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United States securities and exchange commission logo
November 1, 2023
Paul Kim
Chief Financial Officer
Fulgent Genetics, Inc.
4399 Santa Anita Avenue
El Monte, California 91731
Re: Fulgent Genetics,
Inc.
Form 10-K for
Fiscal Year Ended December 31, 2022
Filed February 28,
2023
File No. 001-37894
Dear Paul Kim:
We have limited our review of your filing to the financial
statements and related
disclosures and have the following comment(s).
Please respond to this letter within ten business days by
providing the requested
information or advise us as soon as possible when you will respond. If
you do not believe a
comment applies to your facts and circumstances, please tell us why in
your response.
After reviewing your
response to this letter, we may have additional comments.
Form 10-K for Fiscal Year Ended December 31, 2022
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Results of Operations, page 54
1. We note that the
significant decline in COVID-19 testing revenues has significantly
impacted your results
of operations for fiscal year 2022. As these revenues are not
anticipated to be a
material part of your ongoing results of operations, please provide an
analysis of the
material factors that impact the revenues that are expected to be a material
part of your results of
operations going forward in comparison to the corresponding
revenues for the prior
period. Also provide a discussion and analysis of the material
factors impacting the
associated gross profit for these revenues to provide investors with a
better understanding of
your future expectations of your operating results with the
remaining primary
diagnostic testing revenues. When multiple factors are discussed,
quantify the extent to
which each factor impacted the related operating result line items.
Refer to Item 303(b)(2)
of Regulation S-K and Section 501.12 of the Financial Reporting
Codification for
guidance.
Paul Kim
FirstName LastNamePaul Kim
Fulgent Genetics, Inc.
Comapany 1,
November NameFulgent
2023 Genetics, Inc.
November
Page 2 1, 2023 Page 2
FirstName LastName
2. We note that you incur research and development expenses related to
your diagnostics
testing business and for your therapeutics development business.
Please expand your
discussion and analysis to quantify the costs for each of your
research and development
projects and to discuss the nature of the costs incurred for each
project.
Critical Accounting Policies and Use of Estimates
Valuation of Goodwill and Intangible Assets, page 59
3. We note that you recognized $143 million of goodwill and $64.6 million
of IPR&D, an
indefinite-lived intangible asset, as of December 31, 2022. Please
provide a more
comprehensive discussion and analysis of the critical estimates
associated with assessing
goodwill and the indefinite-lived intangible asset for impairment. In
this regard, we note
that the fourth quarter of fiscal year 2022 is the first time you
recognized operating and
net losses since the second quarter of fiscal year 2020 due to the
significant decline in
revenues from COVID-19 testing. Expanded disclosures are to provide
investors with
sufficient information to assess any material uncertainty regarding
the realizability of
goodwill and the indefinite-lived intangible asset, including but not
limited to the
following.
The percentage by which the estimated fair value exceeds the
carrying value of your
reporting unit(s) or indefinite-lived intangible asset to the
extent that the fair value
does not substantially exceed the carrying value.
The methodologies used to estimate the fair value of the reporting
unit(s) and the
indefinite-lived intangible asset for the most recent
quantitative assessment, including
the material judgements, assumptions and estimates made.
A discussion of the degree of uncertainty associated with the key
assumptions and
estimates along with the potential impact reasonably possible
changes in the key
assumptions would have on your impairment analysis.
A discussion of the potential events and/or changes in
circumstances that could
reasonably be expected to occur and negatively affect the key
assumptions and result
in a material impairment charge.
Refer to Item 303(b)(3) of Regulation S-K and Section 501.14 of the
Financial Reporting
Codification for guidance.
Note 2. Summary of Significant Accounting Policies
Goodwill, page F-13
4. Please expand your accounting policy to disclose the level at which
you are testing
goodwill for impairment (i.e., the identification of your reporting
unit(s)). Also disclose
when you perform your annual impairment test, the circumstances in
which you would
perform an interim impairment test, and the method(s) used to estimate
the fair value of
your reporting unit(s) to the extent that you prepare a quantitative
assessment.
Reporting Segment and Geographic Information, page F-15
5. We note your disclosure that you view your operations and manage your
business in one
Paul Kim
Fulgent Genetics, Inc.
November 1, 2023
Page 3
reporting segment . We further note that you acquired Fulgent
Pharma, a clinical-stage,
therapeutics development company, which differs from your historical
clinical diagnostic
business. As such, please tell us your consideration of the guidance
in ASC 280-10-50-1
through 50-5 for the identification of your operating segments and/or
reportable segments.
Note 15. Business Combinations
Fulgent Pharma Holdings, Inc, page F-33
6. We note that you acquired Fulgent Pharma with one drug candidate for
which IPR&D of
$64.6 million was recognized compared to the purchase price of $68
million. Please
address each of the following:
Provide us with your analysis of the guidance in ASC 805-10-55-5A
through 55-5C,
including the calculation of the screen test.
To the extent that you are able to demonstrate the screen test is
not met, provide us
with your analysis of Fulgent Pharma meeting the definition of a
business based on
the guidance in ASC 805-10-55.
In closing, we remind you that the company and its management are
responsible for the
accuracy and adequacy of their disclosures, notwithstanding any review,
comments, action or
absence of action by the staff.
Please contact Tracey Houser at 202-551-3736 or Terence O'Brien at
202-551-3355 with
any questions.
Sincerely,
FirstName LastNamePaul Kim
Division of
Corporation Finance
Comapany NameFulgent Genetics, Inc.
Office of
Industrial Applications and
November 1, 2023 Page 3 Services
FirstName LastName