1138412--2/25/2010--GENOPTIX

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Risks Relating to Our Business Operations Reimbursement levels for our specialized diagnostic services are subject to continuing change and any reductions in reimbursement levels would decrease our revenues and adversely affect our results of operations and financial condition. Operating as a non-contracting provider with certain payors may adversely affect our results of operations and financial condition and contracting with those payors may be disadvantageous to us. Changes in regulations, payor policies or contracting arrangements with payors or changes in other laws, regulations or policies may adversely affect coverage or reimbursement for our specialized diagnostic services, which may decrease our revenues and adversely affect our results of operations and financial condition. Our inability to obtain and retain new customers, or increase the tests ordered or specimens submitted by existing customers, could adversely affect our business and financial condition. Increased competition, including from competitors replicating our key service offerings in the future and the failure to provide a higher quality of service than that of our competitors could adversely affect our revenues and profitability. We are highly dependent on Cartesian for the services of our hempaths and any significant difficulties in recruiting or retaining these highly trained hempaths could adversely affect our revenues and results of operations. We must hire and retain qualified sales representatives to grow our sales. If we fail to attract and retain key management and other personnel, we may be unable to successfully maintain or develop our business. We may experience difficulties in managing our growth and our growth rate may decline. We are continuing to expand our infrastructure by establishing additional laboratory space and implementing additional backup systems, which, among other things, could divert our resources and may cause our margins to suffer. If our Carlsbad facilities become inoperable, we will be unable to perform our specialized diagnostic services and our business will be harmed. We incur financial risk related to collections. We or our suppliers and/or manufacturers may be subject to litigation relating to, among other things, payor and customer disputes, regulatory actions, professional liability, intellectual property, employee-related matters, product liability and other potential claims, which could adversely affect our business. We rely on a limited number of third parties for manufacture and supply of all of our laboratory instruments, tests and materials, including consumables, and we may not be able to find replacement suppliers or manufacturers in a timely manner in the event of any disruption, which could adversely affect our business. Performance issues, service interruptions or price increases by our shipping carrier could adversely affect our business, results of operations and financial condition and harm our reputation and ability to provide our specialized diagnostic services on a timely basis. Proprietary trademarks, service marks, trade secrets and unpatented expertise are very important to our business. Guidelines, recommendations and studies published by various organizations can reduce the use of our diagnostic tests and may adversely affect our business. If technological innovation or prophylactic treatments were to reduce the need to conduct diagnostic testing on blood and bone marrow samples or allow our customers or other third parties to perform specialized diagnostic services similar to ours, our business, prospects, results of operations and financial condition could be adversely affected. Failure in our information systems, or IS, telephone or other systems could significantly disrupt our operations and adversely affect our business and financial condition. We may experience difficulty in identifying, acquiring or in-licensing and integrating third parties products, services, businesses and technologies into our current infrastructure or otherwise expanding our service offerings and we may not be able to successfully execute on and integrate such products, services, businesses or technologies, which could disrupt our business and adversely affect our results of operations and financial condition. We may fail in our attempts to expand our service offerings by adding new testing capabilities. We use biological and hazardous materials that require considerable expertise and expense for handling, storage or disposal and may result in claims against us. We have a limited operating history and we are unable to predict with certainty whether we will be able to continue our revenue growth and become increasingly profitable. We may be subject to claims that our employees, consultants or independent contractors have wrongfully used or disclosed alleged trade secrets of their other clients or former employers to us. Risks Relating to Regulatory and Compliance Matters We conduct business in a heavily regulated industry and changes in regulations or violations of regulations may, directly or indirectly, reduce our revenues, adversely affect our results of operations and financial condition and harm our business. If we fail to comply with healthcare fraud and abuse laws that govern, among other things, sales and marketing, billing and claims processing practices, we could face substantial penalties and our business, results of operations and financial condition could be adversely affected. Our failure to comply with governmental payor regulations could result in our being excluded from participation in Medicare, Medicaid or other governmental payor programs, which would decrease our revenues and adversely affect our results of operations and financial condition. Our business could be harmed by future interpretations of clinical laboratory mark-up prohibitions. Our business could be harmed from the loss or suspension of a license or imposition of a fine or penalties under, or future changes in, the law or regulations of CLIA or those of other state or local agencies. Certain of our specialized diagnostic tests take advantage of the home-brew exception from the FDA review and any changes to the FDA s policies with respect to this exception could adversely affect our business and results of operations. Failure to comply with the HIPAA security and privacy regulations and other state regulations may increase our operational costs. Our business could be materially harmed by future interpretation or implementation of state laws regarding prohibitions on the corporate practice of medicine. Risks Relating to Our Finances and Capital Requirements Negative conditions in the global credit markets and financial services and other industries may impair the liquidity of a portion of our investment portfolio or may otherwise adversely affect our business. We may need to raise additional capital in the future, which may not be available on favorable terms or at all, which may cause dilution to our existing stockholders or require us to be subject to certain restrictions. We expect to continue to incur significant costs as a result of operating as a public company and our management expects to continue to devote substantial time to public company compliance programs. Future changes in financial accounting standards or practices, or existing taxation rules or practices, may cause adverse unexpected revenue or expense fluctuations and affect our reported results of operations. Risks Relating to the Securities Markets and Investment in Our Common Stock There may not be a viable public market for our common stock. Fluctuations in our operating results and market volatility may affect our stock price. Anti-takeover provisions in our charter documents and under Delaware law could make an acquisition of us, which may be beneficial to our stockholders, more difficult and may prevent attempts by our stockholders to replace or remove our current management. If our executive officers, directors and largest stockholders choose to act together, they may be able to control our operations and act in a manner that advances their interests and not necessarily those of other stockholders. Future sales of our common stock may depress our stock price. We have never paid dividends on our capital stock and because we do not anticipate paying any cash dividends in the foreseeable future, capital appreciation, if any, of our common stock may be the sole source of gain on an investment in our stock. We may become involved in securities class action litigation that could divert management s attention and harm our business. If we are not the subject of securities analyst reports or if any securities analyst downgrades our common stock or our sector, the price of our common stock could be negatively affected.

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1138412--2/25/2010--GENOPTIX_INC