UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-K

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

For the fiscal year ended December 31, 2012

OR

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

Commission File Number 0-26483

diaDexus, Inc.

(Exact name of Registrant as Specified in its Charter)

Delaware	94-3236309
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
349 Oyster Point Boulevard South San Francisco, California	94080
(Address of principal executive offices)	(Zip Code)

(650) 246-6400

(Registrant’s telephone number, including area code)

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

Common Stock, $0.01 par value per share

(Title of Class)

Indicate by check mark if the registrant is a well known seasoned issuer, as defined in Rule 405 of the Securities Act.    Yes  ¨    No  x

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Exchange Act.    Yes  ¨    No  x

Indicate by check mark whether the issuer (1) has filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act of 1934 during the past 12 months (or for such shorter period that the issuer was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  x    No  ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  x    No  ¨

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.  ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one)

Large accelerated filer	¨	Accelerated filer	¨
Non-accelerated filer	¨  (Do not check if a smaller reporting company)	Smaller Reporting Company	x

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ¨    No  x

The aggregate market value of the common stock held by non-affiliates of the Registrant based upon the last trade price of the common stock reported on the OTCQB on June 30, 2012 was approximately $10.5 million.* As of March 8, 2013, 53,890,314 shares of the registrant’s common stock, par value $0.01, were outstanding.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the Registrant’s Proxy Statement for the 2013 Annual Meeting of Stockholders are incorporated by reference into Part III of this Annual Report on Form 10-K. Such Proxy Statement will be filed within 120 days of the end of the fiscal year covered by this Annual Report on Form 10-K.

* Excludes 30,341,228 shares of Common Stock held by directors, officers and stockholders whose beneficial ownership exceeds 5% of the Registrant’s Common Stock outstanding. The number of shares owned by stockholders whose beneficial ownership exceeds 5% was determined based upon Schedules 13D and 13G, if any, filed with the SEC. Exclusion of shares held by any person should not be construed to indicate that such person possesses the power, direct or indirect, to direct or cause the direction of the management or policies of the Registrant, that such person is controlled by or under common control with the Registrant, or that such persons are affiliates for any other purpose.

Special Note Regarding Forward-Looking Statements

This discussion and analysis should be read in conjunction with our audited financial statements and related notes thereto appearing in Item 8 of this Annual Report on Form 10-K and the risk factors described in Part I, Item 1A of this Annual Report on Form 10-K.

This Annual Report includes “forward-looking statements” that are subject to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Certain forward-looking statements can be identified by words such as “may,” “will,” “expects,” “plans,” “anticipates,” “intends,” “believes,” “could” or “would” or the negative thereof or other comparable terminology. All statements other than statements of historical fact are “forward-looking statements” for purposes of these provisions, including any statements of the plans and objectives of management, any statements regarding future operations, any statements regarding future economic conditions or performance and any statement of assumptions underlying any of the foregoing.

Forward-looking statements are based on our current expectations and assumptions regarding our business, the economy, and other future conditions. Because forward-looking statements relate to the future, they are subject to inherent uncertainties, risks, and changes in circumstances that are difficult to predict. Our actual results may differ materially from those contemplated by the forward–looking statements. They are neither statements of historical fact nor guarantees or assurances of future performance. We caution you therefore against relying on any of these forward-looking statements. Important factors that could cause actual results to differ materially from those in the forward-looking statements include, but are not limited to, the following:

• our ability to submit a new 510(k) application for, obtain FDA clearance and commercialize the PLAC Activity Test in the United States;

• our ability to retain our CEO and other key employees, and to attract, retain and motivate other qualified personnel;

• our ability to gain acceptance of our PLAC Test products in the marketplace, including our ability to demonstrate that treatment of individuals based on their Lp-PLA₂ levels improves clinical outcomes in prospective clinical studies;

• our business is characterized by a high degree of customer concentration and our largest customers exert downward pressure on our pricing or may not allow us to pass through higher costs such as the recently imposed medical device excise tax;

• our relationship and dependency on GlaxoSmithKline LLC (“GlaxoSmithKline”), the licensor to us of Lp-PLA₂ which is under development for use with darapladib, GlaxoSmithKline’s phase 3 product;

• our reliance on two third party manufacturers to manufacture our PLAC ELISA Test;

• third party payors’ acceptance of and reimbursement for the PLAC Tests;

• our ability to develop and commercialize new products and services;

• various risks associated with the international expansion of our business;

• our dependence on our distributors for sales of the PLAC Activity Test in Europe;

• our ability to initiate and continue to manufacture the PLAC Activity Test on our site in South San Francisco, California;

• the effects of US and foreign government regulation and our ability to comply with such regulations;

• our significant corporate expenses, including real estate lease liabilities and expenses associated with being a public company;

• our limited revenue and cash resources;

• the adequacy of our intellectual property rights;

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• our ability to satisfy our obligations under our license agreements, to maintain our license rights under those license agreements and to enter into any necessary licenses on acceptable terms; and

• the other risks described below in Part I, Item 1A (“Risk Factors”).

Any forward-looking statement included in this Annual Report speaks only as of the date hereof. Factors or events that could cause our actual results to differ may emerge from time to time, and it is not possible for us to predict all of them. We undertake no obligation to update any such forward-looking statement, whether as a result of new information, future developments or otherwise, except as may be required by law.

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Table of Contents

PART I
Item 1.	Business	5
Item 1A.	Risk Factors	13
Item 1B.	Unresolved Staff Comments	25
Item 2.	Properties	25
Item 3.	Legal Proceedings	25
Item 4.	Mine Safety Disclosures	25
PART II
Item 5.	Market for Registrant’s Common Equity, Related Stock Holder Matters and Issuer Purchases of Equity Securities	26
Item 6.	Selected Financial Data	26
Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	27
Item 7A.	Quantitative and Qualitative Disclosures about Market Risk	34
Item 8.	Financial Statements and Supplementary Data	36
Item 9.	Changes in and Disagreements With Accountants on Accounting and Financial Disclosure	59
Item 9A.	Controls and Procedures	59
Item 9B.	Other Information	60
PART III
Item 10.	Directors, Executive Officers, and Corporate Governance	61
Item 11.	Executive Compensation	61
Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Shareholder Matters	61
Item 13.	Certain Relationships and Related Transactions, and Director Independence	61
Item 14.	Principal Accountant Fees and Services	61
PART IV
Item 15.	Exhibits and Financial Statement Schedules	62
Index to Financial Statements		62
Index to Exhibits		62
Signatures		69

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PART I

Item 1. Business

Company Overview

We are a life sciences company developing and commercializing proprietary cardiovascular diagnostic products addressing unmet needs in cardiovascular disease. We are the successor to a company initially formed as a joint venture between SmithKlineBeecham Corporation (now GlaxoSmithKline LLC (“GlaxoSmithKline”)) and Incyte Pharmaceuticals, Inc. Upon formation, SmithKlineBeecham Corporation granted us an exclusive license to certain diagnostic intellectual property, including Lp-PLA₂, an inflammatory marker of cardiovascular risk.

Our products, known as PLAC^® Tests, are designed to provide information, over and above traditional risk factors, such as cholesterol levels, to help identify individuals at increased risk of suffering a heart attack or stroke. Some of these events may be reduced with earlier detection of increased risk and more aggressive risk-reducing strategies, including treatment to lower LDL-cholesterol goals with statins. We have commercialized two PLAC Tests. One test measures the mass of circulating Lp-PLA₂ in the blood using an enzyme-linked-immunosorbent serologic assay (“ELISA”), the PLAC Test ELISA Kit. The PLAC Test ELISA Kit is the only blood test cleared by the Food and Drug Administration (“FDA”) to aid in assessing risk for both coronary heart disease (“CHD”) and ischemic stroke associated with atherosclerosis. The second test, the PLAC Test for Lp-PLA₂ Activity, is an enzyme assay for the quantitative determination of Lp-PLA₂ activity levels in human plasma and serum on automated clinical chemistry analyzers, to be used in conjunction with clinical evaluation and patient risk assessment as an indicator of atherosclerotic cardiovascular disease. We are currently commercializing the PLAC Test ELISA Kit in the United States (“US”) and Europe and the PLAC Test for Lp-PLA₂ Activity in Europe.

On July 28, 2010, VaxGen, Inc., a Delaware corporation, closed a merger transaction (the “Reverse Merger”) with diaDexus, Inc., a privately held Delaware corporation (“Old diaDexus”), pursuant to an agreement and plan of merger and reorganization, dated as of May 28, 2010, as amended June 24, 2010. On November 1, 2010, VaxGen, Inc., the surviving entity in the Reverse Merger, changed its name to diaDexus, Inc. pursuant to a merger effected under Section 253 of the Delaware General Corporation Law.

Unless otherwise specified, the “Company,” “diaDexus,” “we,” “us,” and “our” refers to the business of diaDexus, Inc. (f/k/a VaxGen, Inc.) after the Reverse Merger and the business of Old diaDexus prior to the Reverse Merger. Unless specifically noted otherwise, “Pre-Merger VaxGen” refers to the business of VaxGen, Inc. prior to the Reverse Merger.

The current diaDexus, Inc. (f/k/a VaxGen, Inc.) was incorporated in Delaware on November 27, 1995. Old diaDexus was the successor to a company initially formed as a joint venture between SmithKlineBeecham Corporation (now GlaxoSmithKline LLC (“GlaxoSmithKline”)) and Incyte Pharmaceuticals, Inc. Upon formation, SmithKlineBeecham Corporation granted that company an exclusive license to certain diagnostic intellectual property, including exclusive rights to develop diagnostic assays for Lp-PLA₂.

Our Products and Product Candidates

The following table summarizes our major products:

Products	Indications	Status
PLAC ELISA Test	An aid in predicting risk for CHD and ischemic stroke associated with atherosclerosis	Clearance from FDA first obtained for marketing in the US in July 2003 for CHD and in June 2005 for ischemic stroke. Commercialized in the US and Europe.
PLAC Activity Test	An indicator of atherosclerotic cardiovascular disease	CE mark received in January 2012. Commercial launch in Europe in March 2012. We are pursuing 510(k) clearance to allow commercialization in the US.

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Background on Lp-PLA₂ Levels and Risk for Heart Attack and Stroke

CHD and stroke were the first and fourth causes of death, respectively, in the US in 2010, as reported by the Center for Disease Control in 2012. CHD and strokes are the first and second causes of death for individuals over 65 years of age in the 27 European Union (“EU”) countries in 2009, as reported by Eurostat in 2012. CHD is a narrowing of the arteries that supply blood and oxygen to the heart, most frequently as a result of atherosclerosis, which occurs when fatty material or other substances build up to form plaque on the walls of the arteries. A heart attack can result if the blood to a section of the heart becomes blocked or reduced as a result of the atherosclerosis. Similarly, ischemic stroke, the most common form of stroke, is often associated with atherosclerosis, when a blood clot forms at the buildup of fatty material or other substances in vessels in the brain or when a blood clot from another part of the body dislodges and then blocks a narrower vessel in the brain. In either case, if blood flow is not restored quickly, that portion of the heart or brain will become damaged from lack of oxygen and the cells begin to die.

Lp-PLA₂ is an inflammatory enzyme implicated in the formation of rupture prone plaque that can lead to the formation of blood clots and trigger a heart attack or stroke. Lp-PLA₂ is a cardiovascular risk marker as substantiated in a number of prospective studies:

• A 2004 peer-reviewed article authored by Dr. Christie Ballantyne and colleagues analyzed samples from the Atherosclerosis Risk in Communities (“ARIC”) study, which followed 12,819 apparently healthy middle-aged men and women for six to eight years. Results from this study indicated that individuals with LDL-cholesterol (commonly referred to as “bad cholesterol”) levels less than 130 mg/dL and levels of Lp-PLA₂ in the highest third of the population are twice as likely to have a coronary event than individuals with LDL-cholesterol levels less than 130 mg/dL and Lp-PLA₂ levels in the lowest third of the population.

• A 2008 peer-reviewed publication by Dr. Philip Gorelick and colleagues based on the analysis of samples from the ARIC study concluded that individuals with systolic blood pressure in the highest third of the population and levels of Lp-PLA₂ above the mean were 6.8 times more likely to have a stroke than someone with a systolic blood pressure in the lowest third of the population and levels of Lp-PLA₂ below the mean.

• A meta-analysis by The Lp-PLA₂ Collaboration published in The Lancet in 2010, reviewed 32 prospective studies evaluating Lp-PLA₂ and risk of coronary disease, stroke and mortality, and interpreted that Lp-PLA₂ activity or mass levels show continuous associations with risk of CHD similar in magnitude to that with non-HDL cholesterol and systolic blood pressure.

• Two peer-reviewed publications, authored by Dr. Wolfgang Koenig and colleagues in 2003 and by Dr. Tomi Häkkinen and colleagues in 1999 indicate that Lp-PLA₂ activity is up-regulated in atherosclerotic lesions and in rupture-prone fibrous caps. The rationale for Lp-PLA₂ as a key inflammatory biomarker is attractive because this enzyme is produced in atherosclerotic plaques and is specifically linked to plaque inflammation and, presumably, ruptures, suggesting a possible causal pathway leading to clinical events. In preclinical studies published in 2008, Dr. Robert L. Wilensky and colleagues have shown that inhibition of Lp-PLA₂ attenuates the inflammatory response and slows atherosclerotic plaque progression. However, clinical trials are necessary to support the proposition that blocking or reducing Lp-PLA₂ activity levels will interrupt the sequence of events leading to atherosclerotic plaque formation and/or rupture. To that end, GlaxoSmithKline has developed an Lp-PLA₂ inhibitor, darapladib, which is in two Phase 3 clinical trials. A first Phase 3 study, named STABILITY, commenced in December 2008, is estimated to have a primary completion date in 2013. GlaxoSmithKline commenced a second Phase 3 study, named SOLID-TIMI 52, in December 2009. We believe that the ongoing Phase 3 studies of darapladib will continue to increase physician awareness of Lp-PLA₂.

• In November 2011, Dr. Harvey D. White presented a first positive outcomes study in an abstract at the American Heart Association meeting demonstrating that treatment of individuals based on their Lp-PLA₂ levels improved clinical outcomes. This study showed that reduction in Lp-PLA₂ is a significant predictor of reduction in CHD and changes in Lp-PLA₂ may account for a substantial proportion of pravastatin (Pravachol^®) effect in reducing CHD events over an average of 6.1 years of treatment. This analysis broke new ground by looking for the first time at the relationship between changes in Lp-PLA₂ levels and its

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correlation to reduced CHD events. Similarly, in March 2012, a peer–reviewed article authored by Dr. Paul Ridker and colleagues based on the analysis of samples from the JUPITER study concluded that among primary prevention patients allocated to the placebo, higher levels of Lp-PLA₂ activity were statistically significantly associated with increased cardiovascular risk. The same study showed that among patients allocated to rosuvastatin (Crestor^®), Lp-PLA₂ levels were not independently associated with residual cardiovascular risk. Treated patients with Lp-PLA₂ activity in the higher second, third and fourth quartiles had a somewhat greater relative risk reduction than did those with levels in the first quartile, although this trend did not meet statistical significance.

Utility of the PLAC Tests

Our PLAC Tests are blood tests that measure Lp-PLA₂ mass or activity levels. We believe that our PLAC Tests thereby provide valuable and actionable information, over and above traditional risk factors such as smoking, blood pressure, cholesterol, family history and age, for treatment and prevention of heart disease and stroke. Individuals with high levels of Lp-PLA₂, when considered in conjunction with traditional risk factors, may merit more aggressive risk-reducing strategies, including treatment towards lower LDL-cholesterol goals with statins.

PLAC ELISA Test

We introduced our initial PLAC ELISA Test product in 2004. Our PLAC ELISA Test uses microplate technologies to measure levels of Lp-PLA₂. The infrastructure for performing microplate tests typically exist only at large and midsize clinical reference laboratories and large hospitals, which must be certified by the US Department of Health and Human Services (“DHHS”) for high-complexity diagnostics under the Clinical Laboratory Improvement Amendments (“CLIA”). Smaller hospitals and clinics can order the PLAC ELISA Test for their patients from those institutions that are able to perform microplate tests and offer the PLAC ELISA Test. Patients can have their blood drawn at a local laboratory and shipped to the more advanced institutions for analysis. The PLAC ELISA Test is the only product that we market in both the US and Europe.

PLAC Activity Test

We introduced the PLAC Activity Test in Europe in March 2012. This PLAC Activity Test is an enzyme assay for the quantitative determination of Lp-PLA₂ activity levels in human serum or plasma. Our PLAC Activity Test allows for the measurement of Lp-PLA₂ using automated clinical chemistry analyzer technology. This clinical chemistry technology is more prevalent than the microplate technology used for the PLAC ELISA Test and is less difficult to operate, such that a broader array of institutions can conduct the test. This group includes clinical laboratories and hospitals of all sizes. In addition, the sample handling requirements are much less stringent for the PLAC Activity Test compared to the PLAC ELISA Test, allowing greater ease of use for those facilities processing specimens. The PLAC Activity Test is available in Europe to be used in conjunction with clinical evaluation and patient risk assessment as an indicator of atherosclerotic cardiovascular disease. CE marking for this intended use was obtained by self-certification in January 2012. The PLAC Activity Test is only available on a commercial basis in Europe. We plan to pursue 510(k) clearance for this test from the FDA and eventually commercialize this assay format in the US if we obtain the FDA clearance.

Marketing and Distribution

The Market Opportunity

In 2008, a consensus panel of investigators recommended how to use Lp-PLA₂ along with guideline-endorsed cardiovascular disease (“CVD”) risk assessment to better stratify individuals who might be at greater CVD risk than suggested by traditional risk factors and who therefore might benefit from more aggressive management strategies. The consensus panel endorsed the use of Lp-PLA₂ for the assessment of CHD event and stroke risk in intermediate- or moderate-risk populations, and specifically recommended testing in the following patients:

• any patient with two or more major CHD risk factors;

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• any patient 65 years of age or older with one additional risk factor, given that risk for CHD events and strokes increase with age;

• smokers;

• individuals with an elevated fasting glucose; and

• patients with diagnostic criteria for metabolic syndrome who are generally at moderate risk (it has been shown that elevated Lp-PLA₂ further increases CVD risk in these patients).

The panel also recommended Lp-PLA₂ testing for patients with known CHD or a CHD risk equivalent, such as diabetes or ischemic stroke. Since the publication of these guidelines, Lp-PLA₂ measurement has been recommended in the American Heart Association guidelines issued in 2010 and in the American Stroke Association guidelines issued in 2011.

In 2011, members of the National Lipid Association Biomarkers Expert Panel recommend that Lp-PLA₂ testing may be considered in intermediate-risk patients, as well as certain greater-risk subgroups, such as those with CHD or a CHD risk equivalent, patients with family history of premature CHD, and patients with recent CHD events, to identify patients who might benefit from more intensive lipid therapy. In 2012, The American Association of Clinical Endocrinologists issued guidelines for the management of dyslipidemia and the prevention of atherosclerosis which included the following specific statements on Lp-PLA₂:

• Lp-PLA₂ has been identified as a strong and independent predictor of cardiovascular disease events and stroke in patients with and without clinically evident coronary artery disease.

• Measurement of Lp-PLA₂, in some studies, has demonstrated more specificity than high sensitivity C-Reactive Protein (“hs-CRP”) when it is necessary to further stratify a patient’s cardiovascular disease risk, especially with elevated hs-CRP in the presence of other causes of inflammation (hs-CRP is an indiscriminate marker of general inflammation).

• Significantly elevated Lp-LPA₂ in combination with significantly elevated hs-CRP constitutes very high cardiovascular disease risk in individuals with low or moderately elevated LDL cholesterol.

We estimate that approximately 85 million adults in the US had two or more cardiovascular risk factors in 2012. We believe this represents the maximum population in the US to be the targets for our PLAC Tests indicated for aiding in predicting risk for CHD. Based on 2012 published statistics from the American Heart Association, we further estimate that approximately 15% of the US adult population that has high total cholesterol (equal or greater than 200 mg/dL) represents our total addressable market, or approximately 36 million individuals. In Europe, we estimate that a total addressable market similar to that of the US exists based on similar age demographics as well as similar life-style.

Distribution and Customers

In the US, we market and distribute our products to approximately 30 national and regional clinical reference laboratories through a sales force that communicates directly with cardiovascular specialty laboratory customers and with distributor sales staffs. Cardiovascular specialty laboratories specialize in the consultative sale and performance of several cardiovascular tests, including the PLAC ELISA Test. Our PLAC Tests ultimately are ordered by physicians who obtain test results from clinical reference laboratories and hospital labs, so we and our participating laboratory customers often conduct physician education and awareness programs about Lp-PLA₂ and about our PLAC Tests. We also have field application specialists that support the start-up of new laboratory customers and responds to their technical questions. Additionally, we maintain a product-focused website, from which interested parties may obtain general information and specific documents relating to the use and clinical performance of our PLAC Test.

In Europe, we market and distribute our PLAC Activity Test through distributors. We have selected international distributors for the PLAC Activity Test in our target countries based on their knowledge, interest in distributing

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the PLAC Activity Test, their contacts and experience in the market, and their ability to reach a variety of customers. All of our European distributors have signed exclusive rights to distribute our product in their respective territories.

Our top four US large laboratory customers for the fiscal year ended December 31, 2012 accounted for 69% of our revenue compared to 81% for the fiscal year ended December 31, 2011. Although our customer base has become more diverse as new cardiovascular specialty laboratories emerge and become customers, we expect this high degree of customer concentration to continue.

Ongoing and Recently Published Studies

Our sales depend in part on whether healthcare providers believe that our PLAC Tests provide incremental clinical utility and that treatment of individuals based on their Lp-PLA₂ levels improves clinical outcomes. Our sales also depend on whether health insurers, government health programs and other third-party payors will issue positive coverage decisions, will pay for our diagnostic tests, and will reimburse sufficient amounts for the tests. Some of these payors require clinical outcomes studies before deciding whether to cover the tests. For these reasons, we tested and analyzed banked samples from two prospective statin outcome studies, with the aim of publishing the results in peer-reviewed publications. The outcome results from the Long-term Intervention with Pravastatin in Ischaemic Disease (“LIPID”) study were presented in abstract form in November 2011 at the annual American Heart Association meeting. This study was positive and it demonstrated that Lp-PLA₂ levels predict risk of recurrent CVD event on statin treatment. It also demonstrated that subjects who had the highest baseline Lp-PLA₂ and who also had the greatest reduction in Lp-PLA₂ levels when treated with statins, had a 35% reduction in the incidence of CHD related death and heart attacks. In addition, the reduction in Lp-PLA₂ levels may account for 57% of the pravastatin (Pravachol^®) treatment effect (did not achieve statistical significance).

The outcome results from the Justification for the Use of Statins in Primary Prevention: An Intervention Trial Evaluating Rosuvastatin (“JUPITER”) trial were published in March 2012 and showed that among primary prevention patients allocated to the placebo, higher levels of Lp-PLA₂ activity were associated with increased cardiovascular risk in a statistically significant manner. Among patients allocated to rosuvastatin (Crestor^®), Lp-PLA₂ levels were not independently associated with residual cardiovascular risk. Treated patients with Lp-PLA₂ activity in the higher second, third and fourth quartiles had a somewhat greater relative risk reduction than did those with levels in the first quartile (not statistically significant).

Clinical Guidelines for Lp-PLA₂ Testing

Because of the existing body of evidence on the usefulness of measuring Lp-PLA₂ levels and expert opinions, testing for Lp-PLA₂ is recommended in the following four guidelines:

• American Association of Clinical Endocrinologists’ guidelines for management of dyslipidemia and prevention of atherosclerosis (2012);

• European guidelines on cardiovascular disease prevention in clinical practice (2012);

• Guidelines for the primary prevention of stroke: A guideline for healthcare professionals from the American Heart Association/American Stroke Association (2011); and

• American College of Cardiology Foundation/America Heart Association guideline for assessment of cardiovascular risk in asymptomatic adults (2010).

Lp-PLA₂ testing is recommended as a vascular-specific inflammation biomarker. The American Association of Clinical Endocrinologists’ guidelines recommend assessing markers of inflammation in patients where further stratification of risk is necessary. Highly sensitive C-reactive protein (“hs-CRP”) and Lp-PLA2 provide useful additional information in these instances and appear to be synergistic in predicting risk of CVD and stroke.

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Measurement of Lp-PLA2, which in some studies has demonstrated more specificity than hs-CRP, is recommended when it is necessary to further stratify a patient’s CVD risk, especially in the presence of systemic hs- CRP elevations.

We intend to continue to analyze archival samples from clinical trials in which Lp-PLA₂ base levels or changes in those levels may be indicative of risk or changes in risk for a given disease and thus further the use of our PLAC Tests in existing or novel indications.

Manufacturing and Sources of Supply

We currently depend on two third-party manufacturers to assemble the PLAC ELISA Test. We manufacture internally certain antibodies and antigens that are used as raw materials by these manufacturers of the reagents that are included in the PLAC ELISA Test. We manufacture the PLAC Activity Test on our site in South San Francisco, California. We also depend on other key vendors and suppliers of materials, some of which are sole source or for whom an alternative could be difficult to find.

Intellectual Property and Licenses

We actively seek patent protection in the US and other jurisdictions to protect technology, inventions, and improvements to inventions that are commercially important to our business. Our success depends to a significant degree upon our ability to obtain patent protection for our technologies. We own or have a license to 21 patents and 12 pending patent applications worldwide that relate to the Company’s current business. These issued patents have expiration dates ranging from 2013 to 2016.

We have exclusive licenses from SmithKlineBeecham Corp. (now GlaxoSmithKline) and a co-exclusive license from ICOS Corporation (“ICOS”) (acquired by Eli Lilly and Company) to practice and commercialize technology covered by several issued and pending US patents and their foreign counterparts. The licenses from GlaxoSmithKline and ICOS include exclusive rights to develop diagnostic assays for Lp-PLA₂. Our issued patents covering composition of matter claims have expiration dates that range from 2013 to 2016. A family of pending patents on methods to measure Lp-PLA₂ activity in the presence of an inhibitor, such as the drug candidate darapladib, would potentially expire after 2024 if and when issued.

We intend to seek further intellectual property protection on both the PLAC ELISA Test and the PLAC Activity Test to strengthen our competitive position.

Prior to the 2010 merger between VaxGen, Inc. (“Vaxgen”) and diaDexus, VaxGen sold its anthrax vaccine program and licensed its Human Immunodeficiency Virus (“HIV”) vaccine program to third parties. We retain rights to milestone and royalty payments under these license and purchase agreements; however we do not anticipate that we will derive nor ultimately receive any significant revenue from these third parties that obtained rights to VaxGen’s anthrax and HIV programs.

Competition

We face competition from a number of life sciences companies in the discovery, development, and commercialization of novel diagnostic products for cardiovascular disease. Competing companies include, but are not limited to, large public companies with significantly greater resources, such as Roche, Abbott Laboratories, Siemens, Quest Diagnostics and Alere. Their products may compete indirectly with our current product offering by offering alternative products for the same clinical need, and they may compete directly with our future product offerings.

We are also aware that research may be underway at various government-financed entities worldwide, as well as at numerous academic institutions, to identify potential diagnostic markers and therapies for cardiovascular disease. Products developed from discoveries made by these entities and institutions may compete with our future product offerings.

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Because of our current exclusive and co-exclusive licenses and patents, we believe it would be difficult for a competing company to commercialize an Lp-PLA₂ product without our agreement. In the broader category of inflammatory biomarkers, the Company is aware that hs-CRP tests are considered by some physicians to be competitive diagnostic blood tests and by other physicians to be complementary diagnostic blood tests. There are over a dozen manufacturers of hs-CRP tests and such tests are widely available to the same laboratory customers who purchase the Company’s Lp-PLA₂ product.

Research and Development

We incurred approximately $4.2 million and $5.1 million of research and development expenses during the years ended December 31, 2012 and 2011, respectively, which accounted for approximately 18% and 21% of our total operating expenses in these respective years. We developed the PLAC Activity Test and we developed a process to improve the PLAC ELISA Test stability in 2011. We continued to make improvements to both tests as well as analyze archival samples from various clinical trials for Lp-PLA₂ levels in 2012.

Pipeline

We are in the process of identifying novel indications for our PLAC Tests. There are several published clinical studies that provide preliminary evidence that Lp-PLA₂ levels may be indicative of other disease risks than for which our PLAC Tests are currently indicated. We intend to focus on cardiovascular disease risks, such as risks of secondary cardiac events and risks of cardiac events in the context of other diseases.

We are also interested in acquiring biomarkers or rights to biomarkers that could be measured on analyzers at cardiovascular specialty laboratories thus leveraging our partnered sales channel. We are specifically interested in assets that would have a development period of three years or less and would help uncover other cardiovascular risks than those solely uncovered through Lp-PLA₂ measurements.

Government Regulation

Our PLAC Tests are subject to regulation by the FDA under its authority to regulate medical devices. In the US, medical devices are classified into one of three classes on the basis of the controls deemed by the FDA to be necessary to reasonably ensure their safety and effectiveness. Class I devices are subject to general controls, including labeling, premarket notification and adherence to the FDA’s Quality Systems Regulation (“QSR”), which covers device-specific good manufacturing practices. Class II devices are subject to general controls and special controls, including performance standards and post-market surveillance. Class III devices are subject to premarket approval and most of the previously identified requirements. Most in vitro diagnostic devices are regulated as Class I or Class II devices, although certain diagnostic tests are classified as Class III devices. Our PLAC Tests are class II devices.

In June 2011, we submitted a premarket notification to the FDA seeking clearance under Section 510(k) of the Food, Drug and Cosmetic Act (“FDCA”) to market our new PLAC Activity Test. In October 2011, we elected to withdraw this application following discussions with the FDA. We continue to have discussions with the FDA regarding a new application for the PLAC Activity Test with data from archival blood samples of a large clinical trial. We anticipate that the pre-submission meeting will occur in the first quarter of 2013. If the FDA does not object to the patient cohort as the basis to demonstrate the effectiveness of the PLAC Activity Test, we will proceed with an analysis of the cohort and a full submission to the FDA seeking clearance under Section 510(k). The FDA then would have up to 90 days to complete its review, but it may request additional data, which increases the time necessary to complete its review. In addition, we are required to comply with the FDA’s good manufacturing practice requirements contained in its QSR. We are also subject to the FDA’s Medical Device Reporting regulations, which require us to report to the FDA any incident in which one of our products may have caused or contributed to a death or serious injury or malfunctioned in a way that could cause death or serious injury. Failure to comply with the applicable US medical device regulatory requirements could result in, among other things, warning letters, fines, injunctions, civil penalties, repairs, replacements, refunds, recalls or seizures

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of products, total or partial suspension of production, the FDA’s refusal to grant future premarket clearances or approvals, withdrawals or suspensions of current product applications, and criminal prosecution, any one or more of which could have a material adverse effect on diaDexus.

We are also subject to the laws that govern the manufacture and distribution of medical devices in the countries in which we manufacture or sell products. The member states of the EU have adopted the European Medical Device Directives, which regulate the manufacture and distribution of medical devices in all EU member countries. These regulations require us to obtain CE marking for diagnostic tests, including our PLAC Tests, prior to marketing them in any EU member state. As of December 2009, we have authorization to apply the CE marking to our PLAC ELISA Test. On September 2011, we were awarded a Certificate of Registration of Quality System to I.A. EN ISO 13485:20003 (“ISO certification”) for “Design, manufacture and distribution of in vitro diagnostic reagents for the determination and evaluation of cardiovascular biomarkers” by the National Standards Authority of Ireland. In January 2012, the Technical File for the PLAC Activity Test was submitted for CE marking with a European authorized representative, mdi Europa. CE marking was obtained by self-certification in January 2012. Both ISO certification and CE marking are requirements for our PLAC Activity Test to be marketed and sold in Europe.

We are also subject to various laws and regulations relating to safe working conditions, laboratory and manufacturing practices, transfers of value to physicians and teaching hospitals, the experimental use of animals and the use and disposal of hazardous or potentially hazardous substances, including radioactive compounds and infectious disease agents used in connection with our research. Compliance with these laws and regulations relating to the protection of the environment has not had a material effect on our capital expenditures or competitive position. However, the extent of governmental regulation that might result from any legislative or administrative action cannot be accurately predicted.

Reimbursement

Our largest markets are hospital laboratories and commercial reference laboratories in the US. Payment for testing in these markets is largely based on third-party payor reimbursement. The laboratory that performs the test will submit an invoice to the patient’s insurance provider or to the patient if he is not covered by an insurance program. Each diagnostic procedure (and in some instances, specific technologies) is assigned a current procedural terminology (“CPT”) code by the American Medical Association. Each CPT code is then assigned a reimbursement level by the Centers for Medicare and Medicaid Services (“CMS”). Third party insurance payors typically establish a specific fee to be paid for each code submitted. Third party payor reimbursement policies are generally determined with reference to the reimbursement for CPT codes for Medicare patients, which themselves are determined on a national basis by CMS. To the extent that third-party insurers cover the PLAC Test, our customers running our Test are reimbursed provided that the clinician’s order contains covered diagnostic codes. Our PLAC ELISA Test has a CPT code and is reimbursed at $46.66 by CMS in 2013 and was reimbursed at $48.08 by CMS in 2012. We anticipate that there will be further decrease in the reimbursement price from CMS in future years. As a result of this decrease, we may experience pressure on our average selling price to our US customer laboratories that run our PLAC ELISA Test.

Employees

As of December 31, 2012, we had 55 full-time employees and two part-time employees. None of our employees are subject to a collective bargaining agreement and we believe that our relations with our employees are good.

Available Information

For more information about us, please visit our website at http://www.diadexus.com and our PLAC Tests website at http://www.plactest.com. You may also obtain a free copy of our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and amendments to those reports on the day the reports or

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amendments are filed with or furnished to the SEC by visiting the SEC’s website located at www.sec.gov, or our website at http://www.diadexus.com. In addition, any stockholder who wishes to obtain a printed copy of any of these documents should write to: Investor Relations, diaDexus, 349 Oyster Point Boulevard, South San Francisco, CA 94080. The information found on, or otherwise accessible through, our website or our PLAC Tests website is not incorporated information and does not form a part of this Annual Report on Form 10-K.

You may also read and copy any document we file at the SEC’s public reference room located at 100 F Street, N.E., Room 1580, Washington, D.C. 20549. Please call the SEC at (800) SEC-0330 for further information on the public reference room.

Item 1A. Risk Factors

Investing in our common stock involves a very high degree of risk. You should carefully consider the risks described below and all of the other information in our filings under the Exchange Act before making any investment decisions regarding our common stock. The risks and uncertainties described below are not the only ones we face. Additional risks and uncertainties that we do not know of or that we currently deem immaterial may also negatively affect our business, financial condition, operating results, and prospects. In that case, the market price of our common stock could decline, and you could lose all or part of your investment.

Risks Relating to Our Business Operations

We have withdrawn our 510(k) premarket notification for FDA clearance of our PLAC Test for Lp-PLA₂ Activity, and we may not be able to submit a subsequent 510(k) premarket notification or to obtain clearance with respect to such application.

On June 17, 2011, we submitted a premarket notification to the FDA seeking clearance under Section 510(k) of the FDCA to market our PLAC Test for Lp-PLA₂ Activity. This new assay measures the activity levels of the Lp-PLA₂ enzyme in the blood, while the PLAC Test currently marketed in the US utilizes an ELISA method that measures the concentration of the enzyme. The PLAC Test for Lp-PLA₂ Activity is capable of running on automated, high throughput clinical chemistry analyzers unlike the current PLAC Test ELISA Kit. Future commercialization of an assay capable of running on automated, high throughput clinical chemistry analyzers may be important for the expansion of the PLAC Tests market and revenue growth. On October 24, 2011, we elected to withdraw this application following discussions with the FDA. We plan to develop a new submission. We are in the process of identifying completed clinical trials acceptable to the FDA from which blood samples of patient cohorts may be obtained and then tested to demonstrate the effectiveness of the PLAC Test for Lp-PLA₂ Activity.

There can be no guarantee that we will identify appropriate clinical trials, or that serum samples can be obtained from such trials to support retesting of PLAC Test for Lp-PLA₂ Activity. We cannot assure you that the results of any such clinical trials will support the proposed clinical claims. There can be no guarantee that the FDA will clear the subsequent 510(k) submission on a timely basis, or at all. We are unable to predict the timing of retesting, submission date or receipt of clearance for the PLAC Test for Lp-PLA₂ Activity, which may result in a loss of potential customers and would have an adverse effect on our financial condition and our ability to maintain or expand our business.

Our future success depends on our ability to retain our Chief Executive Officer and other key employees and to attract, retain and motivate qualified personnel.

We depend on the efforts and abilities of our Chief Executive Officer, along with other senior management, our research and development staff and a number of other key management, sales, support, technical and administrative services personnel. Competition for experienced, high-quality personnel exists, particularly in the San Francisco Bay Area, and we cannot assure you that we can continue to recruit and retain such personnel. Our failure to hire, train and retain qualified personnel would impair our ability to develop new products and manage our business effectively.

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We are an early stage company and have engaged in only limited sales and marketing activities for our first products, the PLAC Tests.

Our products may never gain significant acceptance in the marketplace and therefore never generate substantial revenue or profits for the Company. As is the case with all novel biomarkers, we must establish a market for our PLAC Tests and build that market through physician education and awareness programs. Publication in peer review journals of results from outcome studies using our products will be an important consideration in the adoption by physicians and in the coverage by insurers. Our ability to successfully commercialize the PLAC Tests and other diagnostic products will depend on many factors, including:

• whether healthcare providers believe our PLAC Tests and any other diagnostic tests that we successfully develop provide sufficient incremental clinical utility;

• whether we are able to demonstrate that treatment of individuals based on their Lp-PLA₂ levels improves clinical outcomes in prospective clinical studies; and

• whether health insurers, government health programs and other third-party payors will cover and pay for our diagnostic tests and the amounts they will reimburse.

These and other factors may present obstacles to commercial acceptance of our products, and we may need to devote substantial time and money to surmount these obstacles, and the result might not be successful.

Our business is characterized by a high degree of customer concentration. The loss of one or more of these customers or a decline in revenue from one or more of our key customers could have a material adverse effect on our business, financial condition, and results of operations.

Sales to a limited number of customers account for a significant portion of our revenue and accounts receivable. Our top four customers accounted for 68% and 92% of our accounts receivable as of December 31, 2012 and 2011, respectively, and 69% and 81% of our revenue for the years ended December 31, 2012 and 2011, respectively. Our dependence on and the identity of our key customers may vary from period to period as a result of competition among our customers, developments related to our products, and changes in individual customers’ purchases of our products. We may experience greater or lesser customer concentration in the future, depending on future commercial agreements and whether we are able to grow our revenue from the PLAC Test for Lp-PLA₂ Activity. However, it is likely that our revenue and profitability will continue to be dependent on a very limited number of customers, and we may experience an even higher degree of customer concentration in the future. The loss of, material reduction in sales volume to, or significant adverse change in our relationship with any of our key customers could have a material adverse effect on our revenue in any given period and may result in significant annual and quarterly revenue variations. Moreover, our largest customers exert greater influence over our product pricing, which has led to a decline in average sales price in recent quarters. Such downward pressure on our pricing has the potential to continue. In addition, we may be unable to collect related accounts receivables when due, which could have a material adverse effect on our business.

In addition, we expect that GlaxoSmithKline will provide the first results from its darapladib Phase 3 trial in 2013. Our PLAC Test sales could be affected by the outcome and the timing of the Phase 3 darapladib results.

We rely on two manufacturers to supply materials for our PLAC Test ELISA Kit. If these manufacturers are unable to supply our materials in a timely manner, or at all, we may be unable to meet demand, which would have a material adverse effect on our business.

Prior to June 2012, we depended on a sole source third party manufacturer to produce our PLAC Test ELISA Kit. In June 2012, we qualified a second manufacturer for our PLAC Test ELISA Kit, and we intend to order regularly from both of these third-party manufacturers in the future. We rely on our third-party manufacturers to maintain their manufacturing facility in compliance with FDA and other federal, state and/or local regulations including health, safety and environmental standards. If they fail to maintain compliance with FDA or other critical regulations, they could be ordered to curtail operations, which would have a material adverse impact on

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our business. In addition, increases in the prices we pay our manufacturer, or lapses in quality, such as failure to meet our specifications or the requirements of the Quality System Regulations, or QSR, and other regulatory requirements, could materially adversely affect our business. Any manufacturing defect or error discovered after our products have been produced and distributed could result in significant consequences, including costly recall procedures and damage to our reputation. Our ability to replace the existing manufacturers may be difficult, because the number of potential manufacturers is limited.

We also currently depend on certain key vendors and suppliers of materials, some of which are sole source or for whom an alternative could be difficult to replace in a timely manner, that are essential for the manufacture of our products. Any interruption in the supply of product, or the inability to obtain materials from alternate sources in a timely manner, could impair our ability to supply the PLAC Test ELISA Kit and to meet the demands of our customers, which would have a material adverse effect on our business.

We manufacture our PLAC Test for Lp-PLA₂ Activity on-site in South San Francisco, California and we could experience process, quality control and shipping problems due to the early stage of manufacturing.

We have developed manufacturing of the PLAC Test for Lp-PLA₂ Activity in house. We are dependent on the expertise of our personnel for this product. We could observe performance deviations that have not been apparent during development, including performance and stability of the PLAC Test for Lp-PLA₂ Activity. The discovery of such performance deviations or of any manufacturing problems may adversely affect our sales in Europe.

If third-party payors do not reimburse our customers for the use of our clinical diagnostic products or if they reduce reimbursement levels, our ability to sell our products could be harmed.

We sell our products primarily through distributors and to laboratory customers, substantially all of which receive reimbursement for the health care services they provide to their patients from third-party payors, such as Medicare, Medicaid and other government programs, private insurance plans and managed care programs. Third-party payors are increasingly attempting to contain health care costs by limiting both coverage and the level of reimbursement for medical products and services. Accordingly, third-party payors are increasingly challenging the prices charged for diagnostic tests. Most of these third-party payors may deny coverage and reimbursement if they determine that a product was not medically necessary or not used in accordance with cost-effective treatment methods, or was used for an unapproved indication.

In the US, third-party payors generally require billing codes on claims for reimbursement that describe the services provided. For laboratory services, the American Medical Association (“AMA”) establishes most of the billing codes using a data code set called Current Procedural Terminology, or CPT, codes. Each third-party payor generally develops payment amounts and coverage policies for their beneficiaries or members that ties to the CPT code established for the laboratory test and, therefore, coverage and reimbursement may differ by payor even if the same billing code is reported for claims filing purposes. For laboratory tests without a specific billing code, payors often review claims on a claim-by-claim basis and there are increased uncertainties as to coverage and eligibility for reimbursement. Currently, the tests performed by our assays are described by existing CPT codes, but we cannot guarantee that the CPT codes will not be revised or new CPT codes will not be established for our future assays. If our customers are not reimbursed for our products, they may reduce or discontinue purchases of our products, which would cause our revenues to decline. Lower-than-expected, or decreases in, reimbursement amounts for tests performed using our products may decrease amounts physicians and other practitioners are able to charge patients, which in turn may adversely affect the willingness of physicians and other practitioners to purchase our products at prices we target, or at all. If we are unable to sell our products at target prices, our revenue and gross margins will suffer and our business could be materially harmed.

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Our business, in particular the growth of our business, is dependent on our ability to successfully develop and commercialize novel diagnostic products and services based on biomarkers. If we fail to develop and commercialize or enter into collaborations for new diagnostic products, we may be unable to execute our business plan.

Our long-term ability to generate product revenue will depend in part on our ability to develop additional formats or versions of the PLAC Tests and other new diagnostic products. If internal efforts do not generate sufficient product candidates, we will need to identify third parties that wish to collaborate with us to develop new products and applications. Our ability to enter into third-party relationships will depend in part on our ability to negotiate acceptable license and related agreements. Even if we are successful in establishing collaborative arrangements, they may never result in the successful development or commercialization of any product candidate or the generation of any sales or royalty revenues. In addition, rapid technological developments and innovations characterize the markets for our products and services. Our success will depend in large part on our ability to correctly identify emerging trends, enhance capabilities, and develop and manufacture new products quickly, in a cost-effective manner, and at competitive prices. The development of new and enhanced products is a complex and costly process. We may need to make substantial capital expenditures and incur significant research and development costs to develop and introduce such new products and enhancements. If we fail to timely develop and introduce competitive new products or additional formats of our existing products, our business could be materially adversely affected.

International expansion of our business exposes us to significant risks associated with doing business outside of the United States.

Our business strategy incorporates international expansion, including establishing and maintaining direct sales and physician outreach and education capabilities outside of the US and expanding our relationship with distributors. Doing business internationally involves a number of risks, including:

• multiple, conflicting and changing laws and regulations such as tax laws, export and import restrictions, employment laws, regulatory requirements and other governmental approvals, permits and licenses;

• failure by us or our distributors to obtain and maintain regulatory approvals for the use of our tests in various countries;

• difficulties in managing foreign operations;

• complexities associated with managing multiple payor reimbursement regimes or patient self-pay systems;

• logistics and regulations associated with shipping, including infrastructure conditions and transportation delays;

• limits in our ability to penetrate international markets if we are not able to process tests locally;

• financial risks, such as longer payment cycles, difficulty collecting accounts receivable and exposure to foreign currency exchange rate fluctuations;

• natural disasters, political and economic instability, including wars, terrorism, and political unrest, outbreak of disease, boycotts, curtailment of trade and other business restrictions; and

• regulatory and compliance risks that relate to maintaining accurate information and control over sales and distributors’ activities that may fall within the purview of the Foreign Corrupt Practice Act, its books and records provisions or its anti-bribery provisions.

Any of these factors could significantly harm our future international expansion and operations and, consequently, our revenues and results of operations.

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Our dependence on distributors for foreign sales of our PLAC Test for Lp-PLA₂ Activity could limit or hinder us from selling our tests in Europe and from realizing long-term international revenue growth.

As of December 31, 2012, we had exclusive distribution agreements for our products in 25 countries, mostly in Europe, and we may enter into other similar arrangements in other countries in the future. Exclusive distribution arrangements limit our ability to directly, or indirectly through other distributors, address customers in those countries. Distributors may not commit the necessary resources to market and sell our PLAC Tests to the level of our expectations. We intend to grow our business internationally, and to do so we may need to attract additional distributors to expand the territories in which we sell our PLAC Tests for Lp-PLA₂ Activity. If current or future distributors do not perform adequately, or we are unable to locate distributors in particular geographic areas, we may not realize long-term international revenue growth.

The requirements of being a public company have required and will continue to require significant resources, increase our costs and occupy our management, and we may be unable to comply with these requirements in a timely or cost-effective manner.

As a company with public reporting responsibilities, we have incurred and will continue to incur significant legal, accounting, and other expenses related to, among other things:

• preparing, filing and distributing periodic and current reports under the Exchange Act for a larger operating business and complying with other Exchange Act requirements applicable to public companies;

• formalizing old and establishing new internal policies, such as those relating to insider trading and disclosure controls and procedures;

• involving and retaining to a greater degree outside counsel and accountants in the above activities; and

• establishing and maintaining an investor relations function, including the provision of certain information on our website.

Compliance with these rules and regulations will cause us to incur significant legal and financial compliance costs. In addition, we are required to implement and maintain effective internal control over financial reporting and disclosure. In particular, we must perform system and process evaluation and testing of our internal control over financial reporting to allow management to report on the effectiveness of our internal control over financial reporting. Our testing may reveal deficiencies in our internal control over financial reporting that are deemed to be material weaknesses. We have incurred and expect to continue to incur significant expense and devote substantial management effort toward ensuring compliance with these requirements. Moreover, if we are not able to comply with these requirements in a timely manner, or if we identify deficiencies in our internal control over financial reporting that are deemed to be material weaknesses, the market price of our common stock could decline and we could be subject to sanctions or investigations by the SEC or other regulatory authorities, which would entail expenditure of additional financial and management resources.

Natural disasters, including earthquakes, may damage our facilities.

Our corporate and manufacturing facilities are located in the San Francisco Bay Area of California, in close proximity to known earthquake fault zones. As a result, our corporate, research and manufacturing facilities are susceptible to damage from earthquakes and other natural disasters, such as fires, floods and similar events. Although we maintain general business insurance against fires and some general business interruptions, there can be no assurance that the scope or amount of coverage will be adequate in any particular case. Insurance specifically for earthquake risks is not available on commercially reasonable terms.

Failure in our information technology and storage systems could significantly disrupt the operation of our business.

Our ability to execute our business plan depends, in part, on the continued and uninterrupted performance of our information technology systems, or IT systems. IT systems are vulnerable to damage from a variety of sources,

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including telecommunications or network failures, malicious human acts and natural disasters. Moreover, despite network security and back-up measures, some of our servers are potentially vulnerable to physical or electronic break-ins, computer viruses and similar disruptive problems. Despite the precautionary measures we have taken to prevent unanticipated problems that could affect our IT systems, sustained or repeated system failures that interrupt our ability to generate and maintain data could adversely affect our ability to operate our business.

Risks Relating to Government Regulations

We are subject to extensive regulation by the FDA and other regulatory agencies, and failure to comply with such regulation could have a material adverse effect on our business, financial condition, and results of operations.

Our business and our medical device products, including our PLAC Tests, are subject to extensive regulation by the FDA and other federal, state, and foreign regulatory agencies. These laws and regulations govern many aspects of our products and operations, and the products and operations of our suppliers and distributors, including premarket clearance and approval, design, development and manufacturing, labeling, packaging, safety and adverse event reporting, recalls, storage, advertising, promotion, sales and record keeping. Failure to comply with these laws and regulations could result in, among other things, warning letters, civil or criminal penalties, injunctions, delays in clearance or approval of our products, withdrawal of cleared products, recalls, and other operating restrictions, all of which could cause us to incur significant expenses.

Before we can market or sell a new product or a significant modification to an existing product in the US, we must obtain either clearance under Section 510(k) of the FDCA, or approval of a pre-market approval application (“PMA”) from the FDA, unless an exemption applies. In the 510(k) clearance process, the applicant must demonstrate to the FDA’s satisfaction that a proposed device is “substantially equivalent” to a device legally on the market, known as a “predicate” device, with respect to intended use, technology and safety and effectiveness, in order to obtain clearance from the FDA to market the proposed device. Clinical data is sometimes required to support substantial equivalence. The PMA pathway requires an applicant to demonstrate the safety and effectiveness of the device based, in part, on extensive data, including, but not limited to, technical, preclinical, clinical trial, manufacturing, and labeling data. The FDA can delay, limit, or deny clearance or approval of a device for many reasons, including:

• we may not be able to demonstrate to the FDA’s satisfaction that our products are substantially equivalent to lawful predicate device or safe and effective for their intended uses;

• the data from our pre-clinical studies and clinical trials may be insufficient to support clearance or approval, where required;

• the manufacturing process or facilities we use may not meet applicable requirements; and

• changes in FDA clearance or approval policies or the adoption of new regulations may require additional data.

Further, any modification we make to a 510(k)-cleared device that could significantly affect its safety or effectiveness, or that would constitute a major change in its intended use, design, or manufacture, would require us to seek a new 510(k) clearance or, possibly, approval of a PMA. The FDA requires every manufacturer to make this determination in the first instance, but the FDA may review any manufacturer’s decision. The FDA may not agree with our decisions regarding whether new clearances or approvals are necessary for changes to 510(k) cleared devices. If the FDA disagrees with our determination and requires us to submit new 510(k) notifications or PMAs for modifications to our previously cleared products for which we have concluded that new clearances or approvals are unnecessary, we may be required to cease marketing or to recall the modified product until we obtain clearance or approval, and we may be subject to significant regulatory fines or penalties.

Even when a product reaches the market, the subsequent discovery of previously unknown problems, such as material deficiencies or defects in design, labeling, or manufacture, or a potential unacceptable risk to health,

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with a product may result in restrictions on the product, including recall or withdrawal of the product from the market, and/or a requirement to submit a new 510(k) submission or PMA for the product in order to support continued marketing.

We and our suppliers are subject to inspections by the FDA and other regulatory agencies, and deficiencies identified during these audits could have a material adverse effect on our results of operations.

Once regulatory clearance or approval has been granted, the product and its manufacturer are subject to continual review by the FDA and other regulatory authorities. For example, we are subject to routine inspection by the FDA and certain state agencies for compliance with the QSR, which establishes the good manufacturing practices for medical devices, and Medical Device Reporting regulations, which require us to report to the FDA any incident in which one of our products may have caused or contributed to a death or serious injury or malfunctioned in a way that could cause death or serious injury. Although we believe that we have adequate processes in place to ensure compliance with these and other post-market requirements, the FDA or other regulatory bodies could disagree and take enforcement action, including issuing warning letters, untitled letters, fines, injunctions, consent decrees or civil penalties, or imposing operating restrictions or partial suspension or total shutdown of manufacturing, selling or exporting our products, among other sanctions, if it concludes that we are out of compliance with applicable regulations or if it concludes that our products pose an unacceptable risk to health or are otherwise deficient in design, labeling or manufacture. Further, the ability of our suppliers to supply critical components or materials and of our distributors to sell our products could be adversely affected if their operations are determined to be out of compliance. The FDA and other regulatory bodies could also require us to recall products if we fail to comply with applicable regulations. Such actions by the FDA and other regulatory bodies would adversely affect our revenues and results of operations.

We are and will be subject to new regulations, which could have a material adverse effect on our results of operations.

Many national, regional, and local laws and regulations, including the recently-enacted healthcare reform legislation, have not been fully implemented by the regulatory authorities or adjudicated by the courts, and these provisions are open to a variety of interpretations. In the ordinary course of business, we must frequently make judgments with respect to compliance with applicable laws and regulations. If regulators subsequently disagree with the manner in which we have sought to comply with these regulations, we could be subjected to various sanctions, including substantial civil and criminal penalties, as well as product recall, seizure or injunction with respect to the sale of our products. Such sanctions could severely impair our reputation within the industry and any limitation on our ability to manufacture and market our products could have a material adverse effect on our business. In addition, in January 2011, the FDA announced twenty-five action items it intends to take in reforming the 510(k) premarket review program. The FDA issued its recommendations and proposed action items in response to concerns from both within and outside of the FDA about the 510(k) program. Although the FDA has not detailed the specific modifications or clarifications that the Agency intends to make to its guidance, policies, and regulations pertaining to the review and regulation of devices such as ours which seek and receive marketing clearance through the 510(k) process, the FDA’s announced action items signal that additional regulatory requirements are likely. For example, in July 2011, the FDA issued a draft guidance document intended to clarify when changes to a cleared 510(k) warrant submission of a new 510(k), which many observers believe will result in an increase in the number of 510(k)s submitted to the FDA. The FDA intends to issue a variety of additional draft guidance and regulations over the coming months and years which would, among other things, establish a Unique Device Identification System and clarify the FDA’s use and application of several key terms in the 510(k) review process. These reforms, when fully implemented, could impose additional regulatory requirements upon us, which could delay our ability to obtain new clearances, increase the cost of compliance, or restrict our ability to maintain our current 510(k) clearances.

Healthcare reform and its restrictions on coverage and reimbursement may adversely affect our profitability.

Legislation both proposed and passed has had an impact on reimbursement levels for diagnostic services, including laboratory tests. For instance, in March 2010, President Barack Obama signed the Patient Protection

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and Affordable Care Act, as amended by the Health Care and Education Reconciliation Act (collectively, the “PPACA”), which makes a number of substantial changes to the way health care is financed by both governmental and private insurers. Among other things, the PPACA mandates a reduction in payments for clinical laboratory services paid under the Medicare Clinical Laboratory Fee Schedule of 1.75% for the years 2011 through 2015. A productivity adjustment also is made to the fee schedule payment amount. In addition, on February 22, 2012, President Obama signed the Middle Class Tax Relief and Job Creation Act of 2012, which, among other things, mandated an additional change in Medicare reimbursement for clinical laboratory services. This legislation requires a rebasing of the Medicare clinical laboratory fee schedule to effect a 2% reduction in payment rates otherwise determined for 2013, which in turn will serve as a base for 2014 and subsequent years. Further, with respect to the PPACA changes, the legislation establishes an Independent Payment Advisory Board (“IPAB”) to reduce the per capita rate of growth in Medicare spending. The IPAB has broad discretion to propose policies, which may have a negative impact on payment rates for services, including clinical laboratory services, beginning in 2016, and for hospital services beginning in 2020. In addition, the PPACA provides for an excise tax on medical devices that will potentially increase our costs if we are unable to pass the taxes on to our customers.

There remain significant uncertainties regarding the measures that may be adopted as the PPACA is implemented.

In addition, other legislative changes have been proposed and adopted since the PPACA was enacted. For example, on August 2, 2011, President Obama signed into law the Budget Control Act of 2011, which, among other things, creates the Joint Select Committee on Deficit Reduction to recommend proposals in spending reductions to Congress. The Joint Select Committee did not achieve the targeted deficit reduction of at least $1.2 trillion for the years 2013 through 2021, thereby triggering the legislation’s automatic reduction to several government programs. This includes aggregate reductions to Medicare payments to providers of up to 2% per fiscal year, starting in 2013.

The full impact on our business of the PPACA and the potential impact of the sequestration contemplated if the US budget is not agreed upon is uncertain. Levels of reimbursement may decrease in the future, and future legislation, regulation or reimbursement policies of third-party payors may adversely affect the demand for and price levels of our products.

We are subject to healthcare laws, regulation and enforcement, and our failure to comply with those laws could have a material adverse effect on our results of operations and financial conditions.

We are also subject to healthcare fraud and abuse regulation and enforcement by both the federal government and the states in which we conduct our business. The laws that may affect our ability to operate include:

• the federal Health Insurance Portability and Accountability Act of 1996 as amended by the Health Information Technology for Economic and Clinical Health Act, which governs the conduct of certain electronic healthcare transactions and protects the security and privacy of protected health information;

• the federal healthcare programs’ Anti-Kickback Statute, which prohibits, among other things, persons from knowingly and willfully soliciting, receiving, offering or paying remuneration, directly or indirectly, in exchange for or to induce either the referral of an individual for, or the purchase, order or recommendation of, any good or service for which payment may be made under federal healthcare programs such as the Medicare and Medicaid programs;

• federal false claims laws which prohibit, among other things, individuals or entities from knowingly presenting, or causing to be presented, claims for payment from Medicare, Medicaid, or other third-party payors that are false or fraudulent;

• federal criminal laws that prohibit executing a scheme to defraud any healthcare benefit program or making false statements relating to healthcare matters; and

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• state law equivalents of each of the above federal laws, such as anti-kickback and false claims laws which may apply to items or services reimbursed by any third-party payor, including commercial insurers.

If our operations are found to be in violation of any of the laws described above or any other governmental regulations that apply to us, we may be subject to penalties, including civil and criminal penalties, damages, fines, the curtailment or restructuring of our operations, the exclusion from participation in federal and state healthcare programs and imprisonment, any of which could adversely affect our ability to operate our business and our financial results.

Risks Relating to Liquidity

Our Comerica Bank loan contains restrictions that limit our flexibility in operating our business, and our lender may accelerate repayment of amounts outstanding under certain circumstances.

In September 2011, we entered into a loan and security agreement with Comerica Bank. This agreement was amended effective September 2012. This loan contains various covenants that limit our ability to engage in specified types of transactions. These covenants limit our ability to, among other things:

• Sell, transfer, lease or dispose of our assets;

• Create, incur or assume additional indebtedness;

• Encumber or permit liens on certain of our assets;

• Pay dividends on, repurchase or make distributions with respect to our common stock;

• Make specified investments;

• Consolidate, merge, sell or otherwise dispose of all or substantially all of our assets; and

• Enter into certain transactions with our affiliates.

If we breach any of these covenants, are unable to make a required payment of principal or interest, or experience a material adverse change to our business, it could result in a default under the loan. Additionally, we are required to achieve revenues equal to at least 80% of monthly projections approved by our Board of Directors and provided to the bank, and our failure to do so could result in a default under the loan. Upon the occurrence of an event of default under the loan, the bank could elect to declare all amounts outstanding to be immediately due and payable. If we were unable to repay those amounts, the bank could proceed against the collateral granted to them to secure such indebtedness. We have pledged substantially all of our assets, other than our intellectual property, as collateral under the loan.

We will need to raise additional capital to support our operations in the future.

We will require additional funds to commercialize our products and develop new products. Our ability to fund our net losses and to conduct the required development activities related to any new product candidates will be significantly limited if we are unable to obtain the necessary capital. We will seek to raise funds through equity or debt offerings, bank facilities, or other sources of capital. Additional funding may not be available when needed or on terms acceptable to us. Any additional equity financing may be dilutive to stockholders, and debt financing, if available, may involve restrictive covenants. We cannot assure you that we will be able to raise any such additional funding.

We are an early stage company with a history of losses, we expect to incur losses for at least the next few years, and we may never achieve profitability.

We have incurred substantial net losses since our inception. Our accumulated deficit was $197.7 million at December 31, 2012. For the years ended December 31, 2012 and 2011, we incurred net losses of $2.8 million and $7.5 million, respectively. We expect to continue to incur net losses for at least the next few years based on our

21

current plans to engage in new development activities to broaden or enhance our product pipeline. If we are unable to execute our commercialization strategy to achieve profitability, or if the time required to achieve profitability is longer than we anticipate, we may not be able to continue our business.

Moreover, we are solely dependent on our product line of PLAC Tests. We expect that the PLAC Tests will account for a substantial portion of our revenue for the foreseeable future. We do not know if our PLAC Tests will be successful over the long-term and it is possible that the demand for the product may decline over time. We may never be able to commercialize the PLAC Activity Test in the US. Any decline in demand or failure of our PLAC Tests to penetrate current or new market significantly could have a material adverse effect on our business, financial condition, and results of operations.

We have liabilities for real estate leases in excess of what is necessary for our current business. We will incur these additional expenses until we are able to sublease a portion of our larger leased facility.

We have a significant real estate lease for a facility of approximately 65,000 square feet with current monthly minimum required expenses of approximately $220,000. The term of the lease continues until December 31, 2016. Until such time that we are able to sublease a portion of the facility, we will incur liabilities for real estate leases significantly in excess of what is necessary for our current business. We may never be able to sublease a portion of the facility.

Risks Relating to Intellectual Property

If the combination of patents, trade secrets, trademarks, and contractual provisions that we rely on to protect our intellectual property proves inadequate, our ability to successfully commercialize our products will be harmed and we may never be able to operate our business profitably.

Our success depends, in large part, on our ability to protect proprietary discoveries, technology, and diagnostic tests that we develop under the patent and other intellectual property laws of the US and other countries, so that we can seek to prevent others from unlawfully using our inventions and proprietary information.

Additionally, we have filed or have license rights to a number of patent applications that are in an early stage of prosecution, and we cannot make any assurances that any of the pending patent applications will result in patents being issued. In addition, due to technological changes that may affect our proposed products or judicial interpretation of the scope of our patents, our proposed products might not, now or in the future, be adequately covered by our patents.

Moreover, the US Leahy-Smith America Invents Act, with central provisions effective as of March 2013, brings significant changes to the US patent system, which include a change to a “first to file” system from a “first to invent” system and changes to the procedures for challenging issued patents and disputing patent applications during the examination process, among other things. The effects of these changes on our patent portfolio and business have yet to be determined, as the US Patent and Trademark Office must still implement regulations relating to these changes and US courts have yet to address the new provisions, but in any event, these changes could increase the costs and uncertainties surrounding the prosecution of our patent applications and the enforcement or defense of our patent rights.

Furthermore, there have been several cases involving patents claiming genetic materials and information, and diagnostic products and methods based on genetic materials and information, that are pending in US courts or have been decided by the US Supreme Court that may impact our business. On March 20, 2012, in Mayo Collaborative Services, DBA Mayo Medical Laboratories, et al. v. Prometheus Laboratories, Inc., the US Supreme Court issued an opinion holding that the processes claimed by Prometheus’ patent were not patent eligible because these processes—determining the relationships between concentrations of certain metabolites in the blood and the likelihood that a thiopurine drug dosage will prove ineffective or cause harm—merely apply laws of nature and are not themselves patentable. Additionally, a suit brought by multiple plaintiffs, including the

22

American Civil Liberties Union, or ACLU, against Myriad Genetics and the USPTO, could also impact biotechnology patents. The Federal Circuit issued a written decision on July 29, 2011 that reversed the US District Court for the Southern District of New York’s ruling that Myriad’s composition claims to “isolated” DNA molecules cover unpatentable subject matter. However, the Federal Court affirmed the District Court’s decision that Myriad’s method claims directed to simply “comparing” or “analyzing” DNA sequences without a “transformation” step are not patentable. The US Supreme Court granted certiorari in the Myriad case, vacated the Federal Circuit decision and remanded the case back to the Federal Circuit for further consideration of patentability in light of the Supreme Court’s decision in Mayo v. Prometheus. Upon remand the Court of Appeals for the Federal Circuit issued a written decision on August 16, 2012 maintaining that Myriad’s composition claims to “isolated” DNA molecules cover patentable subject matter and that Myriad’s method claims directed to “comparing” or “analyzing” DNA sequences without a “transformation” step are not patentable. Following appeal, the US Supreme Court has agreed to rehear arguments this year to examine the question of whether human genes are patentable in its rehearing of the Myriad case. It is unknown what the outcome and impact of the decision in this case will bring with respect to the Company’s patents.

We license key intellectual property from GlaxoSmithKline and ICOS, and our contractual relationships have certain limitations.

We have an exclusive license from GlaxoSmithKline (formerly SmithKlineBeecham plc) and a co-exclusive license from ICOS Corporation (“ICOS”), acquired by Eli Lilly and Company, to practice and commercialize technology covered by several issued and pending US patents and their foreign counterparts. The issued patents that relate to the Company’s current business have expiration dates ranging from 2013 to 2016.

Several of our collaboration agreements with GlaxoSmithKline and ICOS provide licenses to use intellectual property that is important to our business, and we may enter into additional agreements in the future with GlaxoSmithKline or with other third parties that change licenses of valuable technology. Current licenses impose, and future licenses may impose, various commercialization, milestone and other obligations on us, including the obligation to terminate our use of patented subject matter under certain circumstances. If a licensor becomes entitled to, and exercises, termination rights under a license, we could lose valuable rights and our ability to develop our current and future products. Our business may suffer if any current or future licenses terminate, if the licensors fail to abide by the terms of the license or fail to prevent infringement by third parties, if the licensed patents or other rights are found to be invalid or if we are unable to enter into necessary licenses on acceptable terms.

Any inability to adequately protect our proprietary technologies and product candidates could harm our competitive position.

We will be able to protect our proprietary rights from unauthorized use by third parties only to the extent that our proprietary technologies are covered by valid and enforceable patents or are effectively maintained as trade secrets. We plan to continue to apply for patents covering our technologies and products as we deem appropriate. We cannot make assurances that our pending patent applications will issue as patents and, if they do, whether the scope of such claims will be sufficiently broad to prevent third parties from utilizing our technologies, commercializing our discoveries or developing competing products. Any patents we currently hold, or obtain in the future, may not be sufficiently broad to prevent others from utilizing our technologies, commercializing our discoveries, or developing competing technologies and products. Moreover, our issued patents have expiration dates beginning in 2013, which may impact our ability to maintain the competitive position of our products. Furthermore, third parties may independently develop similar or alternative technologies or design around our patented technologies. Third parties may challenge or invalidate our patents, or our patents may fail to provide us with any competitive advantage.

We have rights to patents and patent applications owned by GlaxoSmithKline, Human Genome Sciences, Inc. (“Human Genome Sciences”) and ICOS that provide important protection on the composition of matter and utility of our products and product candidates. We do not, however, directly control the prosecution and

23

maintenance of all of these patents. GlaxoSmithKline, Human Genome Sciences, and ICOS may not fulfill their obligations as licensors and may allow these patents to go abandoned or may not pursue meaningful claims for our products. Also, while the US Patent and Trademark Office has issued diagnostic patents covering utility or methods, we do not know whether or how courts will enforce these patents. If a court finds these types of inventions to be unpatentable or interprets them narrowly, the benefits of our patent strategy may not materialize. If any or all of these events occur, they could diminish the value of our intellectual property.

Risks Relating to Our Stock

Our stock price is likely to be volatile.

Currently, our common stock is quoted on the OTCQB marketplace. Stocks traded “over the counter” typically are subject to greater volatility than stocks traded on stock exchanges, such as the NASDAQ Stock Market, due to the fact that OTCQB marketplace trading volumes are generally significantly lower than those on stock exchanges. This lower volume may allow a relatively few number of stock trades to greatly affect the stock price, particularly where the trading price of the stock price is relatively low. The trading price of our common stock has been and is likely to continue to be extremely volatile. Some of the many factors that may cause the market price of our common stock to fluctuate include, in no particular order:

• Actions taken by regulatory authorities with respect to our products;

• The progress and results of our product development efforts;

• The outcome of legal actions to which we may become a party;

• Our ability to commercialize the products, if any, that we are able to develop;

• Changes in our capital structure, such as future issuances of securities or the incurrence of additional debt; and

• Restatements of our financial results and/or material weaknesses in our internal controls.

The stock markets and the markets for medical diagnostics and biotechnology stocks in particular, have experienced volatility that has often been unrelated to the operating performance of particular companies. These broad market fluctuations may adversely affect the trading price of our common stock. Investors may not be able to sell when they desire due to insufficient buyer demand and may realize less than, or lose all of, their investment.

We are not currently listed on a national exchange and there can be no assurance we will ever be listed.

As a result of our failure to make timely filings of financial statements, we were delisted from The NASDAQ Stock Market in 2004. Currently, our common stock is quoted on the OTCQB marketplace under the symbol DDXS. We have not yet applied for our common stock to be listed on a national exchange, and we do not currently meet all of the requirements for listing or relisting on the NASDAQ Stock Market. We do not know when, if ever, our common stock will be listed on a national stock exchange. In addition, if we become eligible we cannot be certain that The NASDAQ Stock Market will approve our stock for relisting or that any other exchange will approve our stock for listing. In order to be eligible for relisting or listing, we must meet the initial listing criteria for The NASDAQ Stock Market or another national exchange, including a minimum per share price.

Our charter documents and Delaware law may discourage an acquisition of the Company.

Provisions of our certificate of incorporation, bylaws, and Delaware law could make it more difficult for a third-party to acquire us, even if doing so would be beneficial to our stockholders. For example, we may issue shares of preferred stock in the future without stockholder approval and upon such terms as our Board of Directors may determine. Our issuance of this preferred stock could have the effect of making it more difficult for a third-party to acquire, or of discouraging a third-party from acquiring, a majority of our outstanding stock. Our bylaws also

24

provide that special stockholder meetings may be called only by our Board of Directors, Chairperson of the Board of Directors, or by our Chief Executive Officer or President, with the result that any third-party takeover not supported by the Board of Directors could be subject to significant delays and difficulties.

Item 1B. Unresolved Staff Comments

None

Item 2. Properties

The Company maintains its principal administrative office, laboratory and production operations in a 65,000 square foot leased facility located at 349 Oyster Point Boulevard under a lease agreement that expires in December 2016. We believe this facility is more than adequate for our present needs.

Item 3. Legal Proceedings

The Company is from time to time subject to various claims and legal actions during the ordinary course of business. The Company believes that there are currently no claims or legal actions that would reasonably be expected to have a material adverse effect on its results of operations or financial condition.

Item 4. Mine Safety Disclosures

Not applicable

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PART II

Item 5. Market for Registrant’s Common Equity, Related Stock Holder Matters and Issuer Purchases of Equity Securities

Our common stock is quoted on the OTCQB marketplace under the symbol “DDXS”. The following table sets forth the high and low bid prices of our common stock for the periods indicated. The prices represent quotations by dealers without adjustments for retail markups or commission and may not represent material transactions.

	Common Stock
	2012				2011
	High		Low		High		Low
First Quarter	$	0.42	$	0.17	$	0.50	$	0.28
Second Quarter		0.46		0.23		0.40		0.28
Third Quarter		0.46		0.32		0.36		0.20
Fourth Quarter		0.43		0.28		0.26		0.09

On March 8, 2013, the last reported sales price of our common stock on the OTCQB marketplace was $0.49 per share.

Holders

There were approximately 327 holders of record of our common stock as of March 8, 2013.

Repurchases and Dividends

Issuer purchases of equity securities during the quarter ended December 31, 2012:

(in thousands, except shares and per share amounts)

Fiscal Period	Total Number of Shares Purchased		Average Price Paid Per Share		Total Number  of Shares Purchased as Part of Publicly Announced Plans or Programs		Approximate Dollar Value  of Shares That May Yet Be Purchased Under Plans or Programs
October 1 – October 31, 2012		—		—		—	$	—
November 1 – November 30, 2012		—		—		—		—
December 1 – December 31, 2012		492,975	$	0.26		—		—
		492,975	$	0.26		—	$	—

In December 2012, we issued 492,975 shares of common stock pursuant to a cashless exercise of 1,917,125 options with an exercise price of $0.26. There were no other repurchases of our equity securities during the year ended December 31, 2012. We have never declared or paid any cash dividends on our common stock and we do not currently intend to pay any cash dividends on our common stock for the foreseeable future. Under the terms of a loan agreement with a bank, we are restricted from declaring a dividend without the bank’s consent.

The information required by this item regarding equity compensation plans is incorporated by reference to the information in Item 11 of this Annual Report on Form 10-K.

Item 6. Selected Financial Data

Not required

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Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following Management’s Discussion and Analysis of Financial Condition and Results of Operations contains forward-looking statements that involve a number of risks and uncertainties. Our actual results could differ materially from those indicated by forward-looking statements as a result of various factors, including but not limited to, the period for which we estimate our cash resources are sufficient, the availability of additional funds, as well as those set forth under “Risk Factors” and those that may be identified from time to time in our reports and registration statements filed with the Securities and Exchange Commission.

The following discussion and analysis is intended to provide an investor with a narrative of our financial results and an evaluation of our financial condition and results of operations. This discussion should be read in conjunction with the Financial Statements and related Notes included in PART II, Item 8 of this Annual Report on Form 10-K for the year ended December 31, 2012.

Overview

We are a life sciences company developing and commercializing proprietary cardiovascular diagnostic products addressing unmet needs in cardiovascular disease. We are the successor to a company initially formed as a joint venture between SmithKlineBeecham Corporation (now GlaxoSmithKline LLC (“GlaxoSmithKline”)) and Incyte Pharmaceuticals, Inc. Upon formation, SmithKlineBeecham Corporation granted us an exclusive license to certain diagnostic intellectual property, including exclusive rights to develop diagnostic assays for Lp-PLA₂, an inflammatory marker of cardiovascular risk.

Our products, known as PLAC^® Tests, are designed to provide information, over and above traditional risk factors, to help identify individuals at increased risk of suffering a heart attack or stroke. Some of these events may be reduced with earlier detection and more aggressive risk-reducing strategies, including treatment to lower LDL-cholesterol goals with statins. We have commercialized two PLAC Tests. One test measures the mass of circulating Lp-PLA₂ in the blood, the PLAC Test ELISA Kit. The PLAC Test ELISA Kit is the only blood test cleared by the FDA to aid in assessing risk for both coronary heart disease and ischemic stroke associated with atherosclerosis. The second test, the PLAC Test for Lp-PLA₂ Activity, is an enzyme assay for the quantitative determination of Lp-PLA₂ activity levels in human plasma and serum on automated clinical chemistry analyzers, to be used in conjunction with clinical evaluation and patient risk assessment as an indicator of atherosclerotic cardiovascular disease. We are currently commercializing the PLAC Test ELISA Kit in the US and Europe and the PLAC Test for Lp-PLA₂ Activity in Europe.

We have incurred substantial losses since inception, and expect to continue to incur net losses for at least the next few years based on our current plans to engage in new development activities to broaden or enhance our product pipeline. To date, we have funded our operations primarily through private placements of equity and debt financing, as well as through revenue generated from the sale of products.

We entered into a loan agreement with Comerica Bank in September 2011, which was amended in September 2012. The agreement contains certain financial and non-financial covenants. Our future liquidity requirements may increase beyond currently expected levels if we fail to maintain compliance with such covenants. In order to meet our future liquidity needs, we may become reliant on additional equity and/or debt financing. Additional funding may not be available when needed or on terms acceptable to us. Any additional equity financing may be dilutive to stockholders, and debt financing, if available, may involve restrictive covenants and security interests in our assets. We cannot assure you that we will be able to raise any such additional funding in a timely manner if we require funds.

All references in this Annual Report on Form 10-K to the “Company,” “we,” “us” and “our” refer to diaDexus, Inc. (f/k/a VaxGen, Inc.), a Delaware corporation, unless the context requires otherwise.

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Critical Accounting Policies and Estimates

The accompanying discussion and analysis of our financial condition and results of operations is based upon our financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”). The preparation of these financial statements requires management to make estimates and judgments that affect the reported amounts of assets, liabilities and expenses, and related disclosures. On an ongoing basis, we evaluate these estimates. Estimates are based on historical experience, information received from third parties and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results could therefore differ materially from those estimates under different assumptions or conditions.

Note 2 of the financial statements in Part II, Item 8 of this Annual Report on Form 10-K describes the significant accounting policies used in the preparation of the financial statements. We consider the following accounting policies to be critical accounting policies because they are significantly affected by critical accounting estimates, they are highly important to the portrayal of our financial condition and results and they require management judgments and assumptions about matters that are inherently uncertain.

Revenue Recognition

Revenues are generated from licensing fees, royalties earned, product sales and contract arrangements, and recorded net of customer and distributor discounts. Revenue is recognized when the four basic criteria of revenue recognition are met: (i) a contractual agreement exists; (ii) delivery of product has occurred and risk of loss and title has transferred, transfer of technology (intellectual property) has been completed or services have been rendered; (iii) the fee is fixed or determinable; and (iv) collectability is reasonably assured.

License fee revenue including nonrefundable upfront fees, is deferred and recognized over the term of the underlying agreements. Royalty revenue is recognized when reportable product sales are confirmed. Revenue from technology licenses or other payments under collaborative agreements where we have a continuing obligation to perform is recognized as revenue over the expected period of the continuing performance obligation. The term of these underlying agreements ranges from two to ten years.

Our revenues are derived to a large extent from sales to a limited number of distributors and large laboratory customers which account for a significant portion of our revenue. The concentration of our key customers may vary from period to period for a variety of reasons, including competition, developments related to our products, and changes in individual customers’ purchases of our products. The concentration of revenue from our top four customers was 69% and 81% for the years ended December 31, 2012 and 2011, respectively.

Revenues by geography are based on the billing address of the customer. The following table sets forth revenues by geographic area (in thousands):

	Years Ended December 31,
	2012		2011
United States	$	20,443	$	16,183
Europe		245		164
Rest of the world		88		37
	$	20,776	$	16,384

Stock-Based Compensation

We account for stock-based compensation using the fair value recognition provisions of Accounting Standard Codification (“ASC”) 718, Share-Based Payment. The fair value of stock options and warrants are calculated using the Black-Scholes pricing method on the date of grant. Determining the appropriate fair value model and calculating the fair value of stock-based payment awards require the input of various highly-subjective

28

assumptions, including the expected life of the stock-based payment awards, our stock price volatility and the expected forfeiture rate of our options. The assumptions used in calculating the fair value of stock-based payment awards represent management’s best estimates, but these estimates involve inherent uncertainties and the application of management judgment.

Because employee stock options have characteristics significantly different from those of traded options, and because changes in the subjective input assumptions can materially affect the fair value estimate, in our management’s opinion, the existing model does not necessarily provide a reliable single measure of fair value of our employee stock options. As a result, if factors change and we use different assumptions, our stock-based compensation expense could be materially different in the future. In addition, we are required to estimate the expected forfeiture rate and only recognize expense for those shares expected to vest. If our actual forfeiture rate is materially different from our estimate, the stock-based compensation expense could be significantly different from what we have recorded in the current period. See Note 12 to the financial statements for more information regarding stock-based compensation.

Income Taxes

Effective January 1, 2009, we adopted ASC 740-10, Accounting for Income Taxes. ASC 740-10 clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements. The interpretation applies to all tax positions accounted for and requires a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken, or expected to be taken, in an income tax return. Subsequent recognition, de-recognition and measurement is based on management’s best judgment given the facts, circumstances and information available at the reporting date. See Note 15 to the financial statements for more information regarding our income tax policies.

Pursuant to the Reverse Merger, which was completed on July 28, 2010, Pre-Merger VaxGen filed tax returns with positions that may be challenged by the tax authorities. These positions relate to, among others, deductibility of certain expenses, expenses included in our research and development tax credit computations, as well as other matters. Although the outcome of tax audit is uncertain, in management’s opinion, adequate provisions for income taxes have been made for potential liabilities resulting from such matters. We regularly assess the tax positions for such matters and include reserves for those differences in position. The reserves are utilized or reversed once the statute of limitations has expired and/or at the conclusion of the tax examination. We believe that the ultimate outcome of these matters will not have a material impact on our financial position, financial operations or liquidity.

We file income tax returns in the US federal jurisdiction and several state jurisdictions. To date, we have not been audited by the Internal Revenue Service or any state income tax jurisdictions. Our policy is to recognize interest and penalties related to the underpayment of income taxes as a component of income tax expense. As of December 31, 2012, there have been no interest or penalties charged to us in relation to the underpayment of income taxes.

We have generated net losses since inception and accordingly did not record a provision for income taxes. The deferred tax assets were primarily comprised of federal and state tax net operating loss (“NOL”), carryforwards. Due to uncertainties surrounding our ability to continue to generate future taxable income to realize these tax assets, a full valuation allowance has been established to offset our deferred tax assets. Additionally, the future utilization of our NOL carryforwards to offset future taxable income may be subject to an annual limitation as a result of ownership changes that may have occurred previously or that could occur in the future. If necessary, the deferred tax assets will be reduced by any carryforwards that expire prior to utilization as a result of such limitations, with a corresponding reduction of the valuation allowance.

Under the provisions of Sections 382 and 383 of the Internal Revenue Code, a change of control, as defined, may impose an annual limitation on the amount of the Company’s net operating loss and tax credit carryforwards, and other tax attributes, that can be used to reduce future tax liabilities. As a result of the Reverse Merger, certain of

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the Company’s Old diaDexus tax attributes prior to the Reverse Merger are subject to an annual limitation of $240,000 for federal and state purposes.

Results of Operations

Results of Operations for the Years Ended December 31, 2012 and 2011

Revenues

	Years Ended December 31,				% Increase (Decrease)
	2012		2011		2011 to 2012
	(in thousands)
Revenues:
License revenue	$	305	$	305		0	%
Royalty revenue		2,405		3,859		(38	)%
Product sales		18,066		12,220		48	%
Total net revenues	$	20,776	$	16,384		27	%

Revenues are generated from licensing fees, royalties earned, product sales, and contract arrangements. The accounting classification of product revenue as either royalties or product sales relates to the sales channels used by the Company, and as such, we believe that operating performance is most effectively evaluated by examining total net revenues.

Revenues for the year ended December 31, 2012 were $20.8 million, an increase of approximately $4.4 million, or 27% compared with the year ended December 31, 2012. This increase primarily reflects an increased volume demand for our PLAC Test ELISA Kit partially offset by a decline in average sales price for our product.

Our top four customers accounted for 69% and 81% of our net revenues for the years ended December 31, 2012 and 2011, respectively. Because of this customer concentration and the timing of orders from these customers, our quarterly and annual revenue may fluctuate materially. Our largest customers exert greater influence over our product pricing which may be offset by obtaining more favorable reimbursement for our PLAC Tests. We expect moderate downward price pressure to slow as we continue to obtain more favorable coverage for our PLAC Tests.

Effective January 1, 2013, we are subject to a new medical device excise tax of 2.3% under the Patient Protection and Affordable Care Act of 2010. This new tax is imposed on our US sales only. While we plan to charge our customers the new medical device excise tax, our customer’s abilities to influence our product pricing may adversely impact our collection of this new tax.

Product Costs

	Years Ended December 31,				% Increase
	2012		2011		2011 to 2012
	(in thousands)
Product costs	$	6,296	$	5,404		17	%

Product costs include our expenditures for cost of goods, manufacturing support, product supplies, quality control, personnel expenses and facility costs. Product costs for the year ended December 31, 2012 were $6.3 million, an increase of $892,000, or 17% compared to the year ended December 31, 2011. This increase primarily reflects an increase in product-related materials and supplies costs of approximately $563,000 due to increased demand for our PLAC Tests, an increase in facilities related expense of $298,000 due to our relocation to a larger facility and an increase of approximately $155,000 in equipment depreciation costs used to produce our PLAC Test ELISA Kit. These cost increases were partially offset by a decrease in consulting expense of approximately $107,000 and a decrease of approximately $22,000 in severance cost.

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We expect product costs to continue to increase due to increased demand for our PLAC Tests, partially offset by production economies of scale. We anticipate the new medical device excise tax will be included as a product cost in 2013.

Sales and Marketing Expenses

	Years Ended December 31,				% Increase (Decrease)
	2012		2011		2011 to 2012
	(in thousands)
Sales and marketing	$	5,465	$	4,143		32	%

Sales and marketing expenses include our expenditures on customer support, medical and other consultant fees, marketing programs and materials, and personnel expenses. Sales and marketing expenses for the year ended December 31, 2012 were $5.4 million, an increase of $1.3 million, or 32% compared to the year ended December 31, 2011. This increase primarily reflects an increase in personnel costs of approximately $1.2 million due to an expansion of our sales and marketing team, an increase in travel expenses of approximately $201,000 due to higher personnel and expenses related to a product launch in Europe, and an increase in marketing program expenses of approximately $169,000. These cost increases were partially offset by a decrease in severance costs incurred in connection with the departure, in 2011, of our former Chief Commercial Officer of approximately $196,000 and a decrease in facility-related costs of approximately $56,000.

We expect our sales and marketing expenses to continue to increase as we identify and hire additional personnel and as we develop and commercialize new products in the US, and maintain and expand our position in the market for diagnostics in cardiovascular disease.

Research and Development Expenses

	Years Ended December 31,				% Increase (Decrease)
	2012		2011		2011 to 2012
	(in thousands)
Research and development	$	4,196	$	5,138		(18	)%

Research and development expenses include costs related to product development, regulatory support of our technology and other technical support costs, including salaries and consultant fees. Research and development expenses for the year ended December 31, 2012 were $4.2 million, a decrease of $942,000, or 18% compared to the year ended December 31, 2011. This decrease primarily reflects a reduction in personnel costs of $644,000 and in severance costs of approximately $234,000 due to the departure of certain employees, including our former Chief Science Officer, in 2011. This decrease also reflects a decrease in the cost of clinical studies by approximately $217,000, and travel and entertainment costs by approximately $23,000. These cost decreases were partially offset by an increase in lab and facility expense of approximately $185,000, due partly to our relocation to a larger facility.

We expect research and development costs will increase in the future as a result of staffing increases and new product development projects.

General and Administrative Expenses

	Years Ended December 31,				% Increase (Decrease)
	2012		2011		2011 to 2012
	(in thousands)
General and administrative	$	7,217	$	9,544		(24	)%

General and administrative expenses include personnel costs for finance, administration, information systems and professional fees as well as facilities expenses. General and administrative expenses for the year ended

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December 31, 2012 were $7.2 million, a decrease of $2.3 million, or 24%, compared to the year ended December 31, 2011. This decrease primarily reflects a reduction in facility costs of approximately $2.3 million for the 343 Oyster Point facility due to the expiration of the associated facility lease in January 2012, a reduction in severance costs of approximately $861,000 primarily associated with the resignation, in June 2011, of the Company’s former Chief Executive Officer, and higher costs incurred in 2011 associated with our move to 349 Oyster Point of approximately $428,000. These cost decreases were partially offset by the loss of sublease income of $910,000, an increase in accrued compensation of $154,000, and an increase in outside professional services costs of $175,000.

We expect general and administrative expenses to stay relatively unchanged in the near future.

Interest Income, Interest Expense and Other Income (Expense), Net

	Years Ended December 31,					% Increase (Decrease)
	2012			2011		2011 to 2012
	(in thousands)
Interest income, interest expense and other income (expense), net
Interest income	$	16		$	56		(71	)%
Interest expense		(395	)		288		(237	)%
Other income (expense), net		(10	)		19		(153	)%
Total net interest and other income (expense)	$	(389	)	$	363		(207	)%

Interest income is derived from cash balances, and short and long-term investments. Interest expense is based on outstanding debt obligations. Net interest and other expense for the year ended December 31, 2012 was $(389,000), an increase of $752,000, or 207% compared to the year ended December 31, 2011. This increase was primarily due to a debt facility entered into in September 2011, and amended in September 2012. Interest expense will continue as long as the loan is outstanding and will trend down as the loan is repaid. Total interest and other income for the year ended December 31, 2011 reflect a reversal, in the third quarter of 2011, of $398,000 in tax-related accrued interest and penalties due to the expiration of the statute of limitations.

Income Taxes

	Years Ended December 31,						% Increase (Decrease)
	2012			2011			2011 to 2012
	(in thousands)
Income tax benefit (provision)	$	(2	)	$	(1	)		100	%

We generated net loss for the year ended December 31, 2012 and had no federal income tax provision. Our effective tax rate was 0% for income tax for the years ended December 31, 2012 and 2011.

While we have substantial net operating loss carryforwards available to offset future taxable income for federal and state income tax purposes, our ability to utilize certain of our net operating losses are limited due to changes in our ownership as defined by Section 382 of the Internal Revenue Code. At December 31, 2012, we had unrecognized tax benefits totaling $1.4 million.

Liquidity and Capital Resources

Since our inception, we have incurred losses, and we have relied primarily on private placements of preferred stock and debt financing, as well as on revenue generated from the sale of products, to fund our operations. As of December 31, 2012, we had an accumulated deficit of $197.7 million, working capital of $14.1 million and stockholders’ equity of $8.9 million. Based on our current operating plan, we believe that our existing cash, cash equivalents, and investment securities will be sufficient to cover our cash needs for operating activities and commitments for at least twelve months.

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Cash, Cash Equivalents and Investments

As of December 31, 2012, we had cash, cash equivalents and investments of $13.6 million, compared to $17.2 million at December 31, 2011. The decrease of $3.6 million primarily reflects cash used in operating activities of $3.4 million.

Cash Flows from Operating Activities

Net cash used in operating activities of $3.4 million for the year ended December 31, 2012 was principally due to the net loss of $2.8 million and a $1.2 million cash outflow related to changes in operating assets and liabilities, offset by the effect of non-cash items totaling $0.6 million. Significant non-cash items were depreciation and amortization of $0.5 million, stock-based compensation of $0.4 million, interest expense of $0.1 million, and unfavorable lease amortization of $(0.5) million.

Net cash used in operating activities was $6.7 million for the year ended December 31, 2011, and was primarily related to net loss of $7.5 million, offset by the effect of non-cash items totaling $0.8 million. Significant non-cash items were stock-based compensation of $0.7 million, depreciation and amortization of property and equipment of $0.6 million, amortization on investments of $0.2 million, reversal of a tax related interest expense accrual of $(0.4) million and unfavorable lease amortization of $(0.4) million.

Cash Flows from Investing Activities

Net cash provided by investing activities in the year ended December 31, 2012 was $5.8 million, primarily due to net investment maturities of $6.0 million and a restricted cash release of $0.4 million relating to the expiration of the 343 Oyster Point facility lease in January 2012. This cash provided by investing activities was partially offset by purchases of property and equipment totaling $0.6 million.

Net cash used in investing activities in the year ended December 31, 2011 was $8.0 million, primarily due to net purchases of available-for-sale investments of $7.0 million and $1.1 million in purchases of property and equipment.

Cash Flows from Financing Activities

Net cash provided by financing activities in the year ended December 31, 2012 was $39,000, reflecting proceeds from stock option exercises, partially offset by a fee paid relating to the amendment of a term loan agreement first entered into in September 2011.

Net cash provided by financing activities in the year ended December 31, 2011 was $4.8 million, reflecting net proceeds received upon the closing of a $5.0 million term loan in September 2011 from Comerica Bank.

Other Information

Our future capital requirements will depend primarily upon our ability to maintain and grow our current product revenues, to obtain regulatory approval for the PLAC Test for Lp-PLA₂ Activity in the US, to develop and commercialize product line extensions for our PLAC Tests, to develop or acquire new cardiovascular biomarker tests, to manage our obligations under real estate leases, to realize the sale of our assets held for sale, and to improve our reimbursement prospects from third-party payors.

We expect to require additional financing and will seek to raise funds through equity or debt offerings, bank facilities, or other sources of capital. Additional funding may not be available when needed or on terms acceptable to us. Any additional equity financing may be dilutive to stockholders, and debt financing, if available, may involve restrictive covenants. We cannot assure you that we will be able to raise any such additional funding.

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We have incurred substantial losses since inception, and expect to continue to incur net losses for at least the next few years based on our current plans to engage in new development activities to broaden or enhance our product pipeline. To date, we have funded our operations primarily through private placements of preferred stock and debt financing, as well as through revenue generated from the sale of products.

In September 2011, we entered into a loan and security agreement with Comerica Bank, which was amended in September of 2012 (see Note 9 of the Notes to Financial Statements included in this Annual Report on Form 10-K). This loan contains various covenants. If we breach any of these covenants or are unable to make a required payment of principal or interest, or experience a material adverse change to our business, it could result in a default under the loan. Additionally, we are required to achieve revenues equal to at least 80% of monthly projections approved by our Board of Directors and provided to the bank, and failure to do so could result in a default under the loan. Upon the occurrence of an event of default under the loan, the bank could elect to declare all amounts outstanding to be immediately due and payable. If we are unable to repay those amounts, the bank could proceed against the collateral granted to them to secure such indebtedness. We have pledged substantially all of our assets, other than our intellectual property, as collateral under the loan.

Our future liquidity requirements may increase beyond currently expected levels if we fail to maintain compliance with the loan covenants. In order to meet future liquidity needs, we may become reliant on additional equity and/or debt financing. Additional funding may not be available when needed or on terms acceptable to us. Any additional equity financing may be dilutive to stockholders, and debt financing, if available, may involve restrictive covenants. We cannot assure you that we will be able to raise any such additional funding or, if available, that such funding would be on favorable terms.

Commitments and Contingencies

Our contractual obligations and future minimum lease payments that are non-cancelable at December 31, 2012 are disclosed in the following table (in thousands):

	Total		2013		2014		2015		2016		2017
Debt obligations	$	5,797	$	574	$	1,466	$	1,400	$	2,357	$	—
Operating lease obligations		10,482		2,505		2,581		2,658		2,738		—
Total contractual commitments	$	16,279	$	3,079	$	4,047	$	4,058	$	5,095	$	—

As part of the reverse Merger completed in 2010, we recorded a lease obligation which contained a lease payment that exceeded current market rates. Accordingly, we recognized a $4.1 million unfavorable lease obligation. We amortize the unfavorable lease obligation using the effective interest rate method. The carrying amount of the unfavorable lease liability was $3.1 million as of December 31, 2012.

Off-Balance Sheet Arrangements

As of December 31, 2012, we did not have any off-balance sheet arrangements as defined in Item 303(a)(4)(ii) of SEC Regulation S-K.

Recent Accounting Pronouncements

See Note 2 of our Notes to Financial Statements for recent accounting pronouncements, including the expected dates of adoption and estimated effects on our financial statements.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

In the normal course of business, our financial position is routinely subject to a variety of risks, including market risk associated with interest rate movement. We regularly assess these risks and have established policies and

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business practices intended to protect against these and other exposures. As a result, we do not anticipate material potential losses in these areas.

As of December 31, 2012, we had cash, cash equivalents, and short-term investments of $13.6 million, consisting of cash, cash equivalents and highly liquid short-term investments. Our short-term investments will likely decline by an immaterial amount if market interest rates increase and, therefore, we believe our exposure to interest rate changes is immaterial. Declines of interest rates over time will however, reduce our interest income from investments.

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Item 8. Financial Statements and Supplementary Data

Report of Independent Registered Public Accounting Firm

To the Board of Directors and Stockholders of

diaDexus, Inc.

We have audited the accompanying balance sheets of diaDexus, Inc. as of December 31, 2012 and 2011, and the related statements of comprehensive loss, of stockholders’ equity and of cash flows for each of the two years in the period ended December 31, 2012. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of diaDexus, Inc. at December 31, 2012 and 2011, and the results of its operations and its cash flows for each of the two years in the period ended December 31, 2012 in conformity with accounting principles generally accepted in the United States of America.

/s/ PricewaterhouseCoopers, LLP

San Jose, California

March 11, 2013

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DIADEXUS, INC.

BALANCE SHEETS

(in thousands, except share data)

	December 31,
	2012			2011
Assets
Current assets:
Cash and cash equivalents	$	12,851		$	10,484
Short-term investment securities		747			6,492
Accounts receivable, net of allowance for doubtful accounts of $0 and $4 and rebate reserve of $0 and $20 at December 31, 2012 and December 31, 2011, respectively		2,789			2,408
Inventories		134			117
Restricted cash		—			400
Assets held for sale		300			304
Prepaid expenses and other current assets		871			975
Total current assets		17,692			21,180
Long-term investments		—			250
Restricted cash		1,400			1,400
Property and equipment, net		1,250			1,350
Other long-term assets		142			175
Total assets	$	20,484		$	24,355
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable	$	469		$	882
Notes payable, current portion		272			372
Deferred revenues, current portion		317			331
Unfavorable lease obligations		588			492
Accrued and other current liabilities		1,953			2,469
Total current liabilities		3,599			4,546
Non-current portion of notes payable		4,621			4,526
Non-current portion of deferred revenue		225			530
Non-current portion of deferred rent		363			266
Non-current portion of unfavorable lease obligation		2,475			3,063
Other long term liabilities		346			284
Total liabilities		11,629			13,215
Commitments and contingencies (Note 14)
Stockholders’ equity:
Preferred Stock, $0.01 par value, 19,979,500 shares authorized; none issued or outstanding		—			—
Common stock, $0.01 par value; 100,000,000 shares authorized; 53,890,314 and 53,067,045 shares issued and outstanding at December 31, 2012 and December 31, 2011, respectively		539			531
Additional paid-in capital		206,048			205,557
Accumulated other comprehensive loss		—			(5	)
Accumulated deficit		(197,732	)		(194,943	)
Total stockholders’ equity		8,855			11,140
Total liabilities and stockholders’ equity	$	20,484		$	24,355

See accompanying notes to financial statements.

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DIADEXUS, INC.

STATEMENTS OF COMPREHENSIVE LOSS

(in thousands, except share and per share data)

	Years ended December 31,
	2012			2011
Revenues:
License revenue	$	305		$	305
Royalty revenue		2,405			3,859
Product sales		18,066			12,220
Total revenues		20,776			16,384
Operating costs and expenses:
Product costs		6,296			5,404
Sales and marketing		5,465			4,143
Research and development		4,196			5,138
General and administrative		7,217			9,544
Total operating costs and expenses		23,174			24,229
Loss from operations		(2,398	)		(7,845	)
Interest income, interest expense and other income (expense), net:
Interest income		16			56
Interest expense		(395	)		288
Other income (expense), net		(10	)		19
Loss before income tax		(2,787	)		(7,482	)
Income tax provision		(2	)		(1	)
Net loss	$	(2,789	)	$	(7,483	)
Basic and diluted net loss per share	$	(0.05	)	$	(0.14	)
Weighted average shares used in computing basic and diluted net loss per share		53,198,336			53,067,052
Comprehensive loss:
Net loss	$	(2,789	)	$	(7,483	)
Net change in unrealized gain/(loss) on available for sale securities		5			(5	)
Comprehensive loss	$	(2,784	)	$	(7,488	)

See accompanying notes to financial statements.

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DIADEXUS, INC.

STATEMENTS OF CASH FLOWS

(in thousands)

	Years Ended December 31,
	2012			2011
Operating activities:
Net loss	$	(2,789	)	$	(7,483	)
Adjustments to reconcile net loss to net cash used in operating activities:
(Gain)/Loss on disposal of assets		4			(9	)
Depreciation and amortization		503			591
Stock-based compensation		362			689
Provision for doubtful account (reversal)		(4	)		4
Provision for rebate reserve (reversal)		(20	)		20
Amortization (accretion) on investments		26			231
Reversal of tax-related interest expense accrual		—			(398	)
Noncash interest (income) expense		29			26
Noncash interest associated with notes payable		125			36
Unfavorable lease		(492	)		(363	)
Inventory written off		31			—
Changes in operating assets and liabilities:
Accounts receivable		(357	)		(714	)
Inventory		(48	)		(12	)
Prepaid expenses, other current assets and other long-term assets		138			142
Accounts payable		(386	)		359
Accrued liabilities and other long-term liabilities		(343	)		339
Deferred rent		97			111
Deferred revenue		(319	)		(279	)
Net cash used in operating activities	$	(3,443	)	$	(6,710	)
Investing activities:
Purchases of property and equipment		(605	)		(1,083	)
Maturities of available-for-sale investments		7,219			19,527
Purchases of available-for-sale investments		(1,245	)		(26,505	)
Proceeds from sale of assets		2			13
Release of restricted cash		400			—
Net cash provided by (used in) investing activities	$	5,771		$	(8,048	)
Financing activities:
Proceeds from notes payable		—			4,980
Debt issuance costs		(50	)		(132	)
Proceeds from stock option exercises		89			—
Net cash provided by financing activities	$	39		$	4,848
Net increase (decrease) in cash and cash equivalents		2,367			(9,910	)
Cash and cash equivalents, beginning of year		10,484			20,394
Cash and cash equivalents, end of year	$	12,851		$	10,484
Supplemental disclosure:
Cash paid for interest	$	267		$	66
Non-cash investing and financing transactions:
Issuance of warrants for common stock in connection with debt	$	48		$	94
Acquisition of property and equipment in accounts payable	$	51		$	78
Acquisition of property and equipment in accrued liabilities	$	27		$	200

See accompanying notes to financial statements.

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DIADEXUS, INC.

STATEMENTS OF STOCKHOLDERS’

EQUITY

(In thousands, except share data)

	Common Stock					Additional Paid in Capital		Accumulated Other Comprehensive Income (Loss)			Accumulated Deficit			Total Stockholder’s Equity
	Number of Shares			Amount
Balance at December 31, 2010		53,067,057			531		204,774		—			(187,460	)		17,845
Adjustment for escrow shares		(12	)		—		—		—			—			—
Stock-based compensation—employee under ASC 718		—			—		689		—			—			689
Issuance of warrants		—			—		94		—			—			94
Change in unrealized gain (loss) on available-for-sale securities		—			—		—		(5	)		—			(5	)
Net loss		—			—		—		—			(7,483	)		(7,483	)
Balance at December 31, 2011		53,067,045		$	531	$	205,557	$	(5	)	$	(194,943	)	$	11,140
Stock-based compensation—employee under ASC 718		—			—		362		—			—			362
Issuance and sale of common stock under stock-based compensation plans		823,269			8		81		—			—			89
Issuance of warrants		—			—		48		—			—			48
Change in unrealized gain (loss) on available-for-sale securities		—			—		—		5			—			5
Net loss		—			—		—		—			(2,789	)		(2,789	)
Balance at December 31, 2012		53,890,314		$	539	$	206,048	$	—		$	(197,732	)	$	8,855

See accompanying notes to financial statements.

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diaDexus, Inc.

Notes to Financial Statements

1. Business Overview

Formation of the Company

diaDexus, Inc., a Delaware corporation (the “Company”), is a life sciences company focused on developing and commercializing proprietary cardiovascular diagnostic products addressing unmet needs in cardiovascular disease. The Company is the successor to a company initially formed as a joint venture between SmithKlineBeecham Corporation (now GlaxoSmithKline LLC (“GlaxoSmithKline”)) and Incyte Pharmaceuticals, Inc. Upon formation, SmithKlineBeecham Corporation granted the Company an exclusive license to certain diagnostic intellectual property, including Lp-PLA₂, an inflammatory marker of cardiovascular risk.

The Company’s products, PLAC^® Tests, provide information, over and above traditional risk factors, to help identify individuals at increased risk of suffering a heart attack or stroke. Some of these events may be reduced with earlier detection and more aggressive risk-reducing strategies, including treatment to lower LDL-cholesterol goals with statins. The Company has commercialized two PLAC Tests. One test measures the mass of circulating Lp-PLA₂ in the blood, the PLAC Test ELISA Kit. The PLAC Test ELISA Kit is the only blood test cleared by the US Food and Drug Administration (“the FDA”) to aid in assessing risk for both coronary heart disease and ischemic stroke associated with atherosclerosis. The second test, the PLAC Test for Lp-PLA₂ Activity, is an enzyme assay for the quantitative determination of Lp-PLA₂ activity levels in human plasma and serum on automated clinical chemistry analyzers, to be used in conjunction with clinical evaluation and patient risk assessment as an indicator of atherosclerotic cardiovascular disease. The Company is currently commercializing the PLAC Test ELISA Kit in the United States and Europe and the PLAC Test for Lp-PLA₂ Activity in Europe.

The Company has incurred substantial losses since the inception, and expects to continue to incur net losses for at least the next few years. To date, the Company has funded its operations primarily through private placements of preferred stock and debt financing, as well as through revenue generated from the sale of products.

In September 2011, the Company entered into a loan and security agreement with Comerica Bank, which was amended in September 2012 (Note 9). This loan contains various covenants. If the Company breaches any of these covenants or is unable to make a required payment of principal or interest, or experiences a material adverse change to its business, it could result in a default under the loan. Additionally, the Company is required to achieve revenues equal to at least 80% of monthly projections approved by its Board of Directors and provided to the bank, and failure to do so could result in a default under the loan. Upon the occurrence of an event of default under the loan, the bank could elect to declare all amounts outstanding to be immediately due and payable. If the Company is unable to repay those amounts, the bank could proceed against the collateral granted to them to secure such indebtedness. The Company has pledged substantially all of its assets, other than its intellectual property, as collateral under the loan. The Company’s future liquidity requirements may increase beyond currently expected levels if it fails to maintain compliance with its covenants. In order to meet the future liquidity needs, the Company may become reliant on additional equity and/or debt financing. Additional funding may not be available when needed or on terms acceptable to the Company. Any additional equity financing may be dilutive to stockholders, and debt financing, if available, may involve restrictive covenants. The Company cannot assure you that it will be able to raise any such additional funding.

PLAC ELISA Test

The Company introduced its initial PLAC Test ELISA Kit product in 2004. The PLAC Test ELISA Kit uses microplate technologies to measure levels of Lp-PLA₂. The infrastructure for performing microplate tests typically exists only at large and midsize clinical reference laboratories and large hospitals, which must be

41

certified by the US Department of Health and Human Services (“DHHS”) for high-complexity diagnostics under the Clinical Laboratory Improvement Amendments (“CLIA”). Smaller hospitals and clinics can order the PLAC Test ELISA Kit for their patients from those institutions that are able to perform microplate tests and offer the PLAC Test ELISA Kit. Patients can have their blood drawn at a local laboratory and shipped to the more advanced institutions for analysis. The Company markets the PLAC Test ELISA Kit in the United States, Europe, Israel and Mexico.

PLAC Activity Test

The Company introduced the PLAC Test for Lp-PLA₂ Activity in Europe in March 2012. This PLAC Test for Lp-PLA₂ Activity is an enzyme assay for the quantitative determination of Lp-PLA₂ activity levels in human serum or plasma. The PLAC Test for Lp-PLA₂ Activity allows for the measurement of Lp-PLA₂ using automated clinical chemistry analyzer technology. This clinical chemistry technology is more prevalent than the microplate technology used for the PLAC Test ELISA Kit and is less difficult to operate, such that a broader array of institutions can conduct the test. This group includes clinical laboratories and hospitals of all sizes and physician operated laboratories (“POLs”). In addition, the sample handling requirements are much less stringent for the PLAC Test for Lp-PLA₂ Activity compared to the PLAC Test ELISA Kit, allowing greater ease of use for those facilities processing specimens. The PLAC Test for Lp-PLA₂ Activity is currently available in Europe for use in conjunction with clinical evaluation and patient risk assessment as an indicator of atherosclerotic cardiovascular disease. The Company affixed the CE marking for this intended use by self-certification in January 2012. The PLAC Test for Lp-PLA₂ Activity is available on a commercial basis only in Europe. The Company plans to pursue 510(k) clearance for this test from the FDA and eventually commercialize this assay format in the United States if the Company obtains FDA clearance.

All references in these notes to financial statements to the “Company,” “we,” “us” and “our” refer to diaDexus, Inc. (f/k/a VaxGen, Inc.), a Delaware corporation, unless the context requires otherwise.

2. Summary of Significant Accounting Policies

Basis of Presentation

The accompanying financial statements have been prepared in accordance with US generally accepted accounting principles (“GAAP”). Certain amounts previously reported in the financial statements have been reclassified to conform to the current year presentation. Such reclassifications did not affect net loss, stockholders’ equity or cash flows.

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets, including assets held for sale, and liabilities at the date of the financial statements and the reported amount of revenues and expenses during the reporting period. Actual results may differ significantly from those estimates.

The Company considers the accounting policies related to revenue recognition, stock-based compensation, and income taxes to be the most critical accounting policies, because they require the Company to make estimates, assumptions and judgments about matters that are inherently uncertain.

Cash and Cash Equivalents

The Company considers all highly liquid investments purchased with original maturities of 90 days or less to be cash equivalents. Cash equivalents consist primarily of money market accounts and treasury securities.

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Restricted Cash

Restricted cash represents term deposits, which expire in December 2016, held at one financial institution as collateral for the leases of the Company’s facilities in South San Francisco.

Available-for-Sale Investments

The Company classifies its investments as available-for-sale. Available-for-sale investments are recorded at fair value based on quoted market prices, with the unrealized gains or losses included in accumulated other comprehensive income (loss) within stockholders’ equity, except that any unrealized losses which are deemed to be other than temporary are reflected in the statement of operations. Management assesses each of these investments on an individual basis to determine if the decline in fair value was other than temporary. The amortized cost of debt securities is adjusted for amortization of premiums and accretion of discounts to maturity. Such amortization or accretion is included in interest income. Realized gains or losses on sales of available-for-sale securities are reported in other income or expenses as incurred. The cost of securities sold is based on the specific identification method. Interest and dividends on available-for-sale securities are recorded in interest and other income.

Inventory

Inventories are stated as the lower of cost or market. Cost is determined using the first in, first out method. Market value is determined as the lower of replacement cost or net realizable value.

Property and Equipment

Property and equipment are recorded at cost and depreciated over their estimated useful lives using the straight-line method. Laboratory equipment, computers, software, and office furniture are depreciated over three years. Leasehold improvements are recorded at cost and amortized over the term of the lease or their useful life, whichever is shorter. Maintenance and repairs are expensed as incurred.

Segments

The Company has one reportable segment and uses one measurement of profitability to manage its business. All long-lived assets are maintained in the United States of America.

Revenue Recognition

Revenues are generated from licensing fees, royalties earned, product sales and contract arrangements, and recorded net of customer and distributor discounts. Revenue is recognized when the four basic criteria of revenue recognition are met: (i) a contractual agreement exists; (ii) delivery of product has occurred and risk of loss and title has transferred, transfer of technology (intellectual property) has been completed or services have been rendered; (iii) the fee is fixed or determinable; and (iv) collectability is reasonably assured.

License fee revenue including nonrefundable upfront fees, is deferred and recognized over the term of the underlying agreements. Royalty revenue is recognized when reportable product sales are confirmed. Revenue from technology licenses or other payments under collaborative agreements where the Company has a continuing obligation to perform is recognized as revenue over the expected period of the continuing performance obligation. The term of these underlying agreements ranges from two to ten years.

Accruals

In connection with the process of preparing financial statements, the Company is required to estimate accrued expenses. This process involves communicating with our applicable personnel to identify services that have been performed on the Company’s behalf and estimating the level of service performed and the associated cost

43

incurred for the service when the Company has not yet been invoiced or otherwise notified of actual cost. The majority of our service providers invoice us monthly in arrears for services performed. The Company makes estimates of accrued expenses as of each balance sheet date in the financial statements based on known facts and circumstances. The Company periodically confirms the accuracy of estimates with selected service providers and makes adjustments, if necessary.

Research and Development

Research and development expenses include internal and external costs. Internal costs include product development, regulatory support for technology, laboratory materials and supply costs and other technical support costs, including salaries and consultant fees. External expenses consist of sponsored research studies and investigator sponsored trials. Research and development costs are expensed as incurred.

Impairment of Long-Lived Assets

In accordance with Accounting Standards Codification (“ASC”) Subtopic 360-10, impairment of long-lived assets is measured or assessed when events or changes in circumstances indicate that the carrying amount of such assets may not be recoverable. Determination of recoverability is based on an estimate of undiscounted future cash flows resulting from the use of the asset and its eventual disposition. In the event that such cash flows are not expected to be sufficient to recover the carrying amount of the assets, the assets are written down to their estimated fair values. Long-lived assets to be disposed of are reported at the lower of carrying amount or fair value less costs to sell.

Stock-Based Compensation

The Company recognizes stock-based compensation expense for all stock-based payment awards in accordance with ASC 718, which requires the measurement and recognition of compensation expense for all stock-based payments made to employees and directors including employee stock option awards, based on estimated fair value. Stock-based compensation expense for expected-to-vest stock-based awards is valued under the single-option approach and amortized on a ratable basis, net of estimated forfeitures. The value of the portion of the award that is ultimately expected to vest is recognized as expense over the requisite service periods in the Company’s statements of operations for all periods presented.

The assumptions used in computing the fair value of stock-based awards reflect the Company’s best estimates, but involve uncertainties relating to market and other conditions, many of which are outside of the Company’s control. In addition, the Company’s estimate of future stock-based compensation expense will be affected by a number of items including the Company’s stock price, the number of stock options the Company’s board of directors may grant in future periods, as well as a number of complex and subjective valuation adjustments and the related tax effect.

The net loss for the years ended December 31, 2012 and 2011 include employee stock-based compensation expense of $362,000 and $689,000, respectively. As of December 31, 2012, the total unrecorded stock-based compensation expense for unvested stock options, net of expected forfeitures, was $794,000, which is expected to be amortized over a weighted-average period of 2.73 years.

Fair Value Measurements

In accordance with ASC Subtopic 820-10 the carrying amounts of certain financial instruments of the Company, including cash equivalents, marketable securities and liabilities, continue to be valued at fair value. ASC Subtopic 820-10 defines fair value and provides guidance for using fair value to measure assets and liabilities and is applicable whenever assets or liabilities are required or permitted to be measured at fair value.

The fair value estimates presented reflect the information available to the Company as of December 31, 2012. See Note 3, “Fair Value Measurements.”

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Deferred Rent

Deferred rent consists of the difference between cash payments and the recognition of rent expense on a straight-line basis for the buildings the Company leases. The leases provide for fixed increases in minimum annual rental payments and the total amount of rental payments due over the lease terms are being charged to rent expense ratably over the life of the leases.

Comprehensive Income (Loss)

Comprehensive income (loss) represents all changes in stockholders’ equity except those resulting from investments or contributions by stockholders. The Company’s unrealized gains on available-for-sale securities represent the component of comprehensive income (loss) excluded from the Company’s net loss.

Income Taxes

The Company accounts for income taxes under the asset and liability method. Under this method, deferred tax assets and liabilities are determined based on the difference between financial statement and tax bases of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to affect taxable income. Valuation allowances are established when necessary to reduce deferred tax assets to the amounts expected to be realized.

On January 1, 2009, the Company adopted ASC 740-10-25. For the years ended December 31, 2012 and 2011, the Company did not have any additional unrecognized tax benefits and there was no effect on its financial condition or results of operations as a result of adopting ASC 740-10-25. The Company’s practice is to recognize interest and/or penalties related to income tax matters in interest expense as incurred.

Recent Accounting Pronouncements

In December 2011, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2011-11, “Disclosure about Offsetting Assets and Liabilities.” ASU 2011-11 will require the Company to disclose information about offsetting and related arrangements to enable users of its financial statements to understand the effect of those arrangements on its financial positions. The new guidance is effective for annual reporting periods beginning on or after January 1, 2013, and interim periods within those annual periods. The disclosures are to be applied retroactively for all comparative periods presented. The Company does not expect that this guidance will have an impact on its financial position, results of operations or cash flows as it is disclosure-only in nature.

In May 2011, the FASB issued ASU 2011-04, “Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRSs”. ASU 2011-04 amended FASB guidance to converge fair value measurement and disclosure guidance about fair value measurement under US GAAP with International Financial Reporting Standards (“IFRS”). IFRS is a comprehensive series of accounting standards published by the International Accounting Standard Board. The amendment changes the wording used to describe many of the requirements in the US GAAP for measuring fair value and for disclosing information about fair value measurements. For many of the requirements, the FASB does not intend for the amendment to result in a change in the application of the requirements in the current authoritative guidance.

In June 2011, the FASB issued ASU 2011-05, “Presentation of Comprehensive Income”. The new standard eliminated the alternative to report other comprehensive income and its components in the statement of changes in equity. Under the new standard, companies can elect to present items of net income and other comprehensive income in one continuous statement or in two separate, but consecutive statements. The Company adopted the provisions of this guidance during the first quarter 2012.

In February 2013, the FASB issued ASU 2013-02, “Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income.” ASU 2013-02 amends the accounting guidance for presentation of comprehensive income to improve the reporting of reclassifications out of accumulated other comprehensive

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income. The amendments do not change the current requirements for reporting net income or other comprehensive income, but do require an entity to provide information about the amounts reclassified out of accumulated other comprehensive income by component. In addition, an entity is required to present, either on the face of the statement where the net income is presented or in the notes, significant amounts reclassified out of accumulated other comprehensive income by the respective line items of net income but only if the amount reclassified is required under GAAP to be reclassified to net income in its entirety in the same reporting period. For other amounts that are not required under GAAP to be reclassified in their entirety to net income, an entity is required to cross-reference to other disclosures required under GAAP that provide additional detail about these amounts. For public companies, these amendments are effective prospectively for reporting periods beginning after December 15, 2012. Other than a change in presentation, the Company does not believe the adoption of this guidance will have a material impact on the Company’s financial statements.

3. Cash, Cash Equivalents and Investments

As part of its cash management program, the Company maintains a portfolio of marketable investment securities. The securities are investment grade and generally mature within one year and may include tax exempt securities and certificates of deposit. The fair value of substantially all securities is determined by quoted market prices. The Company maintains its cash in bank accounts, which at times may exceed federally insured limits. The Company has not experienced any losses on such accounts. The Company considers all highly liquid investments purchased with an original maturity of 90 days or less at the time of purchase to be cash equivalents.

The following is a summary of cash, cash equivalents, and available-for-sale securities as of December 31, 2012 and 2011 (in thousands):

	December 31, 2012
	Cost Basis		Unrealized Gains		Unrealized Losses		Estimated Fair Value
Cash and cash equivalents:
Cash	$	6,054	$	—	$	—	$	6,054
Money market funds		6,797		—		—		6,797
Total cash and cash equivalents	$	12,851	$	—	$	—	$	12,851
Available-for-sale marketable securities:
Certificate of deposits		747		—		—		747
Total available-for-sale marketable securities	$	747	$	—	$	—	$	747

	December 31, 2011
	Cost Basis		Unrealized Gains		Unrealized Losses			Estimated Fair Value
Cash and cash equivalents:
Cash	$	3,243	$	—	$	—		$	3,243
Money market funds		7,241		—		—			7,241
Total cash and cash equivalents	$	10,484	$	—	$	—		$	10,484
Available-for-sale marketable securities:
Commercial paper		3,147		—		(1	)		3,146
Corporate notes		2,850		—		(4	)		2,846
US government agency obligations		750		—		—			750
Total available-for-sale marketable securities	$	6,747	$	—	$	(5	)	$	6,742

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Fair Value Measurements

In accordance with ASC 820, the Company discloses and recognizes the fair value of its assets and liabilities using a hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The guidance establishes three levels of the fair value hierarchy as follows:

Level 1: Observable inputs, such as quoted prices in active markets for identical assets or liabilities;

Level 2: Observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities, quoted prices in markets that are not active, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities;

Level 3: Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.

The following table represents the Company’s fair value hierarchy for its financial assets (cash equivalents and investments) measured at fair value on a recurring basis as of December 31, 2012 and 2011 (in thousands):

			Fair Value Measurements
	Balance as of December 31, 2012		Quoted Prices In  Active Markets for Identical  Assets Level 1		Significant other Observable Inputs Level 2		Significant Unobservable Inputs Level 3
Assets:
Cash	$	6,054	$	6,054	$	—	$	—
Money market funds		6,797		6,797		—		—
Certificates of deposit		747		—		747		—
Restricted cash		1,400		—		1,400		—
	$	14,998	$	12,851	$	2,147	$	—

			Fair Value Measurements
	Balance as of December 31, 2011		Quoted Prices In Active Markets for Identical Assets Level  1		Significant other Observable Inputs Level 2		Significant Unobservable Inputs Level 3
Assets:
Cash	$	3,243	$	3,243	$	—	$	—
Money market funds		7,241		7,241		—		—
Commercial paper		3,146		—		3,146		—
Corporate notes		2,846		—		2,846		—
US government agency obligations		750		—		750		—
Restricted cash		1,800		—		1,800		—
	$	19,026	$	10,484	$	8,542	$	—

The fair value of the notes payable is valued based on Level 2 inputs and approximates its book value. The fair value of the notes payable is based on the present value of expected future cash flows and assumptions about current interest rates and the credit worthiness of the Company. As of December 31, 2012, the notes payable is carried at face value of $5.0 million less any unamortized debt discount.

The carrying value of other financial instruments, including cash, accounts receivable, accounts payable and other payables, approximates fair value due to their short maturities.

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4. Inventory

Inventory consists of the following (in thousands):

	December 31, 2012		December 31, 2011
Finished goods	$	61	$	71
Raw materials		73		46
	$	134	$	117

5. Assets Held For Sale

Prior to the period reflected in this report, the Company had committed to a plan to sell the equipment related to its manufacturing facility and had determined that these assets met the criteria for, and had been classified as, “held for sale” in accordance with ASC Topic 360. The market approach was used in determining the fair market value of these assets.

Total assets held for sale are as follows (in thousands):

			Fair Value Measurements Using
Description	December 31, 2012		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Year Ended December 31, 2012 Total Gains (Losses)
Assets held for sale	$	300	$	—	$	—	$	300	$	—

			Fair Value Measurements Using
Description	December 31, 2011		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Year Ended December 31, 2011 Total Gains (Losses)
Assets held for sale	$	304	$	—	$	—	$	304	$	—

The measurement of the assets held for sale at fair value incorporated significant unobservable inputs as a result of a lack of any available observable market information to determine the fair value. The calculation of the fair value of assets held for sale used a market valuation technique that relied on Level 3 inputs, including quoted prices for similar assets. The Company is committed to selling these assets and has signed an agreement to sell the assets for $695,000, net of disposal costs. As of December 31, 2012, the Company had not transferred to the purchaser any of the assets available for sale. Any gain or loss resulting from the sale of the assets held for sale at December 31, 2012 will be included in future period statements of comprehensive loss as the assets are transferred to the purchaser.

6. Property, Plant and Equipment

Property and equipment are recorded at cost. Expenditures for major additions and improvements are capitalized, and maintenance and repairs are charged to expense as incurred. When property and equipment are retired or otherwise disposed of, the cost and accumulated depreciation are removed from the accounts and any resulting gain or loss is included in the results of operations for the respective period. Depreciation is provided over the estimated useful lives of the related assets using the straight-line method for financial statement purposes. The Company uses other depreciation methods for tax purposes where appropriate. The estimated useful lives for significant property and equipment categories are as follows:

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Office and laboratory equipment	3 years
Computer equipment and software	3 years
Leasehold improvements	Term of lease agreement

The following is a summary of property and equipment at cost less accumulated depreciation as of December 31, 2012 and 2011 (in thousands):

	December 31, 2012			December 31, 2011
Laboratory equipment	$	3,149		$	5,202
Leasehold improvements		602			8,283
Computer and software		361			1,916
Furniture and fixtures		180			835
		4,292			16,236
Less: Accumulated depreciation and amortization		(3,042	)		(14,886	)
	$	1,250		$	1,350

Depreciation and amortization expense for the years ended December 31, 2012 and 2011 was $0.5 million and $0.6 million, respectively.

7. Total Accrued and Other Current Liabilities

Other current liabilities include the following as of December 31, 2012 and 2011 (in thousands):

	December 31, 2012		December 31, 2011
Accrued payroll and related expenses	$	1,220	$	1,351
Accrued royalty expense		118		207
Property and equipment		27		200
Accrued sales tax		60		126
Accrued audit fees		73		120
Accrued collaborative research obligations		22		96
Accrued consulting expenses		122		69
Accrued legal and patent expense		87		35
Other current liabilities		224		265
Total accrued and other current liabilities	$	1,953	$	2,469

8. Concentration of Credit Risk

Revenues from the following distributor and large laboratory customers represented a significant portion of total revenue for the years ended December 31, 2012 and 2011 and accounts receivable as of December 31, 2012 and 2011.

	Revenue						Accounts Receivable
	December 31, 2012			December 31, 2011			December 31, 2012			December 31, 2011
Customer A		44	%		34	%		34	%		44	%
Customer B		13	%		10	%		14	%		13	%
Customer C		6	%		—	%		2	%		—	%
Customer D		6	%		—	%		10	%		—	%
Customer E		3	%		11	%		—	%		15	%
Customer F		—	%		26	%		—	%		20	%
Customer G		6	%		—	%		10	%		—	%

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9. Notes Payable

In September 2011, the Company entered into a loan and security agreement with Comerica Bank to borrow up to $5,000,000, the entire amount of which was borrowed at a rate of 5.25% per annum. The loan was payable in 36 monthly installments which were to begin in October 2012, with interest only payments being made from October 2011 to September 2012. The Company paid an initial fee of $25,000 for access to this loan and will be required to pay an additional fee of $100,000 following repayment of the loan. The Company may prepay all, but not less than all, of the loaned amount with 30 days advance notice to the bank. In connection with the loan, the Company issued a warrant to the bank to purchase 480,769 shares of the Company’s common stock (Note 13).

The term loan is secured by a first priority security interest on all of the Company’s assets excluding the Company’s intellectual property (except for rights to payment related to the sale, licensing or disposition of such intellectual property rights) and property not assignable without consent by a third party or with respect to which granting a security interest is contrary to law. In addition, the Company has agreed not to sell, assign, transfer, pledge or otherwise encumber its intellectual property to another entity without the bank’s approval or consent, subject to certain exceptions.

The loan and security agreement contains customary representations and warranties, covenants, events of defaults and termination provisions. The affirmative covenants include, among other things, that the Company timely file taxes, maintain good standing and government compliance, achieve at least 80% of specified monthly revenue projections calculated on a trailing three months basis, maintain primary depository and operating accounts with the bank, maintain liability and other insurance, and provide security interests to the bank in the collateral of any subsidiary formed or acquired by the Company in the future. The negative covenants provide, among other things, that without the prior consent of the bank, the Company may not dispose of certain assets, engage in certain business combinations or acquisitions, incur additional indebtedness or encumber any of the Company’s property (subject to certain exceptions), pay dividends on the Company’s capital stock or make prohibited investments. The loan and security agreement provides that an event of default will occur if, among other triggers, (1) the Company defaults in the payment of any amount payable under the agreement when due, (2) there occurs any circumstance or circumstances that could reasonably be expected to result in a material adverse effect on the Company’s business, operations or condition, or on the Company’s ability to perform its obligations under the agreement, (3) the Company becomes insolvent, (4) the Company undergoes a change in control or (5) the Company breaches any negative covenants or certain affirmative covenants in the agreement or, subject to a cure period, otherwise neglects to perform or observe any material item in the agreement. The repayment of the term loan may be accelerated, at the option of the bank, following the occurrence of an event of default, which would require the Company to pay to the bank an amount equal to the sum of: (i) all outstanding principal plus accrued interest, (ii) the final payment, plus (iii) all other sums, that shall have become due and payable but have not been paid, including interest at the default rate with respect to any past due amounts. As of December 31, 2012, the Company was in compliance with all the covenants.

On September 11, 2012, the Company and Comerica Bank entered into an Amended and Restated Loan and Security Agreement (the “Amendment”). The Amendment extends the interest-only payment period for an additional twelve months, through September 23, 2013, and extends the maturity date for an additional twelve months, to September 23, 2016. The Amendment also reduces the monthly principal payments by amortizing the loan over a 48 month basis, resulting in an increased balloon payment of principal on the maturity date. The Company paid a fee of $50,000 for access to the Amendment. Pursuant to the Amendment, the Company issued a warrant to Comerica to purchase 168,919 shares of its common stock. The warrant has an exercise price of $0.37 per share and will expire on September 11, 2019 (Note 13).

The Company accounted for this amendment as a debt modification since the terms of the original and the amended Loan and Security Agreements were not substantially different, and the present value of cash flows of the modified instrument was within 10% of the cash flows of the original debt instrument. Accordingly, debt discount of $48,000 associated with the Amended Loan and security Agreement, and unamortized debt discount

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of $72,000 from the Original Term Loan will be amortized as an adjustment of interest expense over the term of the Amended Loan and Security Agreement using the effective interest method.

At December 31, 2012, future minimum payments for the notes payable are as follows (in thousands):

2013	$	574
2014		1,466
2015		1,400
2016		2,357
Total minimum payments		5,797
Less: Amount representing interest		(797	)
Present value of minimum payments		5,000
Less: Unamortized debt discount		(107	)
Notes payable, net		4,893
Less: Notes payable, current portion		(272	)
Non-current portion of notes payable	$	4,621

10. Common Stock

On July 15, 2011, the Company amended its certificate of incorporation to increase the number of authorized shares of its common stock, par value of $0.01 per share, to 100,000,000. The holders of common stock are entitled to receive dividends, as, when and if declared by the Company’s Board of Directors out of funds legally available for distribution, subject to the restriction on dividends contained in the Company’s loan agreement with Comerica bank (Note 9).

11. Basic and Diluted Loss per Share

Basic net loss per common share is based on the weighted average number of common shares outstanding during the period. Diluted net loss per common share is based on the weighted average number of common shares and other dilutive securities outstanding during the period, provided that including these dilutive securities do not increase the net loss per share.

The effect of the options and warrants was anti-dilutive for the years ended December 31, 2012 and 2011. The following table shows the total outstanding securities considered anti-dilutive and therefore, excluded from the computation of diluted net loss per share (in thousands):

	As of December 31,
	2012		2011
Options to purchase common stock		8,963		9,188
Warrants to purchase common stock		650		481
Total		9,613		9,669

12. Stock Based Compensation

Stock Option Plans

2012 Equity Incentive Award Plan

The Company’s stockholders approved the 2012 Equity Incentive Award Plan (the “2012 Plan”) at the 2012 Annual Meeting of Stockholders on May 17, 2012 and approved 3,000,000 shares of common stock authorized for issuance. On May 17, 2012, all stock options that were issued and issuable in the 1996 Plan, the Director Plan

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and outside of plans were transferred to the 2012 Plan. Options granted under the 2012 Plan may be designated as qualified or nonqualified at the discretion of the Compensation Committee of the Board of Directors. Generally, shares issuable upon exercise of options vest ratably over four years, beginning one year from the date of grant; however, options can vest upon grant. Option terms expire no later than 10 years from the date of grant, or 5 years from the date the option is granted to a greater than 10% stockholder. The stock options are exercisable at not less than the fair market value of the stock at the date of grant, or not less than 110% of the fair market value of the stock at the date of grant if granted to a greater than 10% stockholder. As of December 31, 2012, options for 8,963,226 shares were outstanding and 3,793,751 shares were available for grant under the 2012 Plan.

1996 Stock Option Plan

The 1996 Stock Option Plan (the “1996 Plan”) initially had 4,750,000 shares of common stock authorized for issuance and a provision that automatically increased this number by 3.5% of the issued and outstanding common stock on the last trading day of the December immediately preceding each fiscal year through January 2007. Options granted under the 1996 Plan were designated as qualified or nonqualified at the discretion of the Compensation Committee of the Board of Directors. Generally, shares issuable upon exercise of options vest ratably over four years, beginning one year from the date of grant; however, options could vest upon grant. All options expire no later than 10 years from the date of grant. Qualified stock options are exercisable at not less than the fair market value of the stock at the date of grant, and nonqualified stock options are exercisable at prices determined at the discretion of the Board of Directors, but not less than 85% of the fair market value of the stock at the date of grant. On May 17, 2012, 6,398,904 shares that were subject to awards under this plan and 1,555,492 shares which were available for issuance under this plan were transferred to the 2012 Equity Incentive Award Plan.

1998 Director Stock Option Plan

The 1998 Director Stock Option Plan (the “Director Plan”) for non-employee directors had 300,000 shares of common stock authorized for issuance. On May 17, 2012, 170,000 shares that were subject to awards under this plan and 130,000 shares which were available for issuance under this plan were transferred to the 2012 Equity Incentive Award Plan upon stockholder approval.

The following table summarizes stock compensation expense related to employee stock options and employee stock based compensation for the years ended December 31, 2012 and 2011 which was incurred as follows (in thousands):

	Years Ended December  31,
	2012		2011
Stock compensation expense:
Product costs	$	12	$	10
Research and development		73		98
Sales and marketing		73		55
General and administrative		204		526
Total stock compensation expense	$	362	$	689

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Valuation Assumptions

The compensation expense related to stock options recognized was determined using the Black-Scholes option valuation model. Option valuation models require the input of subjective assumptions and these assumptions can vary over time. The weighted average assumptions used were as follows:

	Years ended December 31,
	2012			2011
Dividend yield		0.0	%		0.0	%
Risk-free interest rate		0.54	%		0.75	%
Expected volatility		95.97	%		94.22	%
Forfeiture rate		13.24	%		11.57	%
Expected term (years)		4.12			4.27

The expected stock price volatility assumption was determined by examining the historical volatilities for industry peers, as the Company did not have any significant trading history for the Company’s common stock. The Company will continue to analyze its own historical stock price volatility as more historical data for the Company’s common stock becomes available. The risk-free interest rate assumption is based on the US Treasury instruments whose term was consistent with the expected term of the Company’s stock options. The expected dividend assumption is based on the Company’s history and expectation of dividend payouts. Different estimates of volatility and expected term could materially change the value of an option and the resulting expense. The expected term of stock options represents the weighted-average period the stock options are expected to remain outstanding. The Company considers option vesting terms, contractual terms and historical information to develop reasonable expectations about future exercise patterns and post-vesting employment termination behavior.

Employee Stock-Based Compensation

The table below presents information related to stock option activity, net of options previously exercised:

	Number of Options Outstanding			Weighted- Average Exercise Price		Weighted- Average Remaining Contractual Term (In years)		Aggregate Intrinsic Value
Outstanding as of December 31, 2010		6,948,517		$	0.90
Options granted		4,330,347			0.27
Options exercised		—			—
Options cancelled/forfeited/expired		(2,091,275	)		1.46
Outstanding as of December 31, 2011		9,187,589			0.48
Options granted		2,669,190			0.32
Options exercised		(2,247,419	)		0.26
Options cancelled/forfeited/expired		(646,134	)		0.72
Outstanding as of December 31, 2012		8,963,226		$	0.47		8.04	$	589,690
Exercisable as of December 31, 2012		3,935,510		$	0.69		6.89	$	284,992
Vested and expected to vest as of December 31, 2012		8,157,390		$	0.49		7.94	$	542,952

The weighted-average grant-date fair value of stock options granted during the years ended December 31, 2012 and 2011 was $0.21 and $0.18, respectively. The total intrinsic value of stock options exercised during the year ended December 31, 2012 was $208,095, no stock options were exercised in 2011. The total fair value of shares vested during the years ended December 31, 2012 and 2011 was $384,067 and $574,881, respectively.

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The following table summarizes information relating to stock options outstanding as of December 31, 2012:

	Options Outstanding						Options Exercisable
Range of Exercise Price	Number Outstanding		Weighted Average Remaining Contractual Life (In Years)		Weighted Average Exercise Price		Number Exercisable		Weighted Average Exercise Price
$0.14 – $0.14		64,125		7.16	$	0.14		27,875	$	0.14
$0.25 – $0.25		1,542,000		8.74		0.25		436,583		0.25
$0.26 – $0.26		3,051,577		6.84		0.26		2,070,748		0.26
$0.28 – $0.29		2,164,199		8.71		0.28		752,921		0.29
$0.33 – $0.36		1,651,325		9.42		0.35		329,258		0.34
$0.39 – $15.71		490,000		5.74		3.70		318,125		5.49
$0.14 – $15.71		8,963,226		8.04	$	0.47		3,935,510	$	0.69

The estimated fair value of grants of stock options to non-employees of the Company is charged to expense in the financial statements. These options vest in the same manner as the employee options granted under the option plan as described above.

Stock based compensation expense recognized during the years ended December 31, 2012 and 2011 includes compensation expense for stock based awards granted to employees based on the grant date fair value estimated in accordance with the provisions of ASC 718. As of December 31, 2012, the total remaining unrecognized cost of approximately $0.8 million is expected to be recognized over a weighted-average period of 2.73 years.

Shares Reserved for Future Issuance

The Company had reserved shares of common stock for future issuance as of December 31, 2012 and 2011 as follows:

	As of December 31,
	2012		2011
Options to purchase common stock		8,963,226		9,187,589
Warrants to purchase common stock		649,688		480,769
Shares available for option grants		3,793,751		1,756,807
Total		13,406,665		11,425,165

13. Stock Warrants

The Company issues warrants to investors as part of its overall financing strategy and to vendors in order to reduce costs. In connection with the loan and security agreement the Company entered into with Comerica bank (Note 9) in September 2011, the Company issued a warrant to purchase 480,769 shares of the Company’s common stock, at an exercise price of $0.26 per share. The warrant expires in September 2018. The initial fair value of the warrant was calculated using the Black-Scholes option pricing model and the following assumptions: volatility of 88.03%, risk-free interest rate of 1.36%, exercise price of $0.26 and an expected life of 7 years. The fair value of the warrant was determined to be $94,000 and was recorded as equity in additional paid-in-capital and a discount to the carrying value of the loan. Through August 2012, the discount was amortized to interest expense using the effective interest rate method over the 48-month term of the original loan. As of September 2012, and in connection with the Amended and Restated Loan and Security Agreement between the Company and Comerica Bank (the “Amendment”, Note 9), the unamortized discount will be recognized over the remaining term of the amended loan, which matures in September 2016.

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In connection with the Amendment the Company issued a warrant to purchase 168,919 shares of the Company’s common stock, at an exercise price of $0.37 per share. This warrant expires in September 2019. The initial fair value of the warrant was calculated using the Black-Scholes option pricing model and the following assumptions: volatility of 89.87%, risk-free interest rate of 1.03%, exercise price of $0.37 and an expected life of 7 years. The fair value of the warrant was determined to be $48,000 and was recorded as equity in additional paid-in-capital and a discount to the carrying value of the loan. The discount is being amortized to interest expense using the effective interest rate method over the remaining term of the amended loan which matures in September 2016.

As of December 31, 2012, there were warrants outstanding to purchase 649,688 shares of the Company’s common stock, with a weighted-average exercise price of $0.29 per share and an aggregate exercise price of $0.2 million.

The following table summarizes information about all warrants outstanding as of December 31, 2012:

	Warrants Outstanding and Exercisable
Exercise Price	Number Outstanding		Weighted Average Remaining Contractual Life (In Years)		Weighted Average Exercise Price
$0.26		480,769		5.73	$	0.26
$0.37		168,919		6.73	$	0.37
		649,688		5.99	$	0.29

14. Leases, Commitments and Contingencies

The Company leases an office and laboratory facility (the “349 Facility”) under a long-term, non-cancelable operating lease agreement, which expires in December 2016. The Company also leased another office and laboratory facility (the “343 Facility”), and subleased a portion of that facility, until the Company’s underlying lease for that facility expired on January 1, 2012. Upon expiration of the 343 Facility lease, restricted cash of $400,000 previously pledged as security for this lease was released in 2012.

In connection with its leased facilities, the Company recognized a liability for asset retirement obligations representing the present value of estimated remediation costs to be incurred at the expiration of the 349 Facility lease. The following table describes changes to the Company’s asset retirement obligation liability for the years ended December 31, 2012 and 2011 (in thousands):

	Years Ended December 31,
	2012		2011
Asset retirement obligation, beginning of year	$	273	$	247
Accretion expense		29		26
Asset retirement obligation, end of year	$	302	$	273

In 2010, the Company recorded a lease obligation associated with the 349 Facility, which contained a lease payment that exceeded current market rates. Accordingly, the Company recognized a $4.1 million unfavorable lease obligation in 2010. The Company amortizes the unfavorable lease obligation using the effective interest rate method. The carrying amount, net of accumulated amortization, of the unfavorable lease liability, was $3.1 million as of December 31, 2012.

Rent expense for the Company’s facilities was $2.0 million and $3.1 million for the years ended December 31, 2012 and 2011, respectively. The terms of the lease for the 349 Facility provides for rental payments on a

55

graduated scale. The Company recognizes rent expense on a straight-line basis over the lease period. Deferred rent of $363,000 and $266,000 as of December 31, 2012 and 2011, respectively, is included in the accompanying balance sheets.

Rental income from the sublease of the 343 Facility was none and $910,000 for the years ended December 31, 2012 and 2011, respectively. This rental income was included as a reduction to operating expenses for the year ended December 31, 2011 in the statements of comprehensive loss.

At December 31, 2012, future minimum lease payments under non-cancelable operating leases are as follows (in thousands):

	Operating Leases
2013	$	2,505
2014		2,581
2015		2,658
2016		2,738
2017		—
Total minimum lease payments	$	10,482

Legal Proceedings

The Company is from time to time subject to various claims and legal actions during the ordinary course of business. The Company believes that there are currently no claims or legal actions that would reasonably be expected to have a material adverse effect on its results of operations or financial condition.

15. Income Taxes

Provision for Income Tax

The Company files US Federal and California state tax returns and the tax provision is composed as follows (in thousands):

	December 31,
	2012		2011
Current Tax Expense:
Federal	$	—	$	—
State		2		1
Total current tax expense		2		1
Deferred Tax Expense:
Federal		—		—
State		—		—
Total deferred tax expense		—		—
Net tax provision (benefit)	$	2	$	1

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The differences between the US statutory tax rate and the Company’s effective tax rate are as follows:

	December 31,
	2012			2011
Statutory rate		34.0	%		34.0	%
State taxes		(39.1	)		5.6
True-up – Federal taxes		(0.1	)		76.6
True-up – State taxes		(93.9	)		13.4
Permanent differences		(4.0	)		(1.1	)
Other		(3.1	)		3.1
Change in valuation allowance		106.2			(131.6	)
Effective tax rate		0.0	%		0.0	%

As of December 31, 2012, the Company had approximately $227 million of federal, $160 million of California, and $7 million of other state net operating loss carryforwards available to offset future taxable income. These loss carryforwards begin to expire in 2019 for federal purposes, in 2016 for California purposes and in 2013 for other state purposes.

As of December 31, 2012, the Company had credit carryforwards of approximately $5.3 million and $5.1 million available to reduce future taxable income, if any, for federal and California state income tax purposes, respectively. The federal R&D credit carryforwards expire starting 2016 and California credits can be carried forward indefinitely.

The effects of changes in tax rates and laws are recognized in the period new legislation is enacted. Furthermore, the reinstatement of an expired provision in a later reporting period requires companies to wait until the date the law is enacted to reflect the effect of the tax law changes into the annual estimated effective tax rate starting on the first interim reporting period that includes the enactment date. The impact of these changes, on both the annual effective tax rate and on deferred taxes, are to be reported as a component of tax expense related to continuing operations. Although the Company incurred qualified research expenses in 2012 that would generate a federal R&D credit, the deferred tax benefit of these credits is not recorded as of December 31, 2012 because the federal provisions extending the R&D credit were not enacted until January 2013. Therefore, the available federal R&D credits will be measured during the first quarter of 2013 for financial reporting purposes.

Based on the weight of available evidence, including cumulative losses since inception and expected future losses, the Company has determined that it is more likely than not that the deferred tax asset amount will not be realized and therefore a full valuation allowance has been provided on net deferred tax assets.

As of December 31, 2012 and 2011, the Company had deferred tax assets of approximately $109.2 million and $112.0 million, respectively, which have been fully offset by a valuation allowance. The net valuation allowance decreased by approximately $2.8 million in the year ended December 31, 2012 and increased by $8.5 million during the year ended December 31, 2011. Deferred tax assets primarily relate to net operating loss and research tax credit carryforwards.

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The tax effects of temporary differences and carryforwards that give rise to deferred tax assets are as follows (in thousands):

	December 31,
	2012			2011
Deferred tax assets:
Accruals and reserves	$	1,794		$	1,864
Fixed assets		2,563			4,648
Deferred research expense		5,592			9,782
Stock options		3,798			3,922
Net operating loss carryforwards		86,663			83,025
Research tax credit carryforwards		8,796			8,762
Other		7			21
Total deferred tax assets		109,213			112,024
Less: Valuation allowance		(109,213	)		(112,024	)
Net deferred tax assets	$	—		$	—

Under the provisions of Sections 382 and 383 of the Internal Revenue Code, a change of control, as defined, may impose an annual limitation on the amount of the Company’s net operating loss and tax credit carryforwards, and other tax attributes, that can be used to reduce future tax liabilities. As a result of the Reverse Merger, certain of the Company’s Old diaDexus tax attributes are subject to an annual limitation of $240,000 for federal and state purposes.

Uncertain Tax Positions

Effective January 1, 2009, the Company adopted ASC 740-10 (formerly known as FIN 48), Accounting for Income Taxes, guidance that addresses the recognition, measurement, and disclosure of uncertain tax positions. The Company performed a full analysis of uncertain tax positions at December 31, 2010. The Company has no new uncertain tax positions for 2012.

As of December 31, 2011, the Company had approximately $1.4 million of unrecognized tax benefits relating to the reserve on R&D credits. In 2012, this amount was increased by $9,000 as the result of a reserve placed on California R&D credit carryforwards from tax years ended December 31, 2012. As the Company has not utilized any of these credits, no reserve is recorded on the financial statements.

The following table reflects the changes in the gross unrecognized tax benefits for the years ended December 31 (in thousands):

	2012		2011
Balance at January 1	$	1,366	$	1,731
Increase for prior year positions		9		158
Decrease for prior year positions		—		(523	)
Balance at December 31	$	1,375	$	1,366

The Company is currently not subject to any income tax examinations. Due to the Company’s losses, generally all years remain open.

16. Related Party Transactions

In September 2011, the Company entered into a consulting agreement with director James Panek to perform consulting services for the Company. Amounts paid under this agreement were none and $30,000 for the years ended December 31, 2012 and 2011, respectively.

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Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

None

Item 9A. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

We have performed an evaluation under the supervision and with the participation of our management, including our Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”), of the effectiveness of our disclosure controls and procedures, as defined in Rule 13a-15(e) under the Exchange Act. Based on that evaluation, our management, including our CEO and CFO, concluded that our disclosure controls and procedures were effective as of December 31, 2012 to provide reasonable assurance that information required to be disclosed by us in the reports filed or submitted by us under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and that such information is accumulated and communicated to management, including our CEO and CFO, as appropriate to allow timely decisions regarding required disclosures.

Management’s Annual Report on Internal Control over Financial Reporting

Management is responsible for establishing and maintaining adequate internal control over financial reporting for the Company. Internal control over financial reporting is defined in Exchange Act Rules 13a-15(f) and 15d-15(f) as a process designed by, or under the supervision of, the Company’s principal executive and financial officers, or persons performing similar functions, and effected by the Company’s board of directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.

Our internal control over financial reporting includes those policies and procedures that:

• Pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of the Company;

• Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the Company are being made only in accordance with authorizations of management and directors of the Company; and

• Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Management assessed the effectiveness of our internal control over financial reporting as of December 31, 2012. In making this assessment, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission in Internal Control-Integrated Framework. Based on our assessment and those criteria, our management concluded that the Company maintained effective internal control over financial reporting as of December 31, 2012.

Changes in Internal Controls

There was no change in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that occurred during the quarterly period ended December 31, 2012 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

59

Inherent Limitations on Effectiveness of Controls

Internal control over financial reporting may not prevent or detect all errors and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Also, projections of any evaluation of effectiveness of internal control to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. Accordingly, our disclosure controls and procedures are designed to provide reasonable, not absolute, assurance that the objectives of our disclosure control system are met and, as set forth above, our principal executive officer and principal financial officer have concluded, based on their evaluation as of the end of the period covered by this report, that our disclosure controls and procedures were effective at the reasonable assurance level to ensure the information required to be disclosed in this report is recorded, processed, summarized, and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms.

Item 9B. Other Information

None

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PART III

Item 10. Directors, Executive Officers and Corporate Governance

The information required by this Item will be set forth in the Company’s proxy statement to be filed with the Securities and Exchange Commission within 120 days after the Company’s fiscal year end and is incorporated herein by reference.

Item 11. Executive Compensation

The information required by this Item will be set forth in the Company’s proxy statement to be filed with the Securities and Exchange Commission within 120 days after the Company’s fiscal year end and is incorporated herein by reference.

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

The information required by this Item will be set forth in the Company’s proxy statement to be filed with the Securities and Exchange Commission within 120 days after the Company’s fiscal year end and is incorporated herein by reference.

Item 13. Certain Relationships and Related Transactions and Director Independence

The information required by this Item will be set forth in the Company’s proxy statement to be filed with the Securities and Exchange Commission within 120 days after the Company’s fiscal year end and is incorporated herein by reference.

Item 14. Principal Accountant Fees and Services

The information required by this Item will be set forth in the Company’s proxy statement to be filed with the Securities and Exchange Commission within 120 days after the Company’s fiscal year end and is incorporated herein by reference.

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PART IV

Item 15. Exhibits and Financial Statements Schedules

(a) The following documents are included as part of this Annual Report on Form 10-K.

(1) Index to Financial Statements.

Included in Part II of this Report:

	Page in Form 10-K
Report of Independent Registered Public Accounting Firm		36
Balance Sheets at December 31, 2012 and 2011		37
Statements of Comprehensive Loss for the years ended December 31, 2012 and 2011		38
Statements of Cash Flows for the years ended December 31, 2012 and 2011		39
Statements of Shareholders’ Equity for the years ended December 31, 2012 and 2011		40
Notes to Financial Statements		41

(2) Financial Statement Schedules.

All financial statement schedules are omitted because they are not applicable or not required or because the required information is included in the financial statements or notes thereto.

(3) Exhibits.

The following exhibits are filed as part of this report:

Exhibit	Description
2.1*	Agreement and Plan of Merger and Reorganization, dated May 28, 2010, by and among VaxGen, Inc., Violet Acquisition Corporation, Violet Acquisition LLC, diaDexus, Inc. and John E. Hamer, as the agent of diaDexus, Inc.’s stockholders (incorporated by reference to Exhibit 2.1 to the registrant’s Current Report on Form 8-K (file no. 0-26483), filed on June 1, 2010)
2.2	Amendment No. 1 to Agreement and Plan of Merger and Reorganization, dated June 24, 2010, by and among VaxGen, Inc., Violet Acquisition Corporation, Violet Acquisition LLC, diaDexus, Inc., and John E. Hamer as the agent of diaDexus, Inc’s stockholders (incorporated by reference to Exhibit 2.1 to the registrant’s Current Report on Form 8-K (file no. 0-26483), filed on June 28, 2010)
3.1	Restated Certificate of Incorporation of the registrant (incorporated by reference to Exhibit 3.1 to the registrant’s Quarterly Report on Form 10-Q (file no. 0-26483) for the fiscal quarter ended September 30, 2010, filed on November 15, 2010)
3.2	Certificate of Change of Registered Agent and Registered Office (incorporated by reference to Exhibit 3.1 to the registrant’s Current Report on Form 8-K (file no. 0-26483), filed on January 25, 2011)
3.3	Amendment to Restated Certificate of Incorporation (incorporated by reference to Exhibit 3.1 to the registrant’s Current Report on Form 8-K (file no. 0-26483), filed on July 18, 2011)
3.4	Amended and Restated Bylaws of the registrant (incorporated by reference to Exhibit 3.2 to the registrant’s Current Report on Form 8-K (file no. 0-26483), filed on November 5, 2010)
4.1	Specimen Stock Certificate for Common Stock of diaDexus, Inc. (incorporated by reference to Exhibit 4.1 to the registrant’s Registration Statement on Form S-8 (file no. 333-170924), filed on December 2, 2010)

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Exhibit		Description
	4.2	Warrant to purchase shares of Common Stock, issued to Comerica Bank on September 23, 2011 (incorporated by reference to Exhibit 4.1 to the registrant’s Quarterly Report on Form 10-Q (file no. 0-26483) for the fiscal quarter ended September 30, 2011, filed on November 9, 2011)
	4.3	Warrant to purchase shares of Common Stock, issued to Comerica Bank on September 11, 2012 (incorporated by reference to Exhibit 4.1 to the registrant’s Quarterly Report on Form 10-Q (file no. 0-26483) for the fiscal quarter ended September 30, 2012, filed on November 7, 2012)
	10.1#	Amended and Restated 1996 Stock Option Plan, as amended and restated effective July 29, 2010 (incorporated by reference to Exhibit 10.6 to the registrant’s Quarterly Report on Form 10-Q (file no. 0-26483) for the fiscal quarter ended September 30, 2010, filed on November 15, 2010)
	10.2#	Form of Stock Option Agreement pursuant to the registrant’s Amended and Restated 1996 Stock Option Plan (incorporated by reference to Exhibit 10.7 to the registrant’s Quarterly Report on Form 10-Q (file no. 0-26483) for the fiscal quarter ended September 30, 2010, filed on November 15, 2010)
	10.3	Amended and Restated 1998 Stock Option Plan, as amended and restated effective as of May 29, 2002 (incorporated by reference to Appendix B to the registrant’s Definitive Proxy Statement (file no. 0-26483), filed on April 30, 2002)
	10.4	Form of Indemnity Agreement by and between the registrant and the registrant’s directors and executive officers (incorporated by reference to Exhibit 10.9 to the registrant’s Quarterly Report on Form 10-Q (file no. 0-26483) for the fiscal quarter ended September 30, 2010, filed on November 15, 2010)
	10.5	SB/HGS Diagnostic License Agreement, effective as of July 24, 1997, by and among SmithKline Beecham Corp., SmithKline Beecham p.l.c. and Human Genome Sciences, Inc. (incorporated by reference to Exhibit 10.10 to the registrant’s Quarterly Report on Form 10-Q (file no. 0-26483) for the fiscal quarter ended September 30, 2010, filed on November 15, 2010)
	10.6**	Collaboration and License Agreement, dated as of September 2, 1997 (the “Collaboration Agreement”), by and among diaDexus, LLC, SmithKline Beecham Corp., SmithKline Beecham p.l.c., and Incyte Pharmaceuticals, Inc. (incorporated by reference to Exhibit 10.19 to diaDexus, Inc.’s Registration Statement on Form S-1/A (file no. 333-50318), filed April 9, 2001)
	10.7	Amendment No. 1 to the Collaboration Agreement, dated as of February , 1998 (incorporated by reference to Exhibit 10.20 to diaDexus, Inc.’s Registration Statement on Form S-1 (file no. 333-50318), filed November 20, 2000)
	10.8**	Amendment No. 2 to the Collaboration Agreement, dated as of July , 1998 (incorporated by reference to Exhibit 10.21 to diaDexus, Inc.’s Registration Statement on Form S-1/A (file no. 333-50318), filed April 9, 2001)
	10.9	Amendment to the Collaboration Agreement, dated as of May 4, 1999 (incorporated by reference to Exhibit 10.22 to diaDexus, Inc.’s Registration Statement on Form S-1 (file no. 333-50318), filed November 20, 2000)
	10.10**	Amendment No. 3 to the Collaboration Agreement, dated as of July 28, 1999 (incorporated by reference to diaDexus, Inc.’s Registration Statement on Form S-1/A (file no. 333-50318), filed April 9, 2001)
	10.11	Amendment No. 4 to the Collaboration Agreement, dated as of February 17, 2000 (incorporated by reference to Exhibit 10.24 to diaDexus, Inc.’s Registration Statement on Form S-1 (file no. 333-50318), filed November 20, 2000)
	10.12	Letter Amendment to Collaboration Agreement, dated as of March 30, 2000 (incorporated by reference to Exhibit 10.25 to diaDexus, Inc.’s Registration Statement on Form S-1 (file no. 333-50318), filed November 20, 2000)

63

Exhibit	Description
10.13**	Side Letter to License Agreement, dated February 28, 2005, by and between diaDexus, Inc. and SmithKline Beecham Corp. dba GlaxoSmithKline (incorporated by reference to Exhibit 10.18 to the registrant’s Quarterly Report on Form 10-Q (file no. 0-26483) for the fiscal quarter ended September 30, 2010, filed on November 15, 2010)
10.14**	Diagnostics License Agreement, dated December 9, 2004, by and between diaDexus, Inc. and ICOS Corp. (incorporated by reference to Exhibit 10.19 to the registrant’s Quarterly Report on Form 10-Q (file no. 0-26483) for the fiscal quarter ended September 30, 2010, filed on November 15, 2010)
10.15**	Development, Manufacturing, and Supply Agreement, effective as of March 27, 2007 (the “Denka Seiken Agreement”), by and between diaDexus, Inc. and Denka Seiken (incorporated by reference to Exhibit 10.20 to the registrant’s Quarterly Report on Form 10-Q (file no. 0-26483) for the fiscal quarter ended September 30, 2010, filed on November 15, 2010)
10.16**	First Amendment to the Denka Seiken Agreement, effective as of July 21, 2008 (incorporated by reference to Exhibit 10.21 to the registrant’s Quarterly Report on Form 10-Q (file no. 0-26483) for the fiscal quarter ended September 30, 2010, filed on November 15, 2010)
10.17**	Second Amendment to the Denka Seiken Agreement, effective as of June 1, 2009 (incorporated by reference to Exhibit 10.22 to the registrant’s Quarterly Report on Form 10-Q (file no. 0-26483) for the fiscal quarter ended September 30, 2010, filed on November 15, 2010)
10.18**	Services and Supply Agreement, effective as of January 1, 2009 (the “Diazyme Agreement”), by and between diaDexus, Inc. and Diazyme Laboratories (incorporated by reference to Exhibit 10.23 to the registrant’s Quarterly Report on Form 10-Q (file no. 0-26483) for the fiscal quarter ended September 30, 2010, filed on November 15, 2010)
10.19**	Amendment No. 01 to the Diazyme Agreement, effective as of August 17, 2009 (incorporated by reference to Exhibit 10.24 to the registrant’s Quarterly Report on Form 10-Q (file no. 0-26483) for the fiscal quarter ended September 30, 2010, filed on November 15, 2010)
10.20**	Amendment No. 2 to the Diazyme Agreement, effective as of January 15, 2010 (incorporated by reference to Exhibit 10.25 to the registrant’s Quarterly Report on Form 10-Q (file no. 0-26483) for the fiscal quarter ended September 30, 2010, filed on November 15, 2010)
10.21**	Amended and Restated Supply Agreement, dated as of April 11, 2010, by and between diaDexus, Inc. and BioCheck, Inc. (incorporated by reference to Exhibit 10.26 to the registrant’s Quarterly Report on Form 10-Q (file no. 0-26483) for the fiscal quarter ended September 30, 2010, filed on November 15, 2010)
10.22**	Agreement, dated as of August 1, 2006, by and between diaDexus, Inc. and Dako North America, Inc. (incorporated by reference to Exhibit 10.27 to Amendment No. 1 on Form 10-Q/A (file no. 0-26483), filed on August 15, 2011, to the registrant’s Quarterly Report for the fiscal quarter ended September 30, 2010)
10.23**	Distribution Agreement, effective as of January 1, 2011 (the “Inova Agreement”), by and between diaDexus, Inc. and Inova Diagnostics, Inc. (incorporated by reference to Exhibit 10.1 to Amendment No. 1 on Form 10-Q/A (file no. 0-26483), filed on July 7, 2011, to the registrant’s Quarterly Report for the fiscal quarter ended March 31, 2011)
10.24**	2011 Special Programs Addendum to the Inova Agreement, effective as of January 1, 2011 (incorporated by reference to Exhibit 10.2 to Amendment No. 1 on Form 10-Q/A (file no. 0-26483), filed on July 7, 2011, to the registrant’s Quarterly Report for the fiscal quarter ended March 31, 2011)
10.25**	First Amendment to the Inova Agreement, effective as of January 1, 2011 (incorporated by reference to Exhibit 10.3 to the registrant’s Quarterly Report on Form 10-Q (file no. 0-26483) for the fiscal quarter ended March 31, 2011, filed on May 13, 2011)

64

Exhibit		Description
	10.26**	Master Supply Agreement, dated as of April 1, 2009 (the “BHL Master Supply Agreement”), by and between diaDexus, Inc. and Berkeley HeartLab, Inc. (incorporated by reference to Exhibit 10.33 to the registrant’s Quarterly Report on Form 10-Q (file no. 0-26483) for the fiscal quarter ended September 30, 2010, filed on November 15, 2010)
	10.27**	Addendum No. 1 to the BHL Master Supply Agreement, dated as of April 1, 2010 (incorporated by reference to Exhibit 10.34 to the registrant’s Quarterly Report on Form 10-Q (file no. 0-26483) for the fiscal quarter ended September 30, 2010, filed on November 15, 2010)
	10.28**	Addendum No. 2 to the BHL Master Supply Agreement, dated as of May 14, 2010 (incorporated by reference to Exhibit 10.35 to the registrant’s Quarterly Report on Form 10-Q (file no. 0-26483) for the fiscal quarter ended September 30, 2010, filed on November 15, 2010)
	10.29	Addendum No. 3 to the BHL Master Supply Agreement, effective as of April 1, 2011 (incorporated by reference to Exhibit 10.4 to Amendment No. 1 on Form 10-Q/A (file no. 0-26483), filed on July 7, 2011, to the registrant’s Quarterly Report for the fiscal quarter ended March 31, 2011)
	10.30	Lease, dated as of November 23, 1999, by and between Trammell Crow Northern California Development, Inc. and ViroLogic, Inc. (incorporated by reference to Exhibit 10.36 to the registrant’s Quarterly Report on Form 10-Q (file no. 0-26483) for the fiscal quarter ended September 30, 2010, filed on November 15, 2010)
	10.31	First Amendment to Lease Agreement, dated as of February , 2000, by and between ARE-Technology Center SSF, LLC and ViroLogic, Inc. (incorporated by reference to Exhibit 10.37 to the registrant’s Quarterly Report on Form 10-Q (file no. 0-26483) for the fiscal quarter ended September 30, 2010, filed on November 15, 2010)
	10.32	Acknowledgement of Term Commencement Date, dated November 1, 2001, by and between ARE-Technology Center SSF, LLC and ViroLogic, Inc. (incorporated by reference to Exhibit 10.38 to the registrant’s Quarterly Report on Form 10-Q (file no. 0-26483) for the fiscal quarter ended September 30, 2010, filed on November 15, 2010)
	10.33	Consent to Assignment and Modification of Lease, effective as of June 1, 2002, by and among diaDexus, Inc., ARE-Technology Center SSF, LLC and ViroLogic, Inc. (incorporated by reference to Exhibit 10.39 to the registrant’s Quarterly Report on Form 10-Q (file no. 0-26483) for the fiscal quarter ended September 30, 2010, filed on November 15, 2010)
	10.34	Third Amendment to Lease Agreement, effective as of January 26, 2011, by and between diaDexus, Inc. and ARE-Technology Center SSF, LLC (incorporated by reference to Exhibit 10.41 to the registrant’s Annual Report on Form 10-K (file no. 0-26483) for the fiscal year ended December 31, 2010, filed on March 22, 2011)
	10.35	Sublease, dated June 1, 2002, by and between diaDexus, Inc. and ViroLogic, Inc. (incorporated by reference to Exhibit 10.40 to the registrant’s Quarterly Report on Form 10-Q (file no. 0-26483) for the fiscal quarter ended September 30, 2010, filed on November 15, 2010)
	10.36	First Amendment to Sublease, dated August 21, 2003, by and between diaDexus, Inc. and ViroLogic, Inc. (incorporated by reference to Exhibit 10.41 to the registrant’s Quarterly Report on Form 10-Q (file no. 0-26483) for the fiscal quarter ended September 30, 2010, filed on November 15, 2010)
	10.37	Second Amendment to Sublease, dated October 1, 2004, by and between diaDexus, Inc. and ViroLogic, Inc. (incorporated by reference to Exhibit 10.42 to the registrant’s Quarterly Report on Form 10-Q (file no. 0-26483) for the fiscal quarter ended September 30, 2010, filed on November 15, 2010)
	10.38	Third Amendment to Sublease, dated August 18, 2006, by and between diaDexus, Inc. and Monogram Biosciences, Inc. (incorporated by reference to Exhibit 10.43 to the registrant’s Quarterly Report on Form 10-Q (file no. 0-26483) for the fiscal quarter ended September 30, 2010, filed on November 15, 2010)

65

Exhibit		Description
	10.39	Letter Agreement Regarding Sublease, dated October 10, 2007, by and between diaDexus, Inc. and Monogram Biosciences, Inc. (incorporated by reference to Exhibit 10.44 to the registrant’s Quarterly Report on Form 10-Q (file no. 0-26483) for the fiscal quarter ended September 30, 2010, filed on November 15, 2010)
	10.40	Fourth Amendment to Sublease, dated October 12, 2007, by and between diaDexus, Inc. and Monogram Biosciences, Inc. (incorporated by reference to Exhibit 10.45 to the registrant’s Quarterly Report on Form 10-Q (file no. 0-26483) for the fiscal quarter ended September 30, 2010, filed on November 15, 2010)
	10.41	Lease, dated October 26, 1998, by and between VaxGen, Inc. and Oyster Point Tech Center LLC (incorporated by reference to Exhibit 10.18 to the registrant’s Registration Statement on Form S-1 (file no. 333-78065), filed on May 7, 1999)
	10.42	Fifth Amendment to Lease, dated April 14, 2005, by and between VaxGen, Inc. and Oyster Point Tech Center LLC (incorporated by reference to Exhibit 10.1 to the registrant’s Current Report on Form 8-K (file no. 0-26483), filed on April 21, 2005)
	10.43	Sixth Amendment to Lease Agreement, dated October 11, 2007, by and between VaxGen, Inc. and Oyster Point Tech Center LLC (incorporated by reference to Exhibit 10.1 to the registrant’s Current Report on Form 8-K (file no. 0-26483), filed on October 17, 2007)
	10.44#	Employment Agreement, effective as of January 10, 2011, by and between diaDexus, Inc. and Emilia Zychlinsky Bulaevsky (incorporated by reference to Exhibit 10.55 to the registrant’s Annual Report on Form 10-K (file no. 0-26483) for the fiscal year ended December 31, 2010, filed on March 22, 2011)
	10.45**	Purchase Agreement, effective as of January 1, 2011, by and between diaDexus, Inc. and Health Diagnostics Laboratory (incorporated by reference to Exhibit 10.5 to Amendment No. 1 on Form 10-Q/A (file no. 0-26483), filed on July 7, 2011, to the registrant’s Quarterly Report for the fiscal quarter ended March 31, 2011)
	10.46**	Volume Discount Addendum to the Purchase Agreement, effective as of January 1, 2011, by and between diaDexus, Inc. and Health Diagnostics Laboratory (incorporated by reference to Exhibit 10.6 to Amendment No. 1 on Form 10-Q/A (file no. 0-26483), filed on July 7, 2011, to the registrant’s Quarterly Report for the fiscal quarter ended March 31, 2011)
	10.47	Volume Discount Addendum No. 2 to the Purchase Agreement, effective as of April 1, 2011, by and between diaDexus, Inc. and Health Diagnostics Laboratory (incorporated by reference to Exhibit 10.7 to the registrant’s Quarterly Report on Form 10-Q (file no. 0-26483) for the fiscal quarter ended March 31, 2011, filed on May 13, 2011)
	10.48#	Transition and Separation Agreement, effective as of July 1, 2011, by and between diaDexus, Inc. and Patrick Plewman (incorporated by reference to Exhibit 10.1 to the registrant’s Quarterly Report on Form 10-Q (file no. 0-26483) for the fiscal quarter ended June 30, 2011, filed on August 15, 2011)
	10.49#	Executive Employment Agreement, effective as of July 1, 2011, by and between diaDexus, Inc. and James P. Panek (incorporated by reference to Exhibit 10.2 to the registrant’s Quarterly Report on Form 10-Q (file no. 0-26483) for the fiscal quarter ended June 30, 2011, filed on August 15, 2011)
	10.50#	Consulting Agreement, dated September 22, 2011, by and between diaDexus, Inc. and James P. Panek (incorporated by reference to Exhibit 10.9 to the registrant’s Quarterly Report on Form 10-Q (file no. 0-26483) for the fiscal quarter ended September 30, 2011, filed on November 9, 2011)
	10.51#	Executive Employment Agreement, effective as of July 1, 2011, by and between diaDexus, Inc. and Brian E. Ward (incorporated by reference to Exhibit 10.3 to the registrant’s Quarterly Report on Form 10-Q (file no. 0-26483) for the fiscal quarter ended June 30, 2011, filed on August 15, 2011)

66

Exhibit	Description
10.52#	Offer Letter, dated September 20, 2011, by and between diaDexus, Inc. and Brian E. Ward (incorporated by reference to Exhibit 10.2 to the registrant’s Quarterly Report on Form 10-Q (file no. 0-26483) for the fiscal quarter ended September 30, 2011, filed on November 9, 2011)
10.53#	Stock Option Agreement, dated September 26, 2011, by and between diaDexus, Inc. and Brian E. Ward (incorporated by reference to Exhibit 10.3 to the registrant’s Quarterly Report on Form 10-Q (file no. 0-26483) for the fiscal quarter ended September 30, 2011, filed on November 9, 2011)
10.54#	Change in Control and Severance Agreement, dated September 26, 2011 by and between diaDexus, Inc. and Brian E. Ward (incorporated by reference to Exhibit 10.4 to the registrant’s Quarterly Report on Form 10-Q (file no. 0-26483) for the fiscal quarter ended September 30, 2011, filed on November 9, 2011)
10.55#	Offer Letter, dated September 20, 2011, by and between diaDexus, Inc. and R. Michael Richey (incorporated by reference to Exhibit 10.5 to the registrant’s Quarterly Report on Form 10-Q (file no. 0-26483) for the fiscal quarter ended September 30, 2011, filed on November 9, 2011)
10.56#	Stock Option Agreement, dated October 1, 2011, by and between diaDexus, Inc. and R. Michael Richey (incorporated by reference to Exhibit 10.6 to the registrant’s Quarterly Report on Form 10-Q (file no. 0-26483) for the fiscal quarter ended September 30, 2011, filed on November 9, 2011)
10.57#	Change in Control and Severance Agreement, dated September 20, 2011, by and between diaDexus, Inc. and R. Michael Richey (incorporated by reference to Exhibit 10.7 to the registrant’s Quarterly Report on Form 10-Q (file no. 0-26483) for the fiscal quarter ended September 30, 2011, filed on November 9, 2011)
10.58#**	Transition and Separation Agreement, dated September 14, 2011, by and between diaDexus, Inc. and Robert L. Wolfert (incorporated by reference to Exhibit 10.10 to the registrant’s Quarterly Report on Form 10-Q (file no. 0-26483) for the fiscal quarter ended September 30, 2011, filed on November 9, 2011)
10.59#	Separation Agreement, dated September 30, 2011, by and between diaDexus, Inc. and Bernard M. Alfano (incorporated by reference to Exhibit 10.11 to the registrant’s Quarterly Report on Form 10-Q (file no. 0-26483) for the fiscal quarter ended September 30, 2011, filed on November 9, 2011)
10.60**	Loan and Security Agreement, dated September 23, 2011, by and between diaDexus, Inc. and Comerica Bank (incorporated by reference to Exhibit 10.12 to the registrant’s Quarterly Report on Form 10-Q (file no. 0-26483) for the fiscal quarter ended September 30, 2011, filed on November 9, 2011)
10.61#	Offer Letter, dated January 8, 2012, by and between diaDexus, Inc. and Jean-Frédéric Viret (incorporated by reference to Exhibit 10.61 to the registrant’s Annual Report on Form 10-K (file no. 0-26483), for the fiscal year ended December 31, 2011, filed on March 15, 2012)
10.62#	Stock Option Agreement, dated February 1, 2012, by and between diaDexus, Inc. and Jean-Frédéric Viret (incorporated by reference to Exhibit 10.61 to the registrant’s Annual Report on Form 10-K (file no. 0-26483), for the fiscal year ended December 31, 2011, filed on March 15, 2012)
10.63#	Change in Control and Severance Agreement, dated February 2, 2012, by and between diaDexus, Inc. and Jean-Frédéric Viret (incorporated by reference to Exhibit 10.61 to the registrant’s Annual Report on Form 10-K (file no. 0-26483), for the fiscal year ended December 31, 2011, filed on March 15, 2012)
10.64**	Purchase Agreement, effective as of January 1, 2012, by and between diaDexus, Inc. and Health Diagnostics Laboratory (incorporated by reference to Exhibit 10.1 to the registrant’s Quarterly Report on Form 10-Q (file no. 0-26483) for the fiscal quarter ended March 31, 2012, filed on May 10, 2012)

67

Exhibit	Description
10.65**	Rebate Addendum, effective as of March 1, 2012, by and between diaDexus, Inc. and Health Diagnostics Laboratory (incorporated by reference to Exhibit 10.2 to the registrant’s Quarterly Report on Form 10-Q (file no. 0-26483) for the fiscal quarter ended March 31, 2012, filed on May 10, 2012)
10.66**	Purchase Agreement, dated as of May 9, 2012 and effective as of April 24, 2012, by and between diaDexus, Inc. and Boston Heart Diagnostics (incorporated by reference to Exhibit 10.1 to the registrant’s Quarterly Report on Form 10-Q (file no. 0-26483) for the fiscal quarter ended June 30, 2012, filed on August 7, 2012)
10.67**	Purchase Agreement with Atherotech Diagnostics Lab, dated August 23, 2012 and effective as of August 20, 2012 (incorporated by reference to Exhibit 10.1 to the registrant’s Quarterly Report on Form 10-Q (file no. 0-26483) for the fiscal quarter ended September 30, 2012, filed on November 7, 2012)
10.68**	Volume Discount Program Addendum with Atherotech Diagnostics Lab, dated August 23, 2012 and effective as of August 20, 2012 (incorporated by reference to Exhibit 10.2 to the registrant’s Quarterly Report on Form 10-Q (file no. 0-26483) for the fiscal quarter ended September 30, 2012, filed on November 7, 2012)
10.69**	Amended and Restated Loan and Security Agreement by and between diaDexus, Inc. and Comerica Bank, dated September 11, 2012 (incorporated by reference to Exhibit 10.3 to the registrant’s Quarterly Report on Form 10-Q (file no. 0-26483) for the fiscal quarter ended September 30, 2012, filed on November 7, 2012)
23.1	Consent of PricewaterhouseCoopers LLP, Independent Registered Public Accounting Firm
24.1	Power of Attorney (see signature page to this Annual Report on Form 10-K)
31.1	Certification of Chief Executive Officer pursuant to Exchange Act Rule 13a-14(a)
31.2	Certification of Chief Financial Officer pursuant to Exchange Act Rule 13a-14(a)
32.1	Certification of Chief Executive Officer pursuant to 18 USC. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2	Certification of Chief Financial Officer pursuant to 18 USC. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101.INS†	XBRL Instance Document
101.SCH†	XBRL Taxonomy Extension Schema Document
101.CAL†	XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF†	XBRL Taxonomy Extension Definition Linkbase Document
101.LAB†	XBRL Taxonomy Extension Label Linkbase Document
101.PRE†	XBRL Taxonomy Extension Presentation Linkbase Document

* Certain schedules referenced in the Agreement and Plan of Merger and Reorganization have been omitted in accordance with Item 601(b)(2) of Regulation S-K. A copy of any omitted schedule will be furnished supplementally to the Securities and Exchange Commission upon request.

# Management contract or compensatory plan or arrangement.

** Confidential treatment has been granted with respect to certain portions of this agreement.

† Pursuant to Rule 406T of Regulation S-T, these interactive data files are deemed not filed or part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, or Section 18 of the Securities Exchange Act of 1934, as amended, and otherwise are not subject to liability under those sections.

68

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) 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.

	diaDexus, Inc.
Date: March 11, 2013	By:	/s/  Brian E. Ward
		Brian E. Ward
		President and Chief Executive Officer

POWER OF ATTORNEY

Each person whose individual signature appears below hereby authorizes and appoints Brian E. Ward, with full power of substitution and resubstitution, as his or her true and lawful attorney-in-fact and agent to act in his or her name, place and stead and to execute in the name and on behalf of each person, individually and in each capacity stated below, and to file any and all amendments to this annual report on Form 10-K and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorney-in-fact and agents full power and authority to do and perform each and every act and thing, ratifying and confirming all that said attorney-in-fact and agents or his substitute or substitutes may lawfully do or cause to be done by virtue thereof.

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

Signature	Title	Date
/s/  Brian E. Ward Brian E. Ward	President and Chief Executive Officer, Director (Principal Executive Officer)	March 11, 2013
/s/  Jean-Frédéric Viret Jean-Frédéric Viret	Chief Financial Officer (Principal Financial and Accounting Officer)	March 11, 2013
/s/  Lori F. Rafield Lori F. Rafield	Chairman of the Board of Directors	March 11, 2013
/s/  Karen Drexler Karen Drexler	Director	March 11, 2013
/s/  Andrew Galligan Andrew Galligan	Director	March 11, 2013
/s/  James P. Panek James P. Panek	Director	March 11, 2013
/s/  Charles W. Patrick Charles W. Patrick	Director	March 11, 2013

69

EXHIBIT INDEX

Exhibit		Description
	2.1*	Agreement and Plan of Merger and Reorganization, dated May 28, 2010, by and among VaxGen, Inc., Violet Acquisition Corporation, Violet Acquisition LLC, diaDexus, Inc. and John E. Hamer, as the agent of diaDexus, Inc.’s stockholders (incorporated by reference to Exhibit 2.1 to the registrant’s Current Report on Form 8-K (file no. 0-26483), filed on June 1, 2010)
	2.2	Amendment No. 1 to Agreement and Plan of Merger and Reorganization, dated June 24, 2010, by and among VaxGen, Inc., Violet Acquisition Corporation, Violet Acquisition LLC, diaDexus, Inc., and John E. Hamer as the agent of diaDexus, Inc’s stockholders (incorporated by reference to Exhibit 2.1 to the registrant’s Current Report on Form 8-K (file no. 0-26483), filed on June 28, 2010)
	3.1	Restated Certificate of Incorporation of the registrant (incorporated by reference to Exhibit 3.1 to the registrant’s Quarterly Report on Form 10-Q (file no. 0-26483) for the fiscal quarter ended September 30, 2010, filed on November 15, 2010)
	3.2	Certificate of Change of Registered Agent and Registered Office (incorporated by reference to Exhibit 3.1 to the registrant’s Current Report on Form 8-K (file no. 0-26483), filed on January 25, 2011)
	3.3	Amendment to Restated Certificate of Incorporation (incorporated by reference to Exhibit 3.1 to the registrant’s Current Report on Form 8-K (file no. 0-26483), filed on July 18, 2011)
	3.4	Amended and Restated Bylaws of the registrant (incorporated by reference to Exhibit 3.2 to the registrant’s Current Report on Form 8-K (file no. 0-26483), filed on November 5, 2010)
	4.1	Specimen Stock Certificate for Common Stock of diaDexus, Inc. (incorporated by reference to Exhibit 4.1 to the registrant’s Registration Statement on Form S-8 (file no. 333-170924), filed on December 2, 2010)
	4.2	Warrant to purchase shares of Common Stock, issued to Comerica Bank on September 23, 2011 (incorporated by reference to Exhibit 4.1 to the registrant’s Quarterly Report on Form 10-Q (file no. 0-26483) for the fiscal quarter ended September 30, 2011, filed on November 9, 2011)
	4.3	Warrant to purchase shares of Common Stock, issued to Comerica Bank on September 11, 2012 (incorporated by reference to Exhibit 4.1 to the registrant’s Quarterly Report on Form 10-Q (file no. 0-26483) for the fiscal quarter ended September 30, 2012, filed on November 7, 2012)
	10.1#	Amended and Restated 1996 Stock Option Plan, as amended and restated effective July 29, 2010 (incorporated by reference to Exhibit 10.6 to the registrant’s Quarterly Report on Form 10-Q (file no. 0-26483) for the fiscal quarter ended September 30, 2010, filed on November 15, 2010)
	10.2#	Form of Stock Option Agreement pursuant to the registrant’s Amended and Restated 1996 Stock Option Plan (incorporated by reference to Exhibit 10.7 to the registrant’s Quarterly Report on Form 10-Q (file no. 0-26483) for the fiscal quarter ended September 30, 2010, filed on November 15, 2010)
	10.3	Amended and Restated 1998 Stock Option Plan, as amended and restated effective as of May 29, 2002 (incorporated by reference to Appendix B to the registrant’s Definitive Proxy Statement (file no. 0-26483), filed on April 30, 2002)
	10.4	Form of Indemnity Agreement by and between the registrant and the registrant’s directors and executive officers (incorporated by reference to Exhibit 10.9 to the registrant’s Quarterly Report on Form 10-Q (file no. 0-26483) for the fiscal quarter ended September 30, 2010, filed on November 15, 2010)
	10.5	SB/HGS Diagnostic License Agreement, effective as of July 24, 1997, by and among SmithKline Beecham Corp., SmithKline Beecham p.l.c. and Human Genome Sciences, Inc. (incorporated by reference to Exhibit 10.10 to the registrant’s Quarterly Report on Form 10-Q (file no. 0-26483) for the fiscal quarter ended September 30, 2010, filed on November 15, 2010)

70

Exhibit		Description
	10.6**	Collaboration and License Agreement, dated as of September 2, 1997 (the “Collaboration Agreement”), by and among diaDexus, LLC, SmithKline Beecham Corp., SmithKline Beecham p.l.c., and Incyte Pharmaceuticals, Inc. (incorporated by reference to Exhibit 10.19 to diaDexus, Inc.’s Registration Statement on Form S-1/A (file no. 333-50318), filed April 9, 2001)
	10.7	Amendment No. 1 to the Collaboration Agreement, dated as of February     , 1998 (incorporated by reference to Exhibit 10.20 to diaDexus, Inc.’s Registration Statement on Form S-1 (file no. 333-50318), filed November 20, 2000)
	10.8**	Amendment No. 2 to the Collaboration Agreement, dated as of July     , 1998 (incorporated by reference to Exhibit 10.21 to diaDexus, Inc.’s Registration Statement on Form S-1/A (file no. 333-50318), filed April 9, 2001)
	10.9	Amendment to the Collaboration Agreement, dated as of May 4, 1999 (incorporated by reference to Exhibit 10.22 to diaDexus, Inc.’s Registration Statement on Form S-1 (file no. 333-50318), filed November 20, 2000)
	10.10**	Amendment No. 3 to the Collaboration Agreement, dated as of July 28, 1999 (incorporated by reference to diaDexus, Inc.’s Registration Statement on Form S-1/A (file no. 333-50318), filed April 9, 2001)
	10.11	Amendment No. 4 to the Collaboration Agreement, dated as of February 17, 2000 (incorporated by reference to Exhibit 10.24 to diaDexus, Inc.’s Registration Statement on Form S-1 (file no. 333-50318), filed November 20, 2000)
	10.12	Letter Amendment to Collaboration Agreement, dated as of March 30, 2000 (incorporated by reference to Exhibit 10.25 to diaDexus, Inc.’s Registration Statement on Form S-1 (file no. 333-50318), filed November 20, 2000)
	10.13**	Side Letter to License Agreement, dated February 28, 2005, by and between diaDexus, Inc. and SmithKline Beecham Corp. dba GlaxoSmithKline (incorporated by reference to Exhibit 10.18 to the registrant’s Quarterly Report on Form 10-Q (file no. 0-26483) for the fiscal quarter ended September 30, 2010, filed on November 15, 2010)
	10.14**	Diagnostics License Agreement, dated December 9, 2004, by and between diaDexus, Inc. and ICOS Corp. (incorporated by reference to Exhibit 10.19 to the registrant’s Quarterly Report on Form 10-Q (file no. 0-26483) for the fiscal quarter ended September 30, 2010, filed on November 15, 2010)
	10.15**	Development, Manufacturing, and Supply Agreement, effective as of March 27, 2007 (the “Denka Seiken Agreement”), by and between diaDexus, Inc. and Denka Seiken (incorporated by reference to Exhibit 10.20 to the registrant’s Quarterly Report on Form 10-Q (file no. 0-26483) for the fiscal quarter ended September 30, 2010, filed on November 15, 2010)
	10.16**	First Amendment to the Denka Seiken Agreement, effective as of July 21, 2008 (incorporated by reference to Exhibit 10.21 to the registrant’s Quarterly Report on Form 10-Q (file no. 0-26483) for the fiscal quarter ended September 30, 2010, filed on November 15, 2010)
	10.17**	Second Amendment to the Denka Seiken Agreement, effective as of June 1, 2009 (incorporated by reference to Exhibit 10.22 to the registrant’s Quarterly Report on Form 10-Q (file no. 0-26483) for the fiscal quarter ended September 30, 2010, filed on November 15, 2010)
	10.18**	Services and Supply Agreement, effective as of January 1, 2009 (the “Diazyme Agreement”), by and between diaDexus, Inc. and Diazyme Laboratories (incorporated by reference to Exhibit 10.23 to the registrant’s Quarterly Report on Form 10-Q (file no. 0-26483) for the fiscal quarter ended September 30, 2010, filed on November 15, 2010)
	10.19**	Amendment No. 01 to the Diazyme Agreement, effective as of August 17, 2009 (incorporated by reference to Exhibit 10.24 to the registrant’s Quarterly Report on Form 10-Q (file no. 0-26483) for the fiscal quarter ended September 30, 2010, filed on November 15, 2010)

71

Exhibit	Description
10.20**	Amendment No. 2 to the Diazyme Agreement, effective as of January 15, 2010 (incorporated by reference to Exhibit 10.25 to the registrant’s Quarterly Report on Form 10-Q (file no. 0-26483) for the fiscal quarter ended September 30, 2010, filed on November 15, 2010)
10.21**	Amended and Restated Supply Agreement, dated as of April 11, 2010, by and between diaDexus, Inc. and BioCheck, Inc. (incorporated by reference to Exhibit 10.26 to the registrant’s Quarterly Report on Form 10-Q (file no. 0-26483) for the fiscal quarter ended September 30, 2010, filed on November 15, 2010)
10.22**	Agreement, dated as of August 1, 2006, by and between diaDexus, Inc. and Dako North America, Inc. (incorporated by reference to Exhibit 10.27 to Amendment No. 1 on Form 10-Q/A (file no. 0-26483), filed on August 15, 2011, to the registrant’s Quarterly Report for the fiscal quarter ended September 30, 2010)
10.23**	Distribution Agreement, effective as of January 1, 2011 (the “Inova Agreement”), by and between diaDexus, Inc. and Inova Diagnostics, Inc. (incorporated by reference to Exhibit 10.1 to Amendment No. 1 on Form 10-Q/A (file no. 0-26483), filed on July 7, 2011, to the registrant’s Quarterly Report for the fiscal quarter ended March 31, 2011)
10.24**	2011 Special Programs Addendum to the Inova Agreement, effective as of January 1, 2011 (incorporated by reference to Exhibit 10.2 to Amendment No. 1 on Form 10-Q/A (file no. 0-26483), filed on July 7, 2011, to the registrant’s Quarterly Report for the fiscal quarter ended March 31, 2011)
10.25**	First Amendment to the Inova Agreement, effective as of January 1, 2011 (incorporated by reference to Exhibit 10.3 to the registrant’s Quarterly Report on Form 10-Q (file no. 0-26483) for the fiscal quarter ended March 31, 2011, filed on May 13, 2011)
10.26**	Master Supply Agreement, dated as of April 1, 2009 (the “BHL Master Supply Agreement”), by and between diaDexus, Inc. and Berkeley HeartLab, Inc. (incorporated by reference to Exhibit 10.33 to the registrant’s Quarterly Report on Form 10-Q (file no. 0-26483) for the fiscal quarter ended September 30, 2010, filed on November 15, 2010)
10.27**	Addendum No. 1 to the BHL Master Supply Agreement, dated as of April 1, 2010 (incorporated by reference to Exhibit 10.34 to the registrant’s Quarterly Report on Form 10-Q (file no. 0-26483) for the fiscal quarter ended September 30, 2010, filed on November 15, 2010)
10.28**	Addendum No. 2 to the BHL Master Supply Agreement, dated as of May 14, 2010 (incorporated by reference to Exhibit 10.35 to the registrant’s Quarterly Report on Form 10-Q (file no. 0-26483) for the fiscal quarter ended September 30, 2010, filed on November 15, 2010)
10.29	Addendum No. 3 to the BHL Master Supply Agreement, effective as of April 1, 2011 (incorporated by reference to Exhibit 10.4 to Amendment No. 1 on Form 10-Q/A (file no. 0-26483), filed on July 7, 2011, to the registrant’s Quarterly Report for the fiscal quarter ended March 31, 2011)
10.30	Lease, dated as of November 23, 1999, by and between Trammell Crow Northern California Development, Inc. and ViroLogic, Inc. (incorporated by reference to Exhibit 10.36 to the registrant’s Quarterly Report on Form 10-Q (file no. 0-26483) for the fiscal quarter ended September 30, 2010, filed on November 15, 2010)
10.31	First Amendment to Lease Agreement, dated as of February , 2000, by and between ARE-Technology Center SSF, LLC and ViroLogic, Inc. (incorporated by reference to Exhibit 10.37 to the registrant’s Quarterly Report on Form 10-Q (file no. 0-26483) for the fiscal quarter ended September 30, 2010, filed on November 15, 2010)
10.32	Acknowledgement of Term Commencement Date, dated November 1, 2001, by and between ARE-Technology Center SSF, LLC and ViroLogic, Inc. (incorporated by reference to Exhibit 10.38 to the registrant’s Quarterly Report on Form 10-Q (file no. 0-26483) for the fiscal quarter ended September 30, 2010, filed on November 15, 2010)

72

Exhibit	Description
10.33	Consent to Assignment and Modification of Lease, effective as of June 1, 2002, by and among diaDexus, Inc., ARE-Technology Center SSF, LLC and ViroLogic, Inc. (incorporated by reference to Exhibit 10.39 to the registrant’s Quarterly Report on Form 10-Q (file no. 0-26483) for the fiscal quarter ended September 30, 2010, filed on November 15, 2010)
10.34	Third Amendment to Lease Agreement, effective as of January 26, 2011, by and between diaDexus, Inc. and ARE-Technology Center SSF, LLC (incorporated by reference to Exhibit 10.41 to the registrant’s Annual Report on Form 10-K (file no. 0-26483) for the fiscal year ended December 31, 2010, filed on March 22, 2011)
10.35	Sublease, dated June 1, 2002, by and between diaDexus, Inc. and ViroLogic, Inc. (incorporated by reference to Exhibit 10.40 to the registrant’s Quarterly Report on Form 10-Q (file no. 0-26483) for the fiscal quarter ended September 30, 2010, filed on November 15, 2010)
10.36	First Amendment to Sublease, dated August 21, 2003, by and between diaDexus, Inc. and ViroLogic, Inc. (incorporated by reference to Exhibit 10.41 to the registrant’s Quarterly Report on Form 10-Q (file no. 0-26483) for the fiscal quarter ended September 30, 2010, filed on November 15, 2010)
10.37	Second Amendment to Sublease, dated October 1, 2004, by and between diaDexus, Inc. and ViroLogic, Inc. (incorporated by reference to Exhibit 10.42 to the registrant’s Quarterly Report on Form 10-Q (file no. 0-26483) for the fiscal quarter ended September 30, 2010, filed on November 15, 2010)
10.38	Third Amendment to Sublease, dated August 18, 2006, by and between diaDexus, Inc. and Monogram Biosciences, Inc. (incorporated by reference to Exhibit 10.43 to the registrant’s Quarterly Report on Form 10-Q (file no. 0-26483) for the fiscal quarter ended September 30, 2010, filed on November 15, 2010)
10.39	Letter Agreement Regarding Sublease, dated October 10, 2007, by and between diaDexus, Inc. and Monogram Biosciences, Inc. (incorporated by reference to Exhibit 10.44 to the registrant’s Quarterly Report on Form 10-Q (file no. 0-26483) for the fiscal quarter ended September 30, 2010, filed on November 15, 2010)
10.40	Fourth Amendment to Sublease, dated October 12, 2007, by and between diaDexus, Inc. and Monogram Biosciences, Inc. (incorporated by reference to Exhibit 10.45 to the registrant’s Quarterly Report on Form 10-Q (file no. 0-26483) for the fiscal quarter ended September 30, 2010, filed on November 15, 2010)
10.41	Lease, dated October 26, 1998, by and between VaxGen, Inc. and Oyster Point Tech Center LLC (incorporated by reference to Exhibit 10.18 to the registrant’s Registration Statement on Form S-1 (file no. 333-78065), filed on May 7, 1999)
10.42	Fifth Amendment to Lease, dated April 14, 2005, by and between VaxGen, Inc. and Oyster Point Tech Center LLC (incorporated by reference to Exhibit 10.1 to the registrant’s Current Report on Form 8-K (file no. 0-26483), filed on April 21, 2005)
10.43	Sixth Amendment to Lease Agreement, dated October 11, 2007, by and between VaxGen, Inc. and Oyster Point Tech Center LLC (incorporated by reference to Exhibit 10.1 to the registrant’s Current Report on Form 8-K (file no. 0-26483), filed on October 17, 2007)
10.44#	Employment Agreement, effective as of January 10, 2011, by and between diaDexus, Inc. and Emilia Zychlinsky Bulaevsky (incorporated by reference to Exhibit 10.55 to the registrant’s Annual Report on Form 10-K (file no. 0-26483) for the fiscal year ended December 31, 2010, filed on March 22, 2011)
10.45**	Purchase Agreement, effective as of January 1, 2011, by and between diaDexus, Inc. and Health Diagnostics Laboratory (incorporated by reference to Exhibit 10.5 to Amendment No. 1 on Form 10-Q/A (file no. 0-26483), filed on July 7, 2011, to the registrant’s Quarterly Report for the fiscal quarter ended March 31, 2011)

73

Exhibit	Description
10.46**	Volume Discount Addendum to the Purchase Agreement, effective as of January 1, 2011, by and between diaDexus, Inc. and Health Diagnostics Laboratory (incorporated by reference to Exhibit 10.6 to Amendment No. 1 on Form 10-Q/A (file no. 0-26483), filed on July 7, 2011, to the registrant’s Quarterly Report for the fiscal quarter ended March 31, 2011)
10.47	Volume Discount Addendum No. 2 to the Purchase Agreement, effective as of April 1, 2011, by and between diaDexus, Inc. and Health Diagnostics Laboratory (incorporated by reference to Exhibit 10.7 to the registrant’s Quarterly Report on Form 10-Q (file no. 0-26483) for the fiscal quarter ended March 31, 2011, filed on May 13, 2011)
10.48#	Transition and Separation Agreement, effective as of July 1, 2011, by and between diaDexus, Inc. and Patrick Plewman (incorporated by reference to Exhibit 10.1 to the registrant’s Quarterly Report on Form 10-Q (file no. 0-26483) for the fiscal quarter ended June 30, 2011, filed on August 15, 2011)
10.49#	Executive Employment Agreement, effective as of July 1, 2011, by and between diaDexus, Inc. and James P. Panek (incorporated by reference to Exhibit 10.2 to the registrant’s Quarterly Report on Form 10-Q (file no. 0-26483) for the fiscal quarter ended June 30, 2011, filed on August 15, 2011)
10.50#	Consulting Agreement, dated September 22, 2011, by and between diaDexus, Inc. and James P. Panek (incorporated by reference to Exhibit 10.9 to the registrant’s Quarterly Report on Form 10-Q (file no. 0-26483) for the fiscal quarter ended September 30, 2011, filed on November 9, 2011)
10.51#	Executive Employment Agreement, effective as of July 1, 2011, by and between diaDexus, Inc. and Brian E. Ward (incorporated by reference to Exhibit 10.3 to the registrant’s Quarterly Report on Form 10-Q (file no. 0-26483) for the fiscal quarter ended June 30, 2011, filed on August 15, 2011)
10.52#	Offer Letter, dated September 20, 2011, by and between diaDexus, Inc. and Brian E. Ward (incorporated by reference to Exhibit 10.2 to the registrant’s Quarterly Report on Form 10-Q (file no. 0-26483) for the fiscal quarter ended September 30, 2011, filed on November 9, 2011)
10.53#	Stock Option Agreement, dated September 26, 2011, by and between diaDexus, Inc. and Brian E. Ward (incorporated by reference to Exhibit 10.3 to the registrant’s Quarterly Report on Form 10-Q (file no. 0-26483) for the fiscal quarter ended September 30, 2011, filed on November 9, 2011)
10.54#	Change in Control and Severance Agreement, dated September 26, 2011 by and between diaDexus, Inc. and Brian E. Ward (incorporated by reference to Exhibit 10.4 to the registrant’s Quarterly Report on Form 10-Q (file no. 0-26483) for the fiscal quarter ended September 30, 2011, filed on November 9, 2011)
10.55#	Offer Letter, dated September 20, 2011, by and between diaDexus, Inc. and R. Michael Richey (incorporated by reference to Exhibit 10.5 to the registrant’s Quarterly Report on Form 10-Q (file no. 0-26483) for the fiscal quarter ended September 30, 2011, filed on November 9, 2011)
10.56#	Stock Option Agreement, dated October 1, 2011, by and between diaDexus, Inc. and R. Michael Richey (incorporated by reference to Exhibit 10.6 to the registrant’s Quarterly Report on Form 10-Q (file no. 0-26483) for the fiscal quarter ended September 30, 2011, filed on November 9, 2011)
10.57#	Change in Control and Severance Agreement, dated September 20, 2011, by and between diaDexus, Inc. and R. Michael Richey (incorporated by reference to Exhibit 10.7 to the registrant’s Quarterly Report on Form 10-Q (file no. 0-26483) for the fiscal quarter ended September 30, 2011, filed on November 9, 2011)
10.58#**	Transition and Separation Agreement, dated September 14, 2011, by and between diaDexus, Inc. and Robert L. Wolfert (incorporated by reference to Exhibit 10.10 to the registrant’s Quarterly Report on Form 10-Q (file no. 0-26483) for the fiscal quarter ended September 30, 2011, filed on November 9, 2011)

74

Exhibit	Description
10.59#	Separation Agreement, dated September 30, 2011, by and between diaDexus, Inc. and Bernard M. Alfano (incorporated by reference to Exhibit 10.11 to the registrant’s Quarterly Report on Form 10-Q (file no. 0-26483) for the fiscal quarter ended September 30, 2011, filed on November 9, 2011)
10.60**	Loan and Security Agreement, dated September 23, 2011, by and between diaDexus, Inc. and Comerica Bank (incorporated by reference to Exhibit 10.12 to the registrant’s Quarterly Report on Form 10-Q (file no. 0-26483) for the fiscal quarter ended September 30, 2011, filed on November 9, 2011)
10.61#	Offer Letter, dated January 8, 2012, by and between diaDexus, Inc. and Jean-Frédéric Viret (incorporated by reference to Exhibit 10.61 to the registrant’s Annual Report on Form 10-K (file no. 0-26483), for the fiscal year ended December 31, 2011, filed on March 15, 2012)
10.62#	Stock Option Agreement, dated February 1, 2012, by and between diaDexus, Inc. and Jean-Frédéric Viret (incorporated by reference to Exhibit 10.61 to the registrant’s Annual Report on Form 10-K (file no. 0-26483), for the fiscal year ended December 31, 2011, filed on March 15, 2012)
10.63#	Change in Control and Severance Agreement, dated February 2, 2012, by and between diaDexus, Inc. and Jean-Frédéric Viret (incorporated by reference to Exhibit 10.61 to the registrant’s Annual Report on Form 10-K (file no. 0-26483), for the fiscal year ended December 31, 2011, filed on March 15, 2012)
10.64**	Purchase Agreement, effective as of January 1, 2012, by and between diaDexus, Inc. and Health Diagnostics Laboratory (incorporated by reference to Exhibit 10.1 to the registrant’s Quarterly Report on Form 10-Q (file no. 0-26483) for the fiscal quarter ended March 31, 2012, filed on May 10, 2012)
10.65**	Rebate Addendum, effective as of March 1, 2012, by and between diaDexus, Inc. and Health Diagnostics Laboratory (incorporated by reference to Exhibit 10.2 to the registrant’s Quarterly Report on Form 10-Q (file no. 0-26483) for the fiscal quarter ended March 31, 2012, filed on May 10, 2012)
10.66**	Purchase Agreement, dated as of May 9, 2012 and effective as of April 24, 2012, by and between diaDexus, Inc. and Boston Heart Diagnostics (incorporated by reference to Exhibit 10.1 to the registrant’s Quarterly Report on Form 10-Q (file no. 0-26483) for the fiscal quarter ended June 30, 2012, filed on August 7, 2012)
10.67**	Purchase Agreement with Atherotech Diagnostics Lab, dated August 23, 2012 and effective as of August 20, 2012 (incorporated by reference to Exhibit 10.1 to the registrant’s Quarterly Report on Form 10-Q (file no. 0-26483) for the fiscal quarter ended September 30, 2012, filed on November 7, 2012)
10.68**	Volume Discount Program Addendum with Atherotech Diagnostics Lab, dated August 23, 2012 and effective as of August 20, 2012 (incorporated by reference to Exhibit 10.2 to the registrant’s Quarterly Report on Form 10-Q (file no. 0-26483) for the fiscal quarter ended September 30, 2012, filed on November 7, 2012)
10.69**	Amended and Restated Loan and Security Agreement by and between diaDexus, Inc. and Comerica Bank, dated September 11, 2012 (incorporated by reference to Exhibit 10.3 to the registrant’s Quarterly Report on Form 10-Q (file no. 0-26483) for the fiscal quarter ended September 30, 2012, filed on November 7, 2012)
23.1	Consent of PricewaterhouseCoopers LLP, Independent Registered Public Accounting Firm
24.1	Power of Attorney (see signature page to this Annual Report on Form 10-K)
31.1	Certification of Chief Executive Officer pursuant to Exchange Act Rule 13a-14(a)
31.2	Certification of Chief Financial Officer pursuant to Exchange Act Rule 13a-14(a)

75

Exhibit	Description
32.1	Certification of Chief Executive Officer pursuant to 18 USC. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2	Certification of Chief Financial Officer pursuant to 18 USC. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101.INS†	XBRL Instance Document
101.SCH†	XBRL Taxonomy Extension Schema Document
101.CAL†	XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF†	XBRL Taxonomy Extension Definition Linkbase Document
101.LAB†	XBRL Taxonomy Extension Label Linkbase Document
101.PRE†	XBRL Taxonomy Extension Presentation Linkbase Document

* Certain schedules referenced in the Agreement and Plan of Merger and Reorganization have been omitted in accordance with Item 601(b)(2) of Regulation S-K. A copy of any omitted schedule will be furnished supplementally to the Securities and Exchange Commission upon request.

# Management contract or compensatory plan or arrangement.

** Confidential treatment has been granted with respect to certain portions of this agreement.

† Pursuant to Rule 406T of Regulation S-T, these interactive data files are deemed not filed or part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, or Section 18 of the Securities Exchange Act of 1934, as amended, and otherwise are not subject to liability under those sections.

76