Commitment and Contingencies

6 Months Ended

Jun. 30, 2023

Commitments and Contingencies Disclosure [Abstract]

Commitments and Contingencies

Commitments and Contingencies

Acquisition-related liabilities

In connection with the acquisition of the medical diagnostics division of Royalty Pharma Collection Trust (Royalty Pharma) (formerly known as Cypress Bioscience, Inc.) in 2010, the Company has ongoing royalty payment obligations of 2.5% on net sales of products which incorporate certain acquired technologies. Future royalties payable under these arrangements are limited to the lesser of (i) an aggregate of $1.2 million (including an upfront payment of $0.1 million) and (ii) the total royalties earned through January 1, 2024.

Licensing Agreements

The Company has licensed technology for use in its diagnostic tests. In addition to the milestone payments required by these agreements, individual license agreements generally provide for ongoing royalty payments ranging from 1.5% to 7.0% on net sales of products which incorporate licensed technology, as defined in such agreements. Royalties are accrued when earned and recorded in costs of revenue in the accompanying condensed statements of operations.

Collaboration Obligations

In May 2021, the Company entered into a master research collaboration agreement with Allegheny Health Network Research Institute (AHN), pursuant to which the Company is required to pay AHN a collaboration fee of $0.4 million for each year during the initial term of the agreement. Collaboration expenses under the master research collaboration agreement were $0.1 million for each of the three months ended June 30, 2023 and 2022. For each of the six months ended June 30, 2023 and 2022, collaboration expenses were $0.2 million. Collaboration expenses under the AHN collaboration are included in research and development expenses.

Supply Agreements

In December 2021, the Company entered into an amended supply agreement with one supplier for reagents which includes minimum annual purchase commitments of $6.9 million, $8.0 million and $9.2 million for the years ending December 31, 2023, 2024 and 2025, respectively.

Contingencies

In the normal course of business, the Company enters into contracts and agreements that contain a variety of representations and warranties and provide for general indemnifications; including for subpoenas and other civil investigative demands, from governmental agencies, Medicare or Medicaid and managed care organizations reviewing billing practices or requesting comment on allegations of billing irregularities that are brought to their attention through billing audits or third parties. The Company's exposure under these agreements is unknown because it involves claims that may be made against the Company in the future, but have not yet been made or that the Company believes to be immaterial. The Company accrues a liability for such matters when it is probable that future expenditures will be made and such expenditures can be reasonably estimated.

Litigation

From time to time, the Company may be subject to various legal proceedings that arise in the ordinary course of business activities. The Company does not believe the outcome of any such matters will have a material effect on its financial position or results of operations.

In February 2022, the Company received a subpoena issued by the U.S. Department of Justice (DOJ) requesting documents related to an investigation of potential federal regulatory healthcare offenses. The Company has fully cooperated with the DOJ in connection with the investigation. The DOJ revealed that there is a suit under seal in the Commonwealth of Massachusetts. The suit will remain under seal until a definitive settlement agreement is executed. In July 2023, the Company reached an agreement in principle with the DOJ to resolve this matter and recorded a charge of $0.7 million for the three and six months ended June 30, 2023 as a result. This amount is included in selling, general and administrative expenses. There can be no assurance that a definitive agreement will be executed or that the material terms of the definitive agreement will remain the same as the agreement in principle.