Oncocyte Corp

Item 1A. Risk Factors.

Our business, financial condition, results of operations and future growth prospects are subject to various risks, including those described in Item 1A Risk Factors of our Annual Report on Form 10-K,  for the year ended December 31, 2023, filed with the SEC on April 16, 2024, which we encourage you to review. Other than as noted below, there have been no material changes from the risk factors disclosed in our most recent Annual Report on Form 10-K.

ChangIf the FDA takes ithe position the way the FDA regulaat any of our tes diagnostic tests are not within the scope of its developed bypolicy on enforcement discretion for laboratories like ours could y-developed tests, or otherwise determines that it will seek to actively regulate one or more of our diagnostic tests, result in deponding to such a regulatory position could lead to delays in commercialization (, or (if encountered after commercialization,) requirements to halt the commercial provision of our tests until applicable FDA requirements are met), as well as addimarketing authorizational expenses in offering our tests and tests is obtained.

In May 2024, that we may develop in the future.

Althoughe FDA published a final rule the FDA at phas historically exercisedes out its enforcement discretion over most for LDTs, it does not consider testunless exempt, and amends the FDAs regulations to be subjecmake explicit to this enforcement discretion if hat IVDs are medical devices under they were or are designed or  Federal Food, Drug, and Cosmetic Act ("FDCA"), including when the manufactured completely, or partly, outside of tr of the diagnostic product is a laboratory. The laAmerican Clinical Laboratory that offersAssociation and uses them, or if they are offered over-the-counter (as opposed a private laboratory have filed lawsuits against the FDA to being availablechallenge its authority to patients only when prescribed by a health care provider). In recent years, however,regulate LDTs under this final rule. The full impact of this final rule and the existing (and any future) challenges against currently remains to be seen.

If the FDA has stwere to ultimated it intends to end its policy of general enforcement discretion and regulate ly regulate our tests as traditional IVDs, some or all of our tests may become subject to certain LDTs as FDA medical devices.

In September 2023, the FDA announced a proposed rule aimed at helping to ensure regulations, including, in some cases, pre-market review. If required, the safety and effectivenregulatory marketing authorization process of may involve, among othese tests. The proposed rule seeks to amer things, successfully completing additional clinical trials and the FDAs regulations to make explicit that IVDs are dsubmitting a pre-market clearance (510(k)) submission or filing a de novo or pre-market approval application with the FDA. If pre-market revices under ew and approval is required by the FDC Act, A for any of our tests, we may need to including when the manufacturer of the IVD is a laboratory. Along with this amendment, the ur additional expenses or require additional time to seek it, or we may be unable to satisfy FDA is proposing a policy under which the FDA intends to pstandards, and our applicable tests may not be cleared or approvide greater oversight of LDTs through a phaseout of its general enforcement discretion approach ed on a timely basis, if at all, and the labeling claims permitted by the FDA may not be consistent with our currently planned claims or adequate to support adoption of and reimbursement for most LDTs.

In October 2023, thour tests. Ongoing compliance with any applicable FDA published the proposed rule entitled Medical Devices; Laboratory Developed Tmedical device regulations to which we could become subject in connection with any of our tests. The final rule w that FDA may regulate as reltraditional IVDs would increased to the public on April 29, 2024,  the cost of conducting our business, and subject us to inspection by, and then officially published in potential enforcement of certain regulatory requirements, of the Federal RDA, for example register ration May 6, 2024, with an effective date of July 5, 2024.

The final rule provides that the LDT eand listing, adherence to good manufacturing practices under the Quality System Regulation ("QSR"), and medical device reporting. Enforcement policy phase-out process will occur in gradual stages over a totaction for noncompliance with these requirements could range from warning or untitled letters to civil and criminal period of four years, with premarket approval applicanalties, injunctions, product seizure or recall, import bans, restrictions for high-risk tests to beon the conduct of our operations and total or partial submitted by the 3.5-year mark. Modspension of production. Our laboratories are operate-risk ing under CLIA and low-risks tests are expected to be are not currently operating as registered device manufacturing facilities or in compliance at the 4-year mark, although FDA haswith FDAs QSR. Because these stated that if premarket submissions are pending review it will continue to exercise enforcement discrendards differ, we may face challenges establishing FDA-compliant quality systems or be unable to do so. If after commercialization with respect to thoseunder the LDT framework, our tests. Litigation ch are allenging owed to remain on the agencys authority to adopmarket but there is uncertainty about this final rule is highly e regulatory status of our tests, which is likely, althoughgiven the outcome of such litigation is uncertain. Litigation current state of industry challenging the es to FDAs final rule may also have an impact on the FDAs plans to implement these new, including questions that may be raised if competitors object to our regulatory positioning as an LDT requirements,, we making the potential implementation timeline somewhat uncertain. Affecy encounter ongoing regulatory and legal challenges and related stakeholders continue to press costs. Such challenges or related developments (for a comprehensive legislative solution example if the labeling claims the FDA allows us to creatmake a harmonized paradigm for oversight of LDTs by bothre more limited than the FDA and CMS, instead of implementation of the administrative agency claims we currently plan to make) may impaction, which may be disruptive to the industry and to patie our commercialization efforts as orders or reimbursement accemay be less to certain diagnoshan antic tests. Until any ipated. Any of these regulatory changes become edevelopments may cause our business to suffective,r.

If the FDA is expected to continue to exercise enforcement discretion; although it may attempt to successful in overcoming challenges to the final rule and ultimately regulates certain LDTs on a case-by-case basis at any time, which could result in delas intended under the final rule, our tests may orbe subject to certain additional expense in offering our tests and tests that weregulatory requirements, the scope of which may develop in the future.

In addition, Congress havary from one test to another based on various considered a number of legislative proposals in recations. Complying with the FDAs requirement years that would ames can be expensive, time-consuming, and the regulatory framework fsubject us to significant or LDTs, including, among ounanticipated delays. To ther extent we are requirements, FDAd to obtain premarket review of certain LDTs. In March 2020, the VALID Actclearance or approval to perform or continue performing any of our tests, was officially introduced in Congress. The be cannot guarantee that we will proposes a risk-based approabe able to obtain such to regulate LDTs and creates a new authorization. Even if we obtain vitroregulatory clinical test,earance or IVCT, category of regulated products, which includes LDTs, and a regulatory structure under the FDA. As proposed, the bill grandfathers many existing tests fromapproval where required, such authorization may not be for the intended uses that we believe are commercially attractive or are critical to the proposed premarket approval, quality systems,commercial success of our tests. Based on these and labeling requirementother considerations, respectively, but would require such tests to comply with other regulatory requirements (e.g., registration and listingthe implementation of the FDAs final rule on LDTs could materially and adversely affect our business, financial condition, adversnd results of operations.

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We event reporting). Latercurrently market certain IVDs that month, Senator Paul introduchave not been cleared by the VITAL Act, which proposes that all aspects of laboraFDA in reliance on the regulatory-developed testing procedures be subject to regulation under CLIA, and exemption for IVDs intended for RUO, but if the FDA determines that no aspecour RUO tests of such procedures be subject to regulado not meet the applicable requirements for exemption by the FDA. We cannot predict if either of these bills will or have intended uses that are inconsistent with RUO tests, we may be enactrequired in their current (or any other) form and cannot quato suspend commercialization of such products untify the effect ofl we can obtain these bills on our business.

If requisite FDA clearance and/or subject theo FDA were to ultimately regulate our tests for any reason, including new rules, policies, or guidancearning or untitled letters, seizure, injunction, fines, or due to new legislaother enforcement action such as the proposed VALID Act, .

Some of our tests may become subjectare marketed for RUO, which allows us to FDA requirements, including sell such products without the pre-market review. If clearance that FDA required, s for the regulatory marketing authorizaof tradition al devices. An RUO processduct may involve, among other things, successfully completing additionalnot be marketed for clinical trials diagnostic use and submitting a pre-market clearance (510(k)) submission or filing a de novo must be labeled For Research Use Only. Not for use in diagnostic procedures. Products that are intended for pre-market approval apresearch use only and are properly labeled as RUO are exempt from complicationance with the FDA. If s pre-market review  and approval is post-market required by the FDA, we may needments to incur addwhich traditional expenses or require additional time to seek it, or we may be unable to satisfy FDA standards, and our tests may not devices are subject, including the requirement that the product be cleared or approved on a timely basis, if at all, andbefore commercialization and QSR requirements. However, merely including the required RUO labeling claims permitted bywill not necessarily exempt the device from the FDA may not be consistent with our currently planned claims or adequate to support adoption of and reimburs's 510(k) clearance, premarket approval, or other requirement for our tests. Ongoing complis if the circumstance with FDA regulas surrounding the distributions would increase  of the cost of conproducting our business, indicate and su object us to inspection by andive intent to market the regulatory requirements ofproduct for clinical diagnostic use.

According to the FDA, for example registration and lis guidance, circumstances indicating, adherence manufacturer intent to good manufacturing pracmarket an in vitro device for diagnostices under the Quality System Regulation, and medi use may include written or verbal marketing claims regarding a product's clinical device reporting, and enefficacy or perforcement acmance in clinical applications, in the event we fail to comply with these requirements. Our laboratories are operating under CLIA and are not currently operatstructions for clinical interpretation, clinical information, product names, or descriptors that claim or suggest that the IVD product may be used for any clinical diagnostic use, including as device manufacturing facilities following  clinical investigation that is not exempt from the FDAs Quality System Rinvestigational device exemption regulation. Because s. Othese standards differ, wer indications include a may nuface challenges establishing FDA-compliant quality systems or be unable to turer's provision of technical support for clinical validation or clinical applications or solicitation of business from clinical laboratories that do so. If afternot commercialization unnduct research activities, all of which could be consider the LDT framework our tests are allowed to remain oned evidence of intended uses that conflict with RUO labeling.

In general, if (i) evidence shows the market but theat one or more of our IVDs are is uncertainty abonappropriately labeled RUO (but the regulatory status of ourmarketed for clinical diagnostic use), such tests, including(s) will not quesalify for an IDE exemptions that may and will be raisdeemed misbranded if competitors obunder the FDCA. Device manufacturers found in violation of the FDCA may be subject to our regulatory posita wide range of enforcement actioning as an LDT, we may encounter ongoing regulatory and legal challenges, including warning letters, seizure, injunction, criminal prosecution, monetary penalties, and related costs. Such chothers.

We believe that our promotional activities for our RUO products fallenges or related developments (for example if the labeling claims  within the scope of the applicable premarket exemptions for RUO tests and the FDA allows us to make are more limited than s enforcement discretion, as described in its relevant guidance. However, the claims we currently planFDA could disagree and require us to make) may impact(i) stop promoting our commercialization efforts as ordersRUO devices unless/until we obtain FDA clearance or reimbursement may be less than anticipated. Anyapproval (among other possible outcomes). Any adverse determination in relation to our marketing of these regulatory developments may caucurrent or future products for RUO will likely have a material adverse oimpact on our business to suffer.