanding, options outstanding	20,000
Weighted Average Remaining Contractual Life, Options outstanding	7 months 6 days
Weighted Average Exercise Price, Options outstanding	$ 14.3
Number Exercisable, Options exercisable	20,000
Weighted Average Exercise Price, Options Exercisable	$ 14.3
$15.71 [Member]
Summary of information relating to stock options outstanding
Number Outstanding, options outstanding	40,000
Weighted Average Remaining Contractual Life, Options outstanding	1 year 10 months 24 days
Weighted Average Exercise Price, Options outstanding	$ 15.71
Number Exercisable, Options exercisable	40,000
Weighted Average Exercise Price, Options Exercisable	$ 15.71
$0.14 - $15.71 [Member]
Summary of information relating to stock options outstanding
Number Outstanding, options outstanding	9,762,693
Weighted Average Remaining Contractual Life, Options outstanding	6 years 8 months 19 days
Weighted Average Exercise Price, Options outstanding	$ 0.44
Number Exercisable, Options exercisable	4,781,773
Weighted Average Exercise Price, Options Exercisable	$ 0.61

XML

Condensed Balance Sheets (USD $) In Thousands, unless otherwise specified	Jun. 30, 2012	Dec. 31, 2011
Current assets:
Cash and cash equivalents	$ 12,378	$ 10,484
Short-term investment securities	2,250	6,492
Accounts receivable, net of allowance for doubtful accounts of $4 and rebate reserve of $0 at June 30, 2012 and $4 and $20, respectively, at December 31, 2011	2,387	2,408
Inventories	227	117
Restricted cash		400
Assets held for sale	302	304
Prepaid expenses and other current assets	813	975
Total current assets	18,357	21,180
Long-term investments		250
Restricted cash	1,400	1,400
Property and equipment, net	1,383	1,350
Other long-term assets	130	175
Total assets	21,270	24,355
Current liabilities:
Accounts payable	586	882
Notes payable, current portion	1,209	372
Deferred revenues, current portion	340	331
Unfavorable lease obligations	539	492
Accrued and other current liabilities	1,934	2,469
Total current liabilities	4,608	4,546
Non-current portion of notes payable	3,712	4,526
Non-current portion of deferred revenue	378	530
Non-current portion of deferred rent	314	266
Non-current portion of unfavorable lease obligation	2,776	3,063
Other long term liabilities	318	284
Total liabilities	12,106	13,215
Commitments and contingencies (Note 14)
Stockholders' equity
Preferred Stock, $0.01 par value, 19,979,500 shares authorized; none issued and outstanding
Common stock, $0.01 par value; 100,000,000 shares authorized; 53,101,063 and 53,067,045 shares issued and outstanding at June 30, 2012 and December 31, 2011, respectively	531	531
Additional paid-in capital	205,730	205,557
Accumulated other comprehensive loss	(1)	(5)
Accumulated deficit	(197,096)	(194,943)
Total stockholders' equity	9,164	11,140
Total liabilities and stockholders' equity	$ 21,270	$ 24,355

XML

Concentration of Credit Risk (Details)	3 Months Ended		6 Months Ended
	Jun. 30, 2012	Jun. 30, 2011	Jun. 30, 2012	Jun. 30, 2011	Dec. 31, 2011
Revenues from customers
Revenue	68.00%	80.00%	70.00%	78.00%
Accounts Receivable	70.00%		70.00%		92.00%
Customer A [Member]
Revenues from customers
Revenue	42.00%	34.00%	45.00%	18.00%
Accounts Receivable	32.00%		32.00%		44.00%
Customer B [Member]
Revenues from customers
Revenue	13.00%	10.00%	13.00%	10.00%
Accounts Receivable	19.00%		19.00%		13.00%
Customer C [Member]
Revenues from customers
Revenue	7.00%		6.00%
Accounts Receivable	10.00%		10.00%
Customer D [Member]
Revenues from customers
Revenue	6.00%	13.00%	6.00%	14.00%
Accounts Receivable	9.00%		9.00%		15.00%
Customer E [Member]
Revenues from customers
Revenue		23.00%		36.00%
Accounts Receivable					20.00%

XML

Business Overview

6 Months Ended

Jun. 30, 2012

Business Overview [Abstract]

Business Overview

1. Business Overview

diaDexus, Inc., a Delaware corporation (the “Company”), is a life sciences company focused on the development and commercialization of proprietary cardiovascular diagnostic products addressing unmet needs in cardiovascular disease. The Company is the successor to a company initially formed as a joint venture between SmithKlineBeecham Corporation (now GlaxoSmithKline LLC (“GlaxoSmithKline”)) and Incyte Pharmaceuticals, Inc. Upon formation, SmithKlineBeecham Corporation granted the Company an exclusive license to certain diagnostic intellectual property, including Lp-PLA ₂, an inflammatory marker of cardiovascular risk.

The Company’s products, PLAC ^® Tests, provide new information, over and above traditional risk factors, to help identify individuals at increased risk of suffering a heart attack or stroke. Some of these events may be reduced with earlier detection and more aggressive risk-reducing strategies, including treatment to lower LDL-cholesterol goals with statins. The Company has commercialized two PLAC Tests. One test measures the mass of circulating Lp-PLA₂ in the blood, the PLAC Test ELISA Kit. The PLAC Test ELISA Kit is the only blood test cleared by the U.S. Food and Drug Administration (“the FDA”) to aid in assessing risk for both coronary heart disease and ischemic stroke associated with atherosclerosis. The second test, the PLAC Test for Lp-PLA₂ Activity, is an enzyme assay for the quantitative determination of Lp-PLA₂ activity levels in human plasma and serum on automated clinical chemistry analyzers, to be used in conjunction with clinical evaluation and patient risk assessment as an indicator of atherosclerotic cardiovascular disease. The Company is currently commercializing the PLAC Test ELISA Kit in the United States and Europe and the PLAC Test for Lp-PLA₂  Activity in Europe.

The Company has incurred substantial losses since inception and expects to continue to incur substantial net losses for at least the next few years. To date, the Company has funded its operations primarily through private placements of preferred stock and debt financing, as well as through revenue generated from the sale of products.

In September 2011, the Company entered into a loan and security agreement with Comerica Bank (see Note 9). This loan contains various covenants. If the Company breaches any of these covenants or is unable to make a required payment of principal or interest, or experiences a material adverse change to its business, it could result in a default under the loan. Additionally, the Company is required to achieve revenues equal to at least 80% of monthly projections approved by its Board of Directors and provided to the bank, and failure to do so could result in a default under the loan. Upon the occurrence of an event of default under the loan, the bank could elect to declare all amounts outstanding to be immediately due and payable. If the Company is unable to repay those amounts, the bank could proceed against the collateral granted to them to secure such indebtedness. The Company has pledged substantially all of its assets, other than its intellectual property, as collateral under the loan. The Company’s future liquidity requirements may increase beyond currently expected levels if it fails to maintain compliance with its covenants. In order to meet the future liquidity needs, the Company may become reliant on additional equity and/or debt financing. Additional funding may not be available when needed or on terms acceptable to the Company. Any additional equity financing may be dilutive to stockholders, and debt financing, if available, may involve restrictive covenants. The Company cannot assure you that it will be able to raise any such additional funding.

PLAC Test ELISA Kit

The Company introduced its initial PLAC Test ELISA Kit product in 2004. The PLAC Test ELISA Kit uses microplate technologies to measure levels of Lp-PLA ₂. The infrastructure for performing microplate tests typically exists only at large and midsize clinical reference laboratories and large hospitals, which must be certified by the US Department of Health and Human Services (“DHHS”) for high-complexity diagnostics under the Clinical Laboratory Improvement Amendments (“CLIA”). Smaller hospitals and clinics can order the PLAC Test ELISA Kit for their patients from those institutions that are able to perform microplate tests and offer the PLAC Test ELISA Kit. Patients can have their blood drawn at a local laboratory and shipped to the more advanced institutions for analysis. The PLAC Test ELISA Kit is the only product the Company markets in both the United States and Europe.

PLAC Test for Lp-PLA₂ Activity

The Company introduced the PLAC Test for Lp-PLA ₂ Activity in Europe in March 2012. This PLAC Test for Lp-PLA ₂ Activity is an enzyme assay for the quantitative determination of Lp-PLA ₂ activity levels in human serum or plasma. The PLAC Test for Lp-PLA₂ Activity allows for the measurement of Lp-PLA ₂ using automated clinical chemistry analyzer technology. This clinical chemistry technology is more prevalent than the microplate technology used for the PLAC Test ELISA Kit and is less difficult to operate, such that a broader array of institutions can conduct the test. This group includes clinical laboratories and hospitals of all sizes and physician operated laboratories (“POLs”). In addition, the sample handling requirements are much less stringent for the PLAC Test for Lp-PLA ₂ Activity compared to the PLAC Test ELISA Kit, allowing greater ease of use for those facilities processing specimens. The PLAC Test for Lp-PLA₂ Activity is currently available in Europe for use in conjunction with clinical evaluation and patient risk assessment as an indicator of atherosclerotic cardiovascular disease. The Company affixed the CE marking for this intended use by self-certification in January 2012. The PLAC Test for Lp-PLA₂ Activity is available on a commercial basis only in Europe. The Company plans to pursue 510(k) clearance for this test from the FDA and eventually commercialize this assay format in the United States if the Company obtains FDA clearance.

All references in these notes to condensed financial statements to the “Company,” “we,” “us” and “our” refer to diaDexus, Inc. (f/k/a VaxGen, Inc.), a Delaware corporation, unless the context requires otherwise.

Basis of Presentation

The accompanying unaudited condensed financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. The year-end condensed balance sheet data was derived from audited financial statements, but does not include all disclosures required by U.S. GAAP. In the opinion of management, the accompanying unaudited condensed financial statements have been prepared on a consistent basis with December 31, 2011 audited financial statements and includes all adjustments, consisting of normal recurring adjustments, which are necessary to fairly state the Company’s financial position as of June 30, 2012 and results of operations and cash flows for both the three and six months ended June 30, 2012.

XML

Leases Commitments and Contingencies (Details Textual) (USD $)	3 Months Ended		6 Months Ended
	Jun. 30, 2012	Jun. 30, 2011	Jun. 30, 2012	Jun. 30, 2011	Dec. 31, 2011	Dec. 31, 2010
Leases Commitments and Contingencies (Textual) [Abstract]
Unfavorable lease obligation expense						$ 4,100,000
Rent expense	449,000	761,000	1,000,000	1,500,000
Deferred rent	314,000		314,000		266,000
Rental income from the sublease	$ 0	$ 293,000	$ 0	$ 658,000

XML

Cash, Cash Equivalents and Investments (Details) (USD $) In Thousands, unless otherwise specified	Jun. 30, 2012	Dec. 31, 2011	Jun. 30, 2011	Dec. 31, 2010
Cash and cash equivalents:
Cash and cash equivalents, Cost Basis	$ 12,378	$ 10,484	$ 6,083	$ 20,394
Cash and cash equivalents, Unrealized Gains
Cash and cash equivalents, Unrealized Losses
Cash and cash equivalents, Estimated Fair Value	12,378	10,484
Available-for-sale marketable securities:
Available-for-sale securities, Cost Basis	2,251	6,747
Available-for-sale securities, Unrealized Gains
Available-for-sale securities, Unrealized Losses	(1)	(5)
Available-for-sale Securities, Estimated Fair Value	2,250	6,742
Commercial paper [Member]
Available-for-sale marketable securities:
Available-for-sale securities, Cost Basis		3,147
Available-for-sale securities, Unrealized Gains
Available-for-sale securities, Unrealized Losses		(1)
Available-for-sale Securities, Estimated Fair Value		3,146
Corporate notes [Member]
Available-for-sale marketable securities:
Available-for-sale securities, Cost Basis	1,255	2,850
Available-for-sale securities, Unrealized Gains
Available-for-sale securities, Unrealized Losses	(1)	(4)
Available-for-sale Securities, Estimated Fair Value	1,254	2,846
Certificates of deposit [Member]
Available-for-sale marketable securities:
Available-for-sale securities, Cost Basis	996
Available-for-sale securities, Unrealized Gains
Available-for-sale securities, Unrealized Losses
Available-for-sale Securities, Estimated Fair Value	996
US government agency obligations [Member]
Available-for-sale marketable securities:
Available-for-sale securities, Cost Basis		750
Available-for-sale securities, Unrealized Gains
Available-for-sale securities, Unrealized Losses
Available-for-sale Securities, Estimated Fair Value		750
Cash [Member]
Cash and cash equivalents:
Cash and cash equivalents, Cost Basis	4,102	3,243
Cash and cash equivalents, Unrealized Gains
Cash and cash equivalents, Unrealized Losses
Cash and cash equivalents, Estimated Fair Value	4,102	3,243
Available-for-sale marketable securities:
Available-for-sale securities, Unrealized Losses
Money market funds [Member]
Cash and cash equivalents:
Cash and cash equivalents, Cost Basis	8,276	7,241
Cash and cash equivalents, Unrealized Gains
Cash and cash equivalents, Unrealized Losses
Cash and cash equivalents, Estimated Fair Value	8,276	7,241
Available-for-sale marketable securities:
Available-for-sale securities, Unrealized Losses

XML

Summary of Significant Accounting Policies (Policies)

6 Months Ended

Jun. 30, 2012

Summary of Significant Accounting Policies [Abstract]

Recent Accounting Pronouncements

Recent Accounting Pronouncements

In December 2011, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2011-11, “Disclosure about Offsetting Assets and Liabilities.” ASU 2011-11 will require the Company to disclose information about offsetting and related arrangements to enable users of its financial statements to understand the effect of those arrangements on its financial positions. The new guidance is effective for annual reporting periods beginning on or after January 1, 2013, and interim periods within those annual periods. The disclosures are to be applied retroactively for all comparative periods presented. The Company does not expect that this guidance will have an impact on its financial position, results of operations or cash flows as it is disclosure-only in nature.

In May 2011, the FASB amended its guidance to converge fair value measurement and disclosure guidance about fair value measurement under U.S. GAAP with International Financial Reporting Standards (“IFRS”). IFRS is a comprehensive series of accounting standards published by the International Accounting Standard Board. The amendment changes the wording used to describe many of the requirements in the U.S. GAAP for measuring fair value and for disclosing information about fair value measurements. For many of the requirements, the FASB does not intend for the amendment to result in a change in the application of the requirements in the current authoritative guidance. The amendment became effective prospectively for the Company’s interim period ended March 31, 2012. The Company adopted this guidance and the adoption did not have a material impact on the Company’s financial positions, results of operations or cash flows.

In June 2011, the FASB issued a new standard on the presentation of comprehensive income. The new standard eliminated the alternative to report other comprehensive income and its components in the statement of changes in equity. Under the new standard, companies can elect to present items of net income and other comprehensive income in one continuous statement or in two separate, but consecutive statements. We adopted the provisions of this guidance during the first quarter 2012.

XML

Cash, Cash Equivalents and Investments (Details 1) (Fair Value, Measurements, Recurring [Member], USD $) In Thousands, unless otherwise specified	Jun. 30, 2012	Dec. 31, 2011
Fair value hierarchy for financial assets measured at fair value on a recurring basis
Assets, Fair Value Measurements	$ 16,028	$ 19,026
Commercial paper [Member]
Fair value hierarchy for financial assets measured at fair value on a recurring basis
Assets, Fair Value Measurements		3,146
Corporate notes [Member]
Fair value hierarchy for financial assets measured at fair value on a recurring basis
Assets, Fair Value Measurements	1,254	2,846
Certificates of deposit [Member]
Fair value hierarchy for financial assets measured at fair value on a recurring basis
Assets, Fair Value Measurements	996
US government agency obligations [Member]
Fair value hierarchy for financial assets measured at fair value on a recurring basis
Assets, Fair Value Measurements		750
Restricted cash [Member]
Fair value hierarchy for financial assets measured at fair value on a recurring basis
Assets, Fair Value Measurements	1,400	1,800
Cash [Member]
Fair value hierarchy for financial assets measured at fair value on a recurring basis
Assets, Fair Value Measurements	4,102	3,243
Money market funds [Member]
Fair value hierarchy for financial assets measured at fair value on a recurring basis
Assets, Fair Value Measurements	8,276	7,241
Quoted Prices In Active Markets for Identical Assets Level 1 [Member]
Fair value hierarchy for financial assets measured at fair value on a recurring basis
Assets, Fair Value Measurements	12,378	10,484
Quoted Prices In Active Markets for Identical Assets Level 1 [Member] | Commercial paper [Member]
Fair value hierarchy for financial assets measured at fair value on a recurring basis
Assets, Fair Value Measurements
Quoted Prices In Active Markets for Identical Assets Level 1 [Member] | Corporate notes [Member]
Fair value hierarchy for financial assets measured at fair value on a recurring basis
Assets, Fair Value Measurements
Quoted Prices In Active Markets for Identical Assets Level 1 [Member] | Certificates of deposit [Member]
Fair value hierarchy for financial assets measured at fair value on a recurring basis
Assets, Fair Value Measurements
Quoted Prices In Active Markets for Identical Assets Level 1 [Member] | US government agency obligations [Member]
Fair value hierarchy for financial assets measured at fair value on a recurring basis
Assets, Fair Value Measurements
Quoted Prices In Active Markets for Identical Assets Level 1 [Member] | Restricted cash [Member]
Fair value hierarchy for financial assets measured at fair value on a recurring basis
Assets, Fair Value Measurements
Quoted Prices In Active Markets for Identical Assets Level 1 [Member] | Cash [Member]
Fair value hierarchy for financial assets measured at fair value on a recurring basis
Assets, Fair Value Measurements	4,102	3,243
Quoted Prices In Active Markets for Identical Assets Level 1 [Member] | Money market funds [Member]
Fair value hierarchy for financial assets measured at fair value on a recurring basis
Assets, Fair Value Measurements	8,276	7,241
Significant other Observable Inputs Level 2 [Member]
Fair value hierarchy for financial assets measured at fair value on a recurring basis
Assets, Fair Value Measurements	3,650	8,542
Significant other Observable Inputs Level 2 [Member] | Commercial paper [Member]
Fair value hierarchy for financial assets measured at fair value on a recurring basis
Assets, Fair Value Measurements		3,146
Significant other Observable Inputs Level 2 [Member] | Corporate notes [Member]
Fair value hierarchy for financial assets measured at fair value on a recurring basis
Assets, Fair Value Measurements	1,254	2,846
Significant other Observable Inputs Level 2 [Member] | Certificates of deposit [Member]
Fair value hierarchy for financial assets measured at fair value on a recurring basis
Assets, Fair Value Measurements	996
Significant other Observable Inputs Level 2 [Member] | US government agency obligations [Member]
Fair value hierarchy for financial assets measured at fair value on a recurring basis
Assets, Fair Value Measurements		750
Significant other Observable Inputs Level 2 [Member] | Restricted cash [Member]
Fair value hierarchy for financial assets measured at fair value on a recurring basis
Assets, Fair Value Measurements	1,400	1,800
Significant other Observable Inputs Level 2 [Member] | Cash [Member]
Fair value hierarchy for financial assets measured at fair value on a recurring basis
Assets, Fair Value Measurements
Significant other Observable Inputs Level 2 [Member] | Money market funds [Member]
Fair value hierarchy for financial assets measured at fair value on a recurring basis
Assets, Fair Value Measurements
Significant Unobservable Inputs Level 3 [Member]
Fair value hierarchy for financial assets measured at fair value on a recurring basis
Assets, Fair Value Measurements
Significant Unobservable Inputs Level 3 [Member] | Commercial paper [Member]
Fair value hierarchy for financial assets measured at fair value on a recurring basis
Assets, Fair Value Measurements
Significant Unobservable Inputs Level 3 [Member] | Corporate notes [Member]
Fair value hierarchy for financial assets measured at fair value on a recurring basis
Assets, Fair Value Measurements
Significant Unobservable Inputs Level 3 [Member] | Certificates of deposit [Member]
Fair value hierarchy for financial assets measured at fair value on a recurring basis
Assets, Fair Value Measurements
Significant Unobservable Inputs Level 3 [Member] | US government agency obligations [Member]
Fair value hierarchy for financial assets measured at fair value on a recurring basis
Assets, Fair Value Measurements
Significant Unobservable Inputs Level 3 [Member] | Restricted cash [Member]
Fair value hierarchy for financial assets measured at fair value on a recurring basis
Assets, Fair Value Measurements
Significant Unobservable Inputs Level 3 [Member] | Cash [Member]
Fair value hierarchy for financial assets measured at fair value on a recurring basis
Assets, Fair Value Measurements
Significant Unobservable Inputs Level 3 [Member] | Money market funds [Member]
Fair value hierarchy for financial assets measured at fair value on a recurring basis
Assets, Fair Value Measurements

XML

Inventory (Tables)

6 Months Ended

Jun. 30, 2012

Inventory [Abstract]

Inventory

Inventory consists of the following (in thousands):

	June 30, 2012		December 31, 2011
Finished goods	$	186	$	71
Raw materials		41		46
	$	227	$	117

XML

Summary of Significant Accounting Policies

6 Months Ended

Jun. 30, 2012

Summary of Significant Accounting Policies [Abstract]

Summary of Significant Accounting Policies

2. Summary of Significant Accounting Policies

The Company’s significant accounting policies are disclosed in the Company’s annual report on Form 10-K for the year ended December 31, 2011, filed with the SEC on March 15, 2012, and have not changed as of June 30, 2012.

Recent Accounting Pronouncements

In December 2011, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2011-11, “Disclosure about Offsetting Assets and Liabilities.” ASU 2011-11 will require the Company to disclose information about offsetting and related arrangements to enable users of its financial statements to understand the effect of those arrangements on its financial positions. The new guidance is effective for annual reporting periods beginning on or after January 1, 2013, and interim periods within those annual periods. The disclosures are to be applied retroactively for all comparative periods presented. The Company does not expect that this guidance will have an impact on its financial position, results of operations or cash flows as it is disclosure-only in nature.

In May 2011, the FASB amended its guidance to converge fair value measurement and disclosure guidance about fair value measurement under U.S. GAAP with International Financial Reporting Standards (“IFRS”). IFRS is a comprehensive series of accounting standards published by the International Accounting Standard Board. The amendment changes the wording used to describe many of the requirements in the U.S. GAAP for measuring fair value and for disclosing information about fair value measurements. For many of the requirements, the FASB does not intend for the amendment to result in a change in the application of the requirements in the current authoritative guidance. The amendment became effective prospectively for the Company’s interim period ended March 31, 2012. The Company adopted this guidance and the adoption did not have a material impact on the Company’s financial positions, results of operations or cash flows.

In June 2011, the FASB issued a new standard on the presentation of comprehensive income. The new standard eliminated the alternative to report other comprehensive income and its components in the statement of changes in equity. Under the new standard, companies can elect to present items of net income and other comprehensive income in one continuous statement or in two separate, but consecutive statements. We adopted the provisions of this guidance during the first quarter 2012.

XML

Condensed Balance Sheets (Parenthetical) (USD $) In Thousands, except Share data, unless otherwise specified	Jun. 30, 2012	Dec. 31, 2011
Condensed Balance Sheets [Abstract]
Allowance for doubtful accounts	$ 4	$ 4
Rebate reserve	$ 0	$ 20
Preferred stock, par value	$ 0.01	$ 0.01
Preferred stock, shares authorized	19,979,500	19,979,500
Preferred stock, shares issued	0	0
Preferred stock, shares outstanding	0	0
Common stock, par value	$ 0.01	$ 0.01
Common stock, shares authorized	100,000,000	100,000,000
Common stock, shares issued	53,101,063	53,101,063
Common stock, shares outstanding	53,067,045	53,067,045

XML

Stock Based Compensation

6 Months Ended

Jun. 30, 2012

Stock Based Compensation [Abstract]

Stock Based Compensation

12. Stock Based Compensation

Stock Option Plans

1996 Stock Option Plan

The 1996 Stock Option Plan (the “1996 Plan”) initially had 4,750,000 shares of common stock authorized for issuance and a provision that automatically increased this number by 3.5% of the issued and outstanding common stock on the last trading day of the December immediately preceding each fiscal year through January 2007. Options granted under the 1996 Plan may be designated as qualified or nonqualified at the discretion of the Compensation Committee of the Board of Directors. Generally, shares issuable upon exercise of options vest ratably over four years, beginning one year from the date of grant; however, options can vest upon grant. All options expire no later than 10 years from the date of grant. Qualified stock options are exercisable at not less than the fair market value of the stock at the date of grant, and nonqualified stock options are exercisable at prices determined at the discretion of the Board of Directors, but not less than 85% of the fair market value of the stock at the date of grant. On May 17, 2012, 6,398,904 shares that are subject to awards under this plan and 1,555,492 shares which are available for issuance under this plan were transferred to the 2012 Equity Incentive Award Plan.

1998 Director Stock Option Plan

The 1998 Director Stock Option Plan (the “Director Plan”) for non-employee directors has 300,000 shares of common stock authorized for issuance. On May 17, 2012, 170,000 shares that are subject to awards under this plan and 130,000 shares which are available for issuance under this plan were transferred to the 2012 Equity Incentive Award Plan on May 17, 2012 upon stockholder approval.

2012 Equity Incentive Award Plan

The Company’s stockholders approved the 2012 Equity Incentive Award Plan (the “2012 Plan”) at the 2012 Annual Meeting of Stockholders on May 17, 2012 and approved 3,000,000 shares of common stock authorized for issuance. On May 17, 2012, all shares of stock options that were issued and issuable in the 1996 Plan, the Director Plan and outside of plans were transferred to the 2012 Plan. Options granted under the 2012 Plan may be designated as qualified or nonqualified at the discretion of the Compensation Committee of the Board of Directors. Generally, shares issuable upon exercise of options vest ratably over four years, beginning one year from the date of grant; however, options can vest upon grant. Option terms expire no later than 10 years from the date of grant, or 5 years from the date the option is granted to a greater than 10% stockholder. The stock options are exercisable at not less than the fair market value of the stock at the date of grant, or not less than 110% of the fair market value of the stock at the date of grant if granted to a greater than 10% stockholder. As of June 30, 2012, options for 9,762,693 were outstanding and 5,207,685 shares were available for grant under the 2012 Plan.

Valuation Assumptions

The compensation expense related to stock options recognized was determined using the Black-Scholes option valuation model. Option valuation models require the input of subjective assumptions and these assumptions can vary over time. The weighted average assumptions used were as follows:

	Three Months Ended June 30,				Six Months Ended June 30,
	2012		2011		2012			2011
Dividend yield		—		—		0.0	%		0.0	%
Risk-free interest rate		—		—		0.49	%		1.56	%
Expected volatility		—		—		96.65	%		90.44	%
Forfeiture rate		—		—		13.24	%		11.57	%
Expected term (years)		—		—		4.12			4.27
Fair value per share at grant date		—		—	$	0.19		$	0.26

The expected stock price volatility assumption was determined by examining the historical volatilities for industry peers, as the Company did not have sufficient trading history for the Company’s common stock. The Company will continue to analyze the historical stock price volatility and expected term assumption as more historical data for the Company’s common stock becomes available. The risk-free interest rate assumption is based on the U.S. Treasury instruments whose term was consistent with the expected term of the Company’s stock options. The expected dividend assumption is based on the Company’s history and expectation of dividend payouts. Different estimates of volatility and expected term could materially change the value of an option and the resulting expense. The expected term of stock option represents the weighted-average period the stock options are expected to remain outstanding and is based on the options vesting terms, contractual terms and historical information to develop reasonable expectations about future exercise patterns and post-vesting employment termination behavior. The Company did not grant stock options during the three months ended June 30, 2012 and 2011.

The following table summarizes stock compensation expense related to employee stock options and employee stock based compensation for the three and six months ended June 30, 2012 and 2011, which was incurred as follows (in thousands)

	Three Months Ended June 30,				Six Months Ended June 30,
	2012		2011		2012		2011
Stock compensation expense:
Product costs	$	3	$	3	$	5	$	6
Research and development		14		21		31		43
Sales and marketing		16		13		29		26
General and administrative		54		331		99		387
Total stock compensation expense	$	87	$	368	$	164	$	462

Employee Stock-Based Compensation

The table below presents information related to stock option activity under the 1996 Plan, the Director Plan and certain option grants to employees and a director outside of the Plan, and, as of May 17, 2012, under the 2012 Plan, net of options previously exercised, as follows:

	Number of Options Outstanding			Weighted- Average Exercise Price		Weighted- Average Remaining Contractual Term (In years)		Aggregate Intrinsic Value
Outstanding at December 31, 2011		9,187,589		$	0.48
Options granted		1,141,000			0.28
Options exercised		(34,018	)		0.26
Options cancelled/forfeited/expired		(531,878	)		0.82
Outstanding at June 30, 2012		9,762,693		$	0.44		6.72	$	1,835,746
Exercisable at June 30, 2012		4,781,773		$	0.61		4.13	$	879,331
Vested and expected to vest at June 30, 2012		8,935,141		$	0.45		6.48	$	1,677,120

The aggregate intrinsic value of stock options exercisable at June 30, 2012 was $0.9 million and for in-the-money stock options outstanding was $1.8 million.

The following table summarizes information relating to stock options outstanding as of June 30, 2012:

	Options Outstanding						Options Exercisable
Range of Exercise Price	Number Outstanding		Weighted Average Remaining Contractual Life (In Years)		Weighted Average Exercise Price		Number Exercisable		Weighted Average Exercise Price
$0.14		96,000		9.46	$	0.14		—	$	—
$0.25		1,542,000		9.24		0.25		3,000		0.25
$0.26		5,139,937		4.73		0.26		3,674,896		0.26
$0.28		1,141,000		9.60		0.28		—		—
$0.29		1,218,756		9.04		0.29		700,752		0.29
$0.33 - $4.57		515,000		7.78		0.78		293,125		1.08
$8.74		20,000		1.39		8.74		20,000		8.74
$12.27		30,000		2.31		12.27		30,000		12.27
$14.30		20,000		0.60		14.30		20,000		14.30
$15.71		40,000		1.90		15.71		40,000		15.71
$0.14 - $15.71		9,762,693		6.72	$	0.44		4,781,773	$	0.61

The estimated fair value of grants of stock options to non-employees of the Company is charged to expense in the financial statements. These options generally vest monthly over one year.

Stock based compensation expense recognized during the three and six months ended June 30, 2012 and 2011 includes compensation expense for stock based awards granted to employees based on the grant date fair value estimated in accordance with the provisions of ASC 718. As of June 30, 2012, the total remaining unrecognized cost was approximately $0.8 million to be recognized over approximately three years.

Shares Reserved for Future Issuance

The Company had reserved shares of common stock for future issuance at June 30, 2012 and 2011 as follows:

	As of June 30,
	2012		2011
Options to purchase common stock		9,762,693		6,880,609
Warrants to purchase common stock		480,769		10,000
Shares available for option grants		5,207,685		1,403,787
Total		15,451,147		8,294,396

In October 2004, the Company granted stock options for 30,000 shares outside the Company’s stock option plans to a new director with an exercise price of $12.27 per share. These options were granted with terms that are substantially in accordance with the Company’s standard stock option terms. As of June 30, 2012, none of these stock options have been exercised or repurchased.

In September 2011, the Company granted stock options for 1,530,000 shares outside the Company’s stock option plans to the Chief Executive Officer with an exercise price of $0.25 per share. These options were granted with terms that are substantially in accordance with the Company’s standard stock option terms. As of June 30, 2012, none of these stock options have been exercised or repurchased.

In October 2011, the Company granted stock options for 1,130,000 shares outside the Company’s stock option plans to the Chief Business Officer with an exercise price of $0.26 per share. These options were granted with terms that are substantially in accordance with the Company’s standard stock option terms. As of June 30, 2012, none of these stock options have been exercised or repurchased.

On February 1, 2012, the Company granted stock options for 1,060,000 shares outside of the Company’s stock option plans to the Chief Financial Officer with an exercise price of $0.28 per share. These options were granted with terms that are substantially in accordance with the Company’s standard stock option terms. As of June 30, 2012, none of these stock options have been exercised or repurchased.

All shares granted outside the Company’s stock option plans were transferred to the 2012 Plan on May 17, 2012 upon stockholder approval.

XML

Document and Entity Information	6 Months Ended
	Jun. 30, 2012	Aug. 02, 2012
Document and Entity Information [Abstract]
Entity Registrant Name	diaDexus, Inc.
Entity Central Index Key	0001036968
Document Type	10-Q
Document Period End Date	Jun. 30, 2012
Amendment Flag	false
Document Fiscal Year Focus	2012
Document Fiscal Period Focus	Q2
Current Fiscal Year End Date	--12-31
Entity Filer Category	Smaller Reporting Company
Entity Common Stock, Shares Outstanding		52,203,039

XML

Stock Warrants

6 Months Ended

Jun. 30, 2012

Stock Warrants [Abstract]

Stock Warrants

13. Stock Warrants

The Company issues warrants to investors as part of its overall financing strategy and to vendors in order to reduce costs. In connection with the loan and security agreement the Company entered into with Comerica bank (Note 9) in September 2011, the Company issued a warrant to purchase 480,769 shares of the Company’s common stock, at an exercise price of $0.26 per share. The warrant expires in September 2018. The initial fair value of the warrant was calculated using the Black-Scholes option pricing model and the following assumptions: volatility of 88.03%, risk-free interest rate of 1.36%, exercise price of $0.26 and an expected life of 7 years. The fair value of the warrant was determined to be $94,000 and was recorded as equity in additional paid-in-capital and a discount to the carrying value of the loan. The discount is being amortized to interest expense using the effective interest rate method over the 48-month term of the loan. As of June 30, 2012, there were warrants outstanding to purchase 480,769 shares of the Company’s common stock, with a weighted-average exercise price of $0.26 per share and an aggregate exercise price of $0.1 million.

The following table summarizes information about all warrants outstanding as of June 30, 2012:

	Warrants Outstanding						Warrants Exercisable
Exercise Price	Number Outstanding		Weighted Average Remaining Contractual Life (In Years)		Weighted Average Exercise Price		Number Exercisable		Weighted Average Exercise Price
$0.26		480,769		6.24	$	0.26		480,769	$	0.26
		480,769		6.24	$	0.26		480,769	$	0.26

XML

Condensed Statements of Comprehensive Loss (Unaudited) (USD $) In Thousands, except Share data, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2012	Jun. 30, 2011	Jun. 30, 2012	Jun. 30, 2011
Revenues:
License revenue	$ 77	$ 77	$ 153	$ 153
Royalty revenue	1,037	944	2,074	1,949
Product sales	4,002	2,646	7,832	4,886
Product sales to related party		160		160
Total revenues	5,116	3,827	10,059	7,148
Operating costs and expenses:
Product costs	1,598	1,205	3,317	2,337
Sales and marketing	1,450	977	2,632	2,084
Research and development	1,093	1,274	2,385	2,766
General and administrative	1,704	2,842	3,680	4,956
Total operating costs and expenses	5,845	6,298	12,014	12,143
Loss from operations	(729)	(2,471)	(1,955)	(4,995)
Interest income, interest expense and other income (expense), net:
Interest income	4	15	11	32
Interest expense	(102)		(203)
Other income (expense), net			(3)
Loss before income tax	(827)	(2,456)	(2,150)	(4,963)
Income tax			(3)	(3)
Net loss	(827)	(2,456)	(2,153)	(4,966)
Basic and diluted net loss per share:	$ (0.02)	$ (0.05)	$ (0.04)	$ (0.09)
Weighted average shares used in computing basic and diluted net loss per share	53,067,793	53,067,057	53,067,419	53,067,057
Other comprehensive loss, net of tax:
Net change in unrealized gain/(loss) on available-for-sale securities		(1)	4	(2)
Comprehensive loss	$ (827)	$ (2,457)	$ (2,149)	$ (4,968)

XML

Total Accrued and Other Current Liabilities

6 Months Ended

Jun. 30, 2012

Total Accrued and Other Current Liabilities [Abstract]

Total Accrued and Other Current Liabilities

7. Total Accrued and Other Current Liabilities

Total accrued and other current liabilities include the following as of June 30, 2012 and December 31, 2011 (in thousands):

	June 30, 2012		December 31, 2011
Accrued payroll and related expenses	$	1,054	$	1,351
Accrued royalty expense		246		207
Accrued sales tax		139		126
Accrued legal and patent expense		133		35
Accrued consulting expenses		70		69
Property and equipment		—		200
Accrued audit fees		—		120
Accrued collaborative research obligations		—		96
Other current liabilities		292		265
Total accrued and other current liabilities	$	1,934	$	2,469

XML

Property, Plant and Equipment

6 Months Ended

Jun. 30, 2012

Property, Plant and Equipment [Abstract]

Property, Plant and Equipment

6. Property, Plant and Equipment

Property and equipment are recorded at cost. Expenditures for major additions and improvements are capitalized, and maintenance and repairs are charged to expense as incurred. When property and equipment are retired or otherwise disposed of, the cost and accumulated depreciation are removed from the accounts and any resulting gain or loss is included in the results of operations for the respective period. Depreciation is provided over the estimated useful lives of the related assets using the straight-line method for financial statement purposes. The Company uses other depreciation methods for tax purposes where appropriate. The estimated useful lives for significant property and equipment categories are as follows:

Office and Laboratory equipment	3 years
Computer equipment and software	3 years
Leasehold improvements	Term of lease agreement

The following is a summary of property and equipment at cost less accumulated depreciation as of June 30, 2012 and December 31, 2011 (in thousands):

	June 30, 2012			December 31, 2011
Laboratory equipment	$	3,078		$	5,202
Leasehold improvements		602			8,283
Computer and software		334			1,916
Furniture and fixtures		163			835
		4,177			16,236
Less: Accumulated depreciation and amortization		(2,794	)		(14,886	)
	$	1,383		$	1,350

Depreciation and amortization expense was $0.2 million and $0.3 million for the three and six months ended June 30, 2012, respectively, and $0.2 million and $0.3 million, respectively, for the same periods in 2011.

XML

Cash, Cash Equivalents and Investments (Tables)

6 Months Ended

Jun. 30, 2012

Cash, Cash Equivalents and Investments [Abstract]

Cash, cash equivalents, and available-for-sale securities

The following is a summary of cash, cash equivalents, and available-for-sale securities at June 30, 2012 and December 31, 2011 (in thousands):

	June 30, 2012
	Cost Basis		Unrealized Gains		Unrealized Losses			Estimated Fair Value
Cash and cash equivalents:
Cash	$	4,102	$	—	$	—		$	4,102
Money market funds		8,276		—		—			8,276
Total cash and cash equivalents	$	12,378	$	—	$	—		$	12,378
Available-for-sale marketable securities:
Corporate notes		1,255		—		(1	)		1,254
Certificates of deposit		996		—		—			996
Total available-for-sale marketable securities	$	2,251	$	—	$	(1	)	$	2,250

	December 31, 2011
	Cost Basis		Unrealized Gains		Unrealized Losses			Estimated Fair Value
Cash and cash equivalents:
Cash	$	3,243	$	—	$	—		$	3,243
Money market funds		7,241		—		—			7,241
Total cash and cash equivalents	$	10,484	$	—	$	—		$	10,484
Available-for-sale marketable securities:
Commercial paper		3,147		—		(1	)		3,146
Corporate notes		2,850		—		(4	)		2,846
US government agency obligations		750		—		—			750
Total available-for-sale marketable securities	$	6,747	$	—	$	(5	)	$	6,742

Fair value hierarchy for financial assets measured at fair value on a recurring basis

The following table represents the Company’s fair value hierarchy for its financial assets (cash equivalents and investments) measured at fair value on a recurring basis as of June 30, 2012 and December 31, 2011 (in thousands):

			Fair Value Measurements
	Balance at June 30, 2012		Quoted Prices In Active Markets for Identical Assets Level  1		Significant other Observable Inputs Level 2		Significant Unobservable Inputs Level 3
Assets:
Cash	$	4,102	$	4,102	$	—	$	—
Money market funds		8,276		8,276		—		—
Corporate notes		1,254		—		1,254		—
Certificates of deposit		996		—		996		—
Restricted cash		1,400		—		1,400		—
	$	16,028	$	12,378	$	3,650	$	—

			Fair Value Measurements
	Balance as of December 31, 2011		Quoted Prices In Active Markets for Identical Assets Level  1		Significant other Observable Inputs Level 2		Significant Unobservable Inputs Level 3
Assets:
Cash	$	3,243	$	3,243	$	—	$	—
Money market funds		7,241		7,241		—		—
Commercial paper		3,146		—		3,146		—
Corporate notes		2,846		—		2,846		—
US government agency obligations		750		—		750		—
Restricted cash		1,800		—		1,800		—
	$	19,026	$	10,484	$	8,542	$	—

XML

Leases, Commitments and Contingencies

6 Months Ended

Jun. 30, 2012

Leases, Commitments and Contingencies [Abstract]

Leases, Commitments and Contingencies

14. Leases, Commitments and Contingencies

The Company leases an office and laboratory facility (the “349 Facility”) under a long-term, non-cancelable operating lease agreement, which expires in December 2016. The Company also leased another office and laboratory facility (the “343 Facility”), and subleased a portion of that facility, until the Company’s underlying lease for that facility expired on January 1, 2012.

In 2010, the Company recorded a lease obligation associated with the 349 Facility, which contained a lease payment that exceeded current market rates. Accordingly, the Company recognized a $4.1 million unfavorable lease obligation, included in the accompanying balance sheet. The Company amortizes the unfavorable lease obligation using the effective interest rate method.

Rent expense for the Company’s facilities was $449,000 and $1.0 million for the three and six months ended June 30, 2012, respectively, and $761,000 and $1.5 million, respectively, for the same periods in 2011. The terms of the lease for the 349 Facility provides for rental payments on a graduated scale. The Company recognizes rent expense on a straight-line basis over the lease period. Deferred rent of $314,000 and $266,000 as of June 30, 2012 and December 31, 2011, respectively, is included in the accompanying balance sheet.

Rental income from the sublease of the 343 Facility was $0 for both the three and six months ended June 30, 2012 and $293,000 and $658,000, respectively, for the same periods in 2011. This has been included as a reduction to operating expenses for the three and six months ended June 30, 2011 in the statements of comprehensive income.

Future minimum lease payments under non-cancelable operating leases are as follows (in thousands):

	Operating Leases
2012 (remainder of year)	$	1,216
2013		2,505
2014		2,581
2015		2,658
2016		2,738
Total minimum lease payments	$	11,698

XML

Common Stock

6 Months Ended

Jun. 30, 2012

Common Stock [Abstract]

Common Stock

10. Common Stock

On July 15, 2011, the Company amended its certificate of incorporation to increase the number of authorized shares of its common stock, par value of $0.01 per share, to 100,000,000. The holders of common stock are entitled to receive dividends, as, when and if declared by the Company’s Board of Directors out of funds legally available for distribution, subject to the restriction on dividends contained in the Company’s loan agreement with a bank (Note 9).

XML

Income Taxes (Details Textual) (USD $)	3 Months Ended	6 Months Ended
	Jun. 30, 2012	Jun. 30, 2012	Mar. 31, 2012
Income Taxes (Textual) [Abstract]
Effective tax rate	0.00%	0.00%
Expected effective tax rate current year		0.00%
Merger tax attribute annual limitations for federal and state purpose		$ 240,000
Unrecognized tax benefits, gross	1,400,000	1,400,000
Expected material changes in the next 12 months in unrecognized tax benefits		0
Accrued interest and penalties related to uncertain tax positions			$ 0

XML

Concentration of Credit Risk

6 Months Ended

Jun. 30, 2012

Concentration of Credit Risk [Abstract]

Concentration of Credit Risk

8. Concentration of Credit Risk

Revenues from the following customers represented a significant portion of total revenue for the three and six months ended June 30, 2012 and 2011 and accounts receivable as of June 30, 2012 and December 31, 2011:

	Revenue												Accounts Receivable
	Three Months Ended June 30,						Six Months Ended June 30,						June 30,			December 31,
	2012			2011			2012			2011			2012			2011
Customer A		42	%		34	%		45	%		18	%		32	%		44	%
Customer B		13	%		10	%		13	%		10	%		19	%		13	%
Customer C		7	%		—	%		6	%		—	%		10	%		—	%
Customer D		6	%		13	%		6	%		14	%		9	%		15	%
Customer E		—	%		23	%		—	%		36	%		—	%		20	%
Total		68	%		80	%		70	%		78	%		70	%		92	%

XML

Notes Payable

6 Months Ended

Jun. 30, 2012

Notes Payable [Abstract]

Notes Payable

9. Notes Payable

In September 2011, the Company entered into a loan and security agreement with Comerica Bank to borrow up to $5,000,000, the entire amount of which was borrowed at a rate of 5.25% per annum. The loan is payable in 36 monthly installments which begin in October 2012, with interest only payments being made from October 2011 to September 2012. The Company paid an initial fee of $25,000 for access to this loan and will be required to pay an additional fee of $100,000 following repayment of the loan. The Company may prepay all, but not less than all, of the loaned amount with 30 days advance notice to the bank. If the loan is prepaid prior to September 24, 2012, the Company will be obligated to pay an additional prepayment fee equal to 1% of the principal amount prepaid. In connection with the loan, the Company issued a warrant to the bank to purchase 480,769 shares of the Company’s common stock (Note 13).

The term loan is secured by a first priority security interest on all of the Company’s assets excluding the Company’s intellectual property (except for rights to payment related to the sale, licensing or disposition of such intellectual property rights) and property not assignable without consent by a third party or with respect to which granting a security interest is contrary to law. In addition, the Company has agreed not to sell, assign, transfer, pledge or otherwise encumber its intellectual property to another entity without the bank’s approval or consent, subject to certain exceptions.

The loan and security agreement contains customary representations and warranties, covenants, events of defaults and termination provisions. The affirmative covenants include, among other things, that the Company timely file taxes, maintain good standing and government compliance, achieve at least 80% of specified monthly revenue projections calculated on a trailing three months basis, maintain primary depository and operating accounts with the bank, maintain liability and other insurance, and provide security interests to the bank in the collateral of any subsidiary formed or acquired by the Company in the future. The negative covenants provide, among other things, that without the prior consent of the bank, the Company may not dispose of certain assets, engage in certain business combinations or acquisitions, incur additional indebtedness or encumber any of the Company’s property (subject to certain exceptions), pay dividends on the Company’s capital stock or make prohibited investments. The loan and security agreement provides that an event of default will occur if, among other triggers, (1) the Company defaults in the payment of any amount payable under the agreement when due, (2) there occurs any circumstance or circumstances that could reasonably be expected to result in a material adverse effect on the Company’s business, operations or condition, or on the Company’s ability to perform its obligations under the agreement, (3) the Company becomes insolvent, (4) the Company undergoes a change in control or (5) the Company breaches any negative covenants or certain affirmative covenants in the agreement or, subject to a cure period, otherwise neglects to perform or observe any material item in the agreement. The repayment of the term loan may be accelerated, at the option of the bank, following the occurrence of an event of default, which would require the Company to pay to the bank an amount equal to the sum of: (i) all outstanding principal plus accrued interest, (ii) the final payment, plus (iii) an early payment fee equal to 1% of the principal amount then required to be paid if such repayment is required prior to September 24, 2012, plus (iv) all other sums, that shall have become due and payable but have not been paid, including interest at the default rate with respect to any past due amounts. As of June 30, 2012, the Company was in compliance with all the covenants.

Future minimum payments for the notes payable are as follows (in thousands):

2012 (remainder of year)	$	547
2013		1,870
2014		1,781
2015		1,378
Total minimum payments		5,576
Less: Amount representing interest		(576	)
Present value of minimum payments		5,000
Less: Unamortized debt discount		(79	)
Notes payable, net		4,921
Less: Notes payable, current portion		1,209
Non-current portion of notes payable	$	3,712

XML

Basic and Diluted Net Loss Per Share

6 Months Ended

Jun. 30, 2012

Basic and Diluted Net Loss per Share [Abstract]

Basic and Diluted Net Loss per Share

11. Basic and Diluted Net Loss per Share

Basic net loss per common share is based on the weighted average number of common shares outstanding during the period. Diluted net loss per common share is based on the weighted average number of common shares and other dilutive securities outstanding during the period, provided that including these dilutive securities does not increase the net loss per share.

The effect of the options and warrants was anti-dilutive for the three and six months ended June 30, 2012 and 2011. The following table shows the total outstanding securities considered anti-dilutive and therefore, excluded from the computation of diluted net loss per share (in thousands):

	As of June 30,
	2012		2011
Options to purchase common stock		9,763		6,881
Warrants to purchase common stock		481		10
Total		10,244		6,891

XML

Business Overview (Details)	6 Months Ended
	Jun. 30, 2012
Business Overview (Textual) [Abstract]
Minimum percentage of projected monthly revenue approved by its Board of Directors and provided to the bank	80.00%

XML

Stock Based Compensation (Details 1) (USD $) In Thousands, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2012	Jun. 30, 2011	Jun. 30, 2012	Jun. 30, 2011
Summary of stock compensation expense related to employee stock options and employee stock based compensation
Total stock compensation expense	$ 87	$ 368	$ 164	$ 462
Product costs [Member]
Summary of stock compensation expense related to employee stock options and employee stock based compensation
Total stock compensation expense	3	3	5	6
Research and development [Member]
Summary of stock compensation expense related to employee stock options and employee stock based compensation
Total stock compensation expense	14	21	31	43
Sales and marketing [Member]
Summary of stock compensation expense related to employee stock options and employee stock based compensation
Total stock compensation expense	16	13	29	26
General and administrative [Member]
Summary of stock compensation expense related to employee stock options and employee stock based compensation
Total stock compensation expense	$ 54	$ 331	$ 99	$ 387

XML

Subsequent Events

6 Months Ended

Jun. 30, 2012

Subsequent Events [Abstract]

Subsequent Events

16. Subsequent Events

None

XML

Property Plant and Equipment (Tables)

6 Months Ended

Jun. 30, 2012

Property, Plant and Equipment [Abstract]

Property and equipment at cost less accumulated depreciation

The following is a summary of property and equipment at cost less accumulated depreciation as of June 30, 2012 and December 31, 2011 (in thousands):

	June 30, 2012			December 31, 2011
Laboratory equipment	$	3,078		$	5,202
Leasehold improvements		602			8,283
Computer and software		334			1,916
Furniture and fixtures		163			835
		4,177			16,236
Less: Accumulated depreciation and amortization		(2,794	)		(14,886	)
	$	1,383		$	1,350

Schedule of estimated useful lives for significant property and equipment

The estimated useful lives for significant property and equipment categories are as follows:

Office and Laboratory equipment	3 years
Computer equipment and software	3 years
Leasehold improvements	Term of lease agreement

XML

Basic and Diluted Net Loss per Share (Details) In Thousands, unless otherwise specified	Jun. 30, 2012	Jun. 30, 2011
Outstanding securities considered anti-dilutive and therefore, excluded from the computation of diluted net loss per share
Total	10,244	6,891
Options to purchase common stock [Member]
Outstanding securities considered anti-dilutive and therefore, excluded from the computation of diluted net loss per share
Total	9,763	6,881
Warrants [Member]
Outstanding securities considered anti-dilutive and therefore, excluded from the computation of diluted net loss per share
Total	481	10

XML

Property, Plant and Equipment (Details)	6 Months Ended
	Jun. 30, 2012
Office and laboratory equipment [Member]
Property, Plant and Equipment [Line Items]
Estimated useful lives	3 years
Computer and software [Member]
Property, Plant and Equipment [Line Items]
Estimated useful lives	3 years
Leasehold improvements [Member]
Property, Plant and Equipment [Line Items]
Leasehold improvements	Term of lease agreement

XML

Condensed Statements of Cash Flows (Unaudited) (USD $) In Thousands, unless otherwise specified	6 Months Ended
	Jun. 30, 2012	Jun. 30, 2011
Operating activities:
Net loss	$ (2,153)	$ (4,966)
Adjustments to reconcile net loss to net cash used in operating activities:
Loss on disposal of property and equipment	2
Depreciation and amortization	254	262
Stock-based compensation	164	462
Amortization on investments	21	136
Provision for rebate reserve (reversal)	(20)	62
Noncash other interest expense	14	12
Noncash interest associated with notes payable	68
Inventory written off	4
Unfavorable lease	(240)	(177)
Changes in operating assets and liabilities
Accounts receivable	41	152
Accounts receivable from related party		175
Inventory	(114)	(23)
Prepaid expenses, other current assets and other long-term assets	191	(216)
Accounts payable	(239)	58
Accrued liabilities and other long term liabilities	(335)	852
Deferred rent	48	46
Deferred revenue	(143)	(135)
Net cash used in operating activities	(2,437)	(3,300)
Investing activities:
Purchases of property and equipment	(546)	(147)
Proceeds from sales of assets	2
Restricted cash	400
Maturities of available-for-sale investments	5,471	8,357
Purchases of available-for-sale investments	(996)	(19,221)
Net cash provided by (used in) investing activities	4,331	(11,011)
Net increase (decrease) in cash and cash equivalents	1,894	(14,311)
Cash and cash equivalents, beginning of period	10,484	20,394
Cash and cash equivalents, end of period	12,378	6,083
Supplemental disclosure:
Cash paid for interest	135
Net change in accounts payable from acquisition of property and equipment	(57)
Net change in accrued liabilities from acquisition of property and equipment	(200)
Proceeds from issuance of common stock in other receivables	$ 9

XML

Assets Held For Sale

6 Months Ended

Jun. 30, 2012

Assets Held for Sale [Abstract]

Assets Held For Sale

5. Assets Held For Sale

Prior to the period reflected in this report, the Company had committed to a plan to sell the equipment related to its manufacturing facility and had determined that these assets met the criteria for, and had been classified as, “held for sale” in accordance with ASC Topic 360. The market approach was used in determining the fair market value of these assets.

Total assets held for sale as of June 30, 2012 and December 31, 2011 is as follows (in thousands):

			Fair Value Measurements
Description	Carrying Value at June 30, 2012		June 30,     2012		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Six Months   Ended June 30, 2012 Total Gains (Losses)
Assets held for sale	$	302	$	750	$	—	$	—	$	750	$	—

			Fair Value Measurements
Description	December 31, 2011		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Year Ended December 31, 2011 Total Gains (Losses)
Assets held for sale	$	304	$	—	$	—	$	304	$	—

The measurement of the assets held for sale fair value incorporated significant unobservable inputs as a result of a lack of any available observable market information to determine the fair value. The calculation of the fair value of assets held for sale used a market valuation technique that relied on Level 3 inputs, including quoted prices for similar assets. There was no impairment charge for the three and six months ended June 30, 2012. The Company is committed to selling these assets and has received an offer for $750,000. Any resulting gain or loss will be included in the statement of comprehensive loss.

XML

Leases Commitments and Contingencies (Details) (USD $) In Thousands, unless otherwise specified	Jun. 30, 2012
Future minimum lease payments under non-cancelable operating leases
2012 (remainder of year)	$ 1,216
2013	2,505
2014	2,581
2015	2,658
2016	2,738
Total minimum lease payments	$ 11,698

XML

Total Accrued and Other Current Liabilities (Tables)

6 Months Ended

Jun. 30, 2012

Total Accrued and Other Current Liabilities [Abstract]

Accrued and other current liabilities

Total accrued and other current liabilities include the following as of June 30, 2012 and December 31, 2011 (in thousands):

	June 30, 2012		December 31, 2011
Accrued payroll and related expenses	$	1,054	$	1,351
Accrued royalty expense		246		207
Accrued sales tax		139		126
Accrued legal and patent expense		133		35
Accrued consulting expenses		70		69
Property and equipment		—		200
Accrued audit fees		—		120
Accrued collaborative research obligations		—		96
Other current liabilities		292		265
Total accrued and other current liabilities	$	1,934	$	2,469

XML

Inventory (Details) (USD $) In Thousands, unless otherwise specified	Jun. 30, 2012	Dec. 31, 2011
Inventory
Finished goods	$ 186	$ 71
Raw materials	41	46
Total Inventory	$ 227	$ 117

XML

Income Taxes

6 Months Ended

Jun. 30, 2012

Income Taxes [Abstract]

Income Taxes

15. Income Taxes

Provision for Income Tax

The Company’s effective tax rate is 0% for income tax for both the three and six months ended June 30, 2012 and the Company expects that its effective tax rate for the full year 2012 will be 0%. Based on the weight of available evidence, including cumulative losses since inception and expected future losses, the Company has determined that it is more likely than not that the deferred tax asset amount will not be realized and therefore a valuation allowance has been provided on net deferred tax assets.

Under the provisions of Section 382 and 383 of the Internal Revenue Code (the “Code”), a change of control, as defined in the Code, may impose an annual limitation on the amount of the Company’s net operating loss and tax credit carryforwards, and other tax attributes, that can be used to reduce future tax liabilities. As a result of a merger transaction involving the Company in 2010, certain of the Company’s tax attributes prior to the merger transaction are subject to an annual limitation of $240,000 for federal and state purposes.

The Company files U.S. Federal and multiple state tax returns. The Company is currently not subject to any income tax examinations. Due to the Company’s losses, generally all years remain open.

Uncertain Tax Positions

Effective January 1, 2009, the Company adopted ASC 740-10, which requires that the Company recognize the financial statement effects of a tax position when it becomes more likely than not, based upon the technical merits, that the position will be sustained upon examination.

The gross amount of unrecognized tax benefits as of June 30, 2012 is $1.4 million, related to the reserve on R&D credits, none of which will affect the effective tax rate if recognized due to the valuation allowance. The Company does not expect any material changes in the next 12 months in unrecognized tax benefits.

The Company recognizes interest and/or penalties related to uncertain tax positions. To the extent accrued interest and penalties do not ultimately become payable, amounts accrued will be reduced and reflected in the period that such determination is made. The interest and penalties are recognized as other expense and not tax expense. As of June 30, 2012, the amount of accrued interest and penalties related to uncertain tax positions is $0.