August 7, 2024 - 10-Q: Quarterly report pursuant to Section 13 or 15(d)

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Table of Contents

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 10-Q

(Mark One)

â˜’

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

For the quarterly period ended June 30, 2024.

â˜

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

For the transition period from ÌýÌýÌýÌýÌýÌýÌýÌýÌýÌýÌýÌýÌýÌýÌýÌýÌýÌýÌýÌý to ÌýÌýÌýÌýÌýÌýÌýÌýÌýÌýÌýÌýÌýÌýÌýÌýÌýÌýÌýÌý.

Commission file number 001-33528

Ð¡ÖíÊÓÆµapp Health, Inc.

(Exact Name of Registrant as Specified in Its Charter)

Delaware	75-2402409
(State or Other Jurisdiction of Incorporation or Organization)	(I.R.S. Employer Identification No.)

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4400 Biscayne Blvd.

MiamiÌýÌýÌýÌý FLÌýÌýÌý 33137

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(Address of Principal Executive Offices) (Zip Code)

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(305)Ìý 575-4100

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(Registrantâ€™s Telephone Number, Including Area Code)

Securities registered pursuant to Section 12(b) of the Act:

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Title of each class			Trading Symbol			Name of each exchange on which registered
Common Stock, par value $0.01 per share			OPK			NASDAQ Global Select Market

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Indicate by check mark whether the registrant: (1)Ìýhas filed all reports required to be filed by SectionÌý13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12Ìýmonths (or for such shorter period that the registrant was required to file such reports), and (2)Ìýhas been subject to such filing requirements for the past 90Ìýdays.ÌýÌýÌýÌýâ˜’ÌýÌýYesÌýÌýÌýÌýâ˜ÌýÌýNo

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Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-TÌý(Â§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).ÌýÌýÌýÌýâ˜’ÌýÌýYesÌýÌýÌýÌýâ˜ÌýÌýNo

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Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of â€œlarge accelerated filer,â€ â€œaccelerated filer,â€ â€œsmaller reporting company,â€ and â€œemerging growth companyâ€ in RuleÌý12b-2 of the Exchange Act:

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Large accelerated filer	â˜’	AcceleratedÌýfiler	â˜
Non-accelerated filer	â˜	SmallerÌýreportingÌýcompany	â˜
Ìý	Ìý	Emerging growth company	â˜

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If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. â˜

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Indicate by check mark whether the registrant is a shell company (as defined in RuleÌý12b-2 of the Exchange Act):ÌýÌýÌýâ˜ÌýÌýYesÌýÌýÌýÌýâ˜’ÌýÌýNo

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As of August 1, 2024, the registrant had 697,376,055 shares of Common Stock outstanding.

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TABLE OF CONTENTS

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PART I. FINANCIAL INFORMATION		Page
ItemÌý1.	Financial Statements	Ìý
Condensed Consolidated Balance Sheets as of June 30, 2024 and December 31, 2023 (unaudited)		6
Condensed Consolidated Statements of Operations for the three and six months ended June 30 , 2024 and 2023 (unaudited)		7
Condensed Consolidated Statements of Comprehensive lossÌý for the three and six months ended June 30 , 2024 and 2023 (unaudited)		8
Condensed Consolidated Statements of EquityÌý for the three and six months ended June 30 , 2024 and 2023 (unaudited)		9
Condensed Consolidated Statements of Cash FlowsÌý for the six months ended June 30 , 2024 and 2023 (unaudited)		11
Notes to Condensed Consolidated Financial Statements (unaudited)		12
ItemÌý2.	Managementâ€™s Discussion and Analysis of Financial Condition and Results of Operations	46
ItemÌý3.	Quantitative and Qualitative Disclosures About Market Risk	61
ItemÌý4.	Controls and Procedures	62
PART II. OTHER INFORMATION		Ìý
ItemÌý1.	Legal Proceedings	63
ItemÌý1A.	Risk Factors	63
ItemÌý2.	Unregistered Sales of Equity Securities and Use of Proceeds	63
ItemÌý3.	Defaults Upon Senior Securities	63
ItemÌý4.	Mine Safety Disclosures	64
ItemÌý5.	Other Information	64
ItemÌý6.	Exhibits	64
Signatures		65

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CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

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This Quarterly Report on Form 10-Q contains â€œforward-looking statements,â€ as that term is defined under the Private Securities Litigation Reform Act of 1995 (â€œPSLRAâ€), SectionÌý27A of the Securities Act of 1933, as amended (the â€œSecurities Actâ€), and SectionÌý21E of the Securities Exchange Act of 1934, as amended (the â€œExchange Actâ€). Forward-looking statements include statements about our expectations, beliefs or intentions regarding our product development efforts, business, financial condition, results of operations, strategies or prospects, operating results, cash flows and/or financial condition. You can identify forward-looking statements by the fact that these statements do not relate strictly to historical or current matters. Rather, forward-looking statements relate to anticipated or expected events, activities, trends or results as of the date they are made. Because forward-looking statements relate to matters that have not yet occurred, these statements are inherently subject to risks and uncertainties that could cause our actual results to differ materially from any future results expressed or implied by the forward-looking statements. Many factors could cause our actual activities or results to differ materially from the activities and results anticipated in forward-looking statements. These factors include those described below and in â€œItem 1A-Risk Factorsâ€ of our Annual Report on Form 10-K for the year ended DecemberÌý31, 2023, and described from time to time in our other filings with the Securities and Exchange Commission (the â€œSECâ€). We do not undertake any obligation to update forward-looking statements, except to the extent required by applicable law. We intend that all forward-looking statements be subject to the safe-harbor provisions of the PSLRA. These forward-looking statements are only predictions and reflect our views as of the date they are made with respect to future events and financial performance.

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Risks and uncertainties, the occurrence of which could adversely affect our business, include the following:

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we have had a history of losses and may not generate sustained positive cash flow sufficient to fund our operations and research and development programs;

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â€¢

our need for, and ability to obtain, additional financing when needed on favorable terms, or at all;

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â€¢

adverse results in material litigation matters or governmental inquiries;

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â€¢

the risks inherent in developing, obtaining regulatory approvals for and commercializing new, commercially viable and competitive products and treatments;

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our research and development activities may not result in commercially viable products;

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that earlier clinical results of effectiveness and safety may not be reproducible or indicative of future results;

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that we may not generate or sustain profits or cash flow from our laboratory operations or substantial revenue from NGENLA,ÌýRayaldee and our other pharmaceutical and diagnostic products;

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our ability to manage our growth and our expanded operations;

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that our acquisition of ModeX Therapeutics, Inc. will be successful and the products in the R&D pipeline will ultimately be commercialized;

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that currently available over-the-counter and prescription products, as well as products under development by others, may prove to be as or more effective than our products for the indications being studied;

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our ability and our distribution and marketing partnersâ€™ ability to comply with regulatory requirements regarding the sales, marketing and manufacturing of our products and product candidates and the operation of our laboratories;

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the performance of our third-party distribution partners, licensees and manufacturers over which we have limited control;

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changes in regulation and policies in the U.S. and other countries, including increasing downward pressure on healthcare reimbursement;

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increased competition, including price competition;

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our success is dependent on the involvement and continued efforts of our Chairman and Chief Executive Officer;

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integration challenges for acquired businesses;

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Table of Contents

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â€¢

changing relationships with payors, including the various state and multi-state programs, suppliers and strategic partners;

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efforts by third-party payors to reduce utilization and reimbursement for clinical testing services;

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our ability to maintain reimbursement coverage for our products and services, including Rayaldee and the 4Kscore test;

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failure to timely or accurately bill and collect for our services;

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the information technology systems that we rely on may be subject to unauthorized tampering, cyberattack or other data security or privacy incidents that could impact our billing processes or disrupt our operations;

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failure to obtain and retain new clients and business partners, or a reduction in tests ordered or specimens submitted by existing clients;

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failure to establish, and perform to, appropriate quality standards to assure that the highest level of quality is observed in the performance of our testing services;

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failure to maintain the security of patient-related information;

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our ability to obtain and maintain intellectual property protection for our products;

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our ability to defend our intellectual property rights with respect to our products;

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our ability to operate our business without infringing the intellectual property rights of others;

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our ability to attract and retain key scientific and management personnel;

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the risk that the carrying value of certain assets may exceed the fair value of the assets causing us to impair goodwill or other intangible assets;

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â€¢

our ability to comply with the terms of our 2022 Corporate Integrity Agreement with the U.S. Office of Inspector General of the Department of Health and Human Services;

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â€¢

failure to obtain and maintain regulatory approval for our products and services outside the U.S.;Ìý

Ìý	â€¢	legal, economic, political, regulatory, currency exchange, and other risks associated with international operations; and
Ìý	â€¢	disruptions to operations, including impact on employees, and business continuity, including physical damage or impaired access to company facilities, office of technology from the current conflicts in the Middle East

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PART I. FINANCIAL INFORMATION

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Unless the context otherwise requires, all references in this Quarterly Report on Form 10-Q to the â€œCompanyâ€, â€œÐ¡ÖíÊÓÆµappâ€, â€œweâ€, â€œourâ€, â€œoursâ€, and â€œusâ€ refer to Ð¡ÖíÊÓÆµapp Health, Inc., a Delaware corporation, including our consolidated subsidiaries.

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Item 1. Financial Statements

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The accompanying unaudited Notes to Condensed Consolidated Financial Statements are an integral part of these statements.

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Ð¡ÖíÊÓÆµapp Health, Inc. and Subsidiaries

CONDENSED CONSOLIDATED BALANCE SHEET

(Unaudited)

(In thousands, except share and per share data)

Ìý

Ìý	Ìý	June 30, 2024		Ìý	Ìý	December 31, 2023		Ìý
ASSETS	Ìý	Ìý	Ìý	Ìý	Ìý	Ìý	Ìý	Ìý
Current assets:	Ìý	Ìý	Ìý	Ìý	Ìý	Ìý	Ìý	Ìý
Cash and cash equivalents	Ìý	$	40,576	Ìý	Ìý	$	95,881	Ìý
Accounts receivable, net	Ìý	Ìý	105,313	Ìý	Ìý	Ìý	123,379	Ìý
Inventory, net	Ìý	Ìý	60,153	Ìý	Ìý	Ìý	65,697	Ìý
Other current assets and prepaid expenses	Ìý	Ìý	32,288	Ìý	Ìý	Ìý	24,519	Ìý
Assets held for sale	Ìý	Ìý	119,651	Ìý	Ìý	Ìý	â€”	Ìý
Total current assets	Ìý	Ìý	357,981	Ìý	Ìý	Ìý	309,476	Ìý
Property, plant and equipment, net	Ìý	Ìý	66,766	Ìý	Ìý	Ìý	75,429	Ìý
Intangible assets, net	Ìý	Ìý	659,111	Ìý	Ìý	Ìý	740,283	Ìý
In-process research and development	Ìý	Ìý	195,000	Ìý	Ìý	Ìý	195,000	Ìý
Goodwill	Ìý	Ìý	530,106	Ìý	Ìý	Ìý	598,260	Ìý
Investments	Ìý	Ìý	101,489	Ìý	Ìý	Ìý	16,082	Ìý
Operating lease right-of-use assets	Ìý	Ìý	61,622	Ìý	Ìý	Ìý	68,088	Ìý
Other assets	Ìý	Ìý	7,796	Ìý	Ìý	Ìý	9,080	Ìý
Total assets	Ìý	$	1,979,871	Ìý	Ìý	$	2,011,698	Ìý
LIABILITIES AND EQUITY	Ìý	Ìý	Ìý	Ìý	Ìý	Ìý	Ìý	Ìý
Current liabilities:	Ìý	Ìý	Ìý	Ìý	Ìý	Ìý	Ìý	Ìý
Accounts payable	Ìý	$	82,242	Ìý	Ìý	$	69,677	Ìý
Accrued expenses	Ìý	Ìý	94,516	Ìý	Ìý	Ìý	90,086	Ìý
Current maturities of operating leases	Ìý	Ìý	11,624	Ìý	Ìý	Ìý	12,996	Ìý
Current portion of convertible notes	Ìý	Ìý	170	Ìý	Ìý	Ìý	â€”	Ìý
Current portion of lines of credit and notes payable	Ìý	Ìý	22,129	Ìý	Ìý	Ìý	27,293	Ìý
Liabilities associated with assets held for sale	Ìý	Ìý	8,872	Ìý	Ìý	Ìý	â€”	Ìý
Total current liabilities	Ìý	Ìý	219,553	Ìý	Ìý	Ìý	200,052	Ìý
Operating lease liabilities	Ìý	Ìý	49,624	Ìý	Ìý	Ìý	54,140	Ìý
Long term portion of convertible notes	Ìý	Ìý	175,942	Ìý	Ìý	Ìý	214,325	Ìý
Deferred tax liabilities	Ìý	Ìý	119,120	Ìý	Ìý	Ìý	126,773	Ìý
Other long-term liabilities, principally contract liabilities, contingent consideration and lines of credit	Ìý	Ìý	20,315	Ìý	Ìý	Ìý	27,189	Ìý
Total long-term liabilities	Ìý	Ìý	365,001	Ìý	Ìý	Ìý	422,427	Ìý
Total liabilities	Ìý	Ìý	584,554	Ìý	Ìý	Ìý	622,479	Ìý
Equity:	Ìý	Ìý	Ìý	Ìý	Ìý	Ìý	Ìý	Ìý
Common Stock - $0.01 par value, 1,250,000,000 shares authorized; 727,176,232 and 781,936,885 shares issued at June 30, 2024 and December 31, 2023, respectively	Ìý	Ìý	7,273	Ìý	Ìý	Ìý	7,820	Ìý
Treasury Stock - 29,800,177, and 8,655,082 shares at June 30, 2024 and December 31, 2023, respectively	Ìý	Ìý	(1,791	)	Ìý	Ìý	(1,791	)
Additional paid-in capital	Ìý	Ìý	3,540,414	Ìý	Ìý	Ìý	3,433,006	Ìý
Accumulated other comprehensive loss	Ìý	Ìý	(46,652	)	Ìý	Ìý	(38,030	)
Accumulated deficit	Ìý	Ìý	(2,103,927	)	Ìý	Ìý	(2,011,786	)
Total shareholdersâ€™ equity	Ìý	Ìý	1,395,317	Ìý	Ìý	Ìý	1,389,219	Ìý
Total liabilities and equity	Ìý	$	1,979,871	Ìý	Ìý	$	2,011,698	Ìý

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The accompanying unaudited Notes to Condensed Consolidated Financial Statements are an integral part of these statements.

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Table of Contents

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Ð¡ÖíÊÓÆµapp Health, Inc. and Subsidiaries

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

(In thousands, except share and per share data)

Ìý

For the three months ended June 30,

Ìý

For the six months ended June 30,

Ìý

2024

Ìý

2023

Ìý

2024

Ìý

2023

Ìý

Revenues:

Ìý

Revenue from services

Ìý

129,395

Ìý

127,052

Ìý

256,286

Ìý

259,420

Ìý

Revenue from products

Ìý

40,485

Ìý

43,500

Ìý

78,532

Ìý

83,883

Ìý

Revenue from transfer of intellectual property and other

Ìý

12,306

Ìý

94,866

Ìý

21,054

Ìý

159,692

Ìý

Total revenues

Ìý

182,186

Ìý

265,418

Ìý

355,872

Ìý

502,995

Ìý

Costs and expenses:

Ìý

Cost of service revenue

Ìý

107,078

Ìý

113,028

Ìý

216,952

Ìý

227,087

Ìý

Cost of product revenue

Ìý

23,455

Ìý

25,911

Ìý

45,199

Ìý

50,166

Ìý

Selling, general and administrative

Ìý

68,821

Ìý

79,794

Ìý

138,988

Ìý

155,436

Ìý

Research and development

Ìý

24,082

Ìý

18,159

Ìý

46,020

Ìý

50,764

Ìý

Contingent consideration

Ìý

â€”

Ìý

(34

)

Ìý

â€”

Ìý

102

Ìý

Amortization of intangible assets

Ìý

20,420

Ìý

21,535

Ìý

41,856

Ìý

43,009

Ìý

Total costs and expenses

Ìý

243,856

Ìý

258,393

Ìý

489,015

Ìý

526,564

Ìý

Operating loss (income)

Ìý

(61,670

)

Ìý

7,025

Ìý

(133,143

)

Ìý

(23,569

)

Other income and (expense), net:

Ìý

Interest income

Ìý

391

Ìý

1,077

Ìý

1,204

Ìý

2,107

Ìý

Interest expense

Ìý

(8,180

)

Ìý

(3,277

)

Ìý

(15,865

)

Ìý

(6,668

)

Fair value changes of derivative instruments, net

Ìý

142

Ìý

(26,160

)

Ìý

(917

)

Other income (expense), net

Ìý

58,874

Ìý

(21,417

)

Ìý

80,197

Ìý

(4,400

)

Other income (expense), net

Ìý

51,086

Ìý

(23,475

)

Ìý

39,376

Ìý

(9,878

)

Loss before income taxes and investment losses

Ìý

(10,584

)

Ìý

(16,450

)

Ìý

(93,767

)

Ìý

(33,447

)

Income tax benefit (provision)

Ìý

280

Ìý

(3,148

)

Ìý

1,629

Ìý

(4,381

)

Net loss before investment losses

Ìý

(10,304

)

Ìý

(19,598

)

Ìý

(92,138

)

Ìý

(37,828

)

Loss from investments in investees

Ìý

)

Ìý

(42

)

Ìý

)

Ìý

(79

)

Net loss

Ìý

(10,305

)

Ìý

(19,640

)

Ìý

(92,141

)

Ìý

(37,907

)

Loss per share, basic and diluted:

Ìý

Loss per share

Ìý

(0.01

)

Ìý

(0.03

)

Ìý

(0.13

)

Ìý

(0.05

)

Weighted average common shares outstanding, basic and diluted

Ìý

697,211,592

Ìý

751,727,383

Ìý

702,036,148

Ìý

751,617,431

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The accompanying unaudited Notes to Condensed Consolidated Financial Statements are an integral part of these statements.

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Table of Contents

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Ð¡ÖíÊÓÆµapp Health, Inc. and Subsidiaries

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

(Unaudited)

(In thousands)

Ìý

For the three months ended June 30,

Ìý

For the six months ended June 30,

Ìý

2024

Ìý

2023

Ìý

2024

Ìý

2023

Ìý

Net loss

Ìý

(10,305

)

Ìý

(19,640

)

Ìý

(92,141

)

Ìý

(37,907

)

Other comprehensive income (loss), net of tax:

Ìý

Change in foreign currency translation and other comprehensive income (loss)

Ìý

(1,457

)

Ìý

670

Ìý

(8,622

)

Ìý

6,381

Ìý

Comprehensive loss

Ìý

(11,762

)

Ìý

(18,970

)

Ìý

(100,763

)

Ìý

(31,526

)

Ìý

The accompanying unaudited Notes to Condensed Consolidated Financial Statements are an integral part of these statements.

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Table of Contents

Ìý

CONSOLIDATED STATEMENTS OF EQUITY

(Unaudited)

(In thousands, except share data)

For the three and six months ended June 30, 2024

Ìý

Accumulated

Ìý

Additional

Ìý

Other

Ìý

Common Stock

Ìý

Treasury

Ìý

Paid-In

Ìý

Comprehensive

Ìý

Accumulated

Ìý

Shares

Ìý

Dollars

Ìý

Shares

Ìý

Dollars

Ìý

Capital

Ìý

Loss

Ìý

Deficit

Ìý

Total

Ìý

Balance at March 31, 2024

Ìý

726,791,854

Ìý

7,269

Ìý

(29,772,753

)

Ìý

(1,791

)

Ìý

3,386,147

Ìý

(45,195

)

Ìý

(2,093,622

)

Ìý

1,252,808

Ìý

Equity-based compensation expense

Ìý

â€”

Ìý

â€”

Ìý

â€”

Ìý

â€”

Ìý

2,609

Ìý

â€”

Ìý

â€”

Ìý

2,609

Ìý

Exercise of common stock options and warrants

Ìý

384,378

Ìý

â€”

Ìý

â€”

Ìý

(212

)

Ìý

â€”

Ìý

â€”

Ìý

(208

)

2025 convertible notes

Ìý

â€”

Ìý

â€”

Ìý

(27,154

)

Ìý

â€”

Ìý

â€”

Ìý

â€”

Ìý

â€”

Ìý

â€”

Ìý

2029 convertible notes

Ìý

â€”

Ìý

â€”

Ìý

â€”

Ìý

â€”

Ìý

151,870

Ìý

â€”

Ìý

â€”

Ìý

151,870

Ìý

Net loss

Ìý

â€”

Ìý

â€”

Ìý

â€”

Ìý

â€”

Ìý

â€”

Ìý

â€”

Ìý

(10,305

)

Ìý

(10,305

)

Other comprehensive loss

Ìý

â€”

Ìý

â€”

Ìý

â€”

Ìý

â€”

Ìý

â€”

Ìý

(1,457

)

Ìý

â€”

Ìý

(1,457

)

Balance at June 30, 2024

Ìý

727,176,232

Ìý

7,273

Ìý

(29,799,907

)

Ìý

(1,791

)

Ìý

3,540,414

Ìý

(46,652

)

Ìý

(2,103,927

)

Ìý

1,395,317

Ìý

Accumulated

Ìý

Additional

Ìý

Other

Ìý

Common Stock

Ìý

Treasury

Ìý

Paid-In

Ìý

Comprehensive

Ìý

Accumulated

Ìý

Shares

Ìý

Dollars

Ìý

Shares

Ìý

Dollars

Ìý

Capital

Ìý

Loss

Ìý

Deficit

Ìý

Total

Ìý

Balance at December 31, 2023

Ìý

781,936,885

Ìý

7,820

Ìý

(8,655,082

)

Ìý

(1,791

)

Ìý

3,433,006

Ìý

(38,030

)

Ìý

(2,011,786

)

Ìý

1,389,219

Ìý

Equity-based compensation expense

Ìý

â€”

Ìý

â€”

Ìý

â€”

Ìý

â€”

Ìý

5,199

Ìý

â€”

Ìý

â€”

Ìý

5,199

Ìý

Exercise of common stock options and warrants

Ìý

384,378

Ìý

â€”

Ìý

â€”

Ìý

(212

)

Ìý

â€”

Ìý

â€”

Ìý

(208

)

2025 convertible notes

Ìý

â€”

Ìý

â€”

Ìý

(21,144,825

)

Ìý

â€”

Ìý

â€”

Ìý

â€”

Ìý

â€”

Ìý

â€”

Ìý

2029 convertible notes

Ìý

â€”

Ìý

â€”

Ìý

â€”

Ìý

â€”

Ìý

151,870

Ìý

â€”

Ìý

â€”

Ìý

151,870

Ìý

Share Repurchase

Ìý

(55,145,031

)

Ìý

(551

)

Ìý

â€”

Ìý

â€”

Ìý

(49,449

)

Ìý

â€”

Ìý

â€”

Ìý

(50,000

)

Net loss

Ìý

â€”

Ìý

â€”

Ìý

â€”

Ìý

â€”

Ìý

â€”

Ìý

â€”

Ìý

(92,141

)

Ìý

(92,141

)

Other comprehensive loss

Ìý

â€”

Ìý

â€”

Ìý

â€”

Ìý

â€”

Ìý

â€”

Ìý

(8,622

)

Ìý

â€”

Ìý

(8,622

)

Balance at June 30, 2024

Ìý

727,176,232

Ìý

7,273

Ìý

(29,799,907

)

Ìý

(1,791

)

Ìý

3,540,414

Ìý

(46,652

)

Ìý

(2,103,927

)

Ìý

1,395,317

Ìý

The accompanying unaudited Notes to Condensed Consolidated Financial Statements are an integral part of these statements.

Ìý

Table of Contents

Ìý

CONSOLIDATED STATEMENTS OF EQUITY

(Unaudited)

(In thousands, except share data)

For the three and six months ended June 30, 2023

Ìý

Accumulated

Ìý

Additional

Ìý

Other

Ìý

Common Stock

Ìý

Treasury

Ìý

Paid-In

Ìý

Comprehensive

Ìý

Accumulated

Ìý

Shares

Ìý

Dollars

Ìý

Shares

Ìý

Dollars

Ìý

Capital

Ìý

Loss

Ìý

Deficit

Ìý

Total

Ìý

Balance at March 31, 2023

Ìý

781,306,164

Ìý

7,813

Ìý

(8,655,082

)

Ìý

(1,791

)

Ìý

3,424,589

Ìý

(37,611

)

Ìý

(1,841,190

)

Ìý

1,551,810

Ìý

Equity-based compensation expense

Ìý

â€”

Ìý

â€”

Ìý

â€”

Ìý

â€”

Ìý

2,810

Ìý

â€”

Ìý

â€”

Ìý

2,810

Ìý

Exercise of common stock options and warrants

Ìý

386,971

Ìý

â€”

Ìý

â€”

Ìý

(305

)

Ìý

â€”

Ìý

â€”

Ìý

(301

)

Net loss

Ìý

â€”

Ìý

â€”

Ìý

â€”

Ìý

â€”

Ìý

â€”

Ìý

â€”

Ìý

(19,640

)

Ìý

(19,640

)

Other comprehensive income

Ìý

â€”

Ìý

â€”

Ìý

â€”

Ìý

â€”

Ìý

â€”

Ìý

669

Ìý

â€”

Ìý

669

Ìý

Balance at June 30, 2023

Ìý

781,693,135

Ìý

7,817

Ìý

(8,655,082

)

Ìý

(1,791

)

Ìý

3,427,094

Ìý

(36,942

)

Ìý

(1,860,830

)

Ìý

1,535,348

Ìý

Accumulated

Ìý

Additional

Ìý

Other

Ìý

Common Stock

Ìý

Treasury

Ìý

Paid-In

Ìý

Comprehensive

Ìý

Accumulated

Ìý

Shares

Ìý

Dollars

Ìý

Shares

Ìý

Dollars

Ìý

Capital

Ìý

Loss

Ìý

Deficit

Ìý

Total

Ìý

Balance at December 31, 2022

Ìý

781,306,164

Ìý

7,813

Ìý

(8,655,082

)

Ìý

(1,791

)

Ìý

3,421,872

Ìý

(43,323

)

Ìý

(1,822,923

)

Ìý

1,561,648

Ìý

Equity-based compensation expense

Ìý

â€”

Ìý

â€”

Ìý

â€”

Ìý

â€”

Ìý

5,527

Ìý

â€”

Ìý

â€”

Ìý

5,527

Ìý

Exercise of common stock options and warrants

Ìý

386,971

Ìý

â€”

Ìý

â€”

Ìý

(305

)

Ìý

â€”

Ìý

â€”

Ìý

(301

)

Net loss

Ìý

â€”

Ìý

â€”

Ìý

â€”

Ìý

â€”

Ìý

â€”

Ìý

â€”

Ìý

(37,907

)

Ìý

(37,907

)

Other comprehensive income

Ìý

â€”

Ìý

â€”

Ìý

â€”

Ìý

â€”

Ìý

â€”

Ìý

6,381

Ìý

â€”

Ìý

6,381

Ìý

Balance at June 30, 2023

Ìý

781,693,135

Ìý

7,817

Ìý

(8,655,082

)

Ìý

(1,791

)

Ìý

3,427,094

Ìý

(36,942

)

Ìý

(1,860,830

)

Ìý

1,535,348

Ìý

The accompanying unaudited Notes to Condensed Consolidated Financial Statements are an integral part of these statements.

Ìý

Table of Contents

Ìý

Ð¡ÖíÊÓÆµapp Health, Inc. and Subsidiaries

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

(In thousands)

Ìý

Ìý	Ìý	For the six months ended June 30,						Ìý
Ìý	Ìý	2024		Ìý	Ìý	2023		Ìý
Cash flows from operating activities:	Ìý	Ìý	Ìý	Ìý	Ìý	Ìý	Ìý	Ìý
Net loss	Ìý	$	(92,141	)	Ìý	$	(37,907	)
Adjustments to reconcile net loss to net cash used in operating activities:	Ìý	Ìý	Ìý	Ìý	Ìý	Ìý	Ìý	Ìý
Depreciation and amortization	Ìý	Ìý	49,974	Ìý	Ìý	Ìý	52,993	Ìý
Non-cash interest	Ìý	Ìý	8,138	Ìý	Ìý	Ìý	1,364	Ìý
Amortization of deferred financing costs	Ìý	Ìý	946	Ìý	Ìý	Ìý	598	Ìý
Losses from investments in investees	Ìý	Ìý	3	Ìý	Ìý	Ìý	79	Ìý
Equity-based compensation â€“ employees and non-employees	Ìý	Ìý	5,199	Ìý	Ìý	Ìý	5,527	Ìý
Realized loss (gain) on disposal of fixed assets and sales of equity securities	Ìý	Ìý	(69	)	Ìý	Ìý	2,075	Ìý
Change in fair value of equity securities and derivative instruments	Ìý	Ìý	(59,248	)	Ìý	Ìý	6,146	Ìý
Loss on conversion convertible senior notes	Ìý	Ìý	757	Ìý	Ìý	Ìý	â€”	Ìý
Change in fair value of contingent consideration	Ìý	Ìý	â€”	Ìý	Ìý	Ìý	102	Ìý
Deferred income tax (benefit) provision	Ìý	Ìý	(4,477	)	Ìý	Ìý	1,753	Ìý
Changes in assets and liabilities:	Ìý	Ìý	Ìý	Ìý	Ìý	Ìý	Ìý	Ìý
Accounts receivable, net	Ìý	Ìý	15,353	Ìý	Ìý	Ìý	(81,822	)
Inventory, net	Ìý	Ìý	1,732	Ìý	Ìý	Ìý	2,749	Ìý
Other current assets and prepaid expenses	Ìý	Ìý	(7,817	)	Ìý	Ìý	1,279	Ìý
Other assets	Ìý	Ìý	(116	)	Ìý	Ìý	(1,915	)
Accounts payable	Ìý	Ìý	13,688	Ìý	Ìý	Ìý	20,210	Ìý
Foreign currency measurement	Ìý	Ìý	2,638	Ìý	Ìý	Ìý	(1,318	)
Contract liabilities	Ìý	Ìý	â€”	Ìý	Ìý	Ìý	2	Ìý
Accrued expenses and other liabilities	Ìý	Ìý	3,439	Ìý	Ìý	Ìý	5,073	Ìý
Net cash used in operating activities	Ìý	Ìý	(62,001	)	Ìý	Ìý	(23,012	)
Cash flows from investing activities:	Ìý	Ìý	Ìý	Ìý	Ìý	Ìý	Ìý	Ìý
Investments in investees	Ìý	Ìý	â€”	Ìý	Ìý	Ìý	(5,000	)
Proceeds from the sale of property, plant and equipment	Ìý	Ìý	103	Ìý	Ìý	Ìý	842	Ìý
Capital expenditures	Ìý	Ìý	(11,660	)	Ìý	Ìý	(9,050	)
Net cash used in investing activities	Ìý	Ìý	(11,557	)	Ìý	Ìý	(13,208	)
Cash flows from financing activities:	Ìý	Ìý	Ìý	Ìý	Ìý	Ìý	Ìý	Ìý
Issuance of 3.00% convertible senior notes, net (including related parties)	Ìý	Ìý	230,000	Ìý	Ìý	Ìý	â€”	Ìý
Debt issuance costs	Ìý	Ìý	(8,562	)	Ìý	Ìý	â€”	Ìý
Share repurchase	Ìý	Ìý	(50,000	)	Ìý	Ìý	â€”	Ìý
Proceeds from the exercise of common stock options	Ìý	Ìý	(208	)	Ìý	Ìý	(301	)
Borrowings on lines of credit	Ìý	Ìý	317,811	Ìý	Ìý	Ìý	341,850	Ìý
Repayments of lines of credit	Ìý	Ìý	(324,256	)	Ìý	Ìý	(348,206	)
Redemption of 2025 Notes and 2033 Senior Notes	Ìý	Ìý	(146,287	)	Ìý	Ìý	(3,000	)
Net cash provided by (used in) financing activities	Ìý	Ìý	18,498	Ìý	Ìý	Ìý	(9,657	)
Effect of exchange rate changes on cash and cash equivalents	Ìý	Ìý	(245	)	Ìý	Ìý	794	Ìý
Net decrease in cash and cash equivalents	Ìý	Ìý	(55,305	)	Ìý	Ìý	(45,083	)
Cash and cash equivalents at beginning of period	Ìý	Ìý	95,881	Ìý	Ìý	Ìý	153,191	Ìý
Cash and cash equivalents at end of period	Ìý	$	40,576	Ìý	Ìý	$	108,108	Ìý
SUPPLEMENTAL INFORMATION:	Ìý	Ìý	Ìý	Ìý	Ìý	Ìý	Ìý	Ìý
Interest paid	Ìý	$	3,517	Ìý	Ìý	$	4,204	Ìý
Income taxes paid, net of refunds	Ìý	$	1,576	Ìý	Ìý	$	685	Ìý
Assets acquired by finance leases	Ìý	$	â€”	Ìý	Ìý	$	181	Ìý
Non-cash financing:	Ìý	Ìý	Ìý	Ìý	Ìý	Ìý	Ìý	Ìý
Shares issued upon the conversion of:	Ìý	Ìý	Ìý	Ìý	Ìý	Ìý	Ìý	Ìý
Common stock options, warrants, and restricted stock units surrendered in net exercise	Ìý	$	208	Ìý	Ìý	$	301	Ìý
Fair value of shares received related to milestone achieved from GeneDx Holdings	Ìý	$	â€”	Ìý	Ìý	$	6,689	Ìý

Ìý

The accompanying unaudited Notes to Condensed Consolidated Financial Statements are an integral part of these statements.

Ìý

Table of Contents

Ìý

Ð¡ÖíÊÓÆµapp Health, Inc. and Subsidiaries

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

Ìý

NOTE 1 BUSINESS AND ORGANIZATION

Ìý

Ð¡ÖíÊÓÆµappÌýHealth,ÌýInc.,ÌýaÌýDelawareÌýcorporationÌý(â€œÐ¡ÖíÊÓÆµappâ€,Ìýthe â€œCompanyâ€, â€œweâ€, â€œusâ€,Ìýor â€œourâ€)Ìýis a diversified healthcare company that seeks to establish industry leading positions in large and rapidly growing markets. Our pharmaceutical business features Rayaldee, a U.S. Food and Drug Administration (â€œFDAâ€) approved treatment for secondary hyperparathyroidism (â€œSHPTâ€) in adults with stage 3 or 4 chronic kidney disease (â€œCKDâ€) and vitamin D insufficiency, and Somatrogon (hGH-CTP), a once-weekly human growth hormone injection. We have partnered with Pfizer Inc. (â€œPfizerâ€) for the development and commercialization of Somatrogon (hGH-CTP). Regulatory approvals for Somatrogon (hGH-CTP) for the treatment of growth hormone deficiency in children and adolescents have been secured in over 50 markets, including the United States, European Union (â€œEUâ€) Member States, Japan, Canada, and Australia, where it is marketed under the brand name NGENLAÂ®. Through our 2022 acquisition of ModeX Therapeutics, Inc. (â€œModeXâ€), we haveÌýexpanded our pharmaceutical pipeline with early-stage immune therapies targeting cancer and infectious diseases.

Ìý

Our diagnostics business, BioReference Health, LLC (â€œBioReferenceâ€), is one of the nationâ€™s largest full-service laboratories, with a sales and marketing team focused on growth and new product integration, including the 4Kscore prostate cancer test. BioReference primarily serves customers in major metropolitan areas across the United States. We offer a comprehensive clinical diagnostics menu, including hematology, clinical chemistry, immunoassays, infectious disease testing, serology, hormone analyses, toxicology assays, Pap smears, anatomic pathology, and COVID-19 testing. Our laboratory services are marketed directly to physicians, geneticists, hospitals, clinics, correctional facilities, and other healthcare providers.

Ìý

The Company maintains established, revenue-generating pharmaceutical platforms in Spain, Ireland, Chile, and Mexico, contributing to positive cash flow and facilitating market entry for our development pipeline. In addition to these platforms, we operate a global pharmaceutical development and commercial supply company, a global supply chain operation, and manufacture specialty active pharmaceutical ingredients (API) in Israel through our subsidiary, FineTech.

Ìý

Our management team possesses extensive industry experience in development, regulatory affairs, and commercialization. Their industry relationships support the identification and pursuit of commercial opportunities. Research and development activities are primarily conducted in facilities located in Weston, Massachusetts, Waterford, Ireland, Kiryat Gat, Israel, and Barcelona, Spain.

Ìý

On March 27, 2024, we and Laboratory Corporation of America Holdings (â€œLabcorpâ€) entered into a definitive agreement (the â€œLabcorp Asset Purchase Agreementâ€), pursuant to which Labcorp agreed to acquire select assets of BioReference (the â€œBioReference Transactionâ€). The purchase price for the BioReference Transaction is $237.5 million. The assets contemplated by the BioReference Transaction include BioReference's laboratory testing businesses focused on clinical diagnostics, reproductive health, and women's health across the United States, excluding New York and New Jersey operations. These assets include patient service centers, specific customer contracts, and operating assets. The Labcorp Asset Purchase Agreement contains customary representations, warranties, covenants and indemnification provisions for a transaction of this size and type, including, among other things, customary covenants relating to (i) the conduct of BioReference's business between the signing of the Labcorp Asset Purchase Agreement and the closing of the BioReference Transaction and (ii) the efforts of the parties to cause the BioReference Transaction to be consummated, including obtaining certain consents and approvals. The consummation of the BioReference Transaction is subject to the satisfaction or waiver of customary closing conditions, including the expiration or termination of any required waiting periods under the Hart-Scott-Rodino Antitrust Improvements Act of 1976. The Company anticipates closing the BioReference Transaction in the third quarter of 2024.

Ìý

As of March 27, 2024, the Labcorp Asset Purchase Agreement met the held-for-sale accounting criteria. Accordingly, the related assets and liabilities are classified as held for sale in our consolidated balance sheet. The select assets to be sold in the BioReference Transaction are included in our diagnostics segment.

Ìý

NOTE 2 FOREIGN EXCHANGE RATES

Ìý

Foreign Currency Exchange Rates

Ìý

Approximately 21.7% of our revenue for the six months ended June 30, 2024, was denominated in currencies other than the U.S. Dollar (USD). This compares to 34.4% for the same period in 2023. Our financial statements are reported in USD; therefore, fluctuations in exchange rates affect the translation of foreign-denominated revenue and expenses. During the second quarter of 2024 and the year ended December 31, 2023, our most significant currency exchange rate exposures were to the Euro and the Chilean Peso. Gross accumulated currency translation adjustments, recorded as a separate component of shareholdersâ€™ equity, totaled $43.3 million and $34.6 million at June 30, 2024 and December 31, 2023, respectively.

Table of Contents

Ìý

We are subject to foreign currency transaction risk due to fluctuations in exchange rates between the time a transaction is initiated and settled. To mitigate this risk, we use foreign currency forward contracts. These contracts fix an exchange rate, allowing us to offset potential losses (or gains) caused by exchange rate changes at the settlement date. As of June 30, 2024, we held no open foreign exchange forward contracts related to inventory purchases on letters of credit. As of December 31, 2023, we held 52 open foreign exchange forward contracts related to inventory purchases on letters of credit. These contracts matured monthly through January 2024 with a total notional value of approximately $2.9 million.

Ìý

ÌýNOTE 3 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Ìý

Basis of presentation. The accompanying unaudited Condensed Consolidated Financial Statements have been prepared in accordance with accounting principles generally accepted in the U.S. (â€œGAAPâ€) and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all information and notes required by GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of only normal recurring adjustments or adjustments otherwise disclosed herein) considered necessary to present fairly the Companyâ€™s results of operations, financial position and cash flows have been made. The results of operations and cash flows for the six months ended June 30, 2024 are not necessarily indicative of the results of operations and cash flows that may be reported for the remainder of 2024 or any other future periods. The unaudited Condensed Consolidated Financial Statements should be read in conjunction with the audited Consolidated Financial Statements and the Notes to Consolidated Financial Statements included in our Annual Report on Form 10-K for the year ended December 31, 2023.

Ìý

Principles of consolidation. The accompanying unaudited Condensed Consolidated Financial Statements include the accounts of Ð¡ÖíÊÓÆµapp Health, Inc. and our wholly-owned subsidiaries. All intercompany accounts and transactions are eliminated in consolidation.

Ìý

Use of estimates. The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ significantly from these estimates.

Ìý

Cash and cash equivalents. Cash and cash equivalents include short-term, interest-bearing instruments with original maturities of 90 days or less at the date of purchase. We also consider all highly liquid investments with original maturities at the date of purchase of 90 days or less as cash equivalents. These investments include money markets, bank deposits, certificates of deposit and U.S. treasury securities.

Ìý

Inventories. Inventories are valued at the lower of cost and net realizable value. Cost is determined by the first-in, first-out method. We consider such factors as the amount of inventory on hand, estimated time required to sell such inventories, remaining shelf-life, and current market conditions to determine whether inventories are stated at the lower of cost and net realizable value. Inventories at our diagnostics segment consist primarily of purchased laboratory supplies, which are used in our testing laboratories. ÌýInventory obsolescence expense for the three and six months ended June 30, 2024 wasÌý$0.6 million and $1.0 million, respectively. Inventory obsolescence expense for the three and six months ended June 30, 2023 wasÌý$0.8 million and $2.2 million, respectively.

Ìý

Goodwill and intangible assets. Goodwill represents the difference between the purchase price and the estimated fair value of the net assets acquired accounted for by the acquisition method of accounting. Refer to Note 5. Goodwill, in-process research and development (â€œIPR&Dâ€) and other intangible assets acquired in business combinations, licensing and other transactions was $1.4 billion and $1.5 billion at June 30, 2024 and December 31, 2023, respectively.

Ìý

Assets acquired and liabilities assumed in business combinations, licensing and other transactions are generally recognized at the date of acquisition at their respective fair values. Any excess of the purchase price over the estimated fair values of the net assets acquired is recognized as goodwill. At acquisition, we generally determine the fair value of intangible assets, including IPR&D, using the â€œincome method.â€

Ìý

Subsequent to their acquisition, goodwill and indefinite lived intangible assets are tested at least annually as of October 1 for impairment, or when events or changes in circumstances indicate it is more likely than not that the carrying amount of such assets may not be recoverable.

Ìý

Estimating the fair value of a reporting unit for goodwill impairment is highly sensitive to changes in projections and assumptions and changes in assumptions could potentially lead to impairment. We perform sensitivity analyses around our assumptions in order to assess the reasonableness of the assumptions and the results of our testing. Ultimately, potential changes in these assumptions may impact the estimated fair value of a reporting unit and result in an impairment if the fair value of such reporting unit is less than its carrying value. Goodwill was $530.1 million and $598.3 million, respectively, at June 30, 2024 and December 31, 2023.

Ìý

Table of Contents

Ìý

Net intangible assets other than goodwill were $0.9 billion on each of June 30, 2024, and December 31, 2023, with IPR&D accounting for $195.0 million on each date. Considering the high risk nature of research and development and the industryâ€™s success rate of bringing developmental compounds to market, IPR&D impairment charges may occur in future periods. Estimating the fair value of IPR&D for potential impairment is highly sensitive to changes in projections and assumptions and changes in assumptions could potentially lead to impairment.

Ìý

Upon regulatory approval, IPR&D assets are classified as finite-lived intangible assets. These assets are then amortized on a straight-line basis over their estimated useful lives. If a project is abandoned, the associated IPR&D costs are immediately expensed. We also regularly assess finite-lived intangible assets for impairment. This assessment involves comparing the carrying amount of an asset, which is its cost minus accumulated amortization, to its estimated future undiscounted cash flows. If the carrying amount exceeds the estimated future cash flows, an impairment charge is recognized to reflect the difference between the asset's carrying amount and its fair value.Ìý

Ìý

While we believe our estimates and assumptions used in impairment testing (including for goodwill and IPR&D) are reasonable and reflect those used by market participants, there is a potential risk of material impairment charges. Based on the current financial performance of our diagnostics segment and our Ireland reporting unit (which includes Eirgen and Rayaldee), we could be subject to such charges if their future performance deviates from our current estimates and assumptions. For reference, the combined goodwill of these units totaled $299.6 million and $367.3 million at June 30, 2024 and December 31, 2023, respectively.

Ìý

We amortize intangible assets with definite lives on a straight-line basis over their estimated useful lives, ranging from 3 to 20 years. We use the straight-line method of amortization as there is no reliably determinable pattern in which the economic benefits of our intangible assets are consumed or otherwise used up. Amortization expense wasÌý$20.4 million andÌý$41.9 million for the three and six months ended June 30, 2024, respectively. Amortization expense wasÌý$21.5 million andÌý$43.0 million for the three and six months ended June 30, 2023, respectively.

Ìý

Fair value measurements. The carrying amounts of our cash and cash equivalents, accounts receivable, accounts payable and short-term debt approximate their fair value due to the short-term maturities of these instruments. Investments that are considered equity securities as of June 30, 2024 and December 31, 2023 are predominately carried at fair value. Our debt under the Credit Agreement (as defined below) approximates fair value due to the variable rate of interest applicable to such debt.

Ìý

In evaluating the fair value information, considerable judgment is required to interpret the market data used to develop the estimates. The use of different market assumptions and/or different valuation techniques may have a material effect on the estimated fair value amounts. Accordingly, the estimates of fair value presented herein may not be indicative of the amounts that could be realized in a current market exchange. Refer to Note 9.

Ìý

Contingent consideration. Each period we revalue the contingent consideration obligations associated with certain prior acquisitions to their fair value and record increases in the fair value as contingent consideration expense and decreases in the fair value as a reduction in contingent consideration expense. Changes in contingent consideration result from changes in the assumptions regarding probabilities of successful achievement of related milestones, the estimated timing in which the milestones are achieved and the discount rate used to estimate the fair value of the liability. Contingent considerationÌý mayÌýchange significantly as our development programs progress, revenue estimates evolve and additional data is obtained, impacting our assumptions. The assumptions used in estimating fair value require significant judgment. The use of different assumptions and judgments could result in a materially different estimate of fair value whichÌý mayÌýhave a material impact on our results from operations and financial position.

Ìý

Derivative financial instruments. We record derivative financial instruments on our Condensed Consolidated Balance Sheet at their fair value and recognize the changes in the fair value in our Condensed Consolidated Statement of Operations when they occur, the only exception being derivatives that qualify as hedges. For a derivative instrument to qualify as a hedge, we are required to meet strict hedge effectiveness and contemporaneous documentation requirements at the initiation of the hedge and assess the hedge effectiveness on an ongoing basis over the life of the hedge. At June 30, 2024 and December 31, 2023, our foreign currency forward contracts held to economically hedge inventory purchases did not meet the documentation requirements to be designated as hedges. Accordingly, we recognized all changes in the fair values of our derivatives instruments, net, in our Condensed Consolidated Statement of Operations. Refer to Note 10. In addition, we have determined the value of the embedded derivative liability within the 2029 Convertible 144A Notes (as defined in Note 7) and recorded it at fair value. Refer to Note 7. The changes in the fair value of the embedded derivatives are recognized in the fair value changes of derivatives instruments, net. Refer to Note 9.

Ìý

Table of Contents

Ìý

Property, plant and equipment. Property, plant and equipment are recorded at cost or fair value if acquired in a business combination. Depreciation is provided using the straight-line method over the estimated useful lives of the assets and includes amortization expense for assets capitalized under finance leases. The estimated useful lives by asset class are as follows: software - 3 years, machinery, medical and other equipment - 5-8 years, furniture and fixtures - 5-12 years, leasehold improvements - the lesser of their useful life or the lease term, buildings and improvements - 10-40 years, and automobiles - 3-5 years. Expenditures for repairs and maintenance are charged to expense as incurred. Assets held under finance leases are included within Property, plant and equipment, net in our Condensed Consolidated Balance Sheets and are amortized over the shorter of their useful lives or the expected term of their related leases. Depreciation expense was $3.7 million andÌý$8.1 million for the three and six months ended June 30, 2024, respectively. Depreciation expense wasÌý$5.0 million andÌý$10.0 million for the three and six months ended June 30, 2023, respectively.

Ìý

Impairment of long-lived assets. Long-lived assets, such as property and equipment and assets held for sale, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to estimated undiscounted future cash flows expected to be generated by the asset. If the carrying amount of an asset exceeds its estimated future cash flows, then an impairment charge is recognized for the amount by which the carrying amount of the asset exceeds the fair value of the asset.

Ìý

Income taxes. Income taxes are accounted for under the asset-and-liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and the respective tax bases and for operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in operations in the period that includes the enactment date. We periodically evaluate the realizability of our net deferred tax assets. Our tax accruals are analyzed periodically and adjustments are made as events occur to warrant such adjustment. Valuation allowances on certain U.S. deferred tax assets and non-U.S. deferred tax assets are established, because realization of these tax benefits through future taxable income does not meet the more-likely-than-not threshold.

Ìý

We operate in various countries and tax jurisdictions globally.Ìý For interim reporting purposes, we record income taxes based on the expected effective income tax rate, taking into consideration year to date and global forecasted tax results.ÌýFor the six months ended June 30, 2024, the tax rate differed from the U.S. federal statutory rate of 21% primarily due to the valuation allowance against certain U.S. and non-U.S. deferred tax assets, the relative mix in earnings and losses in the U.S. versus foreign tax jurisdictions, and the impact of certain discrete tax events and operating results in tax jurisdictions which do not result in a tax benefit.

Ìý

Included in Other long-term liabilities is an accrual of $9.9 million related to uncertain tax positions involving income recognition. In connection with an examination of foreign tax returns for the 2015 through 2021 tax years, a foreign taxing authority has issued an income tax assessment of approximately $246Ìýmillion (including interest). We are appealing this assessment, as we believe, other than for uncertain tax positions for which we have reserved, the issues are without technical merit. We intend to exhaust all judicial remedies necessary to resolve the matter as necessary,Ìýwhich could be a lengthy process. There can be no assurance that this matter will be resolved in our favor, and an adverse outcome, or any future tax examinations involving similar assertions, could have a material adverse effect on our financial condition, results of operations and cash flows.

Ìý

Revenue recognition. We recognize revenue when a customer obtains control of promised goods or services in accordance with Accounting Standards Codification Topic 606, Revenue from Contracts with Customers (â€œT´Ç±è¾±³¦ 606â€). The amount of revenue that is recorded reflects the consideration that we expect to receive in exchange for those goods or services. We apply the following five-step model in order to determine this amount: (i) identify the contract(s) with a customer; (ii) identify the performance obligations in the contract; (iii) determine the transaction price; (iv) allocate the transaction price to the performance obligations in the contract; and (v) recognize revenue when (or as) we satisfy a performance obligation.

Ìý

We apply the five-step model to contracts when it is probable that we will collect the consideration we are entitled to in exchange for the goods or services we transfer to the customer. At contract inception, once the contract is determined to be within the scope of Topic 606, we review the contract to determine which performance obligations we must deliver and which of these performance obligations are distinct. We recognize as revenue the amount of the transaction price that is allocated to the respective performance obligation when the performance obligation is satisfied or as it is satisfied. For a complete discussion of accounting for Revenues from services, Revenues from products and Revenue from transfer of intellectual property and other, refer to Note 13.

Ìý

Concentration of credit risk and allowance for credit losses. Financial instruments that potentially subject us to concentrations of credit risk consist primarily of accounts receivable. Substantially all of our accounts receivable are with either companies in the healthcare industry or patients. However, credit risk is limited due to the number of our clients as well as their dispersion across many different geographic regions.

Ìý

Table of Contents

Ìý

While we have receivables due from federal and state governmental agencies, such receivables are not a credit risk because federal and state governments fund the related healthcare programs. Payment is primarily dependent upon submitting appropriate documentation. On June 30, 2024 and December 31, 2023, receivable balances (net of explicit and implicit price concessions) from Medicare and Medicaid were 7.8% and 6.7%, respectively, of our consolidated Accounts receivable, net. The portion of our accounts receivable due from individual patients comprises the largest portion of credit risk. At June 30, 2024 and December 31, 2023, receivables due from patients represented approximately 2.1% and 2.0%, respectively, of our consolidated Accounts receivable, net.

Ìý

We assess the collectability of accounts receivable balances by considering factors such as historical collection experience, customer credit worthiness, the age of accounts receivable balances, regulatory changes and current economic conditions and trends that may affect a customerâ€™s ability to pay. Actual results could differ from those estimates. The allowance for credit losses was $2.0 million on each ofÌý June 30, 2024 and December 31, 2023. The credit loss expense for the three and six months ended June 30, 2024, was $14.1 thousand and $142.6 thousand, respectively. The credit loss expense for the three and six months ended June 30, 2023, wasÌý$2.8 thousand and $88.0 thousand, respectively.

Ìý

As of June 30, 2024, accounts receivable included $1.2 million of revenue earned under the BARDA Contract (as defined in Note 14). As of December 31, 2023, accounts receivable included $0.6 million under this contract. Refer to Note 13, Government Contract Revenue for further information on government contracts and to Note 14, Strategic Alliances for further information on the BARDA Contract.

Ìý

Equity-based compensation. We measure the cost of services received in exchange for an award of equity instruments based on the grant-date fair value of the award. That cost is recognized in the Condensed Consolidated Statement of Operations over the period during which an employee is required to provide service in exchange for the award. We record excess tax benefits realized from the exercise of stock options as cash flows from operations. For the three and six months ended June 30, 2024, we recordedÌý$2.6 million and $5.2 million, respectively, of equity-based compensation expense. For the three and six months ended June 30, 2023, we recorded $2.8 million and $5.5 million, respectively, of equity-based compensation expense.

Ìý

Research and development expenses. Research and development expenses include external and internal expenses. External expenses include clinical and nonclinical activities performed by contract research organizations, lab services, purchases of drug and diagnostic product materials and manufacturing development costs. Research and development employee-related expenses include salaries, benefits and equity-based compensation expense. Other internal research and development expenses are incurred to support overall research and development activities and include expenses related to general overhead and facilities. We expense these costs in the period in which they are incurred. We estimate our liabilities for research and development expenses in order to match the recognition of expenses to the period in which the actual services are received. As such, accrued liabilities related to third party research and development activities are recognized based upon our estimate of services received and degree of completion of the services in accordance with the specific third party contract.

Ìý

Research and development expense includes costs for in-process research and development projects acquired in asset acquisitions which have not reached technological feasibility, and which have no alternative future use. For in-process research and development projects acquired in business combinations, the in-process research and development project is capitalized and evaluated for impairment until the development process has been completed. Once the development process has been completed the asset will be amortized over its remaining estimated useful life.

Ìý

Segment reporting. Our chief operating decision-maker (â€œCODMâ€) is Phillip Frost, M.D., our Chairman and Chief Executive Officer. Dr. Frost reviews our operating results and operating plans and makes resource allocation decisions on a Company-wide or aggregate basis. We manage our operations in two reportable segments, pharmaceutical and diagnostics. The pharmaceutical segment consists of our pharmaceutical operations in Chile, Mexico, Ireland, Israel and Spain, Rayaldee product sales and our pharmaceutical research and development. The diagnostics segment primarily consists of clinical laboratory operations through BioReference and our point-of-care operations. There are no significant inter-segment sales. We evaluate the performance of each segment based on operating profit or loss. There is no inter-segment allocation of interest expense or income taxes. Refer to Note 15.

Ìý

Shipping and handling costs. We do not charge customers for shipping and handling costs. Shipping and handling costs are classified as Cost of revenues in the Condensed Consolidated Statement of Operations.

Ìý

Table of Contents

Ìý

Foreign currency translation. The financial statements of certain of our foreign operations are measured using the local currency as the functional currency. The local currency assets and liabilities are generally translated at the rate of exchange to the U.S. dollar on the balance sheet date. The local currency revenues and expenses are translated at average rates of exchange to the U.S. dollar during the reporting periods. Foreign currency transaction gains (losses) have been reflected as a component of Other income (expense), net within the Condensed Consolidated Statement of Operations and foreign currency translation gains (losses) have been included as a component of the Condensed Consolidated Statement of Comprehensive Income (Loss). During the three and six months ended June 30, 2024, we recorded foreign currency transaction losses of ($1.3 million) and ($4.0 million), respectively. During the three and six months ended June 30, 2023, we recorded foreign currency transaction gains ofÌý$0.9 million and $2.0 million, respectively.

Ìý

Variable interest entities. The consolidation of a variable interest entity (â€œVIEâ€) is required when an enterprise has a controlling financial interest. A controlling financial interest in a VIE will have both of the following characteristics: (a) the power to direct the activities of a VIE that most significantly impact the VIEâ€™s economic performance and (b) the obligation to absorb losses of the VIE that could potentially be significant to the VIE. Refer to Note 6.

Ìý

Investments. We have made strategic investments in development stage and emerging companies. We record these investments as equity method investments or as equity securities based on our percentage of ownership and whether we have significant influence over the operations of the investees. For investments classified under the equity method of accounting, we record our proportionate share of their losses in Losses from investments in investees in our Condensed Consolidated Statement of Operations. Refer to Note 6. For investments classified as equity securities, we record changes in their fair value as Other income (expense) in our Condensed Consolidated Statement of Operations based on their closing price per share at the end of each reporting period, unless the equity security does not have a readily determinable fair value. Refer to Note 6.

Ìý

Accounting standards yet to be adopted.

Ìý

In December 2023, the FASB issued ASU No. 2023-09, â€œIncome Taxes (Topic 740): Improvements to Income Tax Disclosuresâ€ (â€œASU 2023-09â€), which modifies the rules on income tax disclosures to require entities to disclose (i) specific categories in the rate reconciliation, (ii) the income or loss from continuing operations before income tax expense or benefit (separated between domestic and foreign) and (iii) income tax expense or benefit from continuing operations (separated by federal, state and foreign). ASU 2023-09 also requires entities to disclose their income tax payments to international, federal, state, and local jurisdictions, among other changes. The guidance is effective for annual periods beginning after December 15, 2024. Early adoption is permitted for annual financial statements that have not yet been issued or made available for issuance. ASU 2023-09 should be applied on a prospective basis, but retrospective application is permitted. We are currently evaluating the potential impact of adopting this new guidance on our consolidated financial statements and related disclosures.

Ìý

In November 2023, the FASB issued ASU No 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures (â€œASU 2023-07â€). ASU 2023-07 enhances disclosures for significant segment expenses for all public entities required to report segment information in accordance with ASC 280. ASC 280 requires a public entity to report for each reportable segment a measure of segment profit or loss that its CODM uses to assess segment performance and to make decisions about resource allocations. The ASU is effective for fiscal years beginning after December 15, 2024 with updates to be applied on a prospective basis with the option to apply the standard retrospectively. Early adoption is permitted. We are currently evaluating the potential impact of adopting this new guidance on our consolidated financial statements and related disclosures.

Ìý

Recently adopted accounting standards.

Ìý

In 2021, the Organization for Economic Co-operation and Development (â€œOECDâ€) established an inclusive framework on base erosion and profit shifting and agreed on a two-pillar solution (â€œPillar Twoâ€) to global taxation, focusing on global profit allocation and a 15% global minimum effective tax rate. On December 15, 2022, the EU member states agreed to implement the OECDâ€™s global minimum tax rate of 15%. The OECD issued Pillar Two model rules and continues to release guidance on these rules. The inclusive framework calls for tax law changes by participating countries to take effect in 2024 and 2025. Various countries have enacted or have announced plans to enact new tax laws to implement the global minimum tax. We considered the applicable tax law changes on Pillar Two implementation in the relevant countries, and there is no material impact to our tax results for the period. We anticipate further legislative activity and administrative guidance in 2024, and will continue to evaluate the impacts of enacted legislation and pending legislation to enact Pillar Two Model Rules in the non-US tax jurisdictions we operate in.

Ìý

Table of Contents

Ìý

NOTE 4 EARNINGS (LOSS) PER SHARE

Ìý

Basic income (loss) per share is computed by dividing our net income (loss) by the weighted average number of shares of our Common Stock outstanding during the period. Shares of Common Stock outstanding under theÌýshare lendingÌýarrangement entered into in conjunction with the 2025 Notes (as defined in Note 7) are excluded from the calculation of basic and diluted earnings per share because the borrower of the shares is required under the share lending arrangement to refund any dividends paid on the shares lent. Refer to Note 7. For diluted earnings per share, the dilutive impact of stock options and warrants is determined by applying the â€œtreasury stockâ€ method. The dilutive impact of the 2029 Convertible Notes, 2033 Senior Notes, the 2023 Convertible Notes and the 2025 Notes (each, as defined and discussed in Note 7) has been considered using the â€œif convertedâ€ method. For periods in which their effect would have been antidilutive, no effect is given in the dilutive computation to Common Stock issuable under outstanding options or warrants or the potentially dilutive shares issuable pursuant to the 2029 Convertible Notes, 2033 Senior Notes, the 2023 Convertible Notes and the 2025 Notes.

Ìý

A total of 294,774,975 and 82,817,175 potential shares of Common Stock were excluded from the calculation of diluted net loss per share for the three months ended June 30, 2024 and 2023, respectively, because their inclusion would have been antidilutive.ÌýA total of 293,731,532 and 82,438,648 potential shares of Common Stock were excluded from the calculation of diluted net loss per share for the six months ended June 30, 2024 and 2023, respectively, because their inclusion would have been antidilutive. A full presentation of diluted earnings per share has not been provided because the required adjustments to the numerator and denominator resulted in diluted earnings per share equivalent to basic earnings per share.

Ìý

During the three months ended June 30, 2024, no options were exercised and 549,687 restricted stock units vested, resulting in the issuance of 384,378 shares of Common Stock.

Ìý

During the six months ended June 30, 2024, no options were exercised and 549,687 restricted stock units vested, resulting in the issuance of 384,378 shares of Common Stock.

Ìý

During the three months ended June 30, 2023, no options were exercised and 549,680 restricted stock units vested, resulting in the issuance of 386,971 shares of Common Stock.

Ìý

During the six months ended June 30, 2023, no options were exercised and 549,680 restricted stock units vested, resulting in the issuance of 386,971 shares of Common Stock.

Ìý

Table of Contents

Ìý

NOTE 5 COMPOSITION OF CERTAIN FINANCIAL STATEMENT CAPTIONS

Ìý

Ìý	Ìý	June 30,		Ìý	Ìý	December 31,		Ìý
(In thousands)	Ìý	2024		Ìý	Ìý	2023		Ìý
Accounts receivable, net:	Ìý	Ìý	Ìý	Ìý	Ìý	Ìý	Ìý	Ìý
Accounts receivable	Ìý	$	107,310	Ìý	Ìý	$	125,379	Ìý
Less: allowance for credit losses	Ìý	Ìý	(1,997	)	Ìý	Ìý	(2,000	)
Ìý	Ìý	$	105,313	Ìý	Ìý	$	123,379	Ìý
Inventories, net:	Ìý	Ìý	Ìý	Ìý	Ìý	Ìý	Ìý	Ìý
Consumable supplies	Ìý	$	18,011	Ìý	Ìý	$	25,864	Ìý
Finished products	Ìý	Ìý	34,478	Ìý	Ìý	Ìý	35,582	Ìý
Work in-process	Ìý	Ìý	2,203	Ìý	Ìý	Ìý	1,731	Ìý
Raw materials	Ìý	Ìý	9,269	Ìý	Ìý	Ìý	8,981	Ìý
Less: inventory reserve	Ìý	Ìý	(3,808	)	Ìý	Ìý	(6,461	)
Ìý	Ìý	$	60,153	Ìý	Ìý	$	65,697	Ìý
Other current assets and prepaid expenses:	Ìý	Ìý	Ìý	Ìý	Ìý	Ìý	Ìý	Ìý
Taxes recoverable	Ìý	$	4,897	Ìý	Ìý	$	4,211	Ìý
Prepaid expenses	Ìý	Ìý	9,453	Ìý	Ìý	Ìý	6,177	Ìý
Prepaid insurance	Ìý	Ìý	5,399	Ìý	Ìý	Ìý	3,848	Ìý
Other receivables	Ìý	Ìý	5,805	Ìý	Ìý	Ìý	2,610	Ìý
Other	Ìý	Ìý	6,734	Ìý	Ìý	Ìý	7,673	Ìý
Ìý	Ìý	$	32,288	Ìý	Ìý	$	24,519	Ìý
Intangible assets, net:	Ìý	Ìý	Ìý	Ìý	Ìý	Ìý	Ìý	Ìý
Customer relationships	Ìý	$	256,571	Ìý	Ìý	$	315,799	Ìý
Technologies	Ìý	Ìý	812,032	Ìý	Ìý	Ìý	831,509	Ìý
Trade names	Ìý	Ìý	49,740	Ìý	Ìý	Ìý	49,758	Ìý
Covenants not to compete	Ìý	Ìý	12,911	Ìý	Ìý	Ìý	12,916	Ìý
Licenses	Ìý	Ìý	6,240	Ìý	Ìý	Ìý	6,205	Ìý
Product registrations	Ìý	Ìý	6,429	Ìý	Ìý	Ìý	6,790	Ìý
Other	Ìý	Ìý	5,866	Ìý	Ìý	Ìý	6,000	Ìý
Less: accumulated amortization	Ìý	Ìý	(490,678	)	Ìý	Ìý	(488,694	)
Ìý	Ìý	$	659,111	Ìý	Ìý	$	740,283	Ìý
Accrued expenses:	Ìý	Ìý	Ìý	Ìý	Ìý	Ìý	Ìý	Ìý
Employee benefits	Ìý	$	27,158	Ìý	Ìý	$	28,952	Ìý
Clinical trials	Ìý	Ìý	5,779	Ìý	Ìý	Ìý	7,624	Ìý
Commitments and contingencies	Ìý	Ìý	8,842	Ìý	Ìý	Ìý	8,088	Ìý
Gross to net provision	Ìý	Ìý	7,808	Ìý	Ìý	Ìý	9,420	Ìý
Inventory received but not invoiced	Ìý	Ìý	3,608	Ìý	Ìý	Ìý	1,653	Ìý
Finance leases short-term	Ìý	Ìý	1,787	Ìý	Ìý	Ìý	2,827	Ìý
Professional fees	Ìý	Ìý	2,672	Ìý	Ìý	Ìý	3,470	Ìý
Taxes payable	Ìý	Ìý	5,780	Ìý	Ìý	Ìý	1,384	Ìý
Royalties	Ìý	Ìý	880	Ìý	Ìý	Ìý	1,544	Ìý
Commissions	Ìý	Ìý	1,960	Ìý	Ìý	Ìý	1,822	Ìý
Other	Ìý	Ìý	28,242	Ìý	Ìý	Ìý	23,302	Ìý
Ìý	Ìý	$	94,516	Ìý	Ìý	$	90,086	Ìý
Other long-term liabilities:	Ìý	Ìý	Ìý	Ìý	Ìý	Ìý	Ìý	Ìý
Mortgages and other debts payable	Ìý	$	3,676	Ìý	Ìý	$	7,709	Ìý
Finance leases long-term	Ìý	Ìý	4,497	Ìý	Ìý	Ìý	7,274	Ìý
Contract liabilities	Ìý	Ìý	7	Ìý	Ìý	Ìý	7	Ìý
Other	Ìý	Ìý	12,135	Ìý	Ìý	Ìý	12,199	Ìý
Ìý	Ìý	$	20,315	Ìý	Ìý	$	27,189	Ìý

Ìý

Table of Contents

Ìý

Our intangible assets and goodwill relate principally to our completed acquisitions of Ð¡ÖíÊÓÆµapp Renal, Ð¡ÖíÊÓÆµapp Biologics, EirGen, BioReference and ModeX. We amortize intangible assets with definite lives on a straight-line basis over their estimated useful lives. The estimated useful lives by asset class are as follows: technologies - 7-17 years, customer relationships - 5-20 years, product registrations - 7-10 years, covenants not to compete - 5 years, trade names - 5-10 years, other 9-13 years. We do not anticipate capitalizing the cost of product registration renewals, rather we expect to expense these costs, as incurred. Our goodwill is not tax deductible for income tax purposes in any jurisdiction in which we operate.

Ìý

Changes in value of the intangible assets and goodwill during theÌýsix months ended June 30, 2024 and 2023 were primarily due to foreign currency fluctuations between the Euro, and the Chilean Peso against the U.S. dollar.

Ìý

The following table summarizes the changes in Goodwill by reporting unit during the six months ended June 30, 2024.

Ìý

2024

Ìý

(In thousands)

Ìý

Gross goodwill at January 1

Ìý

Cumulative impairment at January 1

Ìý

Acquisitions, dispositions and other

Ìý

Foreign exchange and other

Ìý

Balance at June 30

Ìý

Pharmaceuticals

Ìý

CURNA

Ìý

4,827

Ìý

(4,827

)

Ìý

â€”

Ìý

â€”

Ìý

â€”

Ìý

Rayaldee

Ìý

84,273

Ìý

â€”

Ìý

â€”

Ìý

(2,387

)

Ìý

81,886

Ìý

FineTech

Ìý

11,698

Ìý

(11,698

)

Ìý

â€”

Ìý

â€”

Ìý

â€”

Ìý

ModeX

Ìý

80,260

Ìý

â€”

Ìý

â€”

Ìý

â€”

Ìý

80,260

Ìý

Ð¡ÖíÊÓÆµapp Biologics

Ìý

139,784

Ìý

â€”

Ìý

â€”

Ìý

)

Ìý

139,784

Ìý

Ð¡ÖíÊÓÆµapp Chile

Ìý

3,642

Ìý

â€”

Ìý

â€”

Ìý

(262

)

Ìý

3,380

Ìý

Ð¡ÖíÊÓÆµapp Health Europe

Ìý

7,276

Ìý

â€”

Ìý

â€”

Ìý

(211

)

Ìý

7,065

Ìý

Ð¡ÖíÊÓÆµapp Mexico

Ìý

100

Ìý

(100

)

Ìý

â€”

Ìý

â€”

Ìý

â€”

Ìý

Transition Therapeutics

Ìý

3,421

Ìý

(3,421

)

Ìý

â€”

Ìý

â€”

Ìý

â€”

Ìý

Diagnostics

Ìý

BioReference

Ìý

283,025

Ìý

â€”

Ìý

(65,294

)

Ìý

â€”

Ìý

217,731

Ìý

Ð¡ÖíÊÓÆµapp Diagnostics

Ìý

17,977

Ìý

(17,977

)

Ìý

â€”

Ìý

â€”

Ìý

â€”

Ìý

636,283

Ìý

(38,023

)

Ìý

(65,294

)

Ìý

(2,860

)

Ìý

530,106

Ìý

Acquisitions, disposition and other includes amounts related to the Labcorp Asset Purchase Agreement, which is included in assets held for sale at June 30, 2024.

Ìý

NOTE 6 INVESTMENTS

Ìý

Investments

Ìý

The following table reflects the accounting method, carrying value and underlying equity in net assets of our unconsolidated investments as of June 30, 2024 and December 31, 2023:

Ìý

(in thousands)

Ìý

As of June 30, 2024

Ìý

As of December 31, 2023

Ìý

Investment type

Ìý

Investment Carrying Value

Ìý

Underlying Equity in Net Assets

Ìý

Investment Carrying Value

Ìý

Underlying Equity in Net Assets

Ìý

Equity method investments

Ìý

)

Ìý

2,649

Ìý

)

Ìý

2,942

Ìý

Variable interest entity, equity method

Ìý

793

Ìý

â€”

Ìý

796

Ìý

420

Ìý

Equity method investments - FV option

Ìý

93,022

Ìý

9,786

Ìý

Equity securities

Ìý

149

Ìý

116

Ìý

Equity securities with no readily determinable fair value

Ìý

7,521

Ìý

5,382

Ìý

Warrants and options

Ìý

Total carrying value of investments

Ìý

101,489

Ìý

16,082

Ìý

Table of Contents

Ìý

Equity method investments

Ìý

Our equity method investments, other than in GeneDx Holdings, as describedÌýbelow, consist of investments in Pharmsynthez (ownership 9%), Cocrystal Pharma, Inc. (â€œCOCPâ€) (2%), Non-Invasive Monitoring Systems, Inc. (â€œNIMSâ€) (1%), BioCardia, Inc. (â€œBioCardiaâ€) (1%), Xenetic Biosciences, Inc. (â€œXeneticâ€) (3%),ÌýZebra Biologics, Inc. (â€œZebraâ€) (29%), and LeaderMed Health Group Limited (â€œLeaderMedâ€) (47%). Neovasc, Inc., in which we owned a 0.5% interest, was acquired by Shockwave Medical, Inc. in April 2023. As a result, we received $363 thousand in merger consideration in exchange for our shares. The aggregate amount of assets, liabilities, and net losses of these equity method investees as of and for theÌýsix months ended June 30, 2024 were $74.3 million, $23.0 million, and $16.8 million, respectively. The aggregate amount of assets, liabilities, and net losses of our equity method investees as of and for the year ended December 31, 2023 were $85.5 million, $20.8 million, and $37.7 million, respectively. We have determined that we or our related parties have the ability to exercise significant influence over our equity method investments through our board representation or voting power. Accordingly, we account for our investment in these entities under the equity method and record our proportionate share of their losses in Loss from investments in investees in our Consolidated Statement of Operations. The aggregate value of our equity method investments based on the quoted market prices of their respective shares of common stock and the number of shares held by us as of June 30, 2024 and December 31, 2023 was $0.7 million and $0.7 million, respectively.

Ìý

Equity method investments - Fair value option

Ìý

OnÌý January 14, 2022,Ìýthe Company entered into an Agreement and Plan of Merger and Reorganization (the â€œGeneDx Merger Agreementâ€) with GeneDx Holdings Corp. (f/k/aÌýSema4ÌýHoldings Corp.), a Delaware corporation (â€œGeneDx Holdingsâ€), pursuant to which GeneDx Holdings acquired our former subsidiary, GeneDx LLC (formerly GeneDx, Inc. â€œGeneDxâ€), on April 28, 2022. As a result of this transaction, the Company holds an equity method investment in GeneDx Holdings, representing an approximateÌý13.6% ownership interest at June 30, 2024. Pursuant to the GeneDx Merger Agreement, the Company designated, and GeneDx Holdings nominated for election an individual to serve on the board of directors of GeneDx Holdings.ÌýThis individual was subsequently elected by GeneDx Holdings stockholders and has continued to serve on the board following his re-election in 2024. His term will extend until the GeneDx Holdings annual meeting of stockholders in 2027. Therefore, we have determined that the Company or our related parties can exercise significant influence over the investee through our board representation or voting power.ÌýHowever, our influence is limited by our shareholder agreement with GeneDx Holdings, pursuant to which we have agreed to vote our shares of GeneDx Holdings common stock in accordance with the recommendation of GeneDx Holdings' board of directors for so long as we continue to hold at least 5% of the outstanding shares of GeneDx Holdings common stock. Other than through our sole board seat, we are unable to influence GeneDx Holdings' policy-making process. We currently holdÌýoneÌýofÌýsevenÌýseats on the GeneDx Holdings board of directors, and our designeeÌý mayÌýcontinue to serve following the expiration of his current term if re-elected by GeneDx Holdings stockholders.

Ìý

We elected to account for our investment in GeneDx Holdings under the equity method fair value option and record gains and losses from changes in fair value in other income (expense), net in our Condensed Consolidated Statements of Operations. For the three and six months ended June 30, 2024, we recognizedÌý$60.5 million andÌý$83.2 million in net income related to the change in fair value of our GeneDx Holdings investment, respectively.ÌýFor the three and six months ended June 30, 2023, we recognizedÌý$19.9 million andÌý$11.6 million in net income related to the change in fair value of our GeneDx Holdings investment, respectively. As of June 30, 2024,Ìýthe aggregate value of our GeneDx Holdings investment wasÌý$93.0 million based on the quoted market price of the GeneDx Holdings common stock.

Ìý

Investments in equity securities

Ìý

Our equity securities consist of investments in VBI Vaccines Inc.Ìý(0.16%), ChromaDex Corporation (â€œChromaDexâ€) (0.05%), and Eloxx Pharmaceuticals, Inc. (â€œEloxxâ€) (1%). Our equity securities without readily determinable fair value consists of CAMP4 Therapeutics Corporation (â€œC´¡²Ñ±Ê4â€) (2%) and HealthSnap, Inc. (4%). We have determined that our ownership, along with that of our related parties, does not provide us with significant influence over the operations of these investments. Accordingly, we account for our investment in these entities as equity securities, and we record changes in the fair value of these investments in Other income (expense) each reporting period when they have readily determinable fair value. Equity securities without a readily determinable fair value are adjusted to fair value when there is an observable price change. Net gains and losses on our equity securities for theÌýsix months ended June 30, 2024 and 2023 were as follows:

Ìý

Ìý	Ìý	For the six months ended June 30,						Ìý
(in thousands)	Ìý	2024		Ìý	Ìý	2023		Ìý
Equity Securities:	Ìý	Ìý	Ìý	Ìý	Ìý	Ìý	Ìý	Ìý
Net gains and losses recognized during the period on equity securities	Ìý	$	33	Ìý	Ìý	$	(318	)
Unrealized net losses recognized during the period on equity securities still held at the reporting date	Ìý	$	33	Ìý	Ìý	$	(318	)

Ìý

Table of Contents

Ìý

Sales of investments

Ìý

Gains (losses) included in earnings from sales of our investments are recorded in Other income (expense), net in our Condensed Consolidated Statement of Operations. The cost of securities sold is based on the specific identification method.

Ìý

Warrants and options

Ìý

In addition to our equity method investments and equity securities, we hold options to purchase 47 thousand additional shares of BioCardia, all of which were vested as of June 30, 2024 and December 31, 2023, and warrants to purchase 0.7 million additional shares of InCellDx Inc. We recorded the changes in the fair value of the options and warrants in fair value changes of derivative instruments, net in our Condensed Consolidated Statement of Operations. We also recorded the fair value of the options and warrants in Investments, net in our Condensed Consolidated Balance Sheet. See further discussion of the Companyâ€™s options and warrants in Note 9 and Note 10.

Ìý

Investments in variable interest entities

Ìý

We have determined that we hold variable interests in LeaderMed and Zebra. We made this determination as a result of our assessment that they do not have sufficient resources to carry out their principal activities without additional financial support.

Ìý

In September 2021, we and LeaderMed, a pharmaceutical development company with operations based in Asia, formed a joint venture to develop, manufacture and commercialize two of Ð¡ÖíÊÓÆµappâ€™s clinical stage, long-acting drug products in Greater China and eight other Asian territories. Under the terms of the agreements, we granted the joint venture exclusive rights to develop, manufacture and commercialize (a) OPK88003, an oxyntomodulin analog being developed for the treatment of obesity and diabetes, and (b) Factor VIIa-CTP, a novel long acting coagulation factor being developed to treat hemophilia, in exchange for 4,703 shares 47% ownership interest in the joint venture. In addition, we received an upfront payment of $1.0Ìýmillion and will be reimbursed for clinical trial material and technical support we provide the joint venture.

Ìý

In order to determine the primary beneficiary of the joint venture, we evaluated our investment and our related partiesâ€™ investment, as well as our investment combined with the related partiesâ€™ investment to identify if we had the power to direct the activities that most significantly impact the economic performance of the joint venture. Based on the capital structure, governing documents and overall business operations of the joint venture, we determined that, while a VIE, we do not have the power to direct the activities that most significantly impact the joint ventureâ€™s economic performance and do not have an obligation to fund expected losses. We did determine that we can significantly influence control of the joint venture through our board representation and voting power. Therefore, we have the ability to exercise significant influence over the joint ventureâ€™s operations and account for our investment in the joint venture under the equity method.

Ìý

We own 1,260,000 shares of Zebraâ€™s Series A-2 Preferred Stock and 900,000 shares of Zebra restricted common stock (ownership 29%) at June 30, 2024 and December 31, 2023. Zebra is a privately held biotechnology company focused on the discovery and development of biosuperior antibody therapeutics and complex drugs. Dr. Richard Lerner, M.D., a former member of our Board of Directors, was a founder of Zebra.ÌýDr. FrostÌýserves as a member of Zebraâ€™s Board of Directors.

Ìý

In order to determine the primary beneficiary of Zebra, we evaluated our investment and our related partiesâ€™ investment, as well as our investment combined with the related partiesâ€™ investment to identify if we had the power to direct the activities that most significantly impact the economic performance of Zebra. Based on the capital structure, governing documents and overall business operations of Zebra, we determined that, while a VIE, we do not have the power to direct the activities that most significantly impact Zebraâ€™s economic performance and have no obligation to fund expected losses. We determined, however, that we can significantly influence control of Zebra through our board representation and voting power. Therefore, we have the ability to exercise significant influence over Zebraâ€™s operations and account for our investment in Zebra under the equity method.

Ìý

Table of Contents

ÌýÌý

Ìý

NOTE 7 DEBT

Ìý

As of June 30, 2024 and December 31, 2023, our debt consisted of the following:

Ìý

Ìý	Ìý	June 30,		Ìý	Ìý	December 31,		Ìý
(In thousands)	Ìý	2024		Ìý	Ìý	2023		Ìý
2029 Convertible Notes	Ìý	$	175,892	Ìý	Ìý	$	â€”	Ìý
2025 Convertible Notes	Ìý	Ìý	170	Ìý	Ìý	Ìý	143,250	Ìý
2033 Senior Notes	Ìý	Ìý	50	Ìý	Ìý	Ìý	50	Ìý
2023 Convertible Notes	Ìý	Ìý	â€”	Ìý	Ìý	Ìý	71,025	Ìý
JPMorgan Chase Bank line of credit	Ìý	Ìý	10,007	Ìý	Ìý	Ìý	12,671	Ìý
Chilean and Spanish lines of credit	Ìý	Ìý	10,525	Ìý	Ìý	Ìý	12,629	Ìý
Current portion of notes payable	Ìý	Ìý	1,597	Ìý	Ìý	Ìý	1,993	Ìý
Long term portion of notes payable	Ìý	Ìý	3,676	Ìý	Ìý	Ìý	7,727	Ìý
Total	Ìý	$	201,917	Ìý	Ìý	$	249,345	Ìý
Ìý	Ìý	Ìý	Ìý	Ìý	Ìý	Ìý	Ìý	Ìý
Balance sheet captions	Ìý	Ìý	Ìý	Ìý	Ìý	Ìý	Ìý	Ìý
Current portion of convertible notes	Ìý	$	170	Ìý	Ìý	$	â€”	Ìý
Long term portion of convertible notes	Ìý	Ìý	175,942	Ìý	Ìý	Ìý	214,325	Ìý
Current portion of lines of credit and notes payable	Ìý	Ìý	22,129	Ìý	Ìý	Ìý	27,293	Ìý
Long Term notes payable included in long-term liabilities	Ìý	Ìý	3,676	Ìý	Ìý	Ìý	7,727	Ìý
Total	Ìý	$	201,917	Ìý	Ìý	$	249,345	Ìý

Ìý

InÌý January 2024,Ìýwe completed a private offering of $230.0Ìýmillion aggregate principal amount of ourÌý3.75% Convertible Senior Notes dueÌý2029Ìý(theÌýâ€œ2029ÌýConvertible 144A Notesâ€) in accordance with the terms of a note purchase agreement (theÌýâ€œ144´¡ÌýNote Purchase Agreementâ€) entered into by and between the Company and J.P. Morgan Securities LLC (the â€œInitial Purchaserâ€).

Ìý

Net proceeds from the 2029 Convertible 144A Notes issuance totaled approximately $222.0 million after deducting fees and estimated offering expenses payable by us. We allocated approximately $50.0 million of these net proceeds to repurchase shares of our Common Stock. These repurchases were from purchasers of the 2029 Convertible 144A Notes in privately negotiated transactions effected with or through the Initial Purchaser or its affiliate. The purchase price per share of the Common Stock in these transactions equaled the closing sale price of $0.9067 per share of Common Stock on January 4, 2024.

Ìý

Contemporaneously with the closing of the offering of the 2029 Convertible 144A Notes on January 9, 2024, we issued and sold approximately $71.1 million aggregate principal amount of our 3.75% Convertible Senior Notes due 2029 (the â€œ2029 Convertible Affiliate Notesâ€ and, together with the 2029 Convertible 144A Notes, the â€œ2029 Convertible Notesâ€) pursuant to the terms of a note purchase agreement entered into on January 4, 2024 (the â€œAffiliate Note Purchase Agreementâ€) by and among the Company and certain investors, Frost Gamma Investments Trust, a trust controlled by Dr. Phillip Frost, and Dr. Jane H. HsiaoÌý(collectively, the â€œAffiliate Purchasersâ€). Pursuant to the Affiliate Note Purchase Agreement, we issued and sold the 2029 Convertible Affiliate Notes to the Affiliate Purchasers in exchange for the entirety of the $55.0 million aggregate principal amount of our outstanding 2023 Convertible Notes held by the Affiliate Purchasers, together with approximately $16.1 million of accrued but unpaid interest thereon.

Ìý

On January 9th, 2024, we recorded the $125.6 million value of the embedded derivative liability within the 2029 Convertible Notes as a debt discount. To determine the fair value of this derivative, we employed the Binomial Lattice model. Key inputs and assumptions for this valuation included our common stock price, the derivative's exercise price, risk-free interest rate, volatility, annual coupon rate, and remaining contractual term. We are amortizing the debt discount as non-cash interest expense over the term of the Notes.

Ìý

From the date the Notes were issued through March 31, 2024, we observed an increase in the market price of our Common Stock which resulted in a $26.25 million increase in the estimated fair value of our embedded derivatives recorded in Fair value changes of derivative instruments, net in our Condensed Consolidated Statements of Operations. Effective April 1, 2024, the conversion option contained in the 2029 Convertible Notes met the classification of an equity component. As a result, we reclassified $151.9 million of the embedded derivative liability from debt, non-current, to additional paid-in capital section of stockholders' equity on our Condensed Consolidated Balance Sheet.

Ìý

Table of Contents

Ìý

HoldersÌý mayÌýconvert theirÌý2029ÌýConvertible Notes at their option prior to the close of business on the business day immediately precedingÌý September 15, 2028Ìýonly under the following circumstances: (1) during any calendar quarter commencing after the calendar quarter ending onÌý March 31, 2024 (and only during such calendar quarter), if the last reported sale price of our Common Stock for at leastÌý20Ìýtrading days (whether orÌýnotÌýconsecutive) during the period ofÌý30Ìýconsecutive trading days ending on, and including, the last trading day of the immediately preceding calendar quarter is greater than or equal toÌý130% of the applicable conversion price on each applicable trading day; (2) during theÌýfiveÌýconsecutive business day period after anyÌýtenÌýconsecutive trading day period (the â€œconvertible note measurement periodâ€) in which the trading price perÌý$1,000Ìýprincipal amount of notes for each trading day of the convertible note measurement period was less thanÌý98% of the product of the last reported sale price of our Common Stock and the applicable conversion rate on each such trading day; or (3) upon the occurrence of specified corporate events specified in the indenture governing theÌý2029ÌýConvertible Notes. On or afterÌý September 15, 2028Ìýuntil the close of business on the business day immediately preceding the maturity date, holdersÌý mayÌýconvert their notes at any time, regardless of the foregoing conditions. Upon conversion of a note, we will pay or deliver, as the caseÌý mayÌýbe, cash, shares of our Common Stock or a combination of cash and shares of our Common Stock, at our election.

Ìý

The conversion rate is initially equal toÌý869.5652Ìýshares of Common Stock perÌý$1,000Ìýprincipal amount of notes (equivalent to an initial conversion price of approximately $1.15Ìýper share of Common Stock). The conversion rate for theÌý2029ÌýConvertible Notes will be subject to adjustment upon the occurrence of certain events but willÌýnotÌýbe adjusted for any accrued and unpaid interest. In addition, following certain corporate events that occur prior to the maturity date of the notes,Ìýin certain circumstances we will increase the conversion rate of theÌý2029ÌýConvertible NotesÌýfor a holder who elects to convert its notes in connection with such a corporate event.

Ìý

WeÌý mayÌýnotÌýredeem the notes prior to the maturity date, andÌýnoÌýsinking fund is provided for the notes. If we undergo a fundamental change, holdersÌý mayÌýrequire us to purchase the notes in whole or in part for cash at a fundamental change purchase price equal toÌý100% of the principal amount of the notes to be purchased,ÌýplusÌýaccrued and unpaid interest, if any, to, but excluding, the fundamental change purchase date. TheÌý2029ÌýConvertible Notes areÌýour senior unsecured obligations andÌýrank senior in right of payment to any indebtedness that is expressly subordinated in right of payment to the notes, and equal in right of payment with all of our existing and future unsecured indebtedness that isÌýnotÌýso subordinated. The notes are effectively subordinated to all of our existing and future secured indebtedness to the extent of the value of the assets securing such indebtedness and structurally subordinated to all existing and future liabilities of our subsidiaries.

Ìý

The indenture governing the notes provides for customary events of default which include (subject in certain cases to customary grace and cure periods), among others, the following: nonpayment of principal or interest; breach of covenants or other agreements in the indenture; defaults in failure to pay certain other indebtedness; judgment defaults; and certain events of bankruptcy or insolvency. Generally, if an event of default occurs and is continuing under the indenture, the trustee thereunder or the holders of at leastÌý25%Ìýin aggregate principal amount of the notes then outstandingÌý mayÌýdeclareÌý100%Ìýof the principal of and accrued and unpaid interest, if any on all then-outstanding notes to be immediately due and payable.Ìý In certain circumstances, weÌý may,Ìýfor a period of time, elect to pay additional interest on the notes as the sole remedy to holders of the notes in the case of an event of default related to certain failures by us to comply with certain reporting covenants in the indenture.

Ìý

The following table sets forth information related to theÌý2029ÌýConvertible Notes which is included in our Condensed Consolidated Balance Sheet as of June 30, 2024:

Ìý

(In thousands)

Ìý

2029 convertible notes

Ìý

Embedded conversion option

Ìý

Discount

Ìý

Debt Issuance costs

Ìý

Total

Ìý

Balance at December 31, 2023

Ìý

â€”

Ìý

â€”

Ìý

â€”

Ìý

â€”

Ìý

â€”

Ìý

Issuance of 3.75% 2029 Convertible Notes

Ìý

301,054

Ìý

125,620

Ìý

(125,620

)

Ìý

(8,562

)

Ìý

292,492

Ìý

Amortization of debt discount and debt issuance costs

Ìý

â€”

Ìý

â€”

Ìý

8,110

Ìý

910

Ìý

9,020

Ìý

Change in fair value of embedded derivative

Ìý

â€”

Ìý

26,250

Ìý

â€”

Ìý

â€”

Ìý

26,250

Ìý

Reclassification of embedded derivative to equity

Ìý

â€”

Ìý

(151,870

)

Ìý

â€”

Ìý

â€”

Ìý

(151,870

)

Balance at June 30, 2024

Ìý

301,054

Ìý

â€”

Ìý

(117,510

)

Ìý

(7,652

)

Ìý

175,892

Ìý

ÌýÌýÌý

Table of Contents

Ìý

In February 2019, we issued $200.0 million aggregate principal amount of Convertible Senior Notes due 2025 (the â€œ2025 Notesâ€) in an underwritten public offering. The 2025 Notes bear interest at a rate of 4.50% per year, payable semiannually in arrears on FebruaryÌý15 and AugustÌý15 of each year. The 2025 Notes mature on FebruaryÌý15, 2025, unless earlier repurchased, redeemed or converted.

Ìý

InÌý May 2021,Ìýwe entered into an agreement with certain holders of theÌý2025ÌýNotes pursuant to which the holders exchanged $55.4Ìýmillion in aggregate principal amount of the outstandingÌý2025ÌýNotes forÌý19,051,270Ìýshares of our Common Stock (the â€œExchangeâ€).

Ìý

Contemporaneously with the closing of our offering of theÌý2029ÌýConvertible Notes,Ìýwe repurchased approximately $144.4Ìýmillion aggregate principal amount of theÌý2025ÌýNotes for cash, using $146.3Ìýmillion of the net proceeds from our issuance and sale of theÌý2029ÌýConvertible Notes, following which only $170Ìýthousand aggregate principal amount of theÌý2025ÌýNotes remained outstanding.

Ìý

On January 22, 2024, we terminated our share lending agreement, dated February 4, 2019, with Jefferies Capital Services, LLC (â€œShare Borrowerâ€). Through this agreement, we had lent the Share Borrower approximately 30 million shares of our Common Stock related to our 2019 issuance of the 2025 Notes. With the termination of this agreement, all remaining borrowed shares of Common Stock have been returned to us and are now held as treasury shares

Ìý

In February 2018, we issued a series of 5% Convertible Promissory Notes (the â€œ2023 Convertible Notesâ€) in the aggregate principal amount of $55.0 million. The original maturity of the 2023 Convertible Notes was five years following the date of issuance. Each holder of a 2023 Convertible Note originally had the option, from time to time, to convert all or any portion of the outstanding principal balance of such 2023 Convertible Note, together with accrued and unpaid interest thereon, into shares of our Common Stock at a conversion price of $5.00 per share.

Ìý

On February 10, 2023, we amended the 2023 Convertible Notes to extendÌýthe maturity to January 31, 2025 and reset the conversion price to the 10 day volume weighted average price immediately preceding the date of the amended note, plus a 25% conversion premium, or $1.66 per share. Purchasers of the 2023 Convertible Notes included an affiliate of Dr. Phillip Frost, M.D., our Chairman and Chief Executive Officer, and Dr. Jane H. Hsiao, Ph.D., MBA, our Vice-Chairman and Chief Technical Officer.

Ìý

In connection with the closing of the 2029 Convertible Notes offering, the Company issued approximately $71.1 million aggregate principal amount of its 2029 Convertible Affiliate Notes in exchange for all issued and outstanding 2023 Convertible notes, following which exchange, no 2023 Convertible Notes remained outstanding.

Ìý

InÌý January 2013,Ìýwe issued an aggregate of $175.0Ìýmillion of ourÌý3.0% Senior Notes dueÌý2033Ìý(theÌýâ€œ2033ÌýSenior Notesâ€) in a private placement. TheÌý2033ÌýSenior Notes bearÌýinterest at the rate ofÌý3.0% per year, payable semiannually onÌý February 1ÌýandÌý August 1Ìýof each year and matureÌýonÌý February 1, 2033,Ìýunless earlier repurchased, redeemed or converted. FromÌý2013ÌýtoÌý2016,Ìýholders of theÌý2033ÌýSenior Notes converted $143.2Ìýmillion in aggregate principal amount into Common Stock, and, onÌý February 1, 2019,Ìýapproximately $28.8Ìýmillion aggregate principal amount ofÌý2033ÌýSenior Notes were tendered by holders pursuant to such holdersâ€™ option to require us to repurchase theÌý2033ÌýSenior Notes. During the first quarter of 2023, we paid approximately $3.0Ìýmillion to purchaseÌý2033ÌýSenior Notes in accordance with the indenture governing theÌý2033ÌýSenior Notes, following which $50.6ÌýthousandÌý2033ÌýSenior Notes remained outstanding.

Ìý

In November 2015, BioReference and certain of its subsidiaries entered into a credit agreement with JPMorgan Chase Bank, N.A. (â€œCBâ€), as lender and administrative agent, as amended (the â€œCredit Agreementâ€). As amended, the Credit Agreement provides for a $75.0 million secured revolving credit facility and includes a $20.0 million sub-facility for swingline loans and a $20.0 million sub-facility for the issuance of letters of credit.

Ìý

OnÌý June 29, 2023,Ìýthe Company entered into an amendment to the Credit Agreement (the â€œCredit Agreement Amendmentâ€), which, among other things, (i) replaced the London interbank offered rate (LIBOR) with the forward-looking term rate based on the secured overnight financing rate (the â€œSOFR Rateâ€) as the interest rate benchmark, (ii) reduced the aggregate revolving commitment from $75,000,000 to $50,000,000, (iii)Ìýprovided a revised commitment fee rate, and (iv) extended the maturity date fromÌý August 2024Ìýto the earlier ofÌý August 2025,ÌýandÌý90Ìýdays prior to the maturity date of any indebtedness of the Company in an aggregate principal amount exceeding $7,500,000.

Ìý

Table of Contents

Ìý

The Credit Agreement is guaranteed by all of BioReferenceâ€™s domestic subsidiaries and is also secured by substantially all assets of BioReference and its domestic subsidiaries, as well as a non-recourse pledge by us of our equity interest in BioReference. Availability under the Credit Agreement is based on a borrowing base composed of eligible accounts receivables of BioReference and certain of its subsidiaries, as specified therein. As of June 30, 2024, $8.6 million remained available for borrowing under the Credit Agreement. Principal under the Credit Agreement is due upon maturity on August 30, 2025.

Ìý

At BioReferenceâ€™s option, borrowings under the Credit Agreement (other than swingline loans) bear interest at (i) the CB floating rate (defined as the higher of (x) the prime rate and (y) the SOFR Rate for an interest period ofÌýoneÌýmonth plusÌý2.50% and a benchmark spread adjustment ofÌý0.10%) plus an applicable margin ofÌý1.00%;Ìýor (ii) the SOFR Rate plus a benchmark spread adjustment ofÌý0.10% and an applicable margin ofÌý2.00%. Swingline loans will bear interest at the CB floating rate plus the applicable margin. The Credit Agreement also calls for other customary fees and charges, including an unused commitment fee ofÌý0.400% if the average quarterly availability isÌý50%Ìýor more of the revolving commitment, orÌý0.275% if the average quarterly availability is less than or equal toÌý50%Ìýof the revolving commitments.

Ìý

As of June 30, 2024 and December 31, 2023,Ìý$10.0 million and $12.7 million, respectively, was outstanding under the Credit Agreement.

Ìý

The Credit Agreement contains customary covenants and restrictions, including, without limitation, covenants that require BioReference and its subsidiaries to maintain a minimum fixed charge coverage ratio if availability under the new credit facility falls below a specified amount and to comply with laws and restrictions on the ability of BioReference and its subsidiaries to incur additional indebtedness or to pay dividends and make certain other distributions to the Company, subject to certain exceptions as specified therein. Failure to comply with these covenants would constitute an event of default under the Credit Agreement, notwithstanding the ability of BioReference to meet its debt service obligations. The Credit Agreement also includes various customary remedies for the lenders following an event of default, including the acceleration of repayment of outstanding amounts under the Credit Agreement and execution upon the collateral securing obligations under the Credit Agreement. Substantially all the assets of BioReference and its subsidiaries are restricted from sale, transfer, lease, disposal or distributions to the Company, subject to certain exceptions. As of June 30, 2024, BioReference and its subsidiaries had net assets of approximately $434.4 million, which included goodwill of $217.7 million and intangible assets of $121.7 million.Ìý

Ìý

In addition to the Credit Agreement, we had line of credit agreements with twelve other financial institutions as of June 30, 2024, and December 31, 2023, in the U.S., Chile and Spain. These lines of credit are used primarily as sources of working capital for inventory purchases.

Ìý

The following table summarizes the amounts outstanding under the BioReference, Chilean and Spanish lines of credit:

Ìý

(Dollars in thousands)

Ìý

Balance Outstanding

Ìý

Interest rate on borrowings at

Ìý

Credit line

Ìý

June 30,

Ìý

December 31,

Ìý

Lender

Ìý

June 30, 2024

Ìý

capacity

Ìý

2024

Ìý

2023

Ìý

JPMorgan Chase

Ìý

9.50

Ìý

50,000

Ìý

10,007

Ìý

12,671

Ìý

Itau Bank

Ìý

5.50

Ìý

1,900

Ìý

659

Ìý

1,264

Ìý

Bank of Chile

Ìý

6.60

Ìý

2,500

Ìý

868

Ìý

1,728

Ìý

BICE Bank

Ìý

5.50

Ìý

2,500

Ìý

1,052

Ìý

1,734

Ìý

Scotiabank

Ìý

5.00

Ìý

5,500

Ìý

1,052

Ìý

981

Ìý

Santander Bank

Ìý

5.50

Ìý

5,000

Ìý

2,923

Ìý

450

Ìý

Security Bank

Ìý

5.50

Ìý

1,400

Ìý

921

Ìý

â€”

Ìý

Estado Bank

Ìý

5.50

Ìý

4,000

Ìý

1,240

Ìý

3,303

Ìý

BCI Bank

Ìý

5.00

Ìý

2,500

Ìý

598

Ìý

1,626

Ìý

Internacional Bank

Ìý

5.50

Ìý

1,500

Ìý

1,212

Ìý

1,197

Ìý

Consorcio Bank

Ìý

5.00

Ìý

2,000

Ìý

â€”

Ìý

346

Ìý

Banco De Sabadell

Ìý

1.75

Ìý

536

Ìý

â€”

Ìý

â€”

Ìý

Santander Bank

Ìý

5.36

Ìý

536

Ìý

â€”

Ìý

â€”

Ìý

Total

Ìý

79,872

Ìý

20,532

Ìý

25,300

Ìý

At June 30, 2024 and December 31, 2023, the weighted average interest rate on our lines of credit was approximately 7.5% and 7.5%, respectively.

Ìý

Table of Contents

Ìý

At June 30, 2024 and December 31, 2023, we had notes payable and other debt (excluding the 2033 Senior Notes, the 2023 Convertible Notes, the 2025 Notes, the Credit Agreement and amounts outstanding under lines of credit described above) as follows:

Ìý

Ìý	Ìý	June 30,		Ìý	Ìý	December 31,		Ìý
(In thousands)	Ìý	2024		Ìý	Ìý	2023		Ìý
Current portion of notes payable	Ìý	$	1,597	Ìý	Ìý	$	1,993	Ìý
Other long-term liabilities	Ìý	Ìý	3,676	Ìý	Ìý	Ìý	7,727	Ìý
Total	Ìý	$	5,273	Ìý	Ìý	$	9,720	Ìý

Ìý

The notes and other debt mature at various dates ranging from 2024 through 2032, bearing variable interest rates from 0.7% up to 5.1%. The weighted average interest rate on the notes and other debt was 3.1% on June 30, 2024 and 2.9% on December 31, 2023. The notes are partially secured by our office space in Barcelona.

Ìý

NOTE 8 ACCUMULATED OTHER COMPREHENSIVE LOSS

Ìý

For the six months ended June 30, 2024, changes in Accumulated other comprehensive loss, net of tax, were as follows:

Ìý

Ìý	Ìý	Foreign		Ìý
Ìý	Ìý	currency		Ìý
(In thousands)	Ìý	translation		Ìý
Balance at December 31, 2023	Ìý	$	(38,030	)
Other comprehensive loss	Ìý	Ìý	(8,622	)
Balance at June 30, 2024	Ìý	$	(46,652	)

Ìý

NOTE 9 FAIR VALUE MEASUREMENTS

Ìý

We record fair values at an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. As such, fair value is a market-based measurement determined based on assumptions that market participants would use in pricing an asset or liability. We utilize a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value. These tiers are: Level 1, defined as observable inputs such as quoted prices in active markets; Level 2, defined as inputs other than quoted prices in active markets that are either directly or indirectly observable; and Level 3, defined as unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions.

Ìý

As of June 30, 2024, we had equity securities and an equity method fair value option (refer to Note 6), forward foreign currency exchange contracts for inventory purchases (refer to Note 10). In addition, in connection with our investment and our consulting agreement with BioCardia, we record the related BioCardia options at fair value as well as warrants from COCP.

Ìý

Table of Contents

Ìý

Our financial assets and liabilities measured at fair value on a recurring basis are as follows:

Ìý

Fair value measurements as of June 30, 2024

Ìý

Quoted

Ìý

prices in

Ìý

active

Ìý

Significant

Ìý

markets for

Ìý

other

Ìý

Significant

Ìý

identical

Ìý

observable

Ìý

unobservable

Ìý

assets

Ìý

inputs

Ìý

inputs

Ìý

(In thousands)

Ìý

(Level 1)

Ìý

(Level 2)

Ìý

(Level 3)

Ìý

Total

Ìý

Assets:

Ìý

Money market funds

Ìý

10,732

Ìý

â€”

Ìý

â€”

Ìý

10,732

Ìý

Equity securities

Ìý

149

Ìý

â€”

Ìý

â€”

Ìý

149

Ìý

Equity Method - Fair value option

Ìý

93,022

Ìý

â€”

Ìý

â€”

Ìý

93,022

Ìý

Common stock options

Ìý

â€”

Ìý

â€”

Ìý

Total assets

Ìý

103,903

Ìý

â€”

Ìý

103,908

Ìý

Fair value measurements as of December 31, 2023

Ìý

Quoted

Ìý

prices in

Ìý

active

Ìý

Significant

Ìý

markets for

Ìý

other

Ìý

Significant

Ìý

identical

Ìý

observable

Ìý

unobservable

Ìý

assets

Ìý

inputs

Ìý

inputs

Ìý

(In thousands)

Ìý

(Level 1)

Ìý

(Level 2)

Ìý

(Level 3)

Ìý

Total

Ìý

Assets:

Ìý

Money market funds

Ìý

32,404

Ìý

â€”

Ìý

â€”

Ìý

32,404

Ìý

Equity securities

Ìý

116

Ìý

â€”

Ìý

â€”

Ìý

116

Ìý

Equity Method - fair value option

Ìý

9,786

Ìý

â€”

Ìý

â€”

Ìý

9,786

Ìý

Common stock options/warrants

Ìý

â€”

Ìý

â€”

Ìý

Total assets

Ìý

42,306

Ìý

â€”

Ìý

42,308

Ìý

Liabilities:

Ìý

Forward contracts

Ìý

â€”

Ìý

â€”

Ìý

Total liabilities

Ìý

â€”

Ìý

â€”

Ìý

The carrying amount and estimated fair value of our 2029 Convertible Notes and 2025 Notes, as well as the applicable fair value hierarchy tiers, are contained in the table below. Additionally, the fair value of the 2029 Convertible Notes and 2025 Notes is determined using inputs other than quoted prices in active markets that are directly observable.

Ìý

June 30, 2024

Ìý

Carrying

Ìý

Total

Ìý

(In thousands)

Ìý

Value

Ìý

Fair Value

Ìý

Level 1

Ìý

Level 2

Ìý

Level 3

Ìý

2029 Convertible Notes

Ìý

175,892

Ìý

355,996

Ìý

â€”

Ìý

355,996

Ìý

â€”

Ìý

2025 Notes

Ìý

170

Ìý

141

Ìý

â€”

Ìý

141

Ìý

â€”

Ìý

There have been no transfers between Level 1 and Level 2 and no transfers to Level 3 of the fair value hierarchy.ÌýThe change from level 3 to level 2 for the 2029 Convertible Notes was due to a change in valuation technique to an input that is either directly or indirectly observable. Changes in valuation techniques may result in transfers in or out of an assigned level within the disclosure hierarchy.

Ìý

Table of Contents

Ìý

The following table reconcile the beginning and ending balances of our Level 3 assets and liabilities as of June 30, 2024.

Ìý

Ìý	Ìý	June 30, 2024		Ìý
Ìý	Ìý	Embedded conversion		Ìý
(In thousands)	Ìý	option		Ìý
Balance at December 31, 2023	Ìý	$	â€”	Ìý
Additions	Ìý	Ìý	125,620	Ìý
Change in fair value:	Ìý	Ìý	Ìý	Ìý
Included in results of operations	Ìý	Ìý	26,250	Ìý
Reclassification of embedded derivatives to equity	Ìý	Ìý	(151,870	)
Balance at June 30, 2024	Ìý	$	â€”	Ìý

Ìý

NOTE 10 DERIVATIVE CONTRACTS

Ìý

The following table summarizes the fair values and the presentation of our derivative financial instruments in the Condensed Consolidated Balance Sheets:

Ìý

Ìý	Balance Sheet	Ìý	June 30,		Ìý	Ìý	December 31,		Ìý
(In thousands)	Component	Ìý	2024		Ìý	Ìý	2023		Ìý
Derivative financial instruments:	Ìý	Ìý	Ìý	Ìý	Ìý	Ìý	Ìý	Ìý	Ìý
Common Stock options/warrants	Investments, net	Ìý	$	4	Ìý	Ìý	$	2	Ìý
Forward contracts	Unrealized losses on forward contracts are recorded in Accrued expenses.	Ìý	$	â€”	Ìý	Ìý	$	(29	)

Ìý

We enter into foreign currency forward exchange contracts with respect to the risk of exposure to exchange rate differences arising from inventory purchases on letters of credit. Under these forward contracts, for any rate above or below the fixed rate, we receive or pay the difference between the spot rate and the fixed rate for the given amount at the settlement date.

Ìý

To qualify the derivative instrument as a hedge, we are required to meet strict hedge effectiveness and contemporaneous documentation requirements at the initiation of the hedge and assess the hedge effectiveness on an ongoing basis over the life of the hedge. At June 30, 2024 and December 31, 2023, our derivative financial instruments did not meet the documentation requirements to be designated as hedges. Accordingly, we recognize the changes in fair value of derivative instruments, net in our Condensed Consolidated Statement of Operations. The following table summarizes the losses and gains recorded for the three and six months ended June 30, 2024 and 2023:

Ìý

Three months ended June 30,

Ìý

Six months ended June 30,

Ìý

(In thousands)

Ìý

2024

Ìý

2023

Ìý

2024

Ìý

2023

Ìý

Derivative gain (loss):

Ìý

Notes

Ìý

â€”

Ìý

â€”

Ìý

(26,250

)

Ìý

â€”

Ìý

Common Stock options/warrants

Ìý

Forward contracts

Ìý

â€”

Ìý

130

Ìý

(1,057

)

Total

Ìý

142

Ìý

(26,160

)

Ìý

(1,047

)

Ìý

NOTE 11 RELATED PARTY TRANSACTIONS

Ìý

In January 2024, in connection with the closing of the offering of the 2029 Convertible Notes, we issued and sold approximately $71.1 million aggregate principal amount of the 2029 Convertible Affiliate Notes to the Affiliate Purchasers, in exchange for $55.0 million aggregate principal amount of the 2023 Convertible Notes, together with approximately $16.1 million accrued but unpaid interest thereon, held by such Affiliate Purchasers. See Note 7 for additional information.

Ìý

Table of Contents

Ìý

On October 12, 2023, the Company entered into an E-Commerce Distribution Agreement with NextPlat Corp (â€œNextPlatâ€), a global e-commerce provider, in which Dr. Frost owns more than a 20% interest. Under the terms of the agreement, NextPlat has agreed toÌýlaunch an Ð¡ÖíÊÓÆµapp Health-branded online storefront on the Alibaba Group Holding Limited Tmall Global e-commerce platform in China, featuring an assortment of nutraceutical and veterinary products sold and distributed by Ð¡ÖíÊÓÆµapp Health Europe SLU, our wholly-owned subsidiary.

Ìý

On May 4, 2023, the Company entered into an Assignment and Assumption Agreement (the â€œAssignment Agreementâ€) with Ruen-Hui Biopharmaceuticals, Inc., a Taiwanese entity (â€œRuen-Huiâ€) in which Dr. Hsiao owns more than a 10% interest. Ruen-Hui assumed the Company's obligations under an exclusive license agreement with Academia Sinica in exchange for an upfront payment of $150,000, a number of potential milestone payments up to $1 million, commercial milestones ranging from low to double digit millions, and royalty payments.ÌýRuen Hui is alsoÌýresponsible for any outstanding payment obligations under such license agreement, including patent maintenance costs, and any payments due to Academia Sinica.

Ìý

On April 29, 2022, upon consummation of our sale ofÌýGeneDx, the Company entered into a Transition Services Agreement (the â€œTransition Services Agreementâ€) with GeneDx, pursuant to which the Company agreed to provide, at cost, certain customary support services in respect of GeneDxâ€™s business through August 31, 2023, including human resources, information technology support, and finance and accounting. As of June 30, 2024, the Company had incurred aggregate expenses of $1.2 million for services rendered under the Transition Services Agreement. For the three and six months ended June 30, 2024, the company did not incur expenses for services rendered under the Transaction Services Agreement. As of June 30, 2024, the Company does not have a receivable balance payable to the Company by GeneDx in accordance with the terms of the Transition Services Agreement.

Ìý

The Company owns approximately 9% of Pharmsynthez and Pharmsynthez is the largest and controlling shareholder of Xenetic, in which the Company has a 3% ownership interest. Adam Logal, our Senior Vice President and Chief Financial Officer, is a director of Xenetic.

Ìý

We hold investments in Zebra (ownership 29%),ÌýChromaDexÌý(0.05%), COCP (2%), NIMS (1%), Eloxx (1%), BioCardia (1%) and LeaderMedÌý(47%). Neovasc, Inc., in which we owned a 0.5% interest,Ìýwas acquired by Shockwave Medical, Inc. in April 2023, and during the third quarter of 2023, we received $363 thousand in merger consideration in exchange for our shares. These investments were considered related party transactions as a result of our executive managementâ€™s ownership interests and/or board representation in these entities. We also hold an investment in GeneDx Holdings (Nasdaq: WGS) representing a 13.6% ownership interest as a result of our sale of GeneDx, Inc. and subsequent participation in an underwritten offering by GeneDx Holdings. Richard Pfenniger who sits on our Board also sits on the GeneDx Board as a result of the acquisition. See further discussion of our investments in Note 6.

Ìý

We lease office space from Frost Real Estate Holdings, LLC (â€œFrost Holdingsâ€) in Miami, Florida, where our principal executive offices are located. Effective August 1, 2019, we entered into an amendment to our lease agreement with Frost Holdings. The lease, as amended, is for approximately 29,500 square feet of space. The lease provides for payments of approximately $89 thousand per month in the first year increasing annually to $101 thousand per month in the fifth year, plus applicable sales tax. The rent is inclusive of operating expenses, property taxes and parking.

Ìý

Dr. Elias Zerhouni, our Vice Chairman and President, sits on the board of directors of Danaher Corporation (â€œDanaherâ€). Our subsidiary, BioReference, routinely procures products and services from several subsidiaries of Danaher, including Beckman Coulter, Integrated DNA Technologies Inc., and Leica Microsystems Inc., to which BioReference has paid $1.1 million, $1.7 million, and $0.2 million, respectively, during theÌýsix months ended June 30, 2024.

Ìý

BioReference purchases and uses certain products acquired from InCellDx, a company in which we hold a 29% minority interest.

Ìý

We reimburse Dr.ÌýFrost for Company-related use by Dr.ÌýFrost and our other executives of an airplane owned by a company that is beneficially owned by Dr.ÌýFrost. We reimburse Dr. Frost for out-of-pocket operating costs for the use of the airplane by Dr. Frost or Company executives for Company-related business. We do not reimburse Dr.ÌýFrost for personal use of the airplane by Dr.ÌýFrost or any other executive. For both the three and six months ended June 30, 2024, we reimbursed and accrued approximately $23.9 thousand for Company-related travel by Dr. Frost and other Ð¡ÖíÊÓÆµapp executives. For the three and six months ended June 30, 2023, we reimbursed and accrued approximately $0.0 thousand and $29.3 thousand, respectively, for Company-related travel by Dr. Frost and other Ð¡ÖíÊÓÆµapp executives.

Ìý

Table of Contents

Ìý

NOTE 12 COMMITMENTS AND CONTINGENCIES

Ìý

In February 2023, the Office of the Attorney General for the State of Texas (â€œTX OAGâ€) informed BioReference that it believes that, from 2005 to the present, BioReference may have violated the Texas Medicaid Fraud Prevention Act with respect to claims it presented to Texas Medicaid for reimbursement. BioReference has not determined whether there is any merit to the TX OAG claims nor can it determine the extent of any potential liability. While management cannot predict the outcome of these matters at this time, the ultimate outcome could be material to our business, financial condition, results of operations, and cash flows.

Ìý

On December 29, 2022, the Israel Tax Authority (the â€œITAâ€) issued an assessment against our subsidiary, Ð¡ÖíÊÓÆµapp Biologics in the amount of approximately $246Ìýmillion (including interest) related to uncertain tax positions involving income recognition in connection with an examination of foreign tax returns for the 2014 through 2020 tax years. We recognize that local tax law is inherently complex and the local taxing authorities may not agree with certain tax positions taken. We are appealing this assessment, as we believe, other than for uncertain tax positions for which we have reserved, the issues are without technical merit. We intend to exhaust all judicial remedies necessary to resolve the matter, as necessary, which could be a lengthy process. There can be no assurance that this matter will be resolved in our favor, and an adverse outcome, or any future tax examinations involving similar assertions, could have a material effect on our financial condition, results of operations and cash flows.

Ìý

The Company and BioReference entered into (i) a settlement agreement (the â€œSettlement Agreementâ€), effective July 14, 2022, with the United States of America, acting through the United States Department of Justice and on behalf of the Office of Inspector General of the Department of Health and Human Services (â€œOIG-HHSâ€), and the Defense Health Agency, acting on behalf of the TRICARE Program (collectively, the â€œUnited Statesâ€), the Commonwealth of Massachusetts , the State of Connecticut, and the relator identified therein (â€œRelatorâ€), and (ii) a Corporate Integrity Agreement, effective July 14, 2022 (the â€œCIAâ€), with the OIG-HHS, to resolve the investigation and related civil action concerning alleged fee-for-service claims for payment to the Medicare Program, the Medicaid Program, and the TRICARE Program (collectively, the â€œFederal Health Care Programsâ€).

Ìý

Under the Settlement Agreement, the Company and BioReference admitted only to having made payments to certain physicians and physiciansâ€™ groups for office space rentals for amounts that exceeded fair market value, and that it did not report or return any such overpayments to the Federal Health Care Programs (the â€œCovered Conductâ€). The Covered Conduct had commenced prior to the Companyâ€™s acquisition of BioReference in 2015. With the exception of the Covered Conduct, the Company and BioReference expressly deny the allegations of the Relator as set forth in her civil action. The Company has agreed to pay a total of $10,000,000Ìýplus accrued interest from September 24, 2021 at a rate ofÌý1.5% per annum (the â€œSettlement Amountâ€). The Settlement Amount consists of $9,853,958Ìýpayable to the United States, $141,041Ìýpayable to the Commonwealth and $5,001Ìýpayable to Connecticut, in each case plus interest and was paid on July 18, 2022. Conditioned upon payment of the Settlement Amount, the United States, Massachusetts and Connecticut have agreed to release the Company and BioReference from any civil or administrative monetarily liability arising from the Covered Conduct. Upon payment of the Settlement Amount and the amount due under a separate agreement with the Relator, the Relator has agreed to release the Company and BioReference from any and all claims and potential claims. Further, in consideration of the obligations of the Company and BioReference in the Settlement Agreement and the CIA, the OIG-HHS has agreed to release and refrain from instituting any administrative action seeking to exclude the Company or BioReference from participating in Medicare, Medicaid or other Federal health care programs as a result of the Covered Conduct.

Ìý

Under the CIA, which has a term ofÌý5Ìýyears, BioReference is required to, among other things: (i) maintain a Compliance Officer, a Compliance Committee, board review and oversight of certain federal healthcare compliance matters, compliance programs, and disclosure programs; (ii) provide management certifications and compliance training and education; (iii) establish written compliance policies and procedures to meet federal health care program requirements; (iv) create procedures designed to ensure compliance with the Anti-Kickback Statute and/or Stark Law; (v) engage an independent review organization to conduct a thorough review of BioReferenceâ€™ s systems, policies, processes and procedures related to certain arrangements; (vi) implement a risk assessment and internal review process; (vii) establish a disclosure program for whistleblowers; and (viii) report or disclose certain events and physician payments. The Companyâ€™s or BioReferenceâ€™s failure to comply with its obligations under the CIA could result in monetary penalties and the exclusion from participation in Federal Health Care Programs. The CIA does not apply to any of the Companyâ€™s subsidiaries other than BioReference, and its scope is generally limited to â€œfocus arrangementsâ€, which are those â€œarrangementsâ€ (as defined in the CIA) (i) between BioReference and any actual source or recipient of health care business or referrals and involves, directly or indirectly, the offer, payment, or provision of anything of value, or (ii) is between BioReference and any physician (or a physicianâ€™s immediate family member). Most of these measures have already been implemented at BioReference. Following its acquisition of BioReference, the Company and BioReference implemented robust compliance measures that substantially align with those actions required under the CIA.

Ìý

Table of Contents

Ìý

On March 1, 2019, the Company received a Civil Investigative Demand (â€œCIDâ€) from the U.S. Department of Justice (â€œDOJâ€), Washington, DC. The CID sets forth document requests and interrogatories in connection with allegations that the Company and certain of its affiliates violated the False Claims Act and/or the Anti-Kickback Statute. On January 13, 2022, the Federal Government notified the U.S.D.C., Middle District Florida, Jacksonville Division, that it is declining to intervene in the matter but retains the right, via the Attorney General, to consent to any proposed dismissal of the action by the Court. On February 9, 2022, the States of Florida, Georgia, and Commonwealth of Massachusetts notified the U.S.D.C., Middle District Florida, Jacksonville Division, that they are declining to intervene in the matter. Notwithstanding the above declinations, on February 17, 2022, the Company was served with the Relatorâ€™s Summons and Complaint (â€œComplaintâ€), which had been previously sealed. The Complaint alleges violations of the False Claims Act, the California Fraud Preventions Act, the Florida False Claims Act, the Massachusetts False Claims Act, the Georgia False Medicaid Claims Act, and illegal kickbacks. A motion to dismiss the Complaint was filed on April 25, 2022 and the case was dismissed in March 2023. However, the Relator filed an amended complaint in April 2023 and a second amended complaint, both of which were dismissed. Relator then filed an appeal in the U.S. Eleventh Circuit Court of Appeals which is pending before the court following a failed mediation in April.ÌýWhile management cannot predict the outcome of these matters at this time, the ultimate outcome could be material to our business, financial condition, results of operations, and cash flows.

Ìý

From time to time, we may receive inquiries, document requests, CIDs or subpoenas from the Department of Justice, OCR, CMS, various payors and fiscal intermediaries, and other state and federal regulators regarding investigations, audits and reviews. In addition to the matters discussed in this note, we are currently responding to CIDs, subpoenas, payor audits, and document requests for various matters relating to our laboratory operations. Some pending or threatened proceedings against us may involve potentially substantial amounts as well as the possibility of civil, criminal, or administrative fines, penalties, or other sanctions, which could be material. Settlements of suits involving the types of issues that we routinely confront may require monetary payments as well as corporate integrity agreements. Additionally, qui tam or â€œwhistleblowerâ€ actions initiated under the civil False Claims Act may be pending but placed under seal by the court to comply with the False Claims Actâ€™s requirements for filing such suits. Also, from time to time, we may detect issues of non-compliance with federal healthcare laws pertaining to claims submission and reimbursement practices and/or financial relationships with physicians, among other things. We may avail ourselves of various mechanisms to address these issues, including participation in voluntary disclosure protocols. Participating in voluntary disclosure protocols can have the potential for significant settlement obligations or even enforcement action. The Company generally has cooperated, and intends to continue to cooperate, with appropriate regulatory authorities as and when investigations, audits and inquiries arise.

Ìý

We are a party to other litigation in the ordinary course of business. While we cannot predict the ultimate outcome of legal matters, we accrue a liability for legal contingencies when we believe that it is both probable that a liability has been incurred and that we can reasonably estimate the amount of the loss. Itâ€™s reasonably possible the ultimate liability could exceed amounts currently estimated and we review established accruals and adjust them to reflect ongoing negotiations, settlements, rulings, advice of legal counsel and other relevant information. To the extent new information is obtained and our views on the probable outcomes of claims, suits, assessments, investigations or legal proceedings change, changes in our accrued liabilities would be recorded in the period in which such determination is made. Because of the high degree of judgment involved in establishing loss estimates, the ultimate outcome of such matters will differ from our estimates and such differences may be material to our business, financial condition, results of operations, and cash flows.

Ìý

At June 30, 2024, we were committed to make future purchases for inventory and other items in 2024 that occur in the ordinary course of business under various purchase arrangements with fixed purchase provisions aggregating approximately $45.8 million

Ìý

NOTE 13 REVENUE RECOGNITION

Ìý

We generate revenues from services, products and intellectual property as follows:

Ìý

Revenue from services

Ìý

Revenue for laboratory services is recognized at the time test results are reported, which approximates when services are provided and the performance obligations are satisfied. Services are provided to patients covered by various third-party payor programs including various managed care organizations, as well as the Medicare and Medicaid programs. Billings for services are included in revenue net of allowances for contractual discounts, allowances for differences between the amounts billed and estimated program payment amounts, and implicit price concessions provided to uninsured patients which are all elements of variable consideration.

Ìý

Table of Contents

Ìý

The following are descriptions of our payors for laboratory services:

Ìý

Healthcare Insurers. Reimbursements from healthcare insurers are based on negotiated fee-for-service schedules. Revenues consist of amounts billed, net of contractual allowances for differences between amounts billed and the estimated consideration we expect to receive from such payors, which considers historical denial and collection experience and the terms of our contractual arrangements. Adjustments to the allowances, based on actual receipts from the third-party payors, are recorded upon settlement.

Ìý

Government Payors. Reimbursements from government payors are based on fee-for-service schedules set by governmental authorities, including traditional Medicare and Medicaid. Revenues consist of amounts billed, net of contractual allowances for differences between amounts billed and the estimated consideration we expect to receive from such payors, which considers historical denial and collection experience and the terms of our contractual arrangements. Adjustments to the allowances, based on actual receipts from the government payors, are recorded upon settlement.

Ìý

Client Payors. Client payors include physicians, hospitals, employers, and other institutions for which services are performed on a wholesale basis, and are billed and recognized as revenue based on negotiated fee schedules.

Ìý

Patients. Uninsured patients are billed based on established patient fee schedules or fees negotiated with physicians on behalf of their patients. Insured patients (including amounts for coinsurance and deductible responsibilities) are billed based on fees negotiated with healthcare insurers. Collection of billings from patients is subject to credit risk and ability of the patients to pay. Revenues consist of amounts billed net of discounts provided to uninsured patients in accordance with our policies and implicit price concessions. Implicit price concessions represent differences between amounts billed and the estimated consideration that we expect to receive from patients, which considers historical collection experience and other factors including current market conditions. Adjustments to the estimated allowances, based on actual receipts from the patients, are recorded upon settlement.

Ìý

The complexities and ambiguities of billing, reimbursement regulations and claims processing, as well as considerations unique to Medicare and Medicaid programs, require us to estimate the potential for retroactive adjustments as an element of variable consideration in the recognition of revenue in the period the related services are rendered. Actual amounts are adjusted in the period those adjustments become known. For the six months ended June 30, 2024, we recorded $0.9 of negative revenue adjustments due to changes in estimates of implicit price concessions for performance obligations satisfied in prior periods mainly due to the composition of client pay mix. For the six months ended June 30, 2023, we recorded $13.9 million of negative revenue adjustments primarily due to the composition of patient pay mix.

Ìý

Third-party payors, including government programs, may decide to deny payment or recoup payments for testing they contend were improperly billed or not medically necessary, against their coverage determinations, or for which they believe they have otherwise overpaid (including as a result of their own error), and we may be required to refund payments already received. Our revenues may be subject to retroactive adjustment as a result of these factors among others, including without limitation, differing interpretations of billing and coding guidance and changes by government agencies and payors in interpretations, requirements, and â€œconditions of participationâ€ in various programs. We have processed requests for recoupment from third-party payors in the ordinary course of our business, and it is likely that we will continue to do so in the future. If a third-party payor denies payment for testing or recoups money from us in a later period, reimbursement for our testing could decline.

Ìý

As an integral part of our billing compliance program, we periodically assess our billing and coding practices, respond to payor audits on a routine basis, and investigate reported failures or suspected failures to comply with federal and state healthcare reimbursement requirements, as well as overpayment claims which may arise from time to time without fault on the part of the Company. We may have an obligation to reimburse Medicare, Medicaid,Ìýand third-party payors for overpaymentsÌýregardless of fault. We have periodically identified and reportedÌýoverpayments, reimbursed payors forÌýoverpaymentsÌýand taken appropriate corrective action.

Ìý

Settlements with third-party payors for retroactive adjustments due to audits, reviews or investigations are also considered variable consideration and are included in the determination of the estimated transaction price for providing services. These settlements are estimated based on the terms of the payment agreement with the payor, correspondence from the payor and our historical settlement activity, including an assessment of the probability a significant reversal of cumulative revenue recognized will occur when the uncertainty is subsequently resolved. Estimated settlements are adjusted in future periods as adjustments become known (that is, new information becomes available), or as years are settled or are no longer subject to such audits, reviews, and investigations. As of June 30, 2024 and December 31, 2023, we had liabilities of approximately $5.2 million and $3.1 million, respectively, within Accrued expenses and Other long-term liabilities related to reimbursements for payor overpayments.

Ìý

Table of Contents

Ìý

The composition of revenue from services by payor for theÌýthree and six months ended June 30, 2024 and 2023 was as follows:

Ìý

Three months ended June 30,

Ìý

Six months ended June 30,

Ìý

(In thousands)

Ìý

2024

Ìý

2023

Ìý

2024

Ìý

2023

Ìý

Healthcare insurers

Ìý

78,808

Ìý

76,954

Ìý

153,416

Ìý

157,365

Ìý

Government payers

Ìý

21,234

Ìý

20,923

Ìý

43,193

Ìý

41,267

Ìý

Client payers

Ìý

25,061

Ìý

24,899

Ìý

50,749

Ìý

52,443

Ìý

Patients

Ìý

4,292

Ìý

4,276

Ìý

8,928

Ìý

8,345

Ìý

Total

Ìý

129,395

Ìý

127,052

Ìý

256,286

Ìý

259,420

Ìý

Revenue from products

Ìý

We recognize revenue from product sales when a customer obtains control of promised goods or services. The amount of revenueÌýrecorded reflects the consideration that we expect to receive in exchange for those goods or services. Our estimates for sales returns and allowances are based upon the historical patterns of product returns and allowances taken, matched against the sales from which they originated, and our evaluation of specific factors that may increase or decrease the risk of product returns. Product revenues are recorded net of estimated rebates, chargebacks, discounts, co-pay assistance and other deductions (collectively, â€œSales Deductionsâ€) as well as estimated product returns which are all elements of variable consideration. Allowances are recorded as a reduction of revenue at the time product revenues are recognized. The actual amounts of consideration ultimately received may differ from our estimates. If actual results in the future vary from our estimates, we will adjust these estimates, which would affect revenue from products in the period such variances become known.

Ìý

Rayaldee is distributed in the U.S. principally through the retail pharmacy channel, which initiates with the largest wholesalers in the U.S. (collectively, â€œRayaldee Customersâ€). In addition to distribution agreements with Rayaldee Customers, we have entered into arrangements with many healthcare providers and payors that provide for government-mandated or privately-negotiated rebates, chargebacks and discounts with respect to the purchase of Rayaldee.Ìý

Ìý

We recognize revenue for shipments of Rayaldee at the time of delivery to customers after estimating Sales Deductions and product returns as elements of variable consideration utilizing historical information and market research projections. For the three and six months ended June 30, 2024, we recognizedÌý$7.2 million and $14.1 million, respectively, in net product revenue from sales of Rayaldee. For the three and six months ended June 30, 2023, we recognizedÌý$7.7 million and $14.4 million, respectively, in net product revenue from sales of Rayaldee.

Ìý

The following table presents an analysis of Rayaldee product sales allowances and accruals for the three and six months ended June 30, 2024 and 2023:

Ìý

(In thousands)

Ìý

Chargebacks, discounts, rebates and fees

Ìý

Governmental

Ìý

Returns

Ìý

Total

Ìý

Balance at March 31, 2024

Ìý

2,494

Ìý

4,475

Ìý

2,215

Ìý

9,184

Ìý

Provision related to current period sales

Ìý

4,400

Ìý

6,416

Ìý

368

Ìý

11,184

Ìý

Credits or payments made

Ìý

(4,151

)

Ìý

(4,900

)

Ìý

(389

)

Ìý

(9,440

)

Balance at June 30, 2024

Ìý

2,743

Ìý

5,991

Ìý

2,194

Ìý

10,928

Ìý

Total gross Rayaldee sales

Ìý

18,424

Ìý

Provision for Rayaldee sales allowances and accruals as a percentage of gross Rayaldee sales

Ìý

Table of Contents

ÌýÌý

(In thousands)

Ìý

Chargebacks, discounts, rebates and fees

Ìý

Governmental

Ìý

Returns

Ìý

Total

Ìý

Balance at December 31, 2023

Ìý

2,578

Ìý

6,150

Ìý

2,192

Ìý

10,920

Ìý

Provision related to current period sales

Ìý

8,219

Ìý

10,548

Ìý

672

Ìý

19,439

Ìý

Credits or payments made

Ìý

(8,054

)

Ìý

(10,707

)

Ìý

(670

)

Ìý

(19,431

)

Balance at June 30, 2024

Ìý

2,743

Ìý

5,991

Ìý

2,194

Ìý

10,928

Ìý

Total gross Rayaldee sales

Ìý

33,582

Ìý

Provision for Rayaldee sales allowances and accruals as a percentage of gross Rayaldee sales

Ìý

(In thousands)

Ìý

Chargebacks, discounts, rebates and fees

Ìý

Governmental

Ìý

Returns

Ìý

Total

Ìý

Balance at March 31, 2023

Ìý

1,574

Ìý

5,140

Ìý

1,676

Ìý

8,390

Ìý

Provision related to current period sales

Ìý

3,950

Ìý

5,561

Ìý

351

Ìý

9,862

Ìý

Credits or payments made

Ìý

(3,194

)

Ìý

(4,747

)

Ìý

(393

)

Ìý

(8,334

)

Balance at June 30, 2023

Ìý

2,330

Ìý

5,954

Ìý

1,634

Ìý

9,918

Ìý

Total gross Rayaldee sales

Ìý

17,568

Ìý

Provision for Rayaldee sales allowances and accruals as a percentage of gross Rayaldee sales

Ìý

(In thousands)

Ìý

Chargebacks, discounts, rebates and fees

Ìý

Governmental

Ìý

Returns

Ìý

Total

Ìý

Balance at December 31, 2022

Ìý

1,532

Ìý

5,063

Ìý

1,683

Ìý

8,278

Ìý

Provision related to current period sales

Ìý

7,256

Ìý

9,606

Ìý

637

Ìý

17,499

Ìý

Credits or payments made

Ìý

(6,458

)

Ìý

(8,715

)

Ìý

(686

)

Ìý

(15,859

)

Balance at June 30, 2023

Ìý

2,330

Ìý

5,954

Ìý

1,634

Ìý

9,918

Ìý

Total gross Rayaldee sales

Ìý

31,850

Ìý

Provision for Rayaldee sales allowances and accruals as a percentage of gross Rayaldee sales

Ìý

Taxes collected from customers related to revenues from services and revenues from products are excluded from revenues.

Ìý

Revenue from intellectual property and other

Ìý

We recognize revenues from the transfer of intellectual property generated through license, development, collaboration and/or commercialization agreements. The terms of these agreements typically include payment to us for one or more of the following: non-refundable, up-front license fees; development and commercialization milestone payments; funding of research and/or development activities; and royalties on sales of licensed products. Revenue is recognized upon satisfaction of a performance obligation by transferring control of a good or service to the customer.

Ìý

Table of Contents

Ìý

For research, development and/or commercialization agreements that result in revenues, we identify all material performance obligations, which may include a license to intellectual property and know-how, and research and development activities. In order to determine the transaction price, in addition to any upfront payment, we estimate the amount of variable consideration at the outset of the contract either utilizing the expected value or most likely amount method, depending on the facts and circumstances relative to the contract. We constrain (reduce) our estimates of variable consideration such that it is probable that a significant reversal of previously recognized revenue will not occur throughout the life of the contract. When determining if variable consideration should be constrained, we consider whether there are factors outside of our control that could result in a significant reversal of revenue. In making these assessments, we consider the likelihood and magnitude of a potential reversal of revenue. These estimates are re-assessed each reporting period as required.

Ìý

Upfront License Fees: If a license to our intellectual property is determined to be functional intellectual property distinct from the other performance obligations identified in the arrangement, we recognize revenue from nonrefundable, upfront license fees based on the relative value prescribed to the license compared to the total value of the arrangement. The revenue is recognized when the license is transferred to the customer and the customer is able to use and benefit from the license. For licenses that are not distinct from other obligations identified in the arrangement, we utilize judgment to assess the nature of the combined performance obligation to determine whether the combined performance obligation is satisfied over time or at a point in time. If the combined performance obligation is satisfied over time, we apply an appropriate method of measuring progress for purposes of recognizing revenue from nonrefundable, upfront license fees. We evaluate the measure of progress each reporting period and, if necessary, adjust the measure of performance and related revenue recognition.

Ìý

Research and Development Activities: If we are entitled to reimbursement from our customers for specified research and development expenses, we account for them as separate performance obligations if distinct. We also determine whether the research and development funding would result in revenues or an offset to research and development expenses in accordance with provisions of gross or net revenue presentation. The corresponding revenues or offset to research and development expenses are recognized as the related performance obligations are satisfied.

Ìý

BARDA Contract:ÌýRevenue from the BARDA Contract is generated under terms that are cost plus fee. We recognize revenue using the incurred costs output method to measure progress. Revenue will only be recognized when research and development services are performed to the extent of actual costs incurred.

Ìý

Sales-based Milestone and Royalty Payments: Our customers may be required to pay us sales-based milestone payments or royalties on future sales of commercial products. We recognize revenues related to sales-based milestone and royalty payments upon the later to occur of (i) achievement of the customerâ€™s underlying sales or (ii) satisfaction of any performance obligation(s) related to these sales, in each case assuming the license to our intellectual property is deemed to be the predominant item to which the sales-based milestones and/or royalties relate.

Ìý

Other Potential Products and Services: Arrangements may include an option for license rights, future supply of drug substance or drug product for either clinical development or commercial supply at the licenseeâ€™s election. We assess if these options provide a material right to the licensee and if so, they are accounted for as separate performance obligations at the inception of the contract and revenue is recognized only if the option is exercised and products or services are subsequently delivered or when the rights expire. If the promise is based on market terms and not considered a material right, the option is accounted for if and when exercised. If we are entitled to additional payments when the licensee exercises these options, any additional payments are generally recorded in license or other revenues when the licensee obtains control of the goods, which is upon delivery.

Ìý

For the three months ended June 30, 2024, revenue from the transfer of intellectual property and other was $12.3 million, a decrease fromÌý$94.9 million for the three months ended June 30, 2023. This decrease was primarily attributable to a one-time $90.0 million milestone payment received in 2023, triggered by the FDA approval of NGENLA (Somatrogon). Revenue for the three months ended June 30, 2024, consisted of $6.3 million in gross profit share and royalty payments for NGENLA (Somatrogon) and Pfizer's GenotropinÂ® (Somatropin), compared with $3.8 million for the same period in 2023, and $5.0 million from the BARDA Contract (as defined and described in Note 14).

Ìý

Table of Contents

Ìý

Similarly, for the six months ended June 30, 2024, revenue from the transfer of intellectual property and other decreased toÌý$21.1 million fromÌý$159.7 million for the six months ended June 30, 2023. This decrease was primarily due to one-time milestone payments received in 2023, including the aforementioned $90.0 million payment related to NGENLA, a $50.0 million payment from Merck for rights granted under the Merck Agreement, a $7.0 million payment from VFMCRP triggered by the German price approval for Rayaldee, and a $2.5 million payment from Nicoya upon submission of an investigational new drug application to China's Center for Drug Evaluation. See Note 14 for a description of the arrangements pursuant to which such milestone payments were received. Revenue for the six months ended June 30, 2024, included $11.9 million in gross profit share and royalty payments for NGENLA (Somatrogon) and Pfizer's GenotropinÂ® (Somatropin), compared to $6.9 million in the same period in 2023, as well as $7.2 million from the BARDA Contract during the 2024 period.

Ìý

NOTE 14 STRATEGIC ALLIANCES

Ìý

Biomedical Advanced Research and Development Authority

Ìý

On September 28, 2023, ModeX was awarded a contract (the â€œBARDA Contractâ€) from the Biomedical Advanced Research and Development Authority (â€œBARDAâ€), part of the Administration for Strategic Preparedness and Response at the U.S. Department of Health and Human Services, to advance a platform and specific product candidates designed to address a range of public health threats in viral infectious diseases. The awarded funding will enable research, development and clinical evaluation of potent multispecific antibodies, based on ModeX's proprietary MSTAR technology. MSTAR is a flexible plug-and-play platform able to incorporate multiple independent antibody binding sites into a single molecule, dramatically expanding its therapeutic potential while enabling rapid responses to emerging infections and their viral variants, including COVID-19, influenza, and other pathogens.

Ìý

The BARDA Contract is cost plus fixed fee, pursuant to which we will receive $59.0 million over a five-year period from September 2023 to February 2028 for the development, manufacturing, and execution of a Phase 1 clinical trial for a next-generation MSTAR multispecific antibody with broad neutralizing activity against known variants of SARS-CoV-2. We are eligible to receive up to an additionalÌý$109.6 millionÌýfrom BARDA upon achieving particular milestones to develop multispecific antibodies targeting other viral pathogens such as influenza. As part of the research program, gene-based delivery methods for the multispecific antibodies will be developed using mRNA or DNA vectors to leverage the bodyâ€™s natural protein production processes. BARDA will make periodic assessments of progress, and the continuation of the BARDA Contract is based on ModeXâ€™s performance thereunder, the timeliness and quality of deliverables, and certain other factors. The BARDA Contract contains a number of terms and conditions that are customary for government contracts of this nature, including provisions giving BARDA the right to terminate the BARDA Contract at any time in its sole discretion.

Ìý

The Company evaluated the BARDA Contract under ASC, Topic 606, Revenue from Contracts with Customers, or ASC 606, and concluded that the BARDA Contract is in scope of ASC 606 as the U.S. government meets the definition of a customer. The scope of the BARDA Contract includes preclinical, clinical, and manufacturing and development activities that fall into the following areas: non-clinical efficacy studies, clinical activities; manufacturing activities; and all associated regulatory, quality assurance, management and administrative activities. The R&D effort for the development of these multispecific antibodies will progress in specific stages that cover the base performance segment, and option segments. ModeX will complete specific tasks required in each of the discrete work segments. The Company identified three potential material promises under the BARDA Contract: (i) development of tetravalent trispecific antibody for COVID-19; (ii) development of multispecific protein Ab for Influenza or other pathogen; and (iii) nucleic acid delivery of a mutltispecific influenza Ab or other pathogen.

Ìý

The Company determined that theÌýpromise to develop aÌýtetravalent trispecific antibody for COVID-19, is a separate performance obligation because it is distinct within the context of the contract, as the services have a standalone value and are separately identifiable from other promises within the contract.

Ìý

The Company evaluated the material promises that contained option rights (ii) development of multispecific protein Ab for influenza or other pathogen and (iii) nucleic acid delivery of a mutltispecific influenza Ab or other pathogen and determined (ii) and (iii) were not offered at a discount that is incremental to the range of discounts typically given for these goods and services, and as such, do not represent material rights. Therefore, options for additional services in (ii) and (iii) were not considered performance obligations at the outset of the BARDA Contract.

Ìý

Table of Contents

Ìý

The Company concluded that research and development services performed under the BARDA Contract would be recognized as revenue when research and development services are performed to the extent of actual costs incurred including a fixed fee and will be reimbursed by BARDA. Costs incurred represent work performed, which corresponds with, and thereby best depicts, the transfer of control of the research and development to BARDA. Types of contract costs include labor, material, and third-party services. As such, the related BARDA revenue is recognized as revenue from transfer of intellectual property and other within the Companyâ€™s Consolidated Statements of Operations. For the three and six months ended June 30, 2024, we recorded $5.0 million and $7.2 million in revenue under the BARDA Contract. As of June 30, 2024, the aggregate amount of transaction price allocated to remaining performance obligations, excluding unexercised contract options, was $50.6 million. We expect to recognize this amount as revenue through February 2028.

Ìý

Merck

Ìý

On March 8, 2023, ModeX, the Company (with respect to certain sections), and Merck Sharp & Dohme LLC (â€œMerckâ€) entered into a License and Research Collaboration Agreement (the â€œMerck Agreementâ€) pursuant to which ModeX granted to Merck a license to certain patent rights and know-how in connection with the development of ModeXâ€™s preclinical nanoparticle vaccine candidate targeting the Epstein-Barr Virus.

Ìý

Under the terms of the Merck Agreement, ModeX granted to Merck an exclusive, sublicensable, royalty-bearing license to certain intellectual property to develop, manufacture, use and commercialize (i) a multivalent or monovalent vaccine assembled usingÌýour platform for Epstein-Barr Virus (â€œVaccineâ€), and (ii) any pharmaceutical or biological preparation in final form containing a Vaccine for sale or for administration to human patients in a clinical trial for all uses (â€œProductâ€). We received an initial payment of $50.0Ìýmillion and are eligible to receive up to an additional $872.5Ìýmillion upon the achievement of certain commercial and development milestones under several indications. We are also eligible to receive tiered royalty payments ranging from high single digits to low double digits upon achievement of certain sales targets of the Product. Certain of the rights subject to the license provided by us under the Merck Agreement were obtained by us from Sanofi pursuant to that certain License Agreement entered into as of July 1, 2021 (â€œSanofi In-License Agreementâ€) between us and Sanofi, a French corporation (â€œSanofiâ€), and a portion of the upfront payment, milestones and royalties received by us under the Merck Agreement may be payable to Sanofi under the terms of the Sanofi In-License Agreement. As a result of such obligations under the Sanofi In-License Agreement, we paid $12.5 million to Sanofi during the three months ended June 30, 2023.

Ìý

As part of their strategic collaboration, ModeX and Merck have put in place a research plan to manage research and other development activities related to the development of a Vaccine or Product including a joint steering committee to facilitate the research program. As part of the research plan, they will use a third-party contract development and manufacturing organizationÌýto carry out such activities unless otherwise agreed. Development costs incurred by ModeX in furtherance of these development activities will be reimbursed by Merck. To date, we have spent $23.3 million of development costs related to the Epstein -Barr Virus, for which Merck has provided reimbursement.

Ìý

The Merck Agreement will remain in effect until one or more Products receive marketing authorization, and, thereafter, until the expiration of all royalty obligations unless earlier terminated as permitted under the Merck Agreement. In addition to termination rights for material breach and bankruptcy, Merck is permitted to terminate the Merck Agreement in its entirety without cause after a specified notice period. If Merck terminates the Merck Agreement for convenience or by us for Merckâ€™s uncured material breach, we may elect to receive a reversion license such that we can continue its work with Vaccines and Products which have not been terminated due to a material safety issue.

Ìý

LeaderMed

Ìý

On September 14, 2021, we and LeaderMed announced the formation of a joint venture to develop, manufacture and commercialize two of Ð¡ÖíÊÓÆµappâ€™s clinical stage, long-acting drug products in Greater China and eight other Asian territories.

Ìý

Under the terms of the agreements, we have granted the joint venture exclusive rights to develop, manufacture and commercialize (a) OPK88003, an oxyntomodulin analog being developed for the treatment of obesity and diabetes, and (b) Factor VIIa-CTP, a novel long-acting coagulation factor being developed to treat hemophilia, in exchange for a 47% ownership interest in the joint venture. In addition, during 2021 we received an upfront payment of $1Ìýmillion and will be reimbursed for clinical trial material and technical support we provide the joint venture.

Ìý

Table of Contents

Ìý

LeaderMed is responsible for funding the joint ventureâ€™s operations, development and commercialization efforts and, together with its syndicate partners, initially invested $11Ìýmillion in exchange for a 53% ownership interest. We retain full rights to oxyntomodulin and Factor VIIa-CTP in all other geographies.

Ìý

CAMP4 Therapeutics

Ìý

On July 6, 2021, we entered into an exclusive license agreement (the â€œC´¡²Ñ±Ê4 Agreementâ€) with CAMP4, pursuant to which we granted to CAMP4 an exclusive license to develop, manufacture, commercialize or improve therapeutics utilizing the AntagoNAT technology, an oligonucleotide platform developed under Ð¡ÖíÊÓÆµapp CURNA, which includes the molecule for the treatment of Dravet syndrome, together with any derivative or modification thereof (the â€œLicensed Compoundâ€) and any pharmaceutical product that comprises or contains the Licensed Compound, alone or in combination with one or more other active ingredients (â€œLicensed Productâ€), worldwide. The CAMP4 Agreement grant covers human pharmaceutical, prophylactic, and therapeutic and certain diagnostic uses.

Ìý

We received an initial upfront payment of $1.5Ìýmillion and 3,373,008 shares of °ä´¡²Ñ±Ê4â€™s Series A Prime Preferred Stock (â€œPreferred Stockâ€), which then equated to approximately 9% of the outstanding shares of CAMP4, and we are eligible to receive up to $3.5Ìýmillion in development milestone payments for Dravet syndrome products, and $4Ìýmillion for non-Dravet syndrome products, as well as sales milestones of up to $90Ìýmillion for Dravet syndrome products and up to $90Ìýmillion for non-Dravet syndrome products. We may also receive double digit royalty payments on the net sales of royalty bearing products, subject to adjustment. In addition, upon achievement of certain development milestones, we will be eligible to receive equity consideration of up to 5,782,299 shares of Preferred Stock in connection with Dravet syndrome products and up to 1,082,248 shares of Preferred Stock in connection with non-Dravet syndrome products. In connection with our acquisition of CURNA, we agreed to pay future consideration to the sellers upon the achievement of certain events. As a result of our execution of the CAMP4 Agreement, we will have to pay a percentage of any payments received under the CAMP4 Agreement to the former CURNA stockholders.

Ìý

Unless earlier terminated, the CAMP4 Agreement will remain in effect on a Licensed Product-by-Licensed Product and country by-country basis until such time as the royalty term expires for a Licensed Product in a country, and expires in its entirety upon the expiration of the royalty term for the last Licensed Product in the last country. °ä´¡²Ñ±Ê4â€™s royalty obligations expire on the later of (i) the expiration, invalidation or abandonment date of the last patent right in connection with the royalty bearing product, or (ii) ten (10) years after a royalty bearing productâ€™s first commercial sale in a country. In addition to termination rights for material breach and bankruptcy, CAMP4 is permitted to terminate the CAMP4 Agreement after a specified notice period. CAMP4 has informed the Company that the FDA has placed the Dravet clinical trials on hold as CAMP4 is pursuing strategies to potentially advance to clinical trials.

Ìý

NICOYA Macau Limited

Ìý

On June 18, 2021, EirGen, our wholly owned subsidiary, and NICOYA Macau Limited (â€œNicoyaâ€), a Macau corporation and an affiliate of NICOYA Therapeutics, entered into a Development and License Agreement (the â€œNicoya Agreementâ€) granting Nicoya the exclusive rights for the development and commercialization of extended release calcifediol (the â€œNicoya Productâ€) in Greater China, which includes mainland China, Hong Kong, Macau, and Taiwan (collectively, the â€œNicoya Territoryâ€). Extended release calcifediol is marketed in the U.S. by Ð¡ÖíÊÓÆµapp under the tradename Rayaldee. The license grant to Nicoya covers the therapeutic and preventative use of the Nicoya Product for SHPT in non-dialysis and hemodialysis chronic kidney disease patients (the â€œNicoya Fieldâ€).

Ìý

EirGen received an initial upfront payment of $5Ìýmillion and was eligible to receive an additional $5Ìýmillion tied to the first anniversary of the effective date of the Nicoya Agreement, as amended, of which EirGen has received $2.5Ìýmillion plus accrued interest for the delayed payment. Furthermore, EirGen received the additional $2.5Ìýmillion upon Nicoyaâ€™s submission of an investigational new drug (IND) application to the Center for Drug Evaluation of China in March 2023. EirGen is also eligible to receive up to an additional aggregate amount of $115Ìýmillion upon the achievement of certain development, regulatory and sales-based milestones by Nicoya for the Nicoya Product in the Nicoya Territory. EirGen is eligible to receive tiered, double digit royalty payments at rates in the low double digits on net product sales within the Nicoya Territory and in the Nicoya Field.

Ìý

Nicoya will, at its sole cost and expense, be responsible for performing all development activities necessary to obtain all regulatory approvals for the Nicoya Product in the Nicoya Territory and for all commercial activities pertaining to the Nicoya Product in the Nicoya Territory.

Ìý

Table of Contents

Ìý

Unless earlier terminated, the Nicoya Agreement will remain in effect until such time as all royalty payment terms and extended payment terms have expired, and Nicoya shall have no further payment obligations to EirGen under the terms of the Nicoya Agreement. Nicoyaâ€™s royalty obligations expire on the later of (i) expiration of the last to expire valid patent claim covering the Nicoya Product sold in the Nicoya Territory, (ii) expiration of all regulatory and data exclusivity applicable to the Nicoya Product in the Nicoya Territory, and (iii) on a product-by-product basis, ten (10) years after such Nicoya Productâ€™s first commercial sale in the Nicoya Territory. In addition to termination rights for material breach and bankruptcy, Nicoya is permitted to terminate the Nicoya Agreement after a specified notice period.

Ìý

VFMCRP

Ìý

In May 2016, EirGen and Vifor Fresenius Medical Care Renal Pharma Ltd. (â€œVFMCRP â€) entered into a Development and License Agreement (the â€œVFMCRP Agreementâ€) for the development and commercialization of Rayaldee (the â€œProductâ€) worldwide, except for (i) the United States and Canada, (ii) any country in Central America or South America (including Mexico), (iii) Russia, (iv) China, (v) South Korea, (vi) Ukraine, (vii) Belorussia, (viii) Azerbaijan, (ix) Kazakhstan, (x) Taiwan (xi) the Middle East, and (xii) all countries of Africa (the â€œVFMCRP Territoryâ€), as amended. The license toÌýVFMCRP potentially covers all therapeutic and prophylactic uses of the Product in human patients (the â€œVFMCRP Fieldâ€), provided that initially the license is for the use of the Product for the treatment or prevention of SHPT related to patients with CKD and vitamin D insufficiency/deficiency (the â€œVFMCRP Initial Indicationâ€).

Ìý

In January 2023, the German Association of Statutory Health Insurance funds (GKV-SV) granted price approval for Rayaldee. This triggered a milestone payment of $7.0 million. In 2022, we recognized a separate milestone payment of $3.0 million in revenue from the transfer of intellectual property and other for the first sale of Rayaldee in Europe.

Ìý

Effective May 23, 2021, we entered into an amendment to theÌýVFMCRP Agreement pursuant to which the parties thereto agreed to include Japan as part of theÌýVFMCRP Territory.

Ìý

Effective May 5, 2020, we entered into an amendment to the VFMCRP Agreement pursuant to which the parties agreed to exclude Mexico, South Korea, the Middle East and all of the countries of Africa from the VFMCRP Territory. In addition, the parties agreed to certain amendments to the milestone structure and to reduce minimum royalties payable. As revised, the Company has received a $3 million payment triggered by the first marketing approval of Rayaldee in Europe, $7.0 million payment triggered by the Germany price approval by the local sick fund association, and is eligible to receive up to an additional $15 million in regulatory milestones and $200 million in milestone payments tied to launch, pricing and sales of Rayaldee, and tiered, double-digit royalties.

Ìý

We plan to share responsibility withÌýVFMCRP for the conduct of trials specified within an agreed-upon development plan, with each company leading certain activities within the plan. EirGen will lead the manufacturing activities within and outside theÌýVFMCRP Territory and the commercialization activities outside theÌýVFMCRP Territory and outside theÌýVFMCRP Field in theÌýVFMCRP Territory andÌýVFMCRP will lead the commercialization activities in theÌýVFMCRP Territory and theÌýVFMCRP Field. For the initial development plan, the companies have agreed to certain cost sharing arrangements.ÌýVFMCRP will be responsible for all other development costs thatÌýVFMCRP considers necessary to develop the Product for the use of the Product for the VFMCRP Initial Indication in theÌýVFMCRP Territory in theÌýVFMCRP Field except as otherwise provided in theÌýVFMCRP Agreement. The first of the clinical studies provided for in the development activities commenced in September 2018.

Ìý

In connection with the VFMCRP Agreement, the parties entered into a letter agreement pursuant to which EirGen granted toÌýVFMCRP an exclusive option (the â€œOptionâ€) to acquire an exclusive license under certain EirGen patents and technology to use, import, offer for sale, sell, distribute and commercialize the Product in the U.S. solely for the treatment of SHPT in dialysis patients with CKD and vitamin D insufficiency (the â€œDialysis Indicationâ€). Upon exercise of the Option, VFMCRP has agreed to reimburse EirGen for all of the development costs incurred by EirGen with respect to the Product for the Dialysis Indication in the U.S. VFMCRP would also pay EirGen up to an additional aggregate amount of $555Ìýmillion of sales-based milestones upon the achievement of certain milestones and would be obligated to pay royalties at percentage rates that range from the mid-teens to the mid-twenties on sales of the Product in the U.S. for the Dialysis Indication. To date,ÌýVFMCRP has not exercised the Option.

Ìý

Table of Contents

Ìý

Payments received for regulatory milestones and sales milestones are non-refundable. The regulatory milestones are payable if and whenÌýVFMCRP obtains approval from certain regulatory authorities and will be recognized as revenue in the period in which the associated milestone is achieved, assuming all other revenue recognition criteria are met. We account for the sales milestones as royalties and sales milestones payments will be recognized as revenue in the period in which the associated milestone is achieved or sales occur, assuming all other revenue recognition criteria are met.

Ìý

Pfizer Inc.

Ìý

In December 2014, we entered into an exclusive worldwide agreement with Pfizer for the development and commercialization of our long-acting Somatrogon (hGH-CTP) for the treatment of growth hormone deficiency (â€œGHDâ€) in adults and children, as well as for the treatment of growth failure in children born small for gestational age (the â€œPfizer Transactionâ€).ÌýIn May 2020, we entered into an amended and restated development and commercialization license with Pfizer, effective January 1, 2020 (the â€œRestated Pfizer Agreementâ€), pursuant to which the parties agreed, among other things, to share all costs for Manufacturing Activities, as defined in the Restated Pfizer Agreement, for developing a licensed product for the three indications included in the Restated Pfizer Agreement.

Ìý

In June 2023, the FDA approved NGENLA (Somatrogon (hGH-CTP)) a once-weekly injection to treat pediatric growth hormone deficiency in the United States. In early 2022, the European Commission and Ministry of Health, Labour and Welfare in Japan approved NGENLA (Somatrogon). We have also received pricing approvals in Germany and Japan. NGENLA (Somatrogon (hGH-CTP)) is approved for the treatment of pediatric GHD in more than 50 markets, including Canada, Australia, Japan, and EU Member States. With the achievement of these milestones, in 2023 we recorded revenue of $90 million, and in 2022 we recorded $85.0Ìýmillion, in each case under the Restated Pfizer Agreement.

Ìý

On October 21, 2019, we and Pfizer announced that the global phase 3 trial evaluating Somatrogon dosed once-weekly in prepubertal children with GHD met its primary endpoint of non-inferiority to daily GenotropinÂ® (somatropin) for injection, as measured by annual height velocity at 12 months.

Ìý

Under the terms of the Restated Pfizer Agreement we received non-refundable and non-creditable upfront payments of $295.0 million and are eligible to receive up to an additional $275.0 million upon the achievement of certain regulatory milestones. Pfizer received the exclusive license to commercialize Somatrogon worldwide. In addition, we are eligible to receiveÌýregional, tiered gross profit sharing for both Somatrogon and Pfizerâ€™s GenotropinÂ® (somatropin) in all global markets, with the U.S. region commencing gross profit sharing in August 2023.

Ìý

The Restated Pfizer Agreement will remain in effect until the last sale of the licensed product, unless earlier terminated in accordance with its terms. In addition to termination rights for material breach and bankruptcy, Pfizer is permitted to terminate the Restated Pfizer Agreement in its entirety, or with respect to one or more world regions, without cause after a specified notice period. If the Restated Pfizer Agreement is terminated by us for Pfizerâ€™s uncured material breach, or by Pfizer without cause, provision has been made for transition of product and product responsibilities to us for the terminated regions, as well as continued supply of product by Pfizer or transfer of supply to us in order to support the terminated regions.

Ìý

We recognized the non-refundable $295.0 million upfront payments as revenue as the research and development services were completed. As of June 30, 2024 and December 31, 2023, we had no contract liabilities related to the Pfizer Transaction.

Ìý

TheÌýRestated Pfizer Agreement includes milestone payments of $275.0 million upon the achievement of certain milestones. The milestones range from $20.0 million to $90.0 million each and are based on achievement of regulatory approval in the U.S. and regulatory approval and price approval in other major markets. The milestone payments will be recognized as revenue in the period in which the associated milestone is achieved, assuming all other revenue recognition criteria are met. To date, $175.0 million of revenue has been recognized related to the achievement of the milestones.

Ìý

Other

Ìý

We have completed strategic deals with numerous institutions and commercial partners. In connection with these agreements, upon the achievement of certain milestones we are obligated to make certain payments and have royalty obligations upon sales of products developed under the license agreements. At this time, we are unable to estimate the timing and amounts of payments as the obligations are based on future development of the licensed products.

Ìý

Table of Contents

ÌýÌý

Ìý

NOTE 15 SEGMENTS

Ìý

We manage our operations in two reportable segments, pharmaceutical and diagnostics. The pharmaceutical segment consists of our pharmaceutical operations in Chile, Mexico, Ireland, Israel and Spain, Rayaldee product sales and our pharmaceutical research and development. The diagnostics segment primarily consists of our clinicalÌýlaboratory operations through BioReference. There are no significant inter-segment sales. We evaluate the performance of each segment based on operating profit or loss. There is no inter-segment allocation of interest expense and income taxes.

Ìý

Information regarding our operations and assets for our operating segments and the unallocated corporate operations as well as geographic information are as follows:

Ìý

For the three months ended June 30,

Ìý

For the six months ended June 30,

Ìý

(In thousands)

Ìý

2024

Ìý

2023

Ìý

2024

Ìý

2023

Ìý

Revenue from services:

Ìý

Pharmaceutical

Ìý

â€”

Ìý

â€”

Ìý

â€”

Ìý

â€”

Ìý

Diagnostics

Ìý

129,395

Ìý

127,052

Ìý

256,286

Ìý

259,420

Ìý

Corporate

Ìý

â€”

Ìý

â€”

Ìý

â€”

Ìý

â€”

Ìý

129,395

Ìý

127,052

Ìý

256,286

Ìý

259,420

Ìý

Revenue from products:

Ìý

Pharmaceutical

Ìý

40,485

Ìý

43,500

Ìý

78,532

Ìý

83,883

Ìý

Diagnostics

Ìý

â€”

Ìý

â€”

Ìý

â€”

Ìý

â€”

Ìý

Corporate

Ìý

â€”

Ìý

â€”

Ìý

â€”

Ìý

â€”

Ìý

40,485

Ìý

43,500

Ìý

78,532

Ìý

83,883

Ìý

Revenue from transfer of intellectual property and other:

Ìý

Pharmaceutical

Ìý

12,306

Ìý

94,866

Ìý

21,054

Ìý

159,692

Ìý

Diagnostics

Ìý

â€”

Ìý

â€”

Ìý

â€”

Ìý

â€”

Ìý

Corporate

Ìý

â€”

Ìý

â€”

Ìý

â€”

Ìý

â€”

Ìý

12,306

Ìý

94,866

Ìý

21,054

Ìý

159,692

Ìý

Operating income (loss):

Ìý

Pharmaceutical

Ìý

(24,820

)

Ìý

63,631

Ìý

(52,500

)

Ìý

82,585

Ìý

Diagnostics

Ìý

(26,583

)

Ìý

(44,258

)

Ìý

(60,985

)

Ìý

(84,264

)

Corporate

Ìý

(10,267

)

Ìý

(12,348

)

Ìý

(19,658

)

Ìý

(21,890

)

Ìý

(61,670

)

Ìý

7,025

Ìý

(133,143

)

Ìý

(23,569

)

Depreciation and amortization:

Ìý

Pharmaceutical

Ìý

17,905

Ìý

17,788

Ìý

35,856

Ìý

35,703

Ìý

Diagnostics

Ìý

6,250

Ìý

8,603

Ìý

14,118

Ìý

17,290

Ìý

Corporate

Ìý

â€”

Ìý

â€”

Ìý

â€”

Ìý

â€”

Ìý

24,155

Ìý

26,391

Ìý

49,974

Ìý

52,993

Ìý

Loss from investment in investees:

Ìý

Pharmaceutical

Ìý

)

Ìý

(42

)

Ìý

)

Ìý

(79

)

Diagnostics

Ìý

â€”

Ìý

â€”

Ìý

â€”

Ìý

â€”

Ìý

Corporate

Ìý

â€”

Ìý

â€”

Ìý

â€”

Ìý

â€”

Ìý

)

Ìý

(42

)

Ìý

)

Ìý

(79

)

Revenues:

Ìý

United States

Ìý

141,717

Ìý

134,859

Ìý

277,759

Ìý

323,943

Ìý

Ireland

Ìý

9,842

Ìý

96,749

Ìý

19,065

Ìý

112,595

Ìý

Chile

Ìý

17,602

Ìý

19,954

Ìý

32,491

Ìý

35,494

Ìý

Spain

Ìý

5,872

Ìý

5,968

Ìý

11,531

Ìý

12,078

Ìý

Israel

Ìý

441

Ìý

1,639

Ìý

601

Ìý

6,233

Ìý

Mexico

Ìý

5,908

Ìý

5,724

Ìý

12,991

Ìý

11,551

Ìý

Other

Ìý

804

Ìý

525

Ìý

1,434

Ìý

1,101

Ìý

182,186

Ìý

265,418

Ìý

355,872

Ìý

502,995

Ìý

Table of Contents

Ìý

Ìý	Ìý	June 30,		Ìý	Ìý	December 31,		Ìý
(In thousands)	Ìý	2024		Ìý	Ìý	2023		Ìý
Assets:	Ìý	Ìý	Ìý	Ìý	Ìý	Ìý	Ìý	Ìý
Pharmaceutical	Ìý	$	1,248,270	Ìý	Ìý	$	1,331,764	Ìý
Diagnostics	Ìý	Ìý	607,981	Ìý	Ìý	Ìý	630,753	Ìý
Corporate	Ìý	Ìý	123,620	Ìý	Ìý	Ìý	49,181	Ìý
Ìý	Ìý	$	1,979,871	Ìý	Ìý	$	2,011,698	Ìý
Goodwill:	Ìý	Ìý	Ìý	Ìý	Ìý	Ìý	Ìý	Ìý
Pharmaceutical	Ìý	$	312,375	Ìý	Ìý	$	315,235	Ìý
Diagnostics	Ìý	Ìý	217,731	Ìý	Ìý	Ìý	283,025	Ìý
Ìý	Ìý	$	530,106	Ìý	Ìý	$	598,260	Ìý

Ìý

No customer represented more than 10% of our total consolidated revenue for the six months ended June 30, 2024 and 2023. As of June 30, 2024 and December 31, 2023, no customer represented more than 10% of our accounts receivable balance.

Ìý

NOTE 16 LEASES

Ìý

We have operating leases for office space, laboratory operations, research and development facilities, manufacturing locations, warehouses and certain equipment. We determine if a contract contains a lease at inception or modification of a contract. Our leases generally do not provide an implicit interest rate, and we therefore use our incremental borrowing rate as the discount rate when measuring operating lease liabilities. The incremental borrowing rate represents an estimate of the interest rate we would incur at lease commencement to borrow an amount equal to the lease payments on a collateralized basis over the term of the lease within a particular currency environment. We used the incremental borrowing rates as of January 1, 2019 for operating leases that commenced prior to that date. Many of our leases contain rental escalation, renewal options and/or termination options that are factored into our determination of lease payments as appropriate. Variable lease payment amounts that cannot be determined at the commencement of the lease are not included in the right-to-use assets or liabilities.

Ìý

We elected the use of permitted practical expedients of not recording leases on our Condensed Consolidated Balance Sheet when the leases have terms of 12 months or less, and we elected not to separate nonlease components from lease components and instead account for each separate lease component and the nonlease components associated with that lease component as a single lease component.

Ìý

On January 2, 2023, ModeX entered into a 10-year office lease agreement that commenced in October 2023. ModeX was previously located in Natick, Massachusetts and relocated to Weston, Massachusetts, upon lease commencement. The new location is approximately 33,056 square feet of office space. ModeX has two options to extend the lease term for an additional five years per extension, which would commence upon the expiration of the term in October 2033. Straight-line monthly expense for the lease is $243.5 thousand.

Ìý

Table of Contents

Ìý

The following table presents the lease balances within the Condensed Consolidated Balance Sheet as of June 30, 2024 and December 31, 2023:

Ìý

(in thousands)	*Classification on the Balance Sheet*	Ìý	*June 30, 2024*		Ìý	Ìý	*December 31, 2023*		Ìý
Assets	Ìý	Ìý	Ìý	Ìý	Ìý	Ìý	Ìý	Ìý	Ìý
Operating lease assets	Operating lease right-of-use assets	Ìý	$	61,622	Ìý	Ìý	$	68,088	Ìý
Finance lease assets	Property, plant and equipment, net	Ìý	Ìý	6,284	Ìý	Ìý	Ìý	10,101	Ìý
Ìý	Ìý	Ìý	Ìý	Ìý	Ìý	Ìý	Ìý	Ìý	Ìý
Liabilities	Ìý	Ìý	Ìý	Ìý	Ìý	Ìý	Ìý	Ìý	Ìý
Current	Ìý	Ìý	Ìý	Ìý	Ìý	Ìý	Ìý	Ìý	Ìý
Operating lease liabilities	Current maturities of operating leases	Ìý	Ìý	11,624	Ìý	Ìý	Ìý	12,996	Ìý
Accrued expenses	Current maturities of finance leases	Ìý	Ìý	1,787	Ìý	Ìý	Ìý	2,827	Ìý
Long-term	Ìý	Ìý	Ìý	Ìý	Ìý	Ìý	Ìý	Ìý	Ìý
Operating lease liabilities	Operating lease liabilities	Ìý	Ìý	49,624	Ìý	Ìý	Ìý	54,140	Ìý
Other long-term liabilities	Finance lease liabilities	Ìý	$	4,497	Ìý	Ìý	$	7,274	Ìý
Ìý	Ìý	Ìý	Ìý	Ìý	Ìý	Ìý	Ìý	Ìý	Ìý
Weighted average remaining lease term	Ìý	Ìý	Ìý	Ìý	Ìý	Ìý	Ìý	Ìý	Ìý
Operating leases (in years)		Ìý	Ìý	6.8	Ìý	Ìý	Ìý	7.1	Ìý
Finance leases (in years)		Ìý	Ìý	7.4	Ìý	Ìý	Ìý	6.2	Ìý
Weighted average discount rate	Ìý	Ìý	Ìý	Ìý	Ìý	Ìý	Ìý	Ìý	Ìý
Operating leases		Ìý	Ìý	5.4	%	Ìý	Ìý	5.4	%
Finance leases		Ìý	Ìý	2.7	%	Ìý	Ìý	3.8	%

Ìý

The following table reconciles the undiscounted future minimum lease payments (displayed by year and in the aggregate) under noncancelable operating leases with terms of more than one year to the total operating lease liabilities recognized on our Condensed Consolidated Balance Sheet as of June 30, 2024:

Ìý

(in thousands)	Ìý	*Operating*		Ìý	Ìý	*Finance*		Ìý
July 1, 2024 through December 31, 2024	Ìý	$	6,217	Ìý	Ìý	$	1,085	Ìý
2025	Ìý	Ìý	11,220	Ìý	Ìý	Ìý	1,550	Ìý
2026	Ìý	Ìý	10,367	Ìý	Ìý	Ìý	1,086	Ìý
2027	Ìý	Ìý	10,194	Ìý	Ìý	Ìý	659	Ìý
2028	Ìý	Ìý	9,985	Ìý	Ìý	Ìý	195	Ìý
Thereafter	Ìý	Ìý	25,769	Ìý	Ìý	Ìý	1,881	Ìý
Total undiscounted future minimum lease payments	Ìý	Ìý	73,752	Ìý	Ìý	Ìý	6,456	Ìý
Less: Difference between lease payments and discounted lease liabilities	Ìý	Ìý	12,504	Ìý	Ìý	Ìý	172	Ìý
Total lease liabilities	Ìý	$	61,248	Ìý	Ìý	$	6,284	Ìý

Ìý

Expense under operating leases and finance leases was $9.2 million and $1.3 million, respectively, for the six months ended June 30, 2024, which included $1.0 million of variable lease costs. Expense under operating leases and finance leases wasÌý$8.2 million and $1.4 million, respectively, for the six months ended June 30, 2023, which included $0.6 million of variable lease costs. Operating lease costs and finance lease costs are included within Operating loss in the Condensed Consolidated Statement of Operations. Short-term lease costs were not material.

Ìý

Supplemental cash flow information is as follows:

Ìý

Ìý	Ìý	For the six months ended June 30,						Ìý
(in thousands)	Ìý	2024		Ìý	Ìý	2023		Ìý
Operating cash out flows from operating leases	Ìý	$	9,113	Ìý	Ìý	$	7,955	Ìý
Operating cash out flows from finance leases	Ìý	Ìý	238	Ìý	Ìý	Ìý	206	Ìý
Financing cash out flows from finance leases	Ìý	Ìý	1,268	Ìý	Ìý	Ìý	1,268	Ìý
Total	Ìý	$	10,619	Ìý	Ìý	$	9,429	Ìý

Ìý

Table of Contents

Ìý

NOTE 17 SUBSEQUENT EVENTS

Ìý

On July 18, 2024, the Company announced that its Board of Directors authorized the repurchase of up to $100 million of Common Stock. Under this program, Ð¡ÖíÊÓÆµapp may repurchase shares through various methods, including open market purchases, block trades, privately negotiated transactions, and accelerated share repurchases, as well as pursuant to pre-set trading plans meeting the requirements of Rule 10b5-1(c) of the Exchange Act, and otherwise in compliance with applicable laws. The timing and volume of repurchases will depend on market conditions, the Company's capital management, investment opportunities, and other factors. The program does not obligate the Company to repurchase any specific number of shares, has no set expiration date, and may be modified, suspended, or discontinued at the Company's discretion.

Ìý

On July 17, 2024, the Company completed a private offering of $250 million aggregate principal amount of senior secured notes (the â€œ2044 Notesâ€), pursuant to a note purchase agreement dated July 17, 2024 (the â€œ2044 Note Purchase Agreement), by and among the Company, certain purchasers party thereto, the Companyâ€™s wholly-owned subsidiaries Ð¡ÖíÊÓÆµapp Biologics and EirGen as guarantors (OBL and EirGen collectively, the â€œ2044 Note Guarantorsâ€), and HCR Injection SPV, LLC, as agent (â€œAgentâ€). The 2044 Notes mature on July 17, 2044 and bear interest at the 3-month Secured Overnight Financing Rate (SOFR) subject to a 4.0% per annum floor, plus 7.5% per annum. Interest is payable on the 2044 Notes on a quarterly basis determined by profit share payments received by EirGen pursuant to the profit share arrangement with Pfizer, Inc. (the â€œRoyalty Paymentsâ€) set forth in the Restated Pfizer Agreement. In the event that the aggregate amount of the Royalty Payments received by EirGen during the quarter preceding any quarterly interest payment date are less than the accrued and unpaid interest payable on such date, the excess interest payable on such date shall be paid-in-kind and added to the outstanding principal amount of the 2044 Notes.Ìý The Company will be required to pay the noteholders a 3% exit fee in connection with any repayment in full of the 2044 Notes, whether at maturity or otherwise.Ìý In addition, in the event that the Company repays the 2044 Notes in full prior to the maturity date, the Company will be required to pay the noteholders a make whole payment in an amount necessary such that the noteholders shall have received aggregate payments of principal, interest and fees in respect of the 2044 Notes equal to at least 150% of the initial principal amount of the 2044 Notes, in the event that such prepayment shall occur on or prior to July 17, 2029, or 200% of the initial principal amount of the 2044 Notes, in the event that such prepayment shall occur following July 17, 2029. The Company may authorize up to an additional $50,000,000 in additional 2044 Notes to the purchasers on the same terms and conditions of the initial 2044 Notes. The 2044 Notes are secured by the Royalty Payments, and the 2044 Note Guarantors have guaranteed the obligations under the 2044 Notes by granting a security interest in certain assets of the 2044 Note Guarantors. The 2044 Note Purchase Agreement contains customary terms and covenants, including negative covenants, such as limitations on indebtedness, liens, amendments to certain material contracts and disposition of assets.

Ìý

Table of Contents

Ìý

ITEM 2. MANAGEMENTâ€™S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

Ìý

OVERVIEW

Ìý

You should read this discussion together with the unaudited Condensed Consolidated Financial Statements, related notes, and other financial information included elsewhere in this Quarterly Report on Form 10-Q together with our audited consolidated financial statements, related notes, and other information contained in our Annual Report on Form 10-K for the year ended DecemberÌý31, 2023 (the â€œForm 10-Kâ€). The following discussion contains assumptions, estimates and other forward-looking statements that involve a number of risks and uncertainties, including those discussed under â€œRisk Factors,â€ in Part I, ItemÌý1A of the Form 10-K and as described from time to time in our other filings with the Securities and Exchange Commission. These risks could cause our actual results to differ materially from those anticipated in these forward-looking statements.

Ìý

We are a diversified healthcare company that seeks to establish industry leading positions in large and rapidly growing medical markets. Our pharmaceutical business features Rayaldee, a U.S. Food and Drug Administration (â€œFDAâ€) approved treatment for secondary hyperparathyroidism (â€œSHPTâ€) in adults with stage 3 or 4 chronic kidney disease (â€œCKDâ€) and vitamin D insufficiency, andÌýSomatrogon (hGH-CTP),Ìýa once-weekly human growth hormone injection.ÌýWe have partnered with Pfizer Inc. (â€œPfizerâ€) for the development and commercialization of Somatrogon (hGH-CTP). Regulatory approvals for Somatrogon (hGH-CTP) for the treatment of growth hormone deficiency in children and adolescents have been secured in over 50 markets, including the United States, European Union (â€œEU") Member States, Japan, Canada, and Australia, where it is marketed under the brand name NGENLAÂ®. Our 2022 acquisition of ModeX Therapeutics, Inc. (â€œModeXâ€) has expanded our pharmaceutical pipeline with early-stage immune therapies targeting cancer and infectious diseases.

Ìý

Our diagnostics business, BioReference Health, LLC (â€œBioReferenceâ€), is one of the nationâ€™s largest full-service laboratories, with a sales and marketing team focused on growth and new product integration, including the 4Kscore prostate cancer test. BioReference primarily serves customers in major metropolitan areas across the United States. We offer a comprehensive clinical diagnostics menu, including hematology, clinical chemistry, immunoassays, infectious disease testing, serology, hormone analyses, toxicology assays, Pap smears, anatomic pathology, and COVID-19 testing. Our laboratory services are marketed directly to physicians, geneticists, hospitals, clinics, correctional facilities, and other healthcare providers. On March 28, 2024 we entered into an agreement to sell select assets of BioReference to Laboratory Corporation of America Holdings ("Labcorp"), as described below.

Ìý

RECENT DEVELOPMENTS

Ìý

$250 Million Note Purchase Agreement Secured by NGENLAâ€™s Profit Share Payments

Ìý

On July 17, 2024, the Company completed a private offering of $250 million aggregate principal amount of senior secured notes (the â€œ2044 Notesâ€), pursuant to a note purchase agreement dated July 17, 2024 (the â€œ2044 Note Purchase Agreement), by and among the Company, certain purchasers party thereto, the Companyâ€™s wholly-owned subsidiaries Ð¡ÖíÊÓÆµapp Biologics Limited (â€œÐ¡ÖíÊÓÆµapp Biologicsâ€) and EirGen Pharma Ltd. (â€œEirGenâ€) as guarantors (Ð¡ÖíÊÓÆµapp Biologics and EirGen collectively, the â€œ2044 Note Guarantorsâ€), and HCR Injection SPV, LLC, as agent (â€œAgentâ€). The 2044 Notes mature on July 17, 2044 and bear interest at the 3-month Secured Overnight Financing Rate (â€œSOFRâ€) subject to a 4.0% per annum floor, plus 7.5% per annum. Interest is payable on the 2044 Notes on a quarterly basis determined by profit share payments received by EirGen pursuant to the profit share arrangement with Pfizer, Inc. (the â€œRoyalty Paymentsâ€) set forth in the Restated Pfizer Agreement (as described in Note 4 to our Quarterly Financials). In the event that the aggregate amount of the Royalty Payments received by EirGen during the quarter preceding any quarterly interest payment date are less than the accrued and unpaid interest payable on such date, the excess interest payable on such date shall be paid-in-kind and added to the outstanding principal amount of the 2044 Notes.Ìý The Company will be required to pay the noteholders a 3% exit fee in connection with any repayment in full of the 2044 Notes, whether at maturity or otherwise.Ìý In addition, in the event that the Company repays the 2044 Notes in full prior to the maturity date, the Company will be required to pay the noteholders a make whole payment in an amount necessary such that the noteholders shall have received aggregate payments of principal, interest and fees in respect of the 2044 Notes equal to at least 150% of the initial principal amount of the 2044 Notes, in the event that such prepayment shall occur on or prior to July 17, 2029, or 200% of the initial principal amount of the 2044 Notes, in the event that such prepayment shall occur following July 17, 2029. The Company may authorize up to an additional $50,000,000 in additional 2044 Notes to the purchasers on the same terms and conditions of the initial 2044 Notes.

Table of Contents

Ìý

The 2044 Notes are secured by the Royalty Payments, and the 2044 Note Guarantors have guaranteed the obligations under the 2044 Notes by granting a security interest in certain assets of the 2044 Note Guarantors.

Ìý

The 2044 Note Purchase Agreement contains customary terms and covenants, including negative covenants, such as limitations on indebtedness, liens, amendments to certain material contracts and disposition of assets.

Ìý

Stock Repurchase Program

Ìý

On July 18, 2024, our Board of Directors authorized the repurchase of up to $100 million of our Common Stock. Under this program, we may repurchase shares through various methods, including open market purchases, block trades, privately negotiated transactions and accelerated share repurchases, as well as pursuant to pre-set trading plans meeting the requirements of Rule 10b5-1(c) of the Exchange Act, and otherwise in compliance with applicable laws. The timing and volume of repurchases will depend on market conditions, our capital management, investment opportunities, and other factors. The program does not obligate us to repurchase any specific number of shares, has no set expiration date, and may be modified, suspended, or discontinued at our discretion.

Ìý

Proposed Sale of Select BioReference Assets

Ìý

On March 27, 2024, Labcorp entered into a definitive agreement with us (the â€œLabcorp Asset Purchase Agreementâ€) to acquire select assets of BioReference (the â€œBioReference Transactionâ€). The assets contemplated by the BioReference Transaction include BioReference's laboratory testing businesses focused on clinical diagnostics, reproductive health, and women's health across the United States, excluding New York and New Jersey operations. These assets include patient service centers, specific customer contracts, and operating assets. The purchase price for the BioReference Transaction is $237.5 million. The BioReference Transaction remains subject to customary closing conditions, including applicable regulatory approvals. The Company anticipates closing the BioReference Transaction in the third quarter of 2024.

Ìý

Offering of 3.75% Convertible Senior Notes due 2029

Ìý

InÌýJanuary 2024,Ìýwe completed a private offering of $230.0Ìýmillion aggregate principal amount of ourÌý3.75% Convertible Senior Notes dueÌý2029Ìý(theÌýâ€œ2029ÌýConvertibleÌý144AÌýNotesâ€) in accordance with the terms of a note purchase agreement (theÌýâ€œ144´¡ÌýNote Purchase Agreementâ€) entered into by and between the Company and J.P. Morgan Securities LLC (the â€œInitial Purchaserâ€). The $230.0Ìýmillion aggregate principal amount ofÌý2029ÌýConvertibleÌý144AÌýNotes includedÌý$30.0Ìýmillion aggregate principal amount ofÌý2029ÌýConvertibleÌý144AÌýNotes purchased on the Closing Date by the Initial Purchaser in accordance with its overallotment option.

Ìý

Net proceeds from the 2029 Convertible 144A Notes issuance totaled approximately $222.0 million after deducting fees and estimated offering expenses payable by us. We allocated approximately $50.0 million of these net proceeds to repurchase shares of our Common Stock. These repurchases were from purchasers of the 2029 Convertible 144A Notes in privately negotiated transactions effected with or through the Initial Purchaser or its affiliate. The purchase price per share of the Common Stock in these transactions equaled the closing sale price of $0.9067 per share of Common Stock on January 4, 2024.
Ìý

Contemporaneously with the closing of the offering of the 2029 Convertible Notes on January 9, 2024, we issued and sold approximately $71.1 million aggregate principal amount of our 3.75% Convertible Senior Notes due 2029 (the â€œ2029 Convertible Affiliate Notesâ€ and, together with the 2029 Convertible 144A Notes, the â€œ2029 Convertible Notesâ€) pursuant to the terms of a note purchase agreement entered into on January 4, 2024 (the â€œAffiliate Note Purchase Agreementâ€) by and among the Company and certain investors including, Frost Gamma Investments Trust, a trust controlled by Phillip Frost, M.D., our Chairman and Chief Executive Officer, and Jane H. Hsiao, Ph.D., MBA, our Vice-Chairman and Chief Technical Officer (collectively, the â€œAffiliate Purchasersâ€). Pursuant to the Affiliate Note Purchase Agreement, we issued and sold the 2029 Convertible Affiliate Notes to the Affiliate Purchasers in exchange for the entirety of the $55.0 million aggregate principal amount of our outstanding 2023 Convertible Notes held by the affiliate Purchasers, together with approximately $16.1 million of accrued but unpaid interest thereon.

Ìý

Furthermore, in connection with the closing of our offering of theÌý2029ÌýConvertible Notes,Ìýwe repurchased approximately $144.4Ìýmillion aggregate principal amount of theÌý2025ÌýNotes for cash, using $146.3Ìýmillion of the net proceeds from our issuance and sale of theÌý2029ÌýConvertibleÌý144AÌýNotes.

Ìý

Table of Contents

Ìý

Termination of Share Lending Agreement

Ìý

On January 22, 2024, we terminated our share lending agreement, dated February 4, 2019, with Jefferies Capital Services, LLC (â€œShare Borrowerâ€). Through this agreement, we had lent the Share Borrower approximately 30 million shares of our common stock related to our 2019 issuance of the $200.0 million in 2025 Notes. We had since reduced the number of outstanding borrowed shares by approximately 8.313 million. With the termination of this agreement, all remaining shares have been returned to us and are now held as treasury shares.

Ìý

RESULTS OF OPERATIONS

Ìý

Foreign Currency Exchange Rates

Ìý

Approximately 21.7% of our revenue for the six months ended June 30, 2024, was denominated in currencies other than the U.S. Dollar (USD). This compares to 34.4% for the same period in 2023. Our financial statements are reported in USD; therefore, fluctuations in exchange rates affect the translation of foreign-denominated revenue and expenses. During the second quarter of 2024 and the year ended December 31, 2023, our most significant currency exchange rate exposures were to the Euro and the Chilean Peso. Gross accumulated currency translation adjustments, recorded as a separate component of shareholdersâ€™ equity, totaled $43.3 million and $34.6 million at June 30, 2024 and December 31, 2023, respectively.

Ìý

We are subject to foreign currency transaction risk due to fluctuations in exchange rates between the time a transaction is initiated and settled. To mitigate this risk, we use foreign currency forward contracts. These contracts fix an exchange rate, allowing us to offset potential losses (or gains) caused by exchange rate changes at the settlement date. As of June 30, 2024, we held no open foreign exchange forward contracts related to inventory purchases on letters of credit. As of December 31, 2023, we held 52 open foreign exchange forward contracts related to inventory purchases on letters of credit. These contracts matured monthly through January 2024 with a total notional value of approximately $2.9 million.

Ìý

FOR THE THREE MONTHS ENDED JUNE 30, 2024 AND 2023

Ìý

Our consolidated (loss) income from operations for the three months ended June 30, 2024 and 2023 was as follows:

Ìý

For the three months ended June 30,

Ìý

(In thousands)

Ìý

2024

Ìý

2023

Ìý

Change

Ìý

% Change

Ìý

Revenues:

Ìý

Revenue from services

Ìý

129,395

Ìý

127,052

Ìý

2,343

Ìý

Revenue from products

Ìý

40,485

Ìý

43,500

Ìý

(3,015

)

Ìý

Revenue from transfer of intellectual property and other

Ìý

12,306

Ìý

94,866

Ìý

(82,560

)

Ìý

(87

Total revenues

Ìý

182,186

Ìý

265,418

Ìý

(83,232

)

Ìý

(31

Costs and expenses:

Ìý

Cost of revenue

Ìý

130,533

Ìý

138,939

Ìý

(8,406

)

Ìý

Selling, general and administrative

Ìý

68,821

Ìý

79,794

Ìý

(10,973

)

Ìý

(14

Research and development

Ìý

24,082

Ìý

18,159

Ìý

5,923

Ìý

Contingent consideration

Ìý

â€”

Ìý

(34

)

Ìý

100

Amortization of intangible assets

Ìý

20,420

Ìý

21,535

Ìý

(1,115

)

Ìý

Total costs and expenses

Ìý

243,856

Ìý

258,393

Ìý

(14,537

)

Ìý

(Loss) income from operations

Ìý

(61,670

)

Ìý

7,025

Ìý

(68,695

)

Ìý

(978

Ìý

Table of Contents

Ìý

Diagnostics

Ìý

For the three months ended June 30,

Ìý

(In thousands)

Ìý

2024

Ìý

2023

Ìý

Change

Ìý

% Change

Ìý

Revenues

Ìý

Revenue from services

Ìý

129,395

Ìý

127,052

Ìý

2,343

Ìý

Total revenues

Ìý

129,395

Ìý

127,052

Ìý

2,343

Ìý

Costs and expenses:

Ìý

Cost of revenue

Ìý

107,078

Ìý

113,027

Ìý

(5,949

)

Ìý

Selling, general and administrative

Ìý

44,502

Ìý

52,617

Ìý

(8,115

)

Ìý

(15

Research and development

Ìý

386

Ìý

617

Ìý

(231

)

Ìý

(37

Amortization of intangible assets

Ìý

4,012

Ìý

5,049

Ìý

(1,037

)

Ìý

(21

Total costs and expenses

Ìý

155,978

Ìý

171,310

Ìý

(15,332

)

Ìý

Loss from operations

Ìý

(26,583

)

Ìý

(44,258

)

Ìý

17,675

Ìý

Revenue. Revenue from services for the three months ended June 30, 2024 increased by approximately $2.3 million,Ìýan increase ofÌý1.8% compared to the same period in 2023. This increase was primarily driven by higher clinical test reimbursement of $3.6 million, offset by a decrease in clinical test volume of $1.3 million.

Ìý

Estimated collection amounts are subject to the complexities and ambiguities of billing, reimbursement regulations and claims processing, as well as considerations unique to Medicare and Medicaid programs, and require us to consider the potential for retroactive adjustments when estimating variable consideration in the recognition of revenue in the period the related services are rendered. For the three months ended June 30, 2024 and 2023, we recorded $1.4 million and $13.9 million, respectively, of negative revenue adjustments due to changes in estimates of implicit price concessions for performance obligations satisfied in prior periods mainly due to the composition of client pay mix.

Ìý

The composition of revenue from services by payor for theÌýthree months ended June 30, 2024 and 2023 was as follows:

Ìý

Ìý	Ìý	Three months ended June 30,						Ìý
(In thousands)	Ìý	2024		Ìý	Ìý	2023		Ìý
Healthcare insurers	Ìý	$	78,808	Ìý	Ìý	$	76,954	Ìý
Government payers	Ìý	Ìý	21,234	Ìý	Ìý	Ìý	20,923	Ìý
Client payers	Ìý	Ìý	25,061	Ìý	Ìý	Ìý	24,899	Ìý
Patients	Ìý	Ìý	4,292	Ìý	Ìý	Ìý	4,276	Ìý
Total	Ìý	$	129,395	Ìý	Ìý	$	127,052	Ìý

Ìý

Cost of revenue. Cost of revenue for the three months ended June 30, 2024 decreased $6.0 million,Ìýa decrease ofÌý5.3% compared to the three months ended June 30, 2023.ÌýCost of revenue decreased primarily due to a decrease in employee headcount, reflecting our continued cost-reduction initiatives implemented at BioReference, in addition to changes in theÌýmix of testing orderedÌýduring the period.

Ìý

Selling, general and administrative expenses. Selling, general and administrative expenses for the three months ended June 30, 2024 and 2023 wereÌý$44.5 million and $52.6 million, respectively, representing a decrease ofÌý15.4% from the prior period. Selling, general and administrative expenses in our diagnostics segment decreased primarily due to continued cost-reduction initiatives implemented at BioReference.

Ìý

Table of Contents

Ìý

Research and development expenses. The following table summarizes the components of our research and development expenses:

Ìý

Research and Development Expenses	Ìý	Three months ended June 30,						Ìý
(In thousands)	Ìý	Ìý	2024	Ìý	Ìý	Ìý	2023	Ìý
Research and development employee-related expenses	Ìý	$	331	Ìý	Ìý	$	464	Ìý
Other internal research and development expenses	Ìý	Ìý	55	Ìý	Ìý	Ìý	153	Ìý
Total research and development expenses	Ìý	$	386	Ìý	Ìý	$	617	Ìý

Ìý

The decrease in research and development expenses for the three months endedÌýJune 30, 2024 as compared to 2023 was primarily due to a decrease in employee-related expenses as a result of the continued cost-reduction initiatives implemented at BioReference.

Ìý

Amortization of intangible assets. Amortization of intangible assets wasÌý$4.0 million and $5.1 million, respectively, for the three months ended June 30, 2024 and 2023. Amortization expense reflects the amortization of acquired intangible assets with defined useful lives.

Ìý

Pharmaceuticals

Ìý

For the three months ended June 30,

Ìý

(In thousands)

Ìý

2024

Ìý

2023

Ìý

Change

Ìý

% Change

Ìý

Revenues:

Ìý

Revenue from products

Ìý

40,485

Ìý

43,500

Ìý

(3,015

)

Ìý

Revenue from transfer of intellectual property and other

Ìý

12,306

Ìý

94,866

Ìý

(82,560

)

Ìý

(87

Total revenues

Ìý

52,791

Ìý

138,366

Ìý

(85,575

)

Ìý

(62

Costs and expenses:

Ìý

Cost of revenue

Ìý

23,455

Ìý

25,912

Ìý

(2,457

)

Ìý

Selling, general and administrative

Ìý

14,062

Ìý

14,831

Ìý

(769

)

Ìý

Research and development

Ìý

23,686

Ìý

17,540

Ìý

6,146

Ìý

Contingent consideration

Ìý

â€”

Ìý

(34

)

Ìý

100

Amortization of intangible assets

Ìý

16,408

Ìý

16,486

Ìý

(78

)

Ìý

Total costs and expenses

Ìý

77,611

Ìý

74,735

Ìý

2,876

Ìý

(Loss) income from operations

Ìý

(24,820

)

Ìý

63,631

Ìý

(88,451

)

Ìý

(139

Ìý

Revenue from products. Revenue from products for the three months ended June 30, 2024 decreasedÌý$3.0 million or 6.9%, compared to the three months ended June 30, 2023. This decline was primarily driven by decreasing sales from international operations, further impacted by foreign exchange fluctuations. Additionally, revenue from the sales of Rayaldee for the three months ended June 30, 2024, wasÌý$7.2 million compared to $7.7 million in the same period in 2023.

Ìý

Revenue from transfer of intellectual property and other.ÌýFor the three months ended June 30, 2024, revenue from the transfer of intellectual property and other wasÌý$12.3 million compared toÌý$94.9 million for the prior year period. This decrease was primarily due to a one-time milestone payment of $90.0 million received in the 2023 period triggered by FDA approval of NGENLA (Somatrogon). For the three months ended June 30, 2024, revenue from the transfer of intellectual property and other reflects $6.3 million in gross profit share and royalty payments for NGENLA (Somatrogon) and Pfizer's GenotropinÂ® (Somatropin), compared with $3.8 million of such payments received in the same period in 2023.ÌýFurthermore, revenue for the three months ended June 30, 2024 included $5.0 million from the BARDA Contract (as defined and described in Note 14 to our condensed consolidated financial statements contained in this Quarterly Report on Form 10-Q (our â€œQuarterly Financialsâ€)).

Ìý

Cost of revenue. Cost of revenueÌýfor the three months ended June 30, 2024 decreased $2.5 million, a decrease ofÌý9.5%, compared to the three months ended June 30, 2023. This decrease was primarily due to favorable foreign exchange fluctuations of approximately $2.1 million. However, the positive impact of these fluctuations was offset by an increase in cost of sales, driven by changes in product mix to meet increased demand during the 2024 period.

Ìý

Table of Contents

Ìý

Selling, general and administrative expenses. Selling, general and administrative expenses for the three months endedÌýJune 30, 2024 and 2023 wereÌý$14.1 million and $14.8 million, respectively, a decrease ofÌý5.2% from the prior year period. This decrease was due to lower employee-related costs and favorable foreign exchange fluctuations of approximately $0.4 million in our international operations.

Ìý

Research and development expenses. Research and development expensesÌýfor the three months ended June 30, 2024 and 2023 wereÌý$23.7 million and $17.5 million, respectively, an increase ofÌý35.0% from the prior year period. Research and development expenses include external and internal expenses, partially offset by third-party grants and funding arising from collaboration agreements. External expenses include clinical and non-clinical activities performed by contract research organizations, lab services, purchases of drug and diagnostic product materials and manufacturing development costs. We track external research and development expenses by individual program for phase 3 clinical trials for drug approval and premarket approval for diagnostics tests, if any. Internal expenses include employee-related expenses such as salaries, benefits and equity-based compensation expense. Other internal research and development expenses are incurred to support overall research and development activities and include expenses related to general overhead and facilities.

Ìý

The following table summarizes the components of our research and development expenses:

Ìý

Research and Development Expenses	Ìý	Three months ended June 30,						Ìý
(In thousands)	Ìý	Ìý	2024	Ìý	Ìý	Ìý	2023	Ìý
External expenses:	Ìý	Ìý	Ìý	Ìý	Ìý	Ìý	Ìý	Ìý
Manufacturing expense for biological products	Ìý	$	8,307	Ìý	Ìý	$	3,006	Ìý
Phase 3 studies	Ìý	Ìý	141	Ìý	Ìý	Ìý	1,186	Ìý
Post-marketing studies	Ìý	Ìý	145	Ìý	Ìý	Ìý	29	Ìý
Earlier-stage programs	Ìý	Ìý	8,496	Ìý	Ìý	Ìý	11,925	Ìý
Research and development employee-related expenses	Ìý	Ìý	9,174	Ìý	Ìý	Ìý	8,955	Ìý
Other internal research and development expenses	Ìý	Ìý	1,897	Ìý	Ìý	Ìý	1,052	Ìý
Third-party grants and funding from collaboration agreements	Ìý	Ìý	(4,474	)	Ìý	Ìý	(8,613	)
Total research and development expenses	Ìý	$	23,686	Ìý	Ìý	$	17,540	Ìý

Ìý

Research and development expenses for the three months ended June 30, 2024 increased primarily due to research expenses at ModeX, driven by growth in our early-stage programs. This was partially offset by a reduction in costs associated with Somatrogon (hGH-CTP) following the conclusion of open-label extension studies in countries where the drug has received marketing authorization.

Ìý

Contingent consideration. Contingent considerationÌýfor the three months endedÌýJune 30, 2024 was zero, as compared to $34.0 thousand reversal of expense for the three months ended June 30, 2024. Contingent considerationÌýfor the three months endedÌýJune 30, 2023 was primarily attributable to changes in assumptions regarding the timing of achievement of future milestones for Ð¡ÖíÊÓÆµapp Renal, and potential amounts payable to former stockholders of Ð¡ÖíÊÓÆµapp Renal in connection therewith, pursuant to our acquisition agreement in 2013.

Ìý

Amortization of intangible assets. Amortization of intangible assets wasÌý$16.4 million and $16.5 million, respectively, for the three months ended June 30, 2024 and 2023. Amortization expense reflects the amortization of acquired intangible assets with defined useful lives. Our indefinite lived IPR&D assets will not be amortized until the underlying development programs are completed. Upon obtaining regulatory approval by the FDA, the IPR&D assets will be accounted for as a finite-lived intangible asset and amortized on a straight-line basis over its estimated useful life. The assets will be amortized on a straight-line basis over their estimated useful life of approximately 12 years.

Ìý

Table of Contents

Ìý

Corporate

Ìý

For the three months ended June 30,

Ìý

(In thousands)

Ìý

2024

Ìý

2023

Ìý

Change

Ìý

% Change

Ìý

Costs and expenses:

Ìý

Selling, general and administrative

Ìý

10,257

Ìý

12,346

Ìý

(2,089

)

Ìý

(17

Research and development

Ìý

400

Total costs and expenses

Ìý

10,267

Ìý

12,348

Ìý

(2,081

)

Ìý

(17

Loss from operations

Ìý

(10,267

)

Ìý

(12,348

)

Ìý

2,081

Ìý

Operating loss for our unallocated corporate operationsÌýfor the three months ended June 30, 2024 and 2023 wasÌý$10.3 million and $12.4 million, respectively, and principally reflect general and administrative expenses incurred in connection with our corporate operations. The decrease in operating loss for our unallocated corporate operations was primarily due to a decrease in employee-related expenses.

Ìý

Other

Ìý

Interest income. Interest income for the three months ended June 30, 2024 and 2023 was not significant as our cash investment strategy emphasizes the security of the principal invested and fulfillment of liquidity needs.

Ìý

Interest expense. Interest expense increased toÌý$8.2 million for the three months ended June 30, 2024, compared toÌý$3.3 million in the same period of 2023. This increase was primarily driven by $4.7 million of interest incurred on the 2029 Convertible Notes (as defined below), including interest incurred and amortization of deferred financing costs, partially offset by the extinguishment of our outstanding 2023 Convertible Notes in connection with their exchange for 2029 Convertible Notes and the repurchase of approximately $144.4Ìýmillion aggregate principal amount of theÌý2025ÌýNotes a portion of the net proceeds from the issuance of the 2029 Convertible Notes.

Ìý

Fair value changes of derivative instruments, net. Fair value changes of derivative instruments, net for the three months ended June 30, 2024 and 2023, wasÌý$1.0 thousand andÌý$142.0 thousand of expense, respectively. Derivative expense was principally related to the change in fair value on the 2029 Convertible Notes and on foreign currency forward exchange contracts at Ð¡ÖíÊÓÆµapp Chile.

Ìý

Other income (expense), net.ÌýOther income (expense), net for the three months ended June 30, 2024, resulted inÌý$58.9 million of income compared to $21.4 million of expense for the 2023 period. Other income (expense), net for the three months ended June 30, 2024 and 2023 included $60.5 million of income and $19.9 million of expense, respectively, as a result of the change in the fair value of our investment in GeneDx Holdings (as defined in Note 6 to our Quarterly Financials). Furthermore, a foreign currency loss of $1.3 million was recorded for the 2024 period, compared with aÌý$0.9 million of income in the 2023 period.

Ìý

Income tax (benefit) provision. Our income tax (benefit) provisionÌýfor the three months ended June 30, 2024 and 2023 was a $0.3 million benefit and a $3.2 million provision, respectively. For the three months ended June 30, 2024 and 2023, the tax rate differed from the U.S. federal statutory rate of 21% primarily due to the relative mix in earnings and losses in the U.S. versus foreign tax jurisdictions and operating results in tax jurisdictions which do not result in a tax benefit.

Ìý

Loss from investments in investees.ÌýWe have invested in certain early-stage companies that we perceive to have valuable proprietary technology and significant potential to create value for us as an equityholder. We account for these investments under the equity method of accounting, resulting in the recording of our proportionate share of their losses until our share of their loss exceeds our investment. Until the investeesâ€™ technologies are commercialized, if ever, we anticipate they will report net losses Loss from investments in investees wasÌý$1.0 thousand andÌý$42.0 thousand for the three months ended June 30, 2024 and 2023, respectively.

Ìý

Table of Contents

Ìý

FOR THE six months ended June 30, 2024 and 2023

Ìý

Our consolidated loss from operations for theÌýsix months ended June 30, 2024 and 2023 was as follows:

Ìý

For the six months ended June 30,

Ìý

(In thousands)

Ìý

2024

Ìý

2023

Ìý

Change

Ìý

% Change

Ìý

Revenues:

Ìý

Revenue from services

Ìý

256,286

Ìý

259,420

Ìý

(3,134

)

Ìý

Revenue from products

Ìý

78,532

Ìý

83,883

Ìý

(5,351

)

Ìý

Revenue from transfer of intellectual property and other

Ìý

21,054

Ìý

159,692

Ìý

(138,638

)

Ìý

(87

Total revenues

Ìý

355,872

Ìý

502,995

Ìý

(147,123

)

Ìý

(29

Costs and expenses:

Ìý

Cost of revenue

Ìý

262,151

Ìý

277,253

Ìý

(15,102

)

Ìý

Selling, general and administrative

Ìý

138,988

Ìý

155,436

Ìý

(16,448

)

Ìý

(11

Research and development

Ìý

46,020

Ìý

50,764

Ìý

(4,744

)

Ìý

Contingent consideration

Ìý

â€”

Ìý

102

Ìý

(102

)

Ìý

(100

Amortization of intangible assets

Ìý

41,856

Ìý

43,009

Ìý

(1,153

)

Ìý

Total costs and expenses

Ìý

489,015

Ìý

526,564

Ìý

(37,549

)

Ìý

Loss from operations

Ìý

(133,143

)

Ìý

(23,569

)

Ìý

(109,574

)

Ìý

(465

Ìý

Diagnostics

Ìý

For the six months ended June 30,

Ìý

(In thousands)

Ìý

2024

Ìý

2023

Ìý

Change

Ìý

% Change

Ìý

Revenues

Ìý

Revenue from services

Ìý

256,286

Ìý

259,420

Ìý

(3,134

)

Ìý

Total revenues

Ìý

256,286

Ìý

259,420

Ìý

(3,134

)

Ìý

Costs and expenses:

Ìý

Cost of revenue

Ìý

216,952

Ìý

227,088

Ìý

(10,136

)

Ìý

Selling, general and administrative

Ìý

90,262

Ìý

105,193

Ìý

(14,931

)

Ìý

(14

Research and development

Ìý

1,052

Ìý

1,306

Ìý

(254

)

Ìý

(19

Amortization of intangible assets

Ìý

9,005

Ìý

10,097

Ìý

(1,092

)

Ìý

(11

Total costs and expenses

Ìý

317,271

Ìý

343,684

Ìý

(26,413

)

Ìý

loss from operations

Ìý

(60,985

)

Ìý

(84,264

)

Ìý

23,279

Ìý

Revenue. Revenue from services for theÌýsix months ended June 30, 2024 decreased by approximatelyÌý$3.1 million,Ìýa decrease of 1.2% compared to the six months ended June 30, 2023. This decrease reflects the combined impact of changes in clinical test reimbursement rates, volumes, and mix.

Ìý

Estimated collection amounts are subject to the complexities and ambiguities of billing, reimbursement regulations and claims processing, as well as considerations unique to Medicare and Medicaid programs, and require us to consider the potential for retroactive adjustments when estimating variable consideration in the recognition of revenue in the period the related services are rendered. For the six months ended June 30, 2024 and 2023, we recorded $0.9 million and $18.7 million, respectively, of negative revenue adjustments due to changes in estimates of implicit price concessions for performance obligations satisfied in prior periods mainly due to the composition of patient pay mix.

Ìý

The composition of revenue from services by payor for theÌýsix months ended June 30, 2024 and 2023 was as follows:

Ìý

Ìý	Ìý	Six months ended June 30,						Ìý
(In thousands)	Ìý	2024		Ìý	Ìý	2023		Ìý
Healthcare insurers	Ìý	$	153,416	Ìý	Ìý	$	157,365	Ìý
Government payers	Ìý	Ìý	43,193	Ìý	Ìý	Ìý	41,267	Ìý
Client payers	Ìý	Ìý	50,749	Ìý	Ìý	Ìý	52,443	Ìý
Patients	Ìý	Ìý	8,928	Ìý	Ìý	Ìý	8,345	Ìý
Total	Ìý	$	256,286	Ìý	Ìý	$	259,420	Ìý

Ìý

Table of Contents

Ìý

Cost of revenue. Cost of revenue for the six months ended June 30, 2024 decreasedÌý$10.1 million,Ìýa decrease of 4.5% compared to the six months ended June 30, 2023.ÌýCost of revenue decreased primarily due to a decrease in employee headcount, reflecting our continued cost-reduction initiatives implemented at BioReference, in addition to changes in theÌýmix of testing orderedÌýduring the period.

Ìý

Selling, general and administrative expenses. Selling, general and administrative expenses for the six months ended June 30, 2024 and 2023 wereÌý$90.3 million and $105.2 million, respectively, representing a decrease of 14.2% from the prior period. Selling, general and administrative expenses in our diagnostics segment decreased primarily due to continued cost-reduction initiatives implemented at BioReference.

Ìý

Research and development expenses. The following table summarizes the components of our research and development expenses:

Ìý

Research and Development Expenses	Ìý	Six months ended June 30,						Ìý
Ìý	Ìý	2024		Ìý	Ìý	2023		Ìý
Research and development employee-related expenses	Ìý	$	674	Ìý	Ìý	$	826	Ìý
Other internal research and development expenses	Ìý	Ìý	378	Ìý	Ìý	Ìý	480	Ìý
Total research and development expenses	Ìý	$	1,052	Ìý	Ìý	$	1,306	Ìý

Ìý

The decrease in research and development expenses for the six months ended June 30, 2024 was primarily due to a decrease in employee-related expenses as a result of the continued cost-reduction initiatives implemented at BioReference.

Ìý

Amortization of intangible assets. Amortization of intangible assets wasÌý$9.0 million and $10.1 million, respectively, for the six months ended June 30, 2024 and 2023. Amortization expense reflects the amortization of acquired intangible assets with defined useful lives.

Ìý

Pharmaceuticals

Ìý

For the six months ended June 30,

Ìý

(In thousands)

Ìý

2024

Ìý

2023

Ìý

Change

Ìý

% Change

Ìý

Revenues:

Ìý

Revenue from products

Ìý

78,532

Ìý

83,883

Ìý

(5,351

)

Ìý

Revenue from transfer of intellectual property and other

Ìý

21,054

Ìý

159,692

Ìý

(138,638

)

Ìý

(87

Total revenues

Ìý

99,586

Ìý

243,575

Ìý

(143,989

)

Ìý

(59

Costs and expenses:

Ìý

Cost of revenue

Ìý

45,199

Ìý

50,165

Ìý

(4,966

)

Ìý

(10

Selling, general and administrative

Ìý

29,103

Ìý

28,392

Ìý

711

Ìý

Research and development

Ìý

44,933

Ìý

49,419

Ìý

(4,486

)

Ìý

Contingent consideration

Ìý

â€”

Ìý

102

Ìý

(102

)

Ìý

(100

Amortization of intangible assets

Ìý

32,851

Ìý

32,912

Ìý

(61

)

Ìý

Total costs and expenses

Ìý

152,086

Ìý

160,990

Ìý

(8,904

)

Ìý

(Loss) income from operations

Ìý

(52,500

)

Ìý

82,585

Ìý

(135,085

)

Ìý

(164

Ìý

Table of Contents

Ìý

Revenue from products. Revenue from products for six months ended June 30, 2024 decreased $5.4 million or 6.4%, compared to theÌýsix months ended June 30, 2023. This decline was primarily due to foreign exchange fluctuations of approximately $4.5 million and by decreasing sales from our international operations. Additionally, revenue from sales of Rayaldee for the six months ended June 30, 2024, wasÌý$14.1 million compared to theÌý$14.4 million recorded in the same period in 2023.

Ìý

Revenue from transfer of intellectual property and other.ÌýFor the six months ended June 30, 2024, revenue from the transfer of intellectual property and other wasÌý$21.1 million compared toÌý$159.7 million for the prior period. This decrease was primarily due to one-time milestone payments received in 2023, including a $90.0 million payment triggered by the FDA approval of NGENLA (Somatrogon), a $50.0 million payment from Merck for rights granted under the Merck AgreementÌý(as defined and described in Note 14 to our Quarterly Financials), a $7.0 million payment from VFMCRP triggered by the German price approval for Rayaldee (as described in Note 14 to our Quarterly Financials) and a $2.5 million payment from Nicoya due to Nicoyaâ€™s submission of the investigational new drug application to China's Center for Drug Evaluation pursuant to the Nicoya Agreement (as described in Note 14 to our Quarterly Financials). For the six months ended June 30, 2024, revenue from the transfer of intellectual property and other reflects $11.9 million in gross profit share and royalty payments for NGENLA (Somatrogon) and Pfizer's GenotropinÂ® (Somatropin), compared with $6.9 million received in the same period in 2023.ÌýFurthermore, revenue for theÌýsix months ended June 30, 2024 included $7.2 million from the BARDA Contract (as defined and described in Note 14 to our Quarterly Financials).

Ìý

Cost of revenue. Cost of revenue for the six months ended June 30, 2024 decreased $5.0 million, a decrease ofÌý9.9% compared to the six months ended June 30, 2023 which was primarily driven by favorable foreign exchange fluctuations of $3.7 million and as a result of changes in product mix during the 2024 period.

Ìý

Selling, general and administrative expenses. Selling, general and administrative expenses for the six months ended June 30, 2024 and 2023 were $29.1 million and $28.4 million, respectively, an increase of 2.5% from the prior year period. The increase in selling, general and administrative expenses was due to higher employee-related and professional expenses related to our international operations.

Ìý

Research and development expenses. Research and development expenses for the six months ended June 30, 2024 and 2023 were $44.9 million and $49.4 million, respectively, a decrease of 9.1% from the prior year period. Research and development expenses include external and internal expenses, partially offset by third-party grants and funding arising from collaboration agreements. External expenses include clinical and non-clinical activities performed by contract research organizations, lab services, purchases of drug and diagnostic product materials and manufacturing development costs. We track external research and development expenses by individual program for phase 3 clinical trials for drug approval and premarket approval for diagnostics tests, if any. Internal expenses include employee-related expenses such as salaries, benefits and equity-based compensation expense. Other internal research and development expenses are incurred to support overall research and development activities and include expenses related to general overhead and facilities.

Ìý

The following table summarizes the components of our research and development expenses:

Ìý

Research and Development Expenses	Ìý	Six months ended June 30,						Ìý
(In thousands)	Ìý	Ìý	2024	Ìý	Ìý	Ìý	2023	Ìý
External expenses:	Ìý	Ìý	Ìý	Ìý	Ìý	Ìý	Ìý	Ìý
Manufacturing expense for biological products	Ìý	$	13,235	Ìý	Ìý	$	5,979	Ìý
Phase III studies	Ìý	Ìý	648	Ìý	Ìý	Ìý	3,127	Ìý
Post-marketing studies	Ìý	Ìý	288	Ìý	Ìý	Ìý	159	Ìý
Earlier-stage programs	Ìý	Ìý	18,023	Ìý	Ìý	Ìý	30,075	Ìý
Research and development employee-related expenses	Ìý	Ìý	17,855	Ìý	Ìý	Ìý	16,762	Ìý
Other internal research and development expenses	Ìý	Ìý	3,938	Ìý	Ìý	Ìý	2,003	Ìý
Third-party grants and funding from collaboration agreements	Ìý	Ìý	(9,055	)	Ìý	Ìý	(8,686	)
Total research and development expenses	Ìý	$	44,933	Ìý	Ìý	$	49,419	Ìý

Ìý

Table of Contents

Ìý

Research and development expenses for the six months ended June 30, 2024, decreased primarily due to a one-time payment to Sanofi of $12.5 million pursuant to the Sanofi In-License Agreement, which was made in 2023 as a result of the Merck Agreement. Costs related to Somatrogon (hGH-CTP) decreased following the closure of open-label extension studies in countries where it has received marketing authorization. This decrease was partially offset by increased BARDA spending of $7.2 million of increased BARDA spending and higher employee related expenses during the 2024 period.

Ìý

Contingent consideration. Contingent consideration for the six months ended June 30, 2024 was zero, as compared to aÌý $0.1 million reversal of expense for the six months ended June 30, 2024. Contingent consideration for theÌýsix months ended June 30, 2023 was primarily attributable to changes in assumptions regarding the timing of achievement of future milestones for Ð¡ÖíÊÓÆµapp Renal, and potential amounts payable to former stockholders of Ð¡ÖíÊÓÆµapp Renal in connection therewith, pursuant to our acquisition agreement in 2013.

Ìý

Amortization of intangible assets. Amortization of intangible assets wasÌý$32.9 million for both for the six months ended June 30, 2024 and 2023. Amortization expense reflects the amortization of acquired intangible assets with defined useful lives. Our indefinite lived IPR&D assets will not be amortized until the underlying development programs are completed. Upon obtaining regulatory approval by the FDA, the IPR&D assets will be accounted for as a finite-lived intangible asset and amortized on a straight-line basis over its estimated useful life. The assets will be amortized on a straight-line basis over their estimated useful life of approximately 12 years.

Ìý

Corporate

Ìý

For the six months ended June 30,

Ìý

(In thousands)

Ìý

2024

Ìý

2023

Ìý

Change

Ìý

% Change

Ìý

Costs and expenses:

Ìý

Selling, general and administrative

Ìý

19,623

Ìý

21,851

Ìý

(2,228

)

Ìý

(10

Research and development

Ìý

)

Ìý

(10

Total costs and expenses

Ìý

19,658

Ìý

21,890

Ìý

(2,232

)

Ìý

(10

Loss from operations

Ìý

(19,658

)

Ìý

(21,890

)

Ìý

2,232

Ìý

Operating loss for our unallocated corporate operations for the six months ended June 30, 2024 and 2023 wasÌý$19.7 million and $21.9 million, respectively, and principally reflect general and administrative expenses incurred in connection with our corporate operations. The decrease in operating loss for our unallocated corporate operations was primarily due to a decrease in employee-related expenses.

Ìý

Other

Ìý

Interest income. Interest income for the six months ended June 30, 2024 and 2023 was not significant as our cash investment strategy emphasizes the security of the principal invested and fulfillment of liquidity needs.

Ìý

Interest expense. Interest expense increased to $15.9 million for the six months ended June 30, 2024, compared to $6.7 million in the same period of 2023. This increase was primarily driven by $9.0 million of interest incurred on the 2029 Convertible Notes including interest incurred, amortization of deferred financing costs, and embedded derivatives, partially offset by the extinguishment of our outstanding 2023 Convertible Notes in connection with their exchange for 2029 Convertible Notes and the repurchase of approximately $144.4Ìýmillion aggregate principal amount of theÌý2025ÌýNotes with certain of the net proceeds from the issuance of the 2029 Convertible Notes.

Ìý

Fair value changes of derivative instruments, net. Fair value changes of derivative instruments, net for the six months ended June 30, 2024 and 2023, was $26.2 million andÌý$0.9 million of expense, respectively. Derivative expense was principally related to the change in fair value on the 2029 Convertible Notes and on foreign currency forward exchange contracts at Ð¡ÖíÊÓÆµapp Chile.

Ìý

Other income (expense), net.ÌýOther income (expense), net for the six months ended June 30, 2024, resulted in $80.2 million of income, compared toÌý$4.4 million of expense for the 2023 period. Other income (expense), net for the six months ended June 30, 2024 and 2023, includedÌý$83.2 million of income and $11.6 million of expense, respectively, as a result of the change in the fair value of our investment in GeneDx Holdings (as defined in Note 6 to our Quarterly Financials). Furthermore, the six months ended June 30, 2023, reflected an $8.5 million of income due to GeneDx Holdings reaching specific revenue targets for the fiscal year ending December 31, 2022. Finally, a foreign currency loss of $4.0 million was recorded for the 2024 period, compared with a $2.0 million gain in the 2023 period.

Ìý

Table of Contents

Ìý

Income tax (benefit) provision. Our income tax (benefit) provision for the six months ended June 30, 2024 and 2023 was a $1.6 million benefit and $4.4 million provision, respectively. For the six months ended June 30, 2024 and 2023, the tax rate differed from the U.S. federal statutory rate of 21% primarily due to the relative mix in earnings and losses in the U.S. versus foreign tax jurisdictions, the impact of the payments under Merck Agreement, and operating results in tax jurisdictions which do not result in a tax benefit.

Ìý

Loss from investments in investees. We have invested in certain early stage companies that we perceive to have valuable proprietary technology and significant potential to create value for us as an equityholder. We account for these investments under the equity method of accounting, resulting in the recording of our proportionate share of their losses until our share of their loss exceeds our investment. Until the investeesâ€™ technologies are commercialized, if ever, we anticipate they will report net losses. Loss from investments in investees wasÌý$3.0 thousand andÌý$79.0 thousand for the six months ended June 30, 2024 and 2023, respectively.

Ìý

LIQUIDITY AND CAPITAL RESOURCES

Ìý

On June 30, 2024, we had cash and cash equivalents of approximately $40.6 million. Cash used in operations of $62.0 million for theÌýsix months ended June 30, 2024 principally reflected general and administrative expenses related to our corporate operations, research and development activities, partially offset by the change in fair value of our equity securities. Cash used in investing activities of $11.6 million for theÌýsix months ended June 30, 2024 primarily reflected capital expenditures. Cash provided by financing activities for theÌýsix months ended June 30, 2024 of $18.5 million primarily reflected net borrowings on our lines of credit, the issuance of our 2029ÌýConvertible Notes, the redemption of the 2025 Notes, and repurchase of shares of our Common Stock. We have historically not generated sustained positive cash flow sufficient to offset our operating and other expenses, and our primary sources of cash have been from the public and private placement of equity and debt, as well as credit facilities available to us.

Ìý

On July 17, 2024, we completed a private offering of $250 million aggregate principal amount of the 2044 Notes in accordance with the terms of the 2044 Note Purchase Agreement. The 2044 Notes are secured by the Companyâ€™s profit share payments from Pfizer, received under the Restated Pfizer Agreement. The 2044 Notes bear interest at the 3-month SOFR plus 7.5%, subject to a minimum interest rate of 4.0% per annum. The 2044 Notes mature in July 2044, with interest-only payments required for the first four years.

Ìý

In March 2024, the Company and Labcorp entered into the Labcorp Asset Purchase Agreement, pursuant to which Labcorp agreed to acquire select assets of BioReference. The purchase price for the BioReference Transaction was $237.5 million, subject to adjustments. We anticipate closing the BioReference Transaction in the third quarter of 2024.Ìý The BioReference Transaction met the held-for-sale accounting criteria and the related assets and liabilities are classified as held for sale in our condensed consolidated balance sheet.

Ìý

In January 2024, we completed a private offering of $230.0 million aggregate principal amount of our 3.75% Convertible Senior Notes due 2029 (the â€œ2029 Convertible 144A Notesâ€) in accordance with the terms of a note purchase agreement (theÌýâ€œ144´¡ÌýNote Purchase Agreementâ€) entered into by and between the Company and J.P. Morgan Securities LLC (the â€œInitial Purchaserâ€).

Ìý

The Company received approximately $220.0 million of net proceeds from the issuance of the 2029 Convertible 144A Notes, after deducting fees and estimated offering expenses. The Company used approximately $50.0 million of the net proceeds to repurchase shares of our Common Stock from purchasers of the 2029 Convertible 144A Notes in privately negotiated transactions at a purchase price equal to the closing sale price per share of Common Stock on January 4, 2024, which was $0.9067. Contemporaneously with the pricing of the 2029 Convertible 144A Notes, the Company entered into separate, privately negotiated transactions with certain holders of the Companyâ€™s outstanding 4.50% Convertible Senior Notes due 2025 to repurchase, on the closing date, approximately $144.4 million aggregate principal amount of such notes. The Company effected such repurchases for cash, using $146.3 million of the net proceeds from the offering of the 2029 Convertible 144A Notes, following which only $170Ìýthousand aggregate principal amount of theÌý2025ÌýNotes remained outstanding.

Ìý

Table of Contents

Ìý

Additionally, the Company issued and sold approximately $71.1 million aggregate principal amount of 3.75% Convertible Senior Notes due 2029 (the â€œ2029 Convertible Affiliate Notesâ€ and, together with the 2029 Convertible 144A Notes, the â€œ2029 Convertible Notesâ€) pursuant to the terms of a note purchase agreement entered into on January 4, 2024 (the â€œAffiliate Note Purchase Agreementâ€) by and among the Company and certain investors including, Frost Gamma Investments Trust, a trust controlled by Phillip Frost, M.D., our Chairman and Chief Executive Officer, and Jane H. Hsiao, Ph.D., MBA, our Vice-Chairman and Chief Technical Officer (collectively, the â€œAffiliate Purchasersâ€). Pursuant to the Affiliate Note Purchase Agreement, the Company issued and sold the 2029 Convertible Affiliate Notes to the Affiliate Purchasers in exchange for $55.0 million aggregate principal amount of 2023 Convertible Notes, held by the Affiliate Purchasers, together with approximately $16.1 million of accrued but unpaid interest thereon. Following such exchange, no 2023 Convertible Notes remained outstanding.

Ìý

HoldersÌýmayÌýconvert theirÌý2029ÌýConvertible Notes at their option prior to the close of business on the business day immediately precedingÌýSeptember 15, 2028Ìýonly under the following circumstances: (1) during any calendar quarter commencing after the calendar quarter ending onÌýMarch 31, 2024 (and only during such calendar quarter), if the last reported sale price of our Common Stock for at leastÌý20Ìýtrading days (whether orÌýnotÌýconsecutive) during the period ofÌý30Ìýconsecutive trading days ending on, and including, the last trading day of the immediately preceding calendar quarter is greater than or equal toÌý130% of the applicable conversion price on each applicable trading day; (2) during theÌýfiveÌýconsecutive business day period after anyÌýtenÌýconsecutive trading day period (the â€œconvertible note measurement periodâ€) in which the trading priceÌý perÌý$1,000Ìýprincipal amount of notes for each trading day of the convertible note measurement period was less thanÌý98% of the product of the last reported sale price of our Common Stock and the applicable conversion rate on each such trading day; or (3) upon the occurrence of specified corporate events specified in the indenture governing theÌý2029ÌýConvertible Notes. On or afterÌýSeptember 15, 2028Ìýuntil the close of business on the business day immediately preceding the maturity date, holdersÌýmayÌýconvert their notes at any time, regardless of the foregoing conditions. Upon conversion of a note, we will pay or deliver, as the caseÌýmayÌýbe, cash, shares of our Common Stock or a combination of cash and shares of our Common Stock, at our election.

Ìý

The conversion rate is initially equal toÌý869.5652Ìýshares of Common Stock perÌý$1,000Ìýprincipal amount of notes (equivalent to an initial conversion price of approximately $1.15Ìýper share of Common Stock). The conversion rate for theÌý2029ÌýConvertible Notes is subject to adjustment upon the occurrence of certain events but willÌýnotÌýbe adjusted for any accrued and unpaid interest.

Ìý

On September 28, 2023, ModeX was awarded a BARDA Contract by BARDA, part of the Administration for Strategic Preparedness and Response at the U.S. Department of Health and Human Services, to advance a platform and specific candidates designed to address a range of public health threats in viral infectious diseases. Pursuant to the BARDA Contract, we will receive $59.0 million over a five-year period through February 2028 for the development, manufacturing, and execution of a Phase 1 clinical trial for a next-generation MSTAR multispecific antibody with broad neutralizing activity against known variants of SARS-CoV-2.ÌýWe are eligible to receive up to an additional $109.6 million from BARDA upon achieving particular milestones to develop multispecific antibodies targeting other viral pathogens such as influenza. As of June 30, 2024, the aggregate amount remaining to be funded by BARDA, subject to performance obligations and excluding unexercised contract options, was $50.6 million.

Ìý

On March 8, 2023, ModeX, the Company (with respect to certain sections), and Merck entered into the Merck AgreementÌýpursuant to which Merck obtained a license to certain patent rights and know-how in connection with the development of ModeXâ€™s preclinical nanoparticle vaccine candidate targeting the Epstein -Barr Virus.

Ìý

ModeX and Merck have established a strategic collaboration with a detailed research plan to guide the development of such a vaccine or related product. This plan includes the creation of a joint steering committee and the potential use of third-party contract development and manufacturing organization carry out such activities unless otherwise agreed. Merck will reimburse ModeX for development costs incurred as part of this research plan. To date, we have incurred $23.3 million of development costs related to the Epstein -Barr Virus, for which Merck has provided reimbursement in full.

Ìý

As of June 30, 2024, the total commitments under our amended and restated credit agreement, dated August 30, 2021 (as amended, the â€œCredit Agreementâ€) with JPMorgan Chase Bank, N.A. (â€œCBâ€) and our lines of credit with financial institutions in Chile and Spain were $38.5 million, of which $20.5 million was drawn as of June 30, 2024. On June 30, 2024, the weighted average interest rate on these lines of credit was approximately 7.5%. These lines of credit are short-term and are used primarily as a source of working capital. The highest aggregate principal balance at any time outstanding during theÌýsix months ended June 30, 2024 was $23.6 million. We intend to continue to draw under these lines of credit as needed. There is no assurance that these lines of credit or other funding sources will be available to us on acceptable terms, or at all, in the future.

Ìý

Table of Contents

Ìý

The Credit Agreement provides for a $50.0 million secured revolving credit facility and includes a $20.0 million sub-facility for swingline loans and a $20.0 million sub-facility for the issuance of letters of credit. The Credit Agreement matures on August 30, 2025 and is guaranteed by all of BioReferenceâ€™s domestic subsidiaries, subject to certain exceptions. The Credit Agreement is also secured by substantially all assets of BioReference and its domestic subsidiaries, subject to certain exceptions, as well as a non-recourse pledge by us of our equity interest in BioReference. Availability under the Credit Agreement is based on a borrowing base composed of eligible accounts receivable of BioReference and certain of its subsidiaries, as specified therein. As of June 30, 2024, $8.6 million remained available for borrowing under the Credit Agreement.

Ìý

In connection with our agreements with Merck, Pfizer, VFMCRP, Nicoya and CAMP4, we are eligible to receive various milestone payments and royalty considerations. Under the terms of the Merck Agreement, we received an initial payment of $50.0 million and are also eligible to receive up to an additional $872.5 million upon the achievement of certain commercial and development milestones under several indications. We are also eligible to receive tiered royalty payments ranging from high single digits to low double digits upon achievement of certain sales targets of the Product (as defined in the Merck Agreement). Under the terms of the Restated Pfizer Agreement, we have received or are eligible to receive up to an additional $275.0 million upon the achievement of certain regulatory milestones, including $90 million triggered by the FDA approval in the United States and $85 million due to the commencement of sales of NGENLA (Somatrogon) in Europe and Japan, which we received in 2022. In addition, we are eligible to receive regional, tiered gross profit sharing for both Somatrogon (hGH-CTP) and Pfizerâ€™s GenotropinÂ®. Under the terms of the VFMCRP Agreement, we are entitled to receive up to an additional $15 million in regulatory milestones and $200 million in milestone payments tied to the launch, pricing and sales of Rayaldee, including a $7 million regulatory milestone payment we recorded in the first quarter of 2023 triggered by the German price approval for Rayaldee and $3 million regulatory milestone payment we recognized in 2022 following the first sale of Rayaldee in Europe. In addition, we are eligible to receive tiered, double-digit royalty payments. Under the terms of the Nicoya Agreement, we received an initial upfront payment of $5 million and are eligible to receive an aggregate of $5Ìýmillion tied to the first anniversary of the effective date of the Nicoya Agreement, of which we have received $2.5 million. Furthermore, we received the additional $2.5 million upon Nicoyaâ€™s submission of the investigational new drug application to the Center for Drug Evaluation of China in March 2023. We are also eligible to receive up to an additional aggregate amount of $115 million upon the achievement of certain development, regulatory and sales-based milestones by Nicoya for the Nicoya Product in the Nicoya Territory. We are also eligible to receive tiered, double digit royalty payments at rates in the low double digits on net product sales within the Nicoya Territory and in the Nicoya Field. Under the terms of the CAMP4 Agreement, we received an initial upfront payment of $1.5 million.

Ìý

We believe that the cash and cash equivalents on hand at June 30, 2024, the amounts recieved from the sale of the 2044 Notes and the amounts we expect to receive upon closing of the BioReference Transaction, are sufficient to meet our anticipated cash requirements for operations and debt service beyond the next 12 months. We based this estimate on assumptions that may prove to be wrong or are subject to change, and we may be required to use our available cash resources sooner than we currently expect. If we acquire additional assets or companies, accelerate our product development programs or initiate additional clinical trials, we will need additional funds. Our future cash requirements, and the timing of those requirements, will depend on a number of factors, includingÌýthe approval and success of our products and products in development, particularly our long acting Somatrogon (hGH-CTP) for which we have received approval in over 50 markets, including the United States, Europe, Japan, Australia and Canada, the commercial success of Rayaldee, BioReferenceâ€™s financial performance, possible acquisitions and dispositions (including the BioReference Transaction), the continued progress of research and development of our product candidates, the timing and outcome of clinical trials and regulatory approvals, the costs involved in preparing, filing, prosecuting, maintaining, defending, and enforcing patent claims and other intellectual property rights, the status of competitive products, the availability of financing, our success in developing markets for our product candidates and results of government investigations, payor claims, existing legal proceedings (including the ITA litigation) and those that may arise in the future. We have historically not generated sustained positive cash flow and if we are not able to secure additional funding when needed, we may have to delay, reduce the scope of, or eliminate one or more of our clinical trials or research and development programs or possible acquisitions or reduce our marketing or sales efforts or cease operations.

Ìý

Table of Contents

Ìý

The following table provides information as of June 30, 2024, with respect to the amounts and timing of our known contractual obligation payments due by period.

Ìý

Contractual obligations

Ìý

Remaining six months ending

Ìý

(In thousands)

Ìý

December 31, 2024

Ìý

2025

Ìý

2026

Ìý

2027

Ìý

2028

Ìý

Thereafter

Ìý

Total

Ìý

Open purchase orders

Ìý

40,408

Ìý

4,959

Ìý

415

Ìý

â€”

Ìý

â€”

Ìý

â€”

Ìý

45,782

Ìý

Operating leases

Ìý

6,166

Ìý

10,715

Ìý

9,384

Ìý

8,733

Ìý

8,110

Ìý

18,140

Ìý

61,248

Ìý

Finance leases

Ìý

973

Ìý

1,501

Ìý

1,076

Ìý

658

Ìý

195

Ìý

1,881

Ìý

6,284

Ìý

2029, 2025 and 2023 Convertible Notes

Ìý

â€”

Ìý

170

Ìý

â€”

Ìý

â€”

Ìý

â€”

Ìý

175,942

Ìý

176,112

Ìý

Mortgages and other debts payable

Ìý

156

Ìý

306

Ìý

298

Ìý

291

Ìý

284

Ìý

3,146

Ìý

4,481

Ìý

Lines of credit

Ìý

â€”

Ìý

â€”

Ìý

â€”

Ìý

â€”

Ìý

Interest commitments

Ìý

5,764

Ìý

11,575

Ìý

11,445

Ìý

11,438

Ìý

11,431

Ìý

929

Ìý

52,582

Ìý

Total

Ìý

53,479

Ìý

29,236

Ìý

22,618

Ìý

21,120

Ìý

20,020

Ìý

200,038

Ìý

346,511

Ìý

The preceding table does not include information where the amounts of the obligations are not currently determinable, including the following:

Ìý

â€¢

Contractual obligations in connection with clinical trials, which span over two years, and that depend on patient enrollment. The total amount of expenditures is dependent on the actual number of patients enrolled and as such, the contracts do not specify the maximum amount we may owe.

Ìý

â€¢

Product license agreements effective during the lesser of 15 years or patent expiration whereby payments and amounts are determined by applying a royalty rate on uncapped future sales.

Ìý

â€¢

Contingent consideration that includes payments upon achievement of certain milestones including meeting development milestones such as the completion of successful clinical trials, NDA approvals by the FDA and revenue milestones upon the achievement of certain revenue targets all of which are anticipated to be paid within the next seven years and are payable in either shares of our Common Stock or cash, at our option, and that may aggregate up to $125.0 million.

Ìý

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

Ìý

There were no material changes to our critical accounting policies and estimates described in our Form 10-K that have had a material impact on our Quarterly Financials and related notes.

Ìý

RECENT ACCOUNTING PRONOUNCEMENTS

Ìý

Accounting standards yet to be adopted.

Ìý

In December 2023, the FASB issued ASU No. 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures (â€œASU 2023-09â€), which modifies the rules on income tax disclosures to require entities to disclose (i) specific categories in the rate reconciliation, (ii) the income or loss from continuing operations before income tax expense or benefit (separated between domestic and foreign) and (iii) income tax expense or benefit from continuing operations (separated by federal, state and foreign). ASU 2023-09 also requires entities to disclose their income tax payments to international, federal, state, and local jurisdictions, among other changes. The guidance is effective for annual periods beginning after December 15, 2024. Early adoption is permitted for annual financial statements that have not yet been issued or made available for issuance. ASU 2023-09 should be applied on a prospective basis, but retrospective application is permitted. We are currently evaluating the potential impact of adopting this new guidance on our consolidated financial statements and related disclosures.

Ìý

Table of Contents

Ìý

In November 2023, the FASB issued ASU No 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures (â€œASU 2023-07â€). ASU 2023-07 enhances disclosures for significant segment expenses for all public entities required to report segment information in accordance with ASC 280. ASC 280 requires a public entity to report for each reportable segment a measure of segment profit or loss that its chief operating decision maker (â€œCODMâ€) uses to assess segment performance and to make decisions about resource allocations. The ASU is effective for fiscal years beginning after December 15, 2024 with updates to be applied on a prospective basis with the option to apply the standard retrospectively. Early adoption is permitted. We are currently evaluating the potential impact of adopting this new guidance on our consolidated financial statements and related disclosures.

Ìý

Recently adopted accounting standards.

Ìý

In 2021, the Organization for Economic Co-operation and Development (â€œOECDâ€) established an inclusive framework on base erosion and profit shifting and agreed on a two-pillar solution (â€œPillar Twoâ€) to global taxation, focusing on global profit allocation and a 15% global minimum effective tax rate. On December 15, 2022, the EU member states agreed to implement the OECDâ€™s global minimum tax rate of 15%. The OECD issued Pillar Two model rules and continues to release guidance on these rules. The inclusive framework calls for tax law changes by participating countries to take effect in 2024 and 2025. Various countries have enacted or have announced plans to enact new tax laws to implement the global minimum tax. We considered the applicable tax law changes on Pillar Two implementation in the relevant countries, and there is no material impact to our tax results for the period. We anticipate further legislative activity and administrative guidance in 2024, and will continue to evaluate the impacts of enacted legislation and pending legislation to enact Pillar Two Model Rules in the non-US tax jurisdictions we operate in.

Ìý

Item 3. Quantitative and Qualitative Disclosures About Market Risk

Ìý

In the normal course of doing business, we are exposed to the risks associated with foreign currency exchange rates and changes in interest rates.

Ìý

Foreign Currency Exchange Rate Risk â€“ We operate globally, and we are subject to foreign exchange risk in our commercial operations as portions of our revenues are exposed to changes in foreign currency exchange rates, primarily those for the Chilean Peso and the Euro.

Ìý

From time to time, we manage our exposure to fluctuations in foreign currency exchange rates through the use of foreign exchange forward contracts. Certain firmly committed transactions may be hedged with foreign exchange forward contracts. As exchange rates fluctuate, gains and losses on the exposed transactions are partially offset by gains and losses related to the hedging contracts. Both the exposed transactions and the hedging contracts are translated and fair valued, respectively, at current spot rates, with gains and losses included in earnings. We do not enter into foreign exchange or other derivative contracts for trading or speculative purposes.

Ìý

Our derivative activities, which consist of foreign exchange forward contracts, are intended to economically hedge forecasted cash flows that are exposed to foreign currency risk. The foreign exchange forward contracts generally require us to exchange local currencies for foreign currencies based on pre-established exchange rates at the contractsâ€™ respective maturity dates. As exchange rates change, gains and losses on these contracts are generated based on the change in the exchange rates that are recognized in the Condensed Consolidated Statements of Operations and offset the impact of the change in exchange rates on the foreign currency cash flows that are hedged. If the counterparties to the exchange contracts do not fulfill their obligations to deliver the contracted currencies, our results of operations could be negatively impacted due to effectively unhedged currency related fluctuations. Our foreign exchange forward contracts primarily hedge exchange rates on the Chilean Peso to the U.S. dollar. If Chilean Pesos were to strengthen or weaken in relation to the U.S. dollar, our loss or gain on hedged foreign currency cash-flows would be offset by the derivative contracts, with a net effect of zero.

Ìý

Table of Contents

Ìý

ApproximatelyÌý21.7% of our revenue for the six months ended June 30, 2024 was denominated in currencies other than the U.S. Dollar (USD). This compares to 34.4% for the same period in 2023. Our financial statements are reported in USD; therefore, fluctuations in exchange rates affect the translation of foreign-denominated revenue and expenses. In the first six months of 2024 and for the year ended December 31, 2023, our most significant currency exchange rate exposures were to the Euro and the Chilean Peso. Gross accumulated currency translation adjustments, recorded as a separate component of shareholdersâ€™ equity, totaledÌý$43.3 million and 34.6 million atÌýJune 30, 2024 and December 31, 2023, respectively.ÌýFor information on such open foreign exchange forward contracts for theÌýsix months ended June 30, 2024 and 2023 see â€œManagementâ€™s Discussion and Analysisâ€”Results of Operationsâ€” Foreign Currency Exchange Rates.â€

Ìý

We do not engage in trading market risk sensitive instruments or purchasing hedging instruments or â€œother than tradingâ€ instruments that are likely to expose us to significant market risk, whether interest rate, foreign currency exchange, commodity price, or equity price risk.

Ìý

Interest Rate Risk â€“ Our exposure to interest rate risk relates to our cash and investments and to our borrowings. We generally maintain an investment portfolio of money market funds and marketable securities. The securities in our investment portfolio are not leveraged and are subject to minimal interest rate risk due to their very short-term nature. We currently do not hedge interest rate exposure. Because of the short-term maturities of our investments, we do not believe that a change in interest rates would have a significant negative impact on the value of our investment portfolio except for reduced income resulting from declining interest rates.

Ìý

At June 30, 2024, we had cash and cash equivalents of $40.6 million. The weighted average interest rate related to our cash and cash equivalents for the six months ended June 30, 2024 was approximately 4.1%. As of June 30, 2024, the principal outstanding balances under the Credit Agreement with CB and our Chilean and Spanish lines of credit was $20.5 million in the aggregate at a weighted average interest rate of approximately 7.5%.

Ìý

Our outstanding convertible senior notes have fixed rates of interest; therefore, we are not exposed to interest rate risk on those instruments.

Ìý

The primary objective of our investment activities is to preserve principal while at the same time maximizing yields without significantly increasing risk. To achieve this objective, we may invest our excess cash in debt instruments of the U.S. Government and its agencies, bank obligations, repurchase agreements and high-quality corporate issuers, and money market funds that invest in such debt instruments, and, by policy, restrict our exposure to any single corporate issuer by imposing concentration limits. To minimize the exposure due to adverse shifts in interest rates, we maintain investments at an average maturity of generally less than three months.

Ìý

ItemÌý4. Controls and Procedures

Ìý

Disclosure Controls and Procedures

Ìý

Our management, with the participation of our Chief Executive Officer and our Chief Financial Officer, have evaluated the effectiveness of the Companyâ€™s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of the end of the period covered by this Quarterly Report on Form 10-Q. Our disclosure controls and procedures are designed to provide reasonable assurance that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the rules and forms of the Securities and Exchange Commission. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the companyâ€™s management, including its principal executive and principal financial officers, as appropriate to allow timely decisions regarding required disclosure. Based on managementâ€™s evaluation, our Chief Executive Officer and our Chief Financial Officer concluded that our disclosure controls and procedures were effective as of June 30, 2024.

Ìý

Changes to the Companyâ€™s Internal Control Over Financial Reporting

Ìý

There have been no changes to the Companyâ€™s internal control over financial reporting that occurred during the quarter ended June 30, 2024 that have materially affected, or are reasonably likely to materially affect, the Companyâ€™s internal control over financial reporting.

Ìý

Table of Contents

Ìý

PART II. OTHER INFORMATION

Ìý

ItemÌý1. Legal Proceedings

Ìý

We are, from time to time, party to various legal proceedings arising out of our business. During the reporting period covered by this Quarterly Report on Form 10-Q, there have been no material changes to the description of legal proceedings set forth in our Annual Report on Form 10-K for the year ended December 31, 2023 other than as set forth below.Ìý

Ìý

As previously reported, the Company received a Civil Investigative Demand (â€œCIDâ€) from the U.S. Department of Justice (â€œDOJâ€), Washington, DC on March 1, 2019. The CID sets forth document requests and interrogatories in connection with allegations that the Company and certain of its affiliates violated the False Claims Act and/or the Anti-Kickback Statute. OnÌýJanuary 13, 2022,Ìýthe Federal Government notified the U.S.D.C., Middle District Florida, Jacksonville Division, that it declinedÌýto intervene in the matter but retained the right, via the Attorney General, to consent to any proposed dismissal of the action by the Court. OnÌýFebruary 9, 2022,Ìýthe States of Florida, and Georgia, and the Commonwealth of Massachusetts notified the U.S.D.C., Middle District Florida, Jacksonville Division, that they declinedÌýto intervene in the matter. Notwithstanding the above declinations, onÌýFebruary 17, 2022,Ìýthe Company was served with the Relatorâ€™s Summons and Complaint (â€œComplaintâ€), which had been previously sealed. The Complaint alleges violations of the False Claims Act, the California Fraud Preventions Act, the Florida False Claims Act, the Massachusetts False Claims Act, the Georgia False Medicaid Claims Act, and illegal kickbacks. A motion to dismiss the Complaint was filed on April 25, 2022, and the case was dismissed in March 2023. However, the Relator filed an amended complaint in April 2023, which was subsequently dismissed, and a seconded amended complaint which was also dismissed in January 2024. Relator has since filed an appeal with the U.S. Eleventh Circuit Court of Appeals following a failed mediation in April 2024.

Ìý

ItemÌý1A. Risk Factors

Ìý

There have been no material changes to our risk factors as previously disclosed in our Form 10-K.

Ìý

ItemÌý2. Unregistered Sales of Equity Securities and Use of Proceeds

Ìý

None

Ìý

ItemÌý3. Defaults Upon Senior Securities

Ìý

None.

Ìý

Table of Contents

Ìý

ItemÌý4. Mine Safety Disclosures

Ìý

Not Applicable.

Ìý

ItemÌý5. Other Information

Ìý

During the quarter ended June 30, 2024, none of our officers or directors adopted or terminated any contract, instruction or written plan for the purchase or sale of securities that was intended to satisfy the affirmative defense conditions of Rule 10b5-1(c) under the Exchange Act or any â€œnon-Rule 10b5-1 trading arrangementâ€, as defined in Item 408 of Regulation S-K.Ìý

Ìý

ItemÌý6. Exhibits

Ìý

Exhibit 10.1^*+Ìý			Note Purchase Agreement dated July 17, 2024 by and among the Company, certain purchasers party thereto, Ð¡ÖíÊÓÆµapp Biologics Limited, Eirgen Pharma Ltd. and HCR Injection SPV, LLC as agent.
Exhibit 10.2*			Form of Note dated July 17, 2024
ExhibitÌý31.1*			Certification by Phillip Frost, Chief Executive Officer, pursuant to Rule 13a-14(a) and 15d-14(a) of the Securities and Exchange Act of 1934 as adopted pursuant to Section 302 ofÌýthe Sarbanes-Oxley Act of 2002 for the quarterly period ended June 30, 2024.
ExhibitÌý31.2*			Certification by Adam Logal, Chief Financial Officer, pursuant to Rule 13a-14(a) and 15d-14(a) of the Securities and Exchange Act of 1934 as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 for the quarterly period ended June 30, 2024.
ExhibitÌý32.1*			Certification by Phillip Frost, Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 for the quarterly period ended June 30, 2024.
ExhibitÌý32.2*			Certification by Adam Logal, Chief Financial Officer, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 for the quarterly period ended June 30, 2024.
Exhibit 101.INS			Inline XBRL Instance Document
Exhibit 101.SCH			Inline XBRL Taxonomy Extension Schema Document
Exhibit 101.CAL			Inline XBRL Taxonomy Extension Calculation Linkbase Document
Exhibit 101.DEF			Inline XBRL Taxonomy Extension Definition Linkbase Document
Exhibit 101.LAB			inline XBRL Taxonomy Extension Label Linkbase Document
Exhibit 101.PRE			Inline XBRL Taxonomy Extension Presentation Linkbase Document
Exhibit 104			Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)

Ìý

*	Furnished herewith.
+	Pursuant to Item 601(b)(10)(iv) of Regulation S-K, portions of this exhibit have been omitted because the Company customarily and actually treats the omitted portions as private or confidential, and such portions are not material. The Company will supplementally provide a copy of an unredacted copy of this exhibit to the U.S. Securities and Exchange Commission or its staff upon request.

Ìý

Table of Contents

Ìý

SIGNATURES

Ìý

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 thereunto duly authorized.

Ìý

Date: August 7, 2024	Ìý	Ð¡ÖíÊÓÆµapp Health, Inc.
Ìý	Ìý	Ìý
Ìý	Ìý	/s/ÌýAdam Logal
Ìý	Ìý	Adam Logal
Ìý	Ìý	Senior Vice President and Chief Financial
Ìý	Ìý	Officer

Ìý

Ð¡ÖíÊÓÆµapp

Form: 10-Q

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