Orasure Technologies (EP3) Risk Analysis

In the past, the FDA has taken the position that it has regulatory authority over laboratory-developed tests ("LDTs"), but has exercised enforcement discretion in not regulating most LDTs performed by high complexity CLIA-certified laboratories. LDTs are tests designed, developed, and performed in-house by a laboratory. Such laboratories are subject to regulation under CLIA but have not been subject to regulation by the FDA under the agency's medical device requirements. A significant portion of the total volume of genetic or molecular testing is performed with LDTs. In mid-2010, the FDA announced that it would begin regulating LDTs, including laboratory developed molecular tests, and in October 2014 issued proposed guidance on the regulation of LDTs for public comment. On January 13, 2017, the FDA released a discussion paper synthesizing public comments on the 2014 draft guidance documents and outlining a possible approach to regulation of LDTs. The discussion paper has no legal status and does not represent a final version of the LDT draft guidance documents. The FDA worked with regulatory advocacy groups to bring forward legislative approaches specifically for in vitro diagnostic tests including LDTs. For example, in 2021, the Verifying Accurate, Leading-edge, IVCT Development ("VALID") Act was introduced to Congress and provided a framework to change IVDs and LDTs to in vitro clinical tests ("IVCTs"). The proposed regulation would give the FDA oversight of LDTs once it becomes law. In 2022, the VALID Act was incorporated into the Senate user fee bill but was not included in the year-end Consolidated Appropriations Act of 2022. Subsequently, the VALID Act was introduced to Congress again in March 2023. On April 29, 2024, the FDA published a final rule on LDTs, in which FDA outlines its plan to end enforcement discretion for many LDTs in five stages over a four-year period. However, in March 2025, a federal district court judge issued a decision that vacated the FDA's final rule on the grounds that the FDA did not have authority under the FDCA to promulgate it because LDTs do not fall within the statutory definition of "device." This district court ruling was not appealed, and the FDA's final rule will no longer be implemented or enforced by the FDA. Stakeholders continue to press for a comprehensive legislative solution to create a harmonized paradigm for oversight of LDTs by both the FDA and CMS, although it is unclear whether any future legislative efforts towards such a goal would be successful. The outcome and ultimate impact on our business of any future changes to the federal government's regulation of LDTs via legislative enactments is difficult to predict. The Company's subsidiary, DNAG, sells its DNA collection systems to certain laboratories and other customers for use with LDTs. The FDA's increased regulation of LDTs could make it more difficult for laboratories and other customers to continue offering LDTs that involve genetic or molecular testing. This, in turn, could increase costs, delay the introduction of new LDTs and reduce demand for DNAG's products and adversely impact the Company's revenues. In recent years, the Department of Justice indicted a number of telemedicine companies and cancer genetic testing laboratories for allegedly submitting fraudulent insurance claims to Medicare. In the past, a number of these companies were purchasing DNAG products. As a result of these activities, the FDA has issued letters to genetic testing laboratories indicating that it plans to increase oversight of this market which has caused some of these companies to stop providing testing options or to change how they are reporting the information provided by the testing. The activities have negatively affected this market and, should these enforcement actions continue despite the district court's ruling on FDA's final rule on LDT's, there is a risk that these enforcement actions will continue to negatively affect this market by forcing laboratories to either stop offering such services or restricting the use of such services. Such a reduction in testing could result in decreased sales of the Company's DNA collection devices.

Our business depends on the effective functioning of the FDA, the SEC, and other governmental authorities that regulate, review, fund, or otherwise influence the development, approval, manufacturing, and commercialization of our products. In recent periods, these agencies have experienced material disruptions, including government shutdowns, workforce reductions, hiring freezes, funding uncertainty, and shifts in policy priorities, and similar conditions may persist or recur. These disruptions have resulted in longer and less predictable regulatory review timelines, reduced availability of agency personnel, and delays in inspections, meetings, and other regulatory activities. Following a shutdown or funding change, regulatory backlogs and resource constraints may continue for extended periods. As a result, our ability to obtain timely regulatory approvals, clearances, or authorizations for new or modified products may be delayed or impaired, which could postpone product launches, increase development costs, require additional studies or data, or prevent products from being commercialized. Our regulatory risk is further heightened by the FDA's increasing workload, evolving oversight priorities, and constraints on its ability to hire and retain experienced personnel. Reduced staffing or funding at the FDA or other agencies may limit their capacity to meet performance goals, conduct inspections, or provide timely guidance, which could adversely affect our development timelines and commercial plans.

In addition to the FDA and other regulations described previously, laws and regulations in some states may restrict the Company's ability to sell products in those states. While the Company intends to work with state legislators and regulators to remove or modify any applicable restrictions, there is no guarantee it will be successful in these efforts. The Company must also comply with numerous laws relating to such matters as safe working conditions, manufacturing practices, environmental protection, fire hazard control, disposal of hazardous substances, labor or employment practices and the configuration and operation of the websites through which it advertises its products. As a device manufacturer, the Company is required to report annually to the Centers for Medicare & Medicaid Services ("CMS") any payments or transfers of value it has made to physicians and teaching hospitals and any physician ownership or investment interest in the Company's business. In the U.S., before the Company can market a new medical device, or a new use of, or claim for, or significant modification to, an existing product, it generally must first receive either 510(k) clearance or De Novo authorization or approval of a PMA from the FDA. Similarly, most major markets for medical devices outside the U.S. also require clearance, approval, authorization or compliance with certain standards before a product can be commercially marketed. Compliance with these laws or any new or changed laws regulating the Company's business could result in substantial costs. Because of the number and extent of the laws and regulations affecting the Company's industry, and the number of governmental agencies whose actions could affect its operations, it is impossible to reliably predict the full nature and impact of these requirements. To the extent the costs and procedures associated with complying with these laws and requirements are substantial or it is determined that the Company does not comply, its business and results of operations could be adversely affected.

The Company believes that its products and procedures are in material compliance with all applicable FDA regulations, ISO requirements, and other applicable regulatory requirements, but the regulations regarding the manufacture and sale of its products, the QMSR and ISO requirements, and other requirements may be unclear and are subject to change. Newly promulgated regulations could require changes to the Company's products, necessitate additional clinical trials or procedures, or make it impractical or impossible for it to market its products for certain uses, in certain markets, or at all. The FDA and other regulatory authorities also have the ability to change the requirements for obtaining product approval or clearance and/or impose new or additional requirements as part of the approval or clearance process. These changes or new or additional requirements may occur after the completion of substantial clinical work and other costly development activities. The implementation of such changes or new or additional requirements may result in additional clinical trials and substantial additional costs and could delay or make it more difficult or complicated to obtain approvals and sell the Company's products. In addition, from time to time, legislation is drafted, introduced, passed in Congress and signed into law that could significantly change the statutory provisions governing the approval, manufacturing, and marketing of products regulated by the FDA. In addition to new legislation, FDA regulations, guidance and policies are often revised or reinterpreted by the FDA in ways that may significantly affect the manner in which our products are regulated and marketed. The Company cannot predict the effect, if any, that these changes might have on its business, financial condition or results of operations.

Regulation by the FDA and other federal, state and foreign regulatory agencies impacts many aspects of the Company's operations and the operations of its suppliers and distributors, including manufacturing, labeling, packaging, adverse event reporting, recalls, distribution, storage, advertising, promotion and recordkeeping. The Company is subject to routine inspection by the FDA and other agencies to determine compliance with QMSR and FDA regulatory requirements in the United States and other applicable regulations worldwide, including but not limited to ISO standards. The Company believes that its facilities and procedures are in material compliance with the FDA requirements and ISO standards, but the regulations may be unclear and are subject to change, and the Company cannot be sure that the FDA or other regulators will agree with its compliance with these requirements. The FDA and foreign regulatory agencies may require post-marketing testing and surveillance to monitor the performance of approved or cleared products or impose conditions on any product clearances or approvals that could restrict the distribution or commercial applications of those products. Regulatory agencies may impose restrictions on the Company or its distributors' advertising and promotional activities or preclude these activities altogether if a noncompliance is believed to exist. In addition, the subsequent discovery of previously unknown problems with a product may result in restrictions on the product or additional regulatory actions, including withdrawal of the product from the market. Failure to comply with the applicable requirements of the FDA can result in, among other things, 483 notices, warning letters, administrative or judicially imposed sanctions such as injunctions, civil penalties, recall or seizure of products, total or partial suspension of production, refusal to grant PMA approval for devices, withdrawal of product registrations, marketing clearances or approvals, or criminal prosecution. The ability of the Company's suppliers to supply critical components or materials and of its distributors to sell its products could also be adversely affected if their operations are determined to be out of compliance. Such actions by the FDA and other regulatory bodies could adversely affect the Company's revenues, costs and results of operations. Some of the Company's products, particularly those sold by DNAG, are sold for research purposes in the U.S. The Company does not promote these products for clinical diagnostic use and they are labeled "For Research Use Only" ("RUO"). If the FDA were to disagree with the Company's RUO designation of a product, it could allege that we had misbranded or adulterated our RUO products. If the FDA asserts that our RUO products are subject to marketing authorization, or that our RUO products are adulterated or misbranded, our business, financial condition or results of operations could be adversely affected. In the ordinary course of business, the Company must frequently make subjective judgments with respect to compliance with applicable laws and regulations. If regulators subsequently disagree with the manner in which the Company has sought to comply with these regulations, it could be subjected to substantial civil and criminal penalties, as well as product recall, seizure or injunction with respect to the sale of its products. The assessment of any civil and criminal penalties against the Company could severely impair its reputation within the industry and any limitation on its ability to manufacture and market its products could have a material adverse effect on the Company's business.

Many of the Company's proposed and existing products and services are subject to regulation by the FDA and other governmental or public health agencies. In particular, the Company is subject to strict governmental controls on the development, manufacture, labeling, distribution and marketing of its products. The Company's practice is to train its employees on the legal requirements applicable to its business, including the requirements of the FDA and other relevant agencies. The process of obtaining required approvals, clearances, other premarket authorizations or certifications can involve lengthy and detailed laboratory testing, human clinical trials, sampling activities and other costly, time-consuming procedures. These approvals, clearances, other premarket authorizations or certifications can require the submission of a large amount of clinical data which can be expensive and may require significant time to obtain. It is also possible that a product will not perform at a level needed to generate the clinical data required to obtain such premarket authorizations or certifications. The submission of an application to the FDA or other regulatory authority does not guarantee that an authorization to market or import the product or a laboratory certification will be received. A regulatory authority may impose requirements as a condition to granting an approval, clearance, premarket authorization or certification that may include significant restrictions or limitations. The regulatory authority may delay or refuse to grant premarket authorization or certification, even though a product has been approved or registered without restrictions or limitations in another country or by another agency. Delays in receipt or failure to receive such approvals, clearances, premarket authorization or certification could have a material adverse effect on the Company's business, financial condition and results of operations. All in vitro diagnostic devices that are to be placed on the market in the EU must bear a CE mark indicating conformity with the applicable requirements of the EU IVDR. The EU IVDR became applicable on May 26, 2022 and repealed the previous IVDD. There is a transitional period during which products that have a declaration of conformity issued under the IVDD prior to May 26, 2022 may continue to be placed on the EU market for a certain period before requiring certification under the EU IVDR, subject to compliance with certain requirements under the EU IVDR (see the section titled "Governmental Regulation - International" for further information). The Company has obtained the CE mark for several of its existing products under the IVDD. It also intends to apply for CE marks for certain of its future products and is not aware of any material reason why it would be unable to obtain those marks. However, there can be no assurance that compliance with all provisions of the EU IVDR will be demonstrated and the CE mark will be obtained or maintained for all products that the Company desires to sell in the EU. The failure to obtain or maintain the CE mark for one or more of the Company's products could lead to the termination of strategic alliances and agreements for sales of those products in the EU and mean that the Company is unable to sell such products in the EU. In addition, the Company or its distributors are often required to obtain premarket authorization or product registration with foreign governments or regulatory bodies before it can import and sell its products in foreign countries. The Company may also be required to obtain WHO pre-qualification or endorsement in order to sell certain products in international markets or enable its customers to access interested funding sources for its products. The Company may have difficulty obtaining such authorizations, registrations, pre-qualifications or endorsements and, if obtained, such authorizations, registrations, pre-qualifications or endorsements may contain restrictions that limit the Company's ability to market and sell its products in the relevant country. In addition, any change in the Company's arrangement with a foreign distributor could result in the loss of or delay in transfer of any applicable product registrations, thereby interrupting the Company's ability to sell those products in the affected markets.

The Company is subject to various federal and state laws targeting fraud and abuse in the healthcare industry, including anti-kickback laws, false claims laws, laws constraining the sales, marketing and promotion of medical devices by limiting the kinds of financial arrangements that manufacturers of these products may enter into with physicians, hospitals, laboratories and other potential purchasers of medical devices, and laws requiring the reporting of certain transactions between manufacturers and healthcare professionals. Violations of these laws are punishable by criminal or civil sanctions, including substantial fines, imprisonment and exclusion from participation in government healthcare programs such as Medicare and Medicaid. Many of the existing requirements have not been definitively interpreted by state authorities or courts, and available guidance is limited. Unless and until the Company is in full compliance with these laws, it could face enforcement action and fines and other penalties, and could receive adverse publicity, all of which could materially harm its business. In addition, changes in or evolving interpretations of these laws, regulations, or administrative or judicial interpretations, may require the Company to change its business practices or subject its business practices to legal challenges, which could have a material adverse effect on its business, financial condition and results of operations.

In early 2020, the HHS issued a declaration that the threat to public health posed by COVID-19 justifies the emergency use of unapproved in vitro diagnostics for the detection or diagnosis of SARS-CoV-2. Under Section 564 of the FDCA, because HHS has issued this declaration, the FDA Commissioner is authorized to issue EUAs to permit certain developers of SARS-CoV-2 diagnostics to begin offering the tests for detection and diagnosis of COVID-19 without having completed the normally applicable FDA review and clearance or approval process for marketing authorization (with the related standards that would apply to demonstrate safety and effectiveness). The issuance of an EUA reflects an FDA conclusion that based on the totality of scientific evidence available to the FDA, it is reasonable to believe that the product may be effective in diagnosing COVID-19, the known potential benefits of the product outweigh the known and potential risks, and there is no adequate, approved, and available alternative to the emergency use of the product. During 2020, the Company's ORAcollect- RNA and OMNIgene- ORAL collection devices were included in EUAs granted by the FDA to certain third parties for use in the detection of SARS-CoV-2, and the Company has separately obtained EUAs for these products. In addition, the Company obtained three EUAs for its new InteliSwab COVID-19 Rapid Test. Although there are certain regulatory requirements the FDA has waived for the duration of the EUAs, the Company remains subject to specific conditions of the authorization, including ensuring appropriate labeling as approved by FDA specifically for purposes of the EUA, maintaining records of distribution to authorized laboratories, collecting data on occurrences of any false positives or false negatives, and tracking any adverse events. As part of the conditions of authorization, OraSure was required to conduct a clinical study in a pediatric population ages 2-14 and an asymptomatic population in addition to launching an app for consumers to report their test results to public health jurisdictions. OraSure has completed the required conditions of authorization with respect to the pediatric claim and launched the InteliSwab Connect application for reporting test results to public health jurisdictions. As a result of the National Institutes of Health study (Performance of Screening for SARS-CoV-2 using Rapid Antigen Tests to Detect Incidence of Symptomatic and Asymptomatic SARS-CoV-2 Infection: findings from the Test Us at Home prospective cohort study), the FDA has requested modifications to labeling to include serial testing and has removed the requirement for the Company to conduct a study in an asymptomatic population. Labeling has been modified as required for inclusion of serial testing and authorized by FDA. As with other FDA-regulated products, issues could emerge during the course of the marketing and use of the Company's products under an EUA that could impact the Company's ability to continue the sale and distribution of these products (for example, compliance or product performance issues). The applicable EUAs remain effective only until the HHS declaration is terminated or revoked, and the FDA may also revoke an EUA if it determines the criteria for issuance are no longer met or other circumstances make such revocation appropriate to protect the public health or safety. If that were to occur, then in order to market the Company's diagnostic products or collection kits for the purpose of detecting COVID-19 the Company would be required to obtain the necessary regulatory clearances or approvals and be subject to the full and usual regulatory obligations for device manufacturers, including the QMSR under 21 CFR Part 820. It is possible that the Company may not be able to obtain those clearances or approvals in a timely manner, or at all, and that one or more of OraSure's competitors may obtain the necessary clearances or approvals for their products before the Company does.

In recent years, there have been numerous initiatives at the federal and state level for comprehensive reforms affecting the payment for, the availability of and reimbursement for healthcare services in the United States. These initiatives have ranged from proposals to fundamentally change federal and state healthcare reimbursement programs, including providing comprehensive healthcare coverage to the public under government-funded programs, to minor modifications to existing programs. One example is the Patient Protection and Affordable Care Act, the federal healthcare reform law enacted in 2010 (the "Affordable Care Act"). Similar reforms may occur internationally. Legislative and regulatory bodies are likely to continue to pursue healthcare reform initiatives in many forms and may continue to reduce funding in an effort to lower overall federal healthcare spending. The ultimate content and timing of changes to healthcare reform legislation and the resulting impact on the Company are impossible to predict. If significant reforms continue to be made to the healthcare system in the United States, or in other jurisdictions, those reforms may increase the Company's costs or otherwise have an adverse effect on its financial condition and results of operations.