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What changed in Guardant Health, Inc.'s 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of Guardant Health, Inc.'s 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+365 added−410 removedSource: 10-K (2024-02-22) vs 10-K (2023-02-23)

Top changes in Guardant Health, Inc.'s 2023 10-K

365 paragraphs added · 410 removed · 298 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

105 edited+25 added−29 removed218 unchanged
Biggest changeWe believe key competitive factors affecting our success are the price and performance of our products, evidence of clinical differentiation, support by KOLs, commercial competitiveness, turnaround time and scope and quality of payer contracts. Our competitive landscape may change over the next few years as a result of new competitors entering through investment and acquisition activity.
Biggest changeOver the last year, that has included new and accelerated development programs by a number of potential competitors, and increasing levels of merger and acquisition activity by both existing and new competitors. 11 We believe key competitive factors affecting our success are the price and performance of our products, evidence of clinical differentiation, support by KOLs, commercial competitiveness, turnaround time and scope and quality of payer contracts.
These include: • establishment registration and device listing with the FDA; • the FDA’s QSR, which requires manufacturers, including third-party manufacturers, to follow stringent design, testing, production, control, supplier/contractor selection, complaint handling, documentation and other quality assurance procedures during all aspects of the manufacturing process; • labeling regulations, unique device identification requirements and FDA prohibitions against the promotion of products for uncleared, unapproved or off-label uses; • advertising and promotion requirements; • restrictions on sale, distribution or use of a device; • PMA annual reporting requirements; • PMA approval of product modifications, or the potential for new 510(k) clearances for certain modifications to 510(k)-cleared devices; • medical device reporting regulations, which require that manufacturers report to the FDA if their device may have caused or contributed to a death or serious injury or malfunctioned in a way that would likely cause or contribute to a death or serious injury if the malfunction were to recur; • medical device correction and removal reporting regulations, which require that manufacturers report to the FDA field corrections and product recalls or removals if undertaken to reduce a risk to health posed by the device or to remedy a violation of the FDCA that may present a risk to health; • recall requirements, including a mandatory recall if there is a reasonable probability that the device would cause serious adverse health consequences or death; • an order of repair, replacement or refund; 19 • device tracking requirements; and • post-market surveillance regulations, which apply when necessary to protect the public health or to provide additional safety and effectiveness data for the device.
These include: • establishment registration and device listing with the FDA; • the FDA’s QSR, which requires manufacturers, including third-party manufacturers, to follow stringent design, testing, production, control, supplier/contractor selection, complaint handling, documentation and other quality assurance procedures during all aspects of the manufacturing process; • labeling regulations, unique device identification requirements and FDA prohibitions against the promotion of products for uncleared, unapproved or off-label uses; • advertising and promotion requirements; • restrictions on sale, distribution or use of a device; • PMA annual reporting requirements; • PMA approval of product modifications, or the potential for new 510(k) clearances for certain modifications to 510(k)-cleared devices; • medical device reporting regulations, which require that manufacturers report to the FDA if their device may have caused or contributed to a death or serious injury or malfunctioned in a way that would likely cause or contribute to a death or serious injury if the malfunction were to recur; • medical device correction and removal reporting regulations, which require that manufacturers report to the FDA field corrections and product recalls or removals if undertaken to reduce a risk to health posed by the device or to remedy a violation of the FDCA that may present a risk to health; • recall requirements, including a mandatory recall if there is a reasonable probability that the device would cause serious adverse health consequences or death; • an order of repair, replacement or refund; 18 • device tracking requirements; and • post-market surveillance regulations, which apply when necessary to protect the public health or to provide additional safety and effectiveness data for the device.
Manufacturers must submit reports by the 90th day of each calendar year. Because we manufacture our own LDTs solely for use by or within our own laboratory, we believe that we are currently exempt from these reporting requirements. 24 Efforts to ensure that our business arrangements with third parties comply with applicable laws and regulations will involve substantial costs.
Manufacturers must submit reports by the 90th day of each calendar year. Because we manufacture our own LDTs solely for use by or within our own laboratory, we believe that we are currently exempt from these reporting requirements. Efforts to ensure that our business arrangements with third parties comply with applicable laws and regulations will involve substantial costs.
Under some of our in-license agreements, we are obligated to pay low single-digit percentage running royalties on net sales of the product or service where the licensed technology is used in, subject to minimum annual royalties or fees for certain of the in-license agreements. 12 Our customers and partners recognize us as being a leader in the liquid biopsy field.
Under some of our in-license agreements, we are obligated to pay low single-digit percentage running royalties on net sales of the product or service where the licensed technology is used in, subject to minimum annual royalties or fees for certain of the in-license agreements. Our customers and partners recognize us as being a leader in the liquid biopsy field.
The FDA has developed and maintain a list device types appropriate for the “safety and performance based” pathway and continues to develop product-specific guidance documents that identify the performance criteria for each such device type, as well as recommended testing methods, where feasible. 15 The PMA process We currently market our Guardant360 CDx test pursuant to an approved PMA.
The FDA has developed and maintain a list device types appropriate for the “safety and performance based” pathway and continues to develop product-specific guidance documents that identify the performance criteria for each such device type, as well as recommended testing methods, where feasible. The PMA process We currently market our Guardant360 CDx test pursuant to an approved PMA.
We believe the Guardant Reveal test can improve turnaround by simultaneously interrogating both genomic and epigenomic signals from a single blood draw without the need for tissue. Similar to our data development effort for our Guardant360 tests, we are investing heavily in establishing clinical utility for the use of Guardant Reveal in adjuvant treatment settings.
We believe the Guardant Reveal test can improve turnaround by simultaneously interrogating both genomic and epigenomic signals from a single blood draw without the need for tissue. Similar to our data development effort for our Guardant360 tests, we are investing heavily in establishing clinical validity and utility for the use of Guardant Reveal in adjuvant treatment settings.
Our clinician-focused sales organization in the United States is engaged in sales efforts and promotional activities primarily targeting oncologists and cancer centers. Our sales representatives typically have extensive backgrounds in laboratory testing, therapeutics and oncology. We have supplemented the team with clinical oncology specialists with extensive medical affairs experience for molecular information support in the field.
Our clinician-focused sales organization in the United States is engaged in sales efforts and promotional activities primarily targeting oncologists and cancer centers. Our sales representatives typically have extensive sales-related backgrounds in laboratory testing, therapeutics and oncology. We have supplemented the team with clinical oncology specialists with extensive medical affairs experience for molecular information support in the field.
In December 2020, we signed our first public private partnership agreement with Vall D'Hebron Institute of Oncology, or VHIO, one of Europe’s leading cancer research institutions, and in May 2022, the first blood-based cancer testing services in Europe based on our industry-leading digital sequencing platform became available at the VHIO testing facility in Spain.
In December 2020, we signed our first public private partnership agreement with Vall D'Hebron Institute of Oncology, or VHIO, one of Europe’s leading cancer research institutions, and in May 2022, the first blood-based cancer testing services in Europe based on our digital sequencing platform became available at the VHIO testing facility in Spain.
To achieve this, we intend to: • Increase awareness of our products by: ▪ building awareness of liquid biopsy and pioneering a blood-first paradigm for genotyping cancer patients; ▪ educating biopharmaceutical companies, key opinion leaders, or KOLs, and advocacy groups; ▪ advocating for inclusion of our tests in treatment guidelines; and ▪ expanding access to our products globally through direct investment and by leveraging our global network of partners. • Expand clinical utility and increase reimbursement for our products by: ▪ working with private and public payers to establish coverage and reimbursement for our tests; ▪ investing in clinical evidence directly and through relationships with academia and biopharmaceutical companies to establish expanded indications for use; ▪ demonstrating improved clinical utility and health economics from use of our tests to patients, physicians and payers; and ▪ pursuing FDA and other regulatory approval internationally of our tests to facilitate reimbursement and global market access. • Strengthen our relationships with customers by: ▪ demonstrating the utility of our products in connection with standard of care treatments thereby encouraging clinical adoption; ▪ developing and seeking approval of our products as companion diagnostics for targeted therapies and immuno-oncology therapies; and ▪ providing earlier insights into emerging clinically relevant biomarkers. • Expand our product portfolio by: ▪ using our commercial engine as a force multiplier of returns on research and development investment to generate data and analytical insights to enable development of new products; ▪ taking a disciplined and systematic approach to product and market development, by starting with therapy selection and then expanding sequentially towards early cancer detection; ▪ utilizing our data, sample biobank and insights into biology of circulating tumor-related biomarkers in blood to develop our new products; ▪ building on our regulatory and commercial infrastructure to accelerate new product launches and drive commercial efficiencies; and ▪ using our strategic relationships, including our partnerships with European cancer centers and research organizations, to drive global commercialization of our products.
To achieve this, we intend to: • Increase awareness of our products by: ▪ building awareness of liquid biopsy and pioneering a blood-first paradigm for genotyping cancer patients; ▪ educating biopharmaceutical companies, key opinion leaders, or KOLs, and advocacy groups; ▪ advocating for inclusion of our tests in treatment guidelines; and ▪ expanding access to our products globally through direct investment and by leveraging our global network of partners. • Expand clinical utility and increase reimbursement for our products by: ▪ working with private and public payers to establish coverage and reimbursement for our tests; ▪ investing in clinical evidence directly and through relationships with academia and biopharmaceutical companies to establish expanded indications for use; ▪ demonstrating improved clinical utility and health economics from use of our tests to patients, physicians and payers; and ▪ pursuing FDA and other regulatory approval internationally of our tests to facilitate reimbursement and global market access. • Strengthen our relationships with customers by: ▪ demonstrating the utility of our products in connection with standard of care treatments thereby encouraging clinical adoption; ▪ developing and seeking approval of our products as companion diagnostics for targeted therapies and immuno-oncology therapies; and ▪ providing earlier insights into emerging clinically relevant biomarkers. • Expand our product portfolio by: ▪ using our commercial engine as a force multiplier of returns on research and development investment to generate data and analytical insights to enable development of new products; ▪ taking a disciplined and systematic approach to product and market development, by starting with therapy selection and then expanding sequentially towards early cancer detection; ▪ utilizing our data, sample biobank and insights into biology of circulating tumor-related biomarkers in blood to develop our new products; ▪ building on our regulatory and commercial infrastructure to accelerate new product launches and drive commercial efficiencies; and ▪ using our strategic relationships, including our partnerships with cancer centers, research organizations and laboratory companies in Europe and Asia, to drive global commercialization of our products.
The MHLW and PMDA also assess the quality management systems of the manufacturer and product conformity to the requirements of the PAL. We are subject to compliance inspections by these agencies. We will seek approvals in other countries as may be required in the future.
The MHLW and PMDA also assess the quality management systems of the manufacturer and product conformity to the requirements of the PAL. We are subject to compliance inspections by these agencies. 22 We will seek approvals in other countries as may be required in the future.
While not mandatory, compliance with these standards is viewed as the easiest way to satisfy the essential requirements as a practical matter as it creates a rebuttable presumption that the device satisfies that essential requirement. 20 Compliance with the essential requirements of the IVDD is a prerequisite for European conformity marking, or CE mark, without which in vitro diagnostic medical devices cannot be marketed or sold in the EU.
While not mandatory, compliance with these standards is viewed as the easiest way to satisfy the essential requirements as a practical matter as it creates a rebuttable presumption that the device satisfies that essential requirement. 19 Compliance with the essential requirements of the IVDD is a prerequisite for European conformity marking, or CE mark, without which in vitro diagnostic medical devices cannot be marketed or sold in the EU.
Moreover, legislative measures could likewise result in a change to the approach to FDA’s regulation over LDTs, including a requirement for premarket review of LDTs, among other things. 18 Research use only or investigational use only devices Some of our products are currently available for research use only, or RUO, or for investigational use only, or IUO, depending on the proposed application.
Moreover, legislative measures could likewise result in a change to the approach to FDA’s regulation over LDTs, including a requirement for premarket review of LDTs, among other things. 17 Research use only or investigational use only devices Some of our products are currently available for research use only, or RUO, or for investigational use only, or IUO, depending on the proposed application.
As a result, the potential for more favorable reimbursement associated with becoming a participating provider may be offset by a potential loss of reimbursement for non-covered uses of our tests. We have provided testing services to patients covered by commercial payers with many cancer types and indications, some of the time as a non-participating provider through 2022.
As a result, the potential for more favorable reimbursement associated with becoming a participating provider may be offset by a potential loss of reimbursement for non-covered uses of our tests. We have provided testing services to patients covered by commercial payers with many cancer types and indications, some of the time as a non-participating provider through 2023.
Our competitors within the liquid biopsy space for therapy selection include Foundation Medicine, Inc., which was acquired by Roche Holdings, Inc. in 2018; Roche Molecular Systems, Inc., Thermo Fisher Scientific, Inc., Illumina, Inc., Qiagen N.V., Invitae Corporation, Caris Life Science, Tempus Labs, Inc., and Agilent Technologies, Inc.
Our competitors within the liquid biopsy space for therapy selection include Foundation Medicine, Inc., which was acquired by Roche Holdings, Inc. in 2018; Roche Molecular Systems, Inc., Thermo Fisher Scientific, Inc., Illumina, Inc., Qiagen N.V., Invitae Corporation, Caris Life Science, and Tempus Labs, Inc.
All statements made in any of our securities filings, including all forward-looking statements or information, are made as of the date of the document in which the statement is included, and we do not assume or undertake any obligation to update any of those statements or documents unless we are required to do so by law. 27
All statements made in any of our securities filings, including all forward-looking statements or information, are made as of the date of the document in which the statement is included, and we do not assume or undertake any obligation to update any of those statements or documents unless we are required to do so by law. 25
In May 2022, we launched the Shield LDT test to address the needs of individuals eligible for colorectal cancer screening. From a simple blood draw, Shield uses a novel multimodal approach to detect colorectal cancer signals in the bloodstream, including DNA that is shed by tumors.
For early cancer detection, in May 2022, we launched the Shield LDT test to address the needs of individuals eligible for colorectal cancer screening. From a simple blood draw, Shield uses a novel multimodal approach to detect colorectal cancer signals in the bloodstream, including DNA that is shed by tumors.
Issued U.S. patents and their international counterparts currently in our patent portfolio that relate to various aspects of our technology and products are expected to expire between 2026 and 2039. We also bolster our proprietary technology by acquiring or in-licensing technologies developed by third parties.
Issued U.S. patents and their international counterparts currently in our patent portfolio that relate to various aspects of our technology and products are expected to expire between 2026 and 2041. We also bolster our proprietary technology by acquiring or in-licensing technologies developed by third parties.
For other substances, the notified body can seek the opinion from a national competent authorities or the EMA. 22 The aforementioned EU rules are generally applicable in the European Economic Area, or EEA, which consists of the 27 EU member states plus Norway, Liechtenstein and Iceland.
For other substances, the notified body can seek the opinion from a national competent authorities or the EMA. 21 The aforementioned EU rules are generally applicable in the European Economic Area, or EEA, which consists of the 27 EU member states plus Norway, Liechtenstein and Iceland.
Certain countries also mandate implementation of commercial compliance programs. 21 In the EU, regulatory authorities have the power to carry out announced and, if necessary, unannounced inspections of companies, as well as suppliers and/or sub-contractors and, where necessary, the facilities of professional users.
Certain countries also mandate implementation of commercial compliance programs. 20 In the EU, regulatory authorities have the power to carry out announced and, if necessary, unannounced inspections of companies, as well as suppliers and/or sub-contractors and, where necessary, the facilities of professional users.
Our patent strategy is focused on seeking coverage for our core technology, our digital sequencing platform, and specific follow-on applications and implementations for detecting and monitoring cancer or other diseases by determining genetic variations in patient samples.
Our patent strategy is focused on seeking coverage for our core technology, our digital sequencing platform, and specific follow-on applications and implementations for screening, detecting and monitoring cancer or other diseases by determining genetic and/or epigenomic variations in patient samples.
Results are typically delivered, ten days following receipt of sample and delivered by a clinical report.
Results are typically delivered within ten days following receipt of sample and delivered by a clinical report.
We have also launched the Guardant360 TissueNext tissue test for advanced-stage cancer, Guardant Reveal blood test to detect residual and recurring disease in early-stage cancer patients, and Guardant360 Response blood test to predict patient response to immunotherapy or targeted therapy eight weeks earlier than current standard-of-care imaging.
We have also launched the Guardant360 TissueNext tissue test for advanced-stage cancer, Guardant Reveal blood test to detect residual and recurring disease in early-stage colorectal, breast and lung cancer patients, and Guardant360 Response blood test to predict patient response to immunotherapy or targeted therapy eight weeks earlier than current standard-of-care imaging.
On November 2, 2022, CMS published its final rule for the Medicare Physician Fee Schedule for calendar year (CY) 2023, including changes for clinical laboratories that take effect on January 1, 2023.
On November 2, 2022, CMS published its final rule for the Medicare Physician Fee Schedule for calendar year (CY) 2023, including changes for clinical laboratories that took effect on January 1, 2023.
Despite these needs, clinical study enrollment in oncology has severely lagged, with only approximately 8% of cancer patients enrolling in clinical studies. GuardantConnect is our integrated software-based solution designed for our clinical and biopharmaceutical customers, seeking to connect patients tested with our assays with actionable alterations with potentially relevant clinical studies.
Despite these needs, clinical study enrollment in oncology has severely lagged, with only approximately 6.3% of cancer patients enrolling in clinical studies. GuardantConnect is our integrated software-based solution designed for our clinical and biopharmaceutical customers, seeking to connect patients tested with our assays with actionable alterations with potentially relevant clinical studies.
We also collaborate with biopharmaceutical companies in clinical studies by providing the above-mentioned tests, as well as the GuardantOMNI blood test for advanced-stage cancer, and the GuardantINFINITY blood test, launched in September 2022, which is a next-generation smart liquid biopsy that provides new, multi-dimensional insights into the complexities of tumor molecular profiles and immune response to advance cancer research and therapy development.
We also collaborate with biopharmaceutical companies in clinical studies by providing the above-mentioned tests, as well as the GuardantOMNI blood test for advanced-stage cancer, and the GuardantINFINITY blood test, a next-generation smart liquid biopsy that provides new, multi-dimensional insights into the complexities of tumor molecular profiles and immune response to advance cancer research and therapy development.
If their policies were to change in the future to cover additional cancer indications, we anticipate that our total reimbursement would increase. In January 2021, a PLA code was issued for our Guardant360 CDx test with an effective date in April 2021.
If their policies were to change in the future to cover additional cancer indications, we anticipate that our total reimbursement would increase. In January 2021, a proprietary laboratory analyses, or PLA code was issued for our Guardant360 CDx test with an effective date in April 2021.
Our Guardant360 CDx test has also been approved by the FDA for use as a companion diagnostic to identify NSCLC patients who may benefit from treatment with TAGRISSO ® (osimertinib), RYBREVANT TM (amivantamab-vjmw), LUMAKRAS TM (sotorasib) and ENHERTU ® (fam-trastuzumab deruxtecan-nxki), and breast cancer patients who may benefit from treatment with ORSERDU TM (elacestrant), marketed by biopharmaceutical companies.
Our Guardant360 CDx test has also been approved by the FDA for use as a companion diagnostic to identify NSCLC patients who may benefit from treatment with TAGRISSO® (osimertinib), RYBREVANT® (amivantamab-vjmw), LUMAKRASTM (sotorasib) and ENHERTU® (fam-trastuzumab deruxtecan-nxki), and breast cancer patients who may benefit from treatment with ORSERDUTM (elacestrant), marketed by biopharmaceutical companies.
Guardant360 Response Test Our Guardant360 Response test, launched as an LDT, is the first blood-only liquid biopsy that enables doctors to view molecular response, or changes in circulating tumor DNA (ctDNA) levels, from a simple blood draw to potentially gain early insight regarding patient response to treatment.
Guardant360 Response Test Our Guardant360 Response test is the first blood-only liquid biopsy that enables doctors to view molecular response, or changes in circulating tumor DNA, or ctDNA, levels, from a simple blood draw to potentially gain early insight regarding patient response to treatment.
In May 2018, we formed and capitalized a joint venture, Guardant Health AMEA, Inc., with SoftBank, which we refer to as the Joint Venture or Guardant AMEA, relating to the sale, marketing and distribution of our tests generally outside the Americas and Europe and to accelerate commercialization of our products in Asia, the Middle East and Africa.
In May 2018, we formed and capitalized Guardant Health AMEA, Inc., with SoftBank, which we refer to as Guardant AMEA, relating to the sale, marketing and distribution of our tests generally outside the Americas and Europe and to accelerate commercialization of our products in Asia, the Middle East and Africa.
As of December 31, 2022, women held 50% of the independent director seats on our Board. 26 Culture, Compensation and Benefits We strive to recruit, hire and retain a talented and diverse team of people who align with our values. Our employees are supported with training and development opportunities to pursue their career paths and ensure compliance with our policies.
As of December 31, 2023, women held 43% of the independent director seats on our Board. Culture, Compensation and Benefits We strive to recruit, hire and retain a talented and diverse team of people who align with our values. Our employees are supported with training and development opportunities to pursue their career paths and ensure compliance with our policies.
We publish peer-reviewed studies in order to influence treatment guidelines, to educate clinicians and other oncology stakeholders about the value proposition of our test and to set the stage for reimbursement with private and public payers. We have over 90 targeted therapy outcomes studies, more than 300 peer-reviewed publications and more than 700 scientific abstracts.
We publish peer-reviewed studies in order to influence treatment guidelines, to educate clinicians and other oncology stakeholders about the value proposition of our test and to set the stage for reimbursement with private and public payers. We have over 140 targeted therapy outcomes studies, more than 450 peer-reviewed publications and more than 900 scientific abstracts.
We plan to address this need, first in early-stage colorectal, breast and lung cancers, with our Guardant Reveal test launched as an LDT for residual disease and recurrence monitoring.
We plan to address this need, first in early-stage colorectal, breast and lung cancers, with our Guardant Reveal test for residual disease and recurrence monitoring.
Guardant360 TissueNext Test To complement our liquid biopsy-based products, we launched Guardant360 TissueNext as an LDT, our first tissue-based test which is designed to identify patients with advanced cancer who may benefit from biomarker-informed treatment. Tissue genotyping is currently widely available to physicians and patients.
Guardant360 TissueNext Test To complement our liquid biopsy-based products, Guardant360 TissueNext, our first tissue-based test, is designed to identify patients with advanced cancer who may benefit from biomarker-informed treatment. Tissue genotyping is currently widely available to physicians and patients.
Effective January 1, 2022, Medicare has started to reimburse Guardant360 CDx services at the median rate of claims paid by commercial payers and this rate will apply until December 2023. In March 2022, Palmetto GBA, the Medicare administrative contractor for MolDX, has conveyed coverage for our Guardant360 TissueNext test under the existing local coverage determination.
Effective January 1, 2022, Medicare started to reimburse Guardant360 CDx services at the median rate of claims paid by commercial payers. In March 2022, Palmetto GBA, the Medicare administrative contractor for MolDX, conveyed coverage for our Guardant360 TissueNext test under the existing local coverage determination.
Historic success and payments are not indicative of future success of and payments from such appeals. 10 Due to the inherent variability and unpredictability of the reimbursement landscape, including related to the amount that payers reimburse us for any of our tests, we estimate the amount of revenue to be recognized at the time a test is provided and record revenue adjustments if and when the cash subsequently received differs from the revenue recorded.
Due to the inherent variability and unpredictability of the reimbursement landscape, including related to the amount that payers reimburse us for any of our tests, we estimate the amount of revenue to be recognized at the time a test is provided and record revenue adjustments if and when the cash subsequently received differs from the revenue recorded.
On August 2, 2011, the Budget Control Act of 2011 was signed into law, which, among other things, reduced Medicare payments to providers, effective on April 1, 2013 and, due to subsequent legislative amendments to the statute, will remain in effect through 2032, with the exception of a temporary suspension from May 1, 2020 through March 31, 2022, unless additional Congressional action is taken.
On August 2, 2011, the Budget Control Act of 2011 was signed into law, which, among other things, reduced Medicare payments to providers, effective on April 1, 2013 and, due to subsequent legislative amendments to the statute, will remain in effect through 2032, unless additional Congressional action is taken.
To clinically validate the performance of our next-generation Shield blood test in detecting lung cancer in high-risk individuals ages 50-80, in January 2022, we enrolled the first patient in a nearly 10,000-patient prospective, registrational study, which we refer to as the SHIELD LUNG study. The study is anticipated to run in approximately 100 centers in the United States and Europe.
To clinically validate the performance of our next-generation Shield blood test in detecting lung cancer in high-risk individuals ages 50-80, in January 2022, we enrolled the first patient in a nearly 10,000-patient prospective, registrational study, which we refer to as the SHIELD LUNG study.
Additionally, our competitors in the early screening testing space include GRAIL, Inc., Exact Sciences Corp., Freenome Holdings, Inc., Delfi Diagnostics and InterVenn Biosciences. 11 Competitors within the broader genomics profiling space based on tissue include laboratory companies such as Bio-Reference Laboratories, Inc., Laboratory Corporation of America and Quest Diagnostics, Inc., as well as companies such as Myriad Genetics, Inc., and most if not all of the competitors within the liquid biopsy space for therapy selection, that sell molecular diagnostic tests for cancer to physicians and have or may develop tests that compete with our tests.
Competitors within the broader genomics profiling space based on tissue include laboratory companies such as Bio-Reference Laboratories, Inc., Laboratory Corporation of America and Quest Diagnostics, Inc., as well as Myriad Genetics, Inc., and most if not all of the competitors within the liquid biopsy space for therapy selection, that sell molecular diagnostic tests for cancer to physicians and have or may develop tests that compete with our tests.
Certain other changes to an approved device require the submission of a new PMA, such as when the design change causes a different intended use, mode of operation, and technical basis of operation, or when the design change is so significant that a new generation of the device will be developed, and the data that were submitted with the original PMA are not applicable for the change in demonstrating a reasonable assurance of safety and effectiveness. 16 The IDE process Clinical studies are almost always required to support a PMA or a de novo request, and are sometimes required to support 510(k) submissions.
Certain other changes to an approved device require the submission of a new PMA, such as when the design change causes a different intended use, mode of operation, and technical basis of operation, or when the design change is so significant that a new generation of the device will be developed, and the data that were submitted with the original PMA are not applicable for the change in demonstrating a reasonable assurance of safety and effectiveness.
Such a strategy is predicated on the tests’ ability to offer accurate, reliable and fast guideline-directed comprehensive genotyping for all adult solid tumors without exposing patients to invasive biopsy procedures’ risks, delays or chance of failure. Commercialization Successful commercial adoption of our tests by clinicians and biopharmaceutical companies is critical to our business.
Such a strategy is predicated on the tests’ ability to offer accurate, reliable and fast guideline-directed comprehensive genotyping for all adult solid tumors without exposing patients to invasive biopsy procedures’ risks, delays or chance of failure.
GuardantINFINITY Test In September 2022, we launched GuardantINFINITY, a next-generation smart liquid biopsy test that provides new, multi-dimensional insights into the complexities of tumor molecular profiles and immune response to advance cancer research and therapy development.
In addition, the broad genomic footprint of our GuardantOMNI test enables accurate measurement of tumor mutational burden. 5 GuardantINFINITY Test In September 2022, we launched GuardantINFINITY, a next-generation smart liquid biopsy test that provides new, multi-dimensional insights into the complexities of tumor molecular profiles and immune response to advance cancer research and therapy development.
Failure to comply with CLIA certification and state clinical laboratory licensure requirements may result in a range of enforcement actions, including certificate or license suspension, limitation, or revocation, directed plan of action, onsite monitoring, civil monetary penalties, criminal sanctions, and revocation of the laboratory’s approval to receive Medicare and Medicaid payment for its services, as well as significant adverse publicity. 13 CLIA and state laws and regulations, operating together, sometimes limit the ability of laboratories to offer consumer-initiated testing (also known as “direct access testing”).
Failure to comply with CLIA certification and state clinical laboratory licensure requirements may result in a range of enforcement actions, including certificate or license suspension, limitation, or revocation, directed plan of action, onsite monitoring, civil monetary penalties, criminal sanctions, and revocation of the laboratory’s approval to receive Medicare and Medicaid payment for its services, as well as significant adverse publicity.
In approving a PMA, as a condition of approval, the FDA may require some form of post-approval study or post-market surveillance, whereby the applicant conducts a follow-up study or follows certain patient groups for a number of years and makes periodic reports to the FDA on the clinical status of those patients when necessary to protect the public health or to provide additional or longer term safety and effectiveness data for the device.
The PMA process can be expensive, uncertain and lengthy and a number of devices for which the FDA approval has been sought by other companies have never been approved for marketing. 15 In approving a PMA, as a condition of approval, the FDA may require some form of post-approval study or post-market surveillance, whereby the applicant conducts a follow-up study or follows certain patient groups for a number of years and makes periodic reports to the FDA on the clinical status of those patients when necessary to protect the public health or to provide additional or longer term safety and effectiveness data for the device.
On December 29, 2022, Congress passed the Consolidated Appropriations Act, 2023, which prevented any reduction in payment amounts from commercial payor rate implementation for 2023; delayed by one year data reporting requirements for tests other than ADLTs; and extended the three-year period in which payment may not be reduced by more than 15%, to CYs 2024 through 2026.
On December 29, 2022, Congress passed the Consolidated Appropriations Act, 2023, which prevented any reduction in payment amounts from commercial payor rate implementation for 2023; delayed by one year data reporting requirements for tests other than ADLTs; and extended the three-year period in which payment may not be reduced by more than 15%, to CYs 2024 through 2026. 9 Current Procedural Terminology, or CPT, coding plays a significant role in how our tests are reimbursed both from commercial and governmental payers.
Our Guardant360 LDT test measures 80+ cancer-related genes, and has been used over 300,000 times by clinicians to help inform which therapy may be effective for advanced stage cancer patients with solid tumors, without the need to obtain archival tissue or subject the patient to another invasive biopsy.
Our Guardant360 LDT test measures 80+ cancer-related genes and supports new guideline-recommended biomarkers, to help inform which therapy may be effective for advanced stage cancer patients with solid tumors, without the need to obtain archival tissue or subject the patient to another invasive biopsy.
We believe that our relationships with key stakeholders across the oncology space have helped facilitate the use of our tests by over 12,000 oncologists, who have collectively ordered our Guardant360 LDT test over 300,000 times, and over 150 biopharmaceutical companies. U.S. clinical commercial efforts We sell our tests to clinical customers in the United States through our targeted sales organization.
We believe that our relationships with key stakeholders across the oncology space have helped facilitate the use of our tests by clinicians and biopharmaceutical companies. U.S. clinical commercial efforts We sell our tests to clinical customers in the United States through our targeted sales organization.
As we broaden our coverage amongst contracted payers to include additional tests of ours, we may begin to experience increases in average revenue per test performed; however, we cannot make any assurances that we will be successful in broadening our coverage on a timely basis or at all.
This includes addressing variable coverage requirements and evidence required, and the need for enhanced guideline support. 8 As we broaden our coverage amongst commercial payers to include additional tests of ours, we may begin to experience increases in average revenue per test performed; however, we cannot make any assurances that we will be successful in broadening our coverage on a timely basis or at all.
After a device receives 510(k) clearance, any modification that could significantly affect its safety or effectiveness, or that would constitute a new or major change in its intended use, will require a new 510(k) clearance or, depending on the modification, could require a PMA or de novo request.
De novo classification may also be available after receipt of a “not substantially equivalent” letter following submission of a 510(k) to FDA. 14 After a device receives 510(k) clearance, any modification that could significantly affect its safety or effectiveness, or that would constitute a new or major change in its intended use, will require a new 510(k) clearance or, depending on the modification, could require a PMA or de novo request.
In addition to our existing contracted payers, various laboratory benefit managers and evidence review organizations working with commercial payers have endorsed coverage of our Guardant360 test. We are actively engaged to expand coverage among existing contracted payers and to achieve coverage with the remaining key commercial payers, laboratory benefit managers and evidence review organizations.
We are actively engaged to expand coverage among existing commercial payers and to achieve coverage with the remaining key commercial payers, laboratory benefit managers and evidence review organizations.
Device classification Under the FDCA, medical devices are classified into one of three classes-Class I, Class II or Class III-depending on the degree of risk associated with each medical device and the extent of control needed to provide reasonable assurances with respect to safety and effectiveness.
Both the 510(k) clearance and PMA processes can be resource intensive, expensive, and lengthy, and require payment of significant user fees. 13 Device classification Under the FDCA, medical devices are classified into one of three classes-Class I, Class II or Class III-depending on the degree of risk associated with each medical device and the extent of control needed to provide reasonable assurances with respect to safety and effectiveness.
In addition, we file for patent protection in connection with our on-going research and development activities, particularly those related to early-stage cancer detection, including those based on pattern recognition based on analyzing our extensive patient blood sample database, among others.
In addition, we file for patent protection in connection with our on-going research and development activities, particularly those related to early-stage cancer detection.
Additionally, after a study begins, the sponsor, the FDA or the IRB could suspend or terminate a clinical study at any time for various reasons, including a belief that the risks to study subjects outweigh the anticipated benefits. 17 Expedited development and review programs Following passage of the 21st Century Cures Act, the FDA implemented the Breakthrough Devices Program, which is a voluntary program offered to manufacturers of certain medical devices and device-led combination products that may provide for more effective treatment or diagnosis of life-threatening or irreversibly debilitating diseases or conditions.
Expedited development and review programs Following passage of the 21st Century Cures Act, the FDA implemented the Breakthrough Devices Program, which is a voluntary program offered to manufacturers of certain medical devices and device-led combination products that may provide for more effective treatment or diagnosis of life-threatening or irreversibly debilitating diseases or conditions.
During a study, the sponsor is required to comply with the applicable FDA requirements, including, for example, study monitoring, selecting clinical investigators and providing them with the investigational plan, ensuring IRB review, adverse event reporting, record keeping and prohibitions on the promotion of investigational devices or on making safety or effectiveness claims for them.
An IDE supplement must be submitted to, and approved by, the FDA before a sponsor or investigator may make a change to the investigational plan that may affect its scientific soundness, study plan or the rights, safety or welfare of human subjects. 16 During a study, the sponsor is required to comply with the applicable FDA requirements, including, for example, study monitoring, selecting clinical investigators and providing them with the investigational plan, ensuring IRB review, adverse event reporting, record keeping and prohibitions on the promotion of investigational devices or on making safety or effectiveness claims for them.
Current Procedural Terminology, or CPT, coding plays a significant role in how our tests are reimbursed both from commercial and governmental payers. In addition, Z-Code Identifiers are used by certain payers, including under Medicare's MolDx, to supplement CPT codes for our molecular diagnostics tests. Changes to the codes used to report to payers may result in significant changes in reimbursement.
In addition, Z-Code Identifiers are used by certain payers, including under Medicare's Molecular Diagnostic Services Program, or MolDx, to supplement CPT codes for our molecular diagnostics tests. Changes to the codes used to report to payers may result in significant changes in reimbursement.
A manufacturer can submit a petition for direct de novo review if the manufacturer is unable to identify an appropriate predicate device and the new device or new use of the device presents a moderate or low risk. De novo classification may also be available after receipt of a “not substantially equivalent” letter following submission of a 510(k) to FDA.
A manufacturer can submit a petition for direct de novo review if the manufacturer is unable to identify an appropriate predicate device and the new device or new use of the device presents a moderate or low risk.
We currently do not offer direct access testing and our CLIA tests may only be ordered by authorized healthcare providers. Regulatory framework for medical devices in the United States Pursuant to its authority under the Federal Food, Drug and Cosmetic Act, or the FDCA, the FDA has jurisdiction over medical devices, which are defined to include, among other things, IVDs.
Regulatory framework for medical devices in the United States Pursuant to its authority under the Federal Food, Drug and Cosmetic Act, or the FDCA, the FDA has jurisdiction over medical devices, which are defined to include, among other things, IVDs.
In October 2021, we signed a partnership agreement with The Royal Marsden NHS Foundation Trust, a premier cancer center within the United Kingdom for patient care, research and teaching of all types of cancer.
In October 2021, we signed a partnership agreement with The Royal Marsden NHS Foundation Trust, or Royal Marsden, a premier cancer center within the United Kingdom, or the UK, for patient care, research and teaching of all types of cancer, and in April 2023, the blood-based cancer testing services based on our digital sequencing platform became available at Royal Marsden testing facility in the UK.
At the same time, broader panel-wide performance of small variants is roughly similar to that of Guardant360 LDT test. The broad genomic footprint of our GuardantOMNI test enables accurate measurement of tumor mutational burden.
At the same time, broader panel-wide performance of small variants is roughly similar to that of Guardant360 LDT test.
Employees and Human Capital Our Employees and Commitment to Diversity, Equity and Inclusion As of December 31, 2022, we had 1,793 full-time employees, of which approximately 1,685 are in the U.S., with the remainder in Asia, Europe and Canada. We have also engaged and may continue to engage independent contractors to assist us with our operations.
Employees and Human Capital Our Employees and Commitment to Diversity, Equity and Inclusion As of December 31, 2023, we had 1,779 employees, 1,768 of which are full-time employees and approximately 1,655 of which are in the U.S., with the remainder in Asia, Europe and Canada.
We therefore believe our Guardant360 TissueNext, together with our liquid biopsy-based products, have the potential to help address the challenges with tissue genotyping products currently in the market. 4 Recurring Monitoring / Minimum Residual Disease Guardant Reveal Test In the management of early-stage cancer, current tools do not identify all high-risk patients who will benefit from adjuvant therapy or detect recurrence early enough when it is most curable.
Recurring Monitoring / Minimum Residual Disease Guardant Reveal Test In the management of early-stage cancer, current tools do not identify all high-risk patients who will benefit from adjuvant therapy or detect recurrence early enough when it is most curable.
None of our employees are represented by a labor union or covered by a collective bargaining agreement, except as required by local laws such as in some European countries, and we have never experienced any employment-related work stoppages. We also track voluntary and involuntary turnover rates, conduct frequent employee engagement surveys, and consider relations with our employees to be good.
We have also engaged and may continue to engage independent contractors to assist us with our operations. None of our employees are represented by a labor union or covered by a collective bargaining agreement, except as required by local laws such as in some European countries, and we have never experienced any employment-related work stoppages.
At this time, we are unable to predict the outcome of this investigation. See “Commitments and Contingencies – Legal Proceedings” in this Annual Report on Form 10-K for more information.
The CID requests information and documents regarding billing government-funded programs for our panel of genetic tests known as Guardant360. We are fully cooperating with the investigation. At this time, we are unable to predict the outcome of this investigation. See “Commitments and Contingencies – Legal Proceedings” in this Annual Report on Form 10-K for more information.
For clinicians, endorsement by KOLs, utilization by academic centers and inclusion in national treatment guidelines are important, especially for adoption in the local community setting where 80% of cancer treatment occurs.
Commercialization Successful commercial adoption of our tests by clinicians and biopharmaceutical companies is critical to our business. For clinicians, endorsement by KOLs, utilization by academic centers and inclusion in national treatment guidelines are important, especially for adoption in the local community setting.
We expect to migrate our products to the platform and we believe our smart liquid biopsy platform has the potential to unlock the power of the epigenome, broaden the view of what drives cancer biology, and provide industry leading high-sensitivity genomic and epigenomic detection at ultra-high specificity and low cost. 6 Guardant Galaxy Our Guardant Galaxy suite of advanced analytical technologies have been developed internally and through outside partnerships to enhance the performance and clinical utility of our portfolio of cancer tests, and to power the next generation of biomarker and drug discovery.
We expect to migrate our products to the platform and we believe our smart liquid biopsy platform has the potential to unlock the power of the epigenome, broaden the view of what drives cancer biology, and provide industry leading high-sensitivity genomic and epigenomic detection at ultra-high specificity and low cost.
Government regulations Federal and state laboratory licensing requirements Under CLIA, a laboratory is any facility that performs laboratory testing on specimens derived from humans for the purpose of providing information for the diagnosis, prevention or treatment of disease, or the impairment of or assessment of health.
We also enter into invention disclosure and assignment agreements with our employees and consultants that obligate them to assign to us any inventions they have developed while working for us. 12 Government regulations Federal and state laboratory licensing requirements Under CLIA, a laboratory is any facility that performs laboratory testing on specimens derived from humans for the purpose of providing information for the diagnosis, prevention or treatment of disease, or the impairment of or assessment of health.
We expect these partnerships will lead to the establishment of our testing services at the partner laboratories, using our digital sequencing technology, as well as generation of clinical and economic evidence to support commissioning in other areas of Europe. 8 Payer coverage and reimbursement Commercial payers Payment from commercial payers can vary depending on whether we have entered into a contract with the payers as a “participating provider” or do not have a contract and are considered a “non-participating provider.” Payers often reimburse non-participating providers, if at all, at a lower amount than participating providers.
Payer coverage and reimbursement Commercial payers Payment from commercial payers can vary depending on whether we have entered into a contract with the payers as a “participating provider” or do not have a contract and are considered a “non-participating provider.” Payers often reimburse non-participating providers, if at all, at a lower amount than participating providers.
If any physicians or other healthcare providers or entities with whom we do business is found to be not in compliance with applicable laws, they may be subject to criminal, civil or administrative sanctions, including exclusions from government-funded healthcare programs.
If any physicians or other healthcare providers or entities with whom we do business is found to be not in compliance with applicable laws, they may be subject to criminal, civil or administrative sanctions, including exclusions from government-funded healthcare programs. 23 In January 2022, we received a civil investigative demand, or CID, from the United States Attorney for the Northern District of California in connection with an investigation under the False Claims Act.
State Medicaid programs make individual coverage decisions for diagnostic tests and have taken steps to control the cost, utilization and delivery of healthcare services.
Effective January 1, 2024, Medicare has increased the reimbursement rate for our Guardant360 LDT test to the same rate as our Guardant360 CDx test. State Medicaid programs make individual coverage decisions for diagnostic tests and have taken steps to control the cost, utilization and delivery of healthcare services.
We also expect to be able to capture other commercial opportunities from our genomic data, which can be used in combination with clinical outcomes or claims data for multiple applications, including novel target identification. 7 International commercial efforts and expansion A component of our long-term growth strategy is to expand our commercial footprint internationally, and we expect to increase our sales and marketing expense to execute on this strategy.
We also expect to be able to capture other commercial opportunities from our genomic and epigenomic data, which can be used in combination with clinical outcomes or claims data for multiple applications, including novel target identification.
A PMA must also provide valid scientific evidence that demonstrates to the FDA’s satisfaction a reasonable assurance of the safety and effectiveness of the device for its intended use. 14 The 510(k) clearance process Under the 510(k) clearance process, the manufacturer must submit to the FDA a premarket notification, demonstrating that the device is “substantially equivalent” to a legally marketed predicate device.
A PMA must also provide valid scientific evidence that demonstrates to the FDA’s satisfaction a reasonable assurance of the safety and effectiveness of the device for its intended use.
See “Risk Factors – General Risk Factors” for additional information about the risks to our business associated with a breach or compromise to our information technology systems. 25 U.S. healthcare reform In the United States, there have been a number of legislative and regulatory changes at the federal and state levels which seek to reduce healthcare costs and improve the quality of healthcare.
U.S. healthcare reform In the United States, there have been a number of legislative and regulatory changes at the federal and state levels which seek to reduce healthcare costs and improve the quality of healthcare.
In addition, NeoGenomics Laboratories, Inc., Natera, Inc., and Exact Sciences Corp., among others, are our competitors in minimal residual disease testing.
In addition, NeoGenomics Laboratories, Inc., Natera, Inc., Exact Sciences Corp., and Tempus Labs, Inc., among others, are our competitors in minimal residual disease testing. Additionally, our competitors in the early screening testing space include GRAIL, Inc., Exact Sciences Corp., Freenome Holdings, Inc., Delfi Diagnostics and InterVenn Biosciences.
Guardant360 LDT The number of personalized therapy options for advanced cancer patients continues to grow, giving patients who may have cycled through standard of care therapies additional options. Focused on addressing patient care throughout the diagnostic journey, we launched an updated and expanded version of our LDT to support new guideline-recommended biomarkers.
Guardant360 LDT The number of personalized therapy options for advanced cancer patients continues to grow, giving patients who may have cycled through standard of care therapies additional options.
The MHLW additionally granted regulatory approval of the Guardant360 CDx liquid biopsy test as a companion diagnostic for identifying patients with metastatic NSCL cancer who may benefit from treatment with LUMAKRASTM (sotorasib), a KRAS G12C inhibitor developed and manufactured by Amgen. 23 To be sold in Japan, most medical devices must undergo thorough safety examinations and demonstrate medical efficacy before they are granted approval, or “shonin.” The Japanese government, through the MHLW, regulates medical devices under the Pharmaceutical Affairs Law, or PAL.
The MHLW additionally granted regulatory approval of the Guardant360 CDx liquid biopsy test as a companion diagnostic for identifying patients with metastatic NSCL cancer who may benefit from treatment with LUMAKRASTM (sotorasib), a KRAS G12C inhibitor developed and manufactured by Amgen.
We are proactively pursuing studies to support the use of our tests as a preferred alternative to tissue testing to inform first line treatment right after diagnosis, with the goal to provide evidence that our tests detect genomic alterations at a similar rate compared to standard of care tissue testing in the United States, Europe and Asia.
Future planned applications include deep learning-driven genomic, epigenomic and spatial biomarker discovery via collaboration with biopharmaceutical partners and integration with GuardantINFORM real-world clinical data platform. 6 Clinical Studies and Publications We are proactively pursuing studies to support the use of our tests as a preferred alternative or complementary to tissue testing to inform first line treatment right after diagnosis and at time of disease progression, with the goal to provide evidence that our tests detect genomic alterations at a similar rate compared to standard of care tissue testing and detects mutations that may not be detected by tissue based testing in the United States, Europe and Asia.
Our testing process includes sample collection, laboratory processing, analysis and reporting. All major processing steps utilize quality control to ensure consistent and reproducible results. Supply chain We utilize industry leading vendors for our supply chain. Most reagents and materials are sourced from a limited number of vendors and would require qualification to transition to a different vendor.
This methodology allows for rapid scaling of testing volume without impacting performance metrics. Our testing process includes sample collection, laboratory processing, analysis and reporting. All major processing steps utilize quality control to ensure consistent and reproducible results. Supply chain We utilize industry leading vendors for our supply chain.
In February 2021, an affiliate of Guardant AMEA, submitted an application to Japan's Ministry of Health, Labour and Welfare, or the MHLW, for regulatory approval of Guardant360 CDx. In December 2021, MHLW granted regulatory approval of Guardant360 CDx as a companion diagnostic for identifying patients with metastatic NSCLC who may benefit from treatment with LUMAKRAS™ (sotorasib).
In Japan, we have received regulatory approval of our Guardant360 CDx test as a companion diagnostic for identifying patients who may benefit from treatment with LUMAKRAS™ (sotorasib), Keytruda® (pembrolizumab), Opdivo® (nivolumab), and ENHERTU® (trastuzumab deruxtecan), from Japan's Ministry of Health, Labour and Welfare, or the MHLW.
The rules for placing medical devices on the market in Northern Ireland, which is part of the UK, differ from those in the rest of the UK. Compliance with this legislation is a prerequisite to be able to affix the UKCA mark to our products, without which they cannot be sold or marketed in Great Britain.
Compliance with this legislation is a prerequisite to be able to affix the UKCA mark to our products, without which they cannot be sold or marketed in Great Britain. An MHRA public consultation was opened until end of November 2021 on the post-Brexit regulatory framework for medical devices and diagnostics.
Medicare’s National Coverage Determination, or NCD, for Next Generation Sequencing, or NGS, provides coverage for molecular diagnostic tests such as our Guardant360 CDx test, if, among other criteria, such tests are offered within their FDA-approved companion diagnostic labeling. 9 In March 2020, we began to receive reimbursement from Medicare for claims submitted with respect to Guardant360 clinical tests performed for qualifying patients diagnosed with solid tumor cancers of non-central nervous system origin other than NSCLC.
In March 2020, we began to receive reimbursement from Medicare for claims submitted with respect to Guardant360 clinical tests performed for qualifying patients diagnosed with solid tumor cancers of non-central nervous system origin other than NSCLC.
We appreciate one another’s differences and strengths and we are proud to be an equal opportunity employer. We do not discriminate on the basis of race, religion, color, sex, gender identity, sexual orientation, age, non-disqualifying physical or mental disability, national origin, veteran status or any other basis covered by applicable law.
We do not discriminate on the basis of race, religion, color, sex, gender identity, sexual orientation, age, non-disqualifying physical or mental disability, national origin, veteran status or any other basis covered by applicable law. All employment is decided on the basis of qualifications, merit, and business need. Further, we have policies in place that prohibit harassment of all kinds.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeRevenue from clinical tests for patients covered by Medicare represented approximately 45%, 45% and 42% of our precision oncology revenue from clinical customers for the years ended December 31, 2022, 2021 and 2020, respectively. Revenue attributable to Medicare accounted for more than 10% of our total revenue in each of the years ended December 31, 2022, 2021 and 2020.
Biggest changeIn September 2018, we began to receive reimbursement from Medicare for claims submitted with respect to our precision oncology tests. Revenue from clinical tests for patients covered by Medicare represented approximately 43%, 45% and 45% of our precision oncology revenue from clinical customers for the years ended December 31, 2023, 2022 and 2021, respectively.
Products that are under development have taken time and considerable resources to develop, and we may not be able to complete the development and commercialization of the such products for clinical use on a timely basis, or at all. For example, there can be no assurance that we will be able to produce commercial products for early detection of cancer.
Products that are under development have taken time and considerable resources to develop, and we may not be able to complete the development and commercialization of such products for clinical use on a timely basis, or at all. For example, there can be no assurance that we will be able to produce commercial products for early detection of cancer.
In January 2021, a proprietary laboratory analyses, or PLA code was issued for our Guardant360 CDx with an effective date in April 2021. Additionally, based on this new PLA code, we applied to the CMS for our Guardant360 CDx test to become an advanced diagnostic laboratory test, or ADLT.
In January 2021, a proprietary laboratory analyses, or PLA code was issued for our Guardant360 CDx test with an effective date in April 2021. Additionally, based on this new PLA code, we applied to the CMS for our Guardant360 CDx test to become an advanced diagnostic laboratory test, or ADLT.
Among others, these provisions include that: • our board of directors has the exclusive right to expand its size and to elect directors to fill a vacancy created by the expansion of the board or the resignation, death or removal of a director, which prevents stockholders from being able to fill vacancies on our board of directors; • our board of directors is divided into three classes, Class I, Class II and Class III, with each class serving staggered three-year terms, which may delay the ability of stockholders to change the membership of a majority of our board of directors; • our stockholders may not act by written consent, which forces stockholder action to be taken at an annual or special meeting of our stockholders; • a special meeting of stockholders may be called only by our board of directors, its chairman, or our co-chief executive officers, which may delay the ability of our stockholders to force consideration of a proposal or to take action, including the removal of directors; • our amended and restated certificate of incorporation prohibits cumulative voting in the election of directors, which limits the ability of minority stockholders to elect their director candidates; • our board of directors may alter our bylaws without obtaining stockholder approval; • approval of the holders of at least two-thirds of the shares entitled to vote at an election of directors is required to adopt, amend or repeal our bylaws or repeal the provisions of our amended and restated certificate of incorporation regarding the election and removal of directors; • stockholders must provide advance notice and additional disclosures in order to nominate candidates for election to the board of directors or to propose matters that can be acted upon at a stockholders’ meeting, which may discourage or deter a potential acquiror from conducting a solicitation of proxies to elect the acquiror’s own slate of directors or otherwise attempting to obtain control of our company; and • our board of directors is authorized to issue shares of preferred stock and to determine the terms of those shares, including preferences and voting rights, without stockholder approval, which could be used to significantly dilute the ownership of a hostile acquiror. 70 Table of Contents Moreover, because we are incorporated in Delaware, we are governed by the provisions of Section 203 of the Delaware General Corporation Law, which prohibits a person who owns in excess of 15% of our outstanding voting stock from merging or combining with us for a period of three years after the date of the transaction in which the person acquired in excess of 15% of our outstanding voting stock, unless the merger or combination is approved in a prescribed manner.
Among others, these provisions include that: • our board of directors has the exclusive right to expand its size and to elect directors to fill a vacancy created by the expansion of the board or the resignation, death or removal of a director, which prevents stockholders from being able to fill vacancies on our board of directors; • our board of directors is divided into three classes, Class I, Class II and Class III, with each class serving staggered three-year terms, which may delay the ability of stockholders to change the membership of a majority of our board of directors; • our stockholders may not act by written consent, which forces stockholder action to be taken at an annual or special meeting of our stockholders; • a special meeting of stockholders may be called only by our board of directors, its chairman, or our co-chief executive officers, which may delay the ability of our stockholders to force consideration of a proposal or to take action, including the removal of directors; • our amended and restated certificate of incorporation prohibits cumulative voting in the election of directors, which limits the ability of minority stockholders to elect their director candidates; • our board of directors may alter our bylaws without obtaining stockholder approval; • approval of the holders of at least two-thirds of the shares entitled to vote at an election of directors is required to adopt, amend or repeal our bylaws or repeal the provisions of our amended and restated certificate of incorporation regarding the election and removal of directors; • stockholders must provide advance notice and additional disclosures in order to nominate candidates for election to the board of directors or to propose matters that can be acted upon at a stockholders’ meeting, which may discourage or deter a potential acquiror from conducting a solicitation of proxies to elect the acquiror’s own slate of directors or otherwise attempting to obtain control of our company; and • our board of directors is authorized to issue shares of preferred stock and to determine the terms of those shares, including preferences and voting rights, without stockholder approval, which could be used to significantly dilute the ownership of a hostile acquiror. 67 Table of Contents Moreover, because we are incorporated in Delaware, we are governed by the provisions of Section 203 of the Delaware General Corporation Law, which prohibits a person who owns in excess of 15% of our outstanding voting stock from merging or combining with us for a period of three years after the date of the transaction in which the person acquired in excess of 15% of our outstanding voting stock, unless the merger or combination is approved in a prescribed manner.
Our indebtedness could have significant negative consequences for our security holders, business, results of operations and financial condition by, among other things: • increasing our vulnerability to adverse economic and industry conditions; • limiting our ability to obtain additional financing; • in the event interest accrues on the 2027 Notes or additional indebtedness, requiring the dedication of a substantial portion of our cash flow from operations to service our indebtedness, which will reduce the amount of cash available for other purposes; 68 Table of Contents • limiting our flexibility to plan for, or react to, changes in our business; • diluting the interests of our existing stockholders if we issue shares of our common stock upon conversion of the Notes or additional indebtedness; and • placing us at a possible competitive disadvantage with competitors that are less leveraged than us or have better access to capital.
Our indebtedness could have significant negative consequences for our security holders, business, results of operations and financial condition by, among other things: • increasing our vulnerability to adverse economic and industry conditions; • limiting our ability to obtain additional financing; • in the event interest accrues on the 2027 Notes or additional indebtedness, requiring the dedication of a substantial portion of our cash flow from operations to service our indebtedness, which will reduce the amount of cash available for other purposes; 65 Table of Contents • limiting our flexibility to plan for, or react to, changes in our business; • diluting the interests of our existing stockholders if we issue shares of our common stock upon conversion of the Notes or additional indebtedness; and • placing us at a possible competitive disadvantage with competitors that are less leveraged than us or have better access to capital.
Our failure to comply with applicable regulatory requirements could result in enforcement action by the FDA, state or foreign regulatory agencies, which may include any of the following sanctions: • adverse publicity, warning letters, untitled letters, fines, injunctions, consent decrees and civil penalties; 47 Table of Contents • repair, replacement, refunds, recalls, termination of distribution, administrative detention or seizures of our products; • operating restrictions, partial suspension or total shutdown of production; • customer notifications or repair, replacement or refunds; • refusing our requests for clearances or approvals of new products, new intended uses or modifications to existing products; • withdrawals of current clearances, approvals or certifications, resulting in prohibitions on sales of our products; • refusal to issue certificates needed to export products for sale in other countries; and • criminal prosecution.
Our failure to comply with applicable regulatory requirements could result in enforcement action by the FDA, state or foreign regulatory agencies, which may include any of the following sanctions: • adverse publicity, warning letters, untitled letters, fines, injunctions, consent decrees and civil penalties; 44 Table of Contents • repair, replacement, refunds, recalls, termination of distribution, administrative detention or seizures of our products; • operating restrictions, partial suspension or total shutdown of production; • customer notifications or repair, replacement or refunds; • refusing our requests for clearances or approvals of new products, new intended uses or modifications to existing products; • withdrawals of current clearances, approvals or certifications, resulting in prohibitions on sales of our products; • refusal to issue certificates needed to export products for sale in other countries; and • criminal prosecution.
As a result, comparing our operating results on a period-to-period basis may not be meaningful. Investors should not rely on our past results as an indication of our future performance. This variability and unpredictability could also result in our failing to meet the expectations of industry or financial analysts or investors for any period.
As a result, comparing our operating results on a period-to-period basis may not be meaningful. Investors should not rely on our past results as an indication of our future performance. 27 This variability and unpredictability could also result in our failing to meet the expectations of industry or financial analysts or investors for any period.
These fluctuations may occur due to a variety of factors, many of which are outside of our control, including, but not limited to: • the level of demand for any of our products, which may vary significantly; • the timing and cost of, and level of investment in, research, development, regulatory approval or certification and commercialization activities relating to our products, which may change from time to time; • the volume and customer mix of our precision oncology testing; • the start and completion of projects in which our development services are utilized; • the introduction of new products or product enhancements by us or others in our industry; • coverage and reimbursement policies with respect to our products and products that compete with our products; • expenditures that we may incur to acquire, develop or commercialize additional products and technologies; • changes in governmental regulations or in the status of our regulatory approvals or certifications or applications; • future accounting pronouncements or changes in our accounting policies; • developments or disruptions in the business and operations of our clinical, commercial and other partners; • the impact of natural disasters, political and economic instability, including wars, terrorism, and political unrest, epidemics or pandemics, including the ongoing coronavirus pandemic, boycotts, curtailment of trade and other business restrictions; and • the effects of high inflation or other general market conditions and other factors, including factors unrelated to our operating performance or the operating performance of our competitors.
These fluctuations may occur due to a variety of factors, many of which are outside of our control, including, but not limited to: • the level of demand for any of our products, which may vary significantly; • the timing and cost of, and level of investment in, research, development, regulatory approval or certification and commercialization activities relating to our products, which may change from time to time; • the volume and customer mix of our precision oncology testing; • the start and completion of projects in which our development services and other are utilized; • the introduction of new products or product enhancements by us or others in our industry; • coverage and reimbursement policies with respect to our products and products that compete with our products; • expenditures that we may incur to acquire, develop or commercialize additional products and technologies; • changes in governmental regulations or in the status of our regulatory approvals or certifications or applications; • future accounting pronouncements or changes in our accounting policies; • developments or disruptions in the business and operations of our clinical, commercial and other partners; • the impact of natural disasters, political and economic instability, including wars, terrorism, and political unrest, epidemics or pandemics, boycotts, curtailment of trade and other business restrictions; and • the effects of high inflation or other general market conditions and other factors, including factors unrelated to our operating performance or the operating performance of our competitors.
See “Commitments and Contingencies – Legal Proceedings” in this Annual Report on Form 10-K for more information; 51 Table of Contents • the HIPAA fraud and abuse provisions, which created federal criminal statutes that prohibit, among other things, knowingly and willfully executing, or attempting to execute, a scheme to defraud any healthcare benefit program, including private insurers, knowingly and willfully embezzling or stealing from a healthcare benefit program, willfully obstructing a criminal investigation of a healthcare offense, and knowingly and willfully falsifying, concealing or covering up a material fact or making any materially false, fictitious or fraudulent statement in connection with the delivery of or payment for healthcare benefits, items or services.
See “Commitments and Contingencies – Legal Proceedings” in this Annual Report on Form 10-K for more information; 48 Table of Contents • the HIPAA fraud and abuse provisions, which created federal criminal statutes that prohibit, among other things, knowingly and willfully executing, or attempting to execute, a scheme to defraud any healthcare benefit program, including private insurers, knowingly and willfully embezzling or stealing from a healthcare benefit program, willfully obstructing a criminal investigation of a healthcare offense, and knowingly and willfully falsifying, concealing or covering up a material fact or making any materially false, fictitious or fraudulent statement in connection with the delivery of or payment for healthcare benefits, items or services.
If our clinical studies do not enroll a sufficient number of patients to support submission of a PMA or similar marketing application, or if the number of patients enrolled with the target disease or condition is lower than we estimated, we may be required to enroll additional patients in our clinical studies or conduct additional clinical studies before we are able to seek and/or obtain marketing authorizations for our product candidates, which may result in significant additional expenses for us and could delay or prevent us from bringing our product candidates to market. 45 Table of Contents In addition, we may find it necessary to engage CROs to perform data collection and analysis and other aspects of our clinical studies, which might increase the cost and complexity of our studies.
If our clinical studies do not enroll a sufficient number of patients to support submission of a PMA or similar marketing application, or if the number of patients enrolled with the target disease or condition is lower than we estimated, we may be required to enroll additional patients in our clinical studies or conduct additional clinical studies before we are able to seek and/or obtain marketing authorizations for our product candidates, which may result in significant additional expenses for us and could delay or prevent us from bringing our product candidates to market. 42 Table of Contents In addition, we may find it necessary to engage CROs to perform data collection and analysis and other aspects of our clinical studies, which might increase the cost and complexity of our studies.
Although we have obtained licenses from states where we believe we are required to be licensed, it is possible that other states we are not aware of currently require out-of-state laboratories to obtain licensure in order to test specimens from the state, and that other states may adopt similar requirements in the future. 49 Table of Contents We may also be subject to regulations in foreign jurisdictions as we seek to expand international utilization of our tests or as such jurisdictions adopt new licensure requirements, which may require review of our tests in order to offer them or may have other limitations such as restrictions on the transport of specimens necessary for us to perform our tests that may limit our ability to make our tests available outside of the United States.
Although we have obtained licenses from states where we believe we are required to be licensed, it is possible that other states we are not aware of currently require out-of-state laboratories to obtain licensure in order to test specimens from the state, and that other states may adopt similar requirements in the future. 46 Table of Contents We may also be subject to regulations in foreign jurisdictions as we seek to expand international utilization of our tests or as such jurisdictions adopt new licensure requirements, which may require review of our tests in order to offer them or may have other limitations such as restrictions on the transport of specimens necessary for us to perform our tests that may limit our ability to make our tests available outside of the United States.
If we are unsuccessful in achieving and maintaining market acceptance of our products, our business and results of operations will suffer. Our operating results may fluctuate significantly, which makes our future operating results difficult to predict and could cause our operating results to fall below expectations or any guidance we may provide.
If we are unsuccessful in achieving and maintaining market acceptance of our products, our business and results of operations will suffer. 26 Our operating results may fluctuate significantly, which makes our future operating results difficult to predict and could cause our operating results to fall below expectations or any guidance we may provide.
Concerns about and claims challenging our practices with regard to the collection, use, retention, disclosure or security of personally identifiable information or other privacy-related matters, even if unfounded and even if we are in compliance with applicable laws, could damage our reputation and harm our business. 55 Table of Contents Numerous federal, state and foreign laws and regulations govern collection, dissemination, use and confidentiality of personally identifiable information and protected health information, or PHI, including HIPAA, as amended by the Health Information Technology for Economic and Clinical Health Act of 2009, and regulations promulgated thereunder, or collectively, HIPAA; state privacy and confidentiality laws (including state laws requiring disclosure of breaches); federal and state consumer protection and employment laws; and European and other foreign data protection laws.
Concerns about and claims challenging our practices with regard to the collection, use, retention, disclosure or security of personally identifiable information or other privacy-related matters, even if unfounded and even if we are in compliance with applicable laws, could damage our reputation and harm our business. 52 Table of Contents Numerous federal, state and foreign laws and regulations govern collection, dissemination, use and confidentiality of personally identifiable information and protected health information, or PHI, including HIPAA, as amended by the Health Information Technology for Economic and Clinical Health Act of 2009, and regulations promulgated thereunder, or collectively, HIPAA; state privacy and confidentiality laws (including state laws requiring disclosure of breaches); federal and state consumer protection and employment laws; and European and other foreign data protection laws.
If the interim, topline, or preliminary data that we report differ from actual results, or if others, including regulatory authorities, disagree with the conclusions reached, our ability to obtain approval for and commercialize our product candidates may be harmed, which could harm our business, operating results, prospects or financial condition. 46 Table of Contents Our “research use only” and “investigational use only” products could become subject to more onerous regulation by the FDA or other regulatory agencies in the future, which could increase our costs and delay our commercialization efforts, thereby materially and adversely affecting our business and results of operations.
If the interim, topline, or preliminary data that we report differ from actual results, or if others, including regulatory authorities, disagree with the conclusions reached, our ability to obtain approval for and commercialize our product candidates may be harmed, which could harm our business, operating results, prospects or financial condition. 43 Table of Contents Our “research use only” and “investigational use only” products could become subject to more onerous regulation by the FDA or other regulatory agencies in the future, which could increase our costs and delay our commercialization efforts, thereby materially and adversely affecting our business and results of operations.
Parties making claims against us may be able to sustain the costs of complex patent litigation more effectively than we can, for example, because they have substantially greater resources. 66 Table of Contents Parties making claims against us may be able to obtain injunctive or other relief, which could block our ability to develop, manufacture, commercialize, sell and import certain products, services or technologies, and could result in the award of substantial damages against us, including treble damages, attorney’s fees, costs and expenses if we are found to have willfully infringed.
Parties making claims against us may be able to sustain the costs of complex patent litigation more effectively than we can, for example, because they have substantially greater resources. 63 Table of Contents Parties making claims against us may be able to obtain injunctive or other relief, which could block our ability to develop, manufacture, commercialize, sell and import certain products, services or technologies, and could result in the award of substantial damages against us, including treble damages, attorney’s fees, costs and expenses if we are found to have willfully infringed.
Several factors make the billing process complex, including: • differences between the list prices for our tests and the reimbursement rates of payers; 53 Table of Contents • compliance with complex federal and state regulations related to billing government healthcare programs, including Medicare and Medicaid, to the extent our tests are covered by such programs; • differences in coverage among payers and the effect of patient co-payments or co-insurance; • differences in information, pre-authorization and other billing requirements among payers; • changes to codes and coding instructions governing our tests; • incorrect or missing billing information; and • the resources required to manage the billing and claim appeals process.
Several factors make the billing process complex, including: • differences between the list prices for our tests and the reimbursement rates of payers; 50 Table of Contents • compliance with complex federal and state regulations related to billing government healthcare programs, including Medicare and Medicaid, to the extent our tests are covered by such programs; • differences in coverage among payers and the effect of patient co-payments or co-insurance; • differences in information, pre-authorization and other billing requirements among payers; • changes to codes and coding instructions governing our tests; • incorrect or missing billing information; and • the resources required to manage the billing and claim appeals process.
Any infringement claim, regardless of its validity, could harm our business by, among other things, resulting in time-consuming and costly litigation, diverting management’s time and attention from the development of our business, or requiring the payment of monetary damages (including treble damages, attorneys’ fees, costs and expenses if we are found to have willfully infringed) and ongoing royalties. 65 Table of Contents Litigation may be necessary for us to enforce our intellectual property and proprietary rights or to determine the scope, coverage and validity of the intellectual property and proprietary rights of others.
Any infringement claim, regardless of its validity, could harm our business by, among other things, resulting in time-consuming and costly litigation, diverting management’s time and attention from the development of our business, or requiring the payment of monetary damages (including treble damages, attorneys’ fees, costs and expenses if we are found to have willfully infringed) and ongoing royalties. 62 Table of Contents Litigation may be necessary for us to enforce our intellectual property and proprietary rights or to determine the scope, coverage and validity of the intellectual property and proprietary rights of others.
In addition, responding to government investigations regarding alleged violations of these and other laws and regulations, even if ultimately concluded with no findings of violations or no penalties imposed, can consume company resources and impact our business and, if public, harm our reputation. 56 Table of Contents Further, various states, such as California and Massachusetts, have implemented similar privacy laws and regulations, such as the California Confidentiality of Medical Information Act, that impose restrictive requirements regulating the use and disclosure of health information and other personally identifiable information.
In addition, responding to government investigations regarding alleged violations of these and other laws and regulations, even if ultimately concluded with no findings of violations or no penalties imposed, can consume company resources and impact our business and, if public, harm our reputation. 53 Table of Contents Further, various states, such as California and Massachusetts, have implemented similar privacy laws and regulations, such as the California Confidentiality of Medical Information Act, that impose restrictive requirements regulating the use and disclosure of health information and other personally identifiable information.
Additionally, any product liability or professional liability lawsuit could damage our reputation or cause current clinical customers to terminate existing agreements with us and potential clinical customers to seek other partners, any of which could adversely impact our results of operations. 76 Table of Contents Cyberattacks, security breaches, loss of data and other disruptions in relation to our information technology systems, as well as those of our third-party service providers, could compromise sensitive information related to our business, prevent us from accessing it and expose us to substantial liability, which could adversely affect our business and reputation.
Additionally, any product liability or professional liability lawsuit could damage our reputation or cause current clinical customers to terminate existing agreements with us and potential clinical customers to seek other partners, any of which could adversely impact our results of operations. 73 Table of Contents Cyberattacks, security breaches, loss of data and other disruptions in relation to our information technology systems, as well as those of our third-party service providers, could compromise sensitive information related to our business, prevent us from accessing it and expose us to substantial liability, which could adversely affect our business and reputation.
We market some of our tests, Guardant360, Guardant360 Response, Guardant360 Tissue Next, and Guardant Reveal, as LDTs. LDTs are in vitro diagnostic tests that are intended for clinical use and are designed, manufactured, and used within a single laboratory.
We market some of our tests, Guardant360, Guardant360 Response, Guardant360 Tissue Next, Guardant Reveal and Shield, as LDTs. LDTs are in vitro diagnostic tests that are intended for clinical use and are designed, manufactured, and used within a single laboratory.
Moreover, a person or entity does not need to have actual knowledge of the statute or specific intent to violate it in order to have committed a violation; 50 Table of Contents • the EKRA, which prohibits knowingly and willfully soliciting or receiving any remuneration (including any kickback, bribe or rebate) directly or indirectly, overtly or covertly, in cash or in kind, in return for referring a patient or patronage to a laboratory; or paying or offering any remuneration (including any kickback, bribe or rebate) directly or indirectly, overtly or covertly, in cash or in kind, to induce a referral of an individual to a laboratory or in exchange for an individual using the services of that laboratory.
Moreover, a person or entity does not need to have actual knowledge of the statute or specific intent to violate it in order to have committed a violation; 47 Table of Contents • the EKRA, which prohibits knowingly and willfully soliciting or receiving any remuneration (including any kickback, bribe or rebate) directly or indirectly, overtly or covertly, in cash or in kind, in return for referring a patient or patronage to a laboratory; or paying or offering any remuneration (including any kickback, bribe or rebate) directly or indirectly, overtly or covertly, in cash or in kind, to induce a referral of an individual to a laboratory or in exchange for an individual using the services of that laboratory.
It is possible that governmental authorities may conclude that our business practices, including our consulting and advisory board arrangements with physicians and other healthcare providers, some of whom receive stock or stock options as compensation for services provided, do not comply with current or future corporate practice of medicine or healthcare fraud and abuse statutes, regulations, agency guidance or case law. 52 Table of Contents The growth and international expansion of our business may increase the potential of violating applicable laws and regulations.
It is possible that governmental authorities may conclude that our business practices, including our consulting and advisory board arrangements with physicians and other healthcare providers, some of whom receive stock or stock options as compensation for services provided, do not comply with current or future corporate practice of medicine or healthcare fraud and abuse statutes, regulations, agency guidance or case law. 49 Table of Contents The growth and international expansion of our business may increase the potential of violating applicable laws and regulations.
Additionally, if coding changes were to occur, payments for certain uses of our tests could be reduced, put on hold, or eliminated. 54 Table of Contents Use of coding for billing our products that does not describe a specific test, requires the claim to be examined to determine what test was provided, whether the test was appropriate and medically necessary, and whether payment should be rendered, which may require a letter of medical necessity from the ordering physician.
Additionally, if coding changes were to occur, payments for certain uses of our tests could be reduced, put on hold, or eliminated. 51 Table of Contents Use of coding for billing our products that does not describe a specific test, requires the claim to be examined to determine what test was provided, whether the test was appropriate and medically necessary, and whether payment should be rendered, which may require a letter of medical necessity from the ordering physician.
The FTC expects a company’s data security measures to be reasonable and appropriate in light of the sensitivity and volume of consumer information it holds, the size and complexity of its business, and the cost of available tools to improve security and reduce vulnerabilities. 57 Table of Contents In addition, the interpretation and application of consumer, health-related, and data protection laws, especially with respect to genetic samples and data, in the United States, European Economic Area, or EEA, and elsewhere are often uncertain, contradictory, and in flux.
The FTC expects a company’s data security measures to be reasonable and appropriate in light of the sensitivity and volume of consumer information it holds, the size and complexity of its business, and the cost of available tools to improve security and reduce vulnerabilities. 54 Table of Contents In addition, the interpretation and application of consumer, health-related, and data protection laws, especially with respect to genetic samples and data, in the United States, European Economic Area, or EEA, and elsewhere are often uncertain, contradictory, and in flux.
If any of our confidential proprietary information were to be lawfully obtained or independently developed by a competitor, absent patent protection, we would have no right to prevent such competitor from using that technology or information to compete with us, which could harm our competitive position. 64 Table of Contents We may be subject to claims that our employees, consultants or independent contractors have wrongfully used or disclosed confidential information of third parties or that our employees have wrongfully used or disclosed trade secrets of their former employers.
If any of our confidential proprietary information were to be lawfully obtained or independently developed by a competitor, absent patent protection, we would have no right to prevent such competitor from using that technology or information to compete with us, which could harm our competitive position. 61 Table of Contents We may be subject to claims that our employees, consultants or independent contractors have wrongfully used or disclosed confidential information of third parties or that our employees have wrongfully used or disclosed trade secrets of their former employers.
Adverse speculation about our existing or potential relationships with biopharmaceutical companies may be a catalyst for adverse speculation about us, our products and our technology, which can adversely affect our reputation and business. 31 Our future success depends in part on our ability to maintain relationships and to enter into new relationships with biopharmaceutical customers, including offering our platform to such customers for companion diagnostic development, novel target discovery and validation as well as clinical study enrollment, and growing into other business opportunities.
Adverse speculation about our existing or potential relationships with biopharmaceutical companies may be a catalyst for adverse speculation about us, our products and our technology, which can adversely affect our reputation and business. 29 Our future success depends in part on our ability to maintain relationships and to enter into new relationships with biopharmaceutical customers, including offering our platform to such customers for companion diagnostic development, novel target discovery and validation as well as clinical study enrollment, and growing into other business opportunities.
In March 2021, CMS approved ADLT status to the Guardant360 CDx test, based on which, Medicare paid us at the lowest available commercial rate from April 1, 2021 to December 31, 2021.
In March 2021, CMS approved ADLT status to the Guardant360 CDx test, based on which Medicare paid us at the lowest available commercial rate per test, from April 1, 2021 to December 31, 2021.
In March 2020, we began to receive reimbursement from Medicare for claims submitted, with respect to Guardant360 clinical tests performed for qualifying patients diagnosed with solid tumor cancers of non-central nervous system origin other than NSCLC. 43 Table of Contents Under Medicare, payment for laboratory tests like ours is generally made under the Clinical Laboratory Fee Schedule, or CLFS, with payment amounts assigned to specific procedure billing codes.
In March 2020, we began to receive reimbursement from Medicare for claims submitted, with respect to Guardant360 clinical tests performed for qualifying patients diagnosed with solid tumor cancers of non-central nervous system origin other than NSCLC. 40 Table of Contents Under Medicare, payment for laboratory tests like ours is generally made under the Clinical Laboratory Fee Schedule, or CLFS, with payment amounts assigned to specific procedure billing codes.
As a result, our owned and licensed patent portfolio may not provide us with a sufficient exclusivity period to exclude others from commercializing products or services similar or identical to ours. 67 Table of Contents Risks related to our common stock and indebtedness The price of our common stock has fluctuated substantially and may do so in the future, and you may not be able to resell shares of our common stock at or above the price at which you purchased them.
As a result, our owned and licensed patent portfolio may not provide us with a sufficient exclusivity period to exclude others from commercializing products or services similar or identical to ours. 64 Table of Contents Risks related to our common stock and indebtedness The price of our common stock has fluctuated substantially and may do so in the future, and you may not be able to resell shares of our common stock at or above the price at which you purchased them.
We rely on a mixture of safeguards to transfer personal data from our EU business to the U.S., and could be impacted by changes in law as a result of a future review of these transfer mechanisms by European regulators or current challenges to these mechanisms in the European courts. 58 Table of Contents In addition to government regulation, privacy advocates and industry groups have and may in the future propose self-regulatory standards from time to time.
We rely on a mixture of safeguards to transfer personal data from our EU business to the U.S., and could be impacted by changes in law as a result of a future review of these transfer mechanisms by European regulators or current challenges to these mechanisms in the European courts. 55 Table of Contents In addition to government regulation, privacy advocates and industry groups have and may in the future propose self-regulatory standards from time to time.
In addition, if we fail to adhere to our privacy policy and other published statements or applicable laws concerning our processing, use, transmission and disclosure of protected information, or if our statements or practices are found to be deceptive or misrepresentative, we could face regulatory actions, fines and other liability. 77 Table of Contents The secure processing, storage, maintenance and transmission of this critical information are vital to our operations and business strategy, and we devote significant resources to protecting such information.
In addition, if we fail to adhere to our privacy policy and other published statements or applicable laws concerning our processing, use, transmission and disclosure of protected information, or if our statements or practices are found to be deceptive or misrepresentative, we could face regulatory actions, fines and other liability. 74 Table of Contents The secure processing, storage, maintenance and transmission of this critical information are vital to our operations and business strategy, and we devote significant resources to protecting such information.
If our intellectual property rights do not provide adequate coverage of our products, services or technology, our competitive position could be adversely affected, as could our business. 59 Table of Contents As is the case with other biotechnology companies, our success depends in large part on our ability to obtain, maintain and protect the intellectual property we own or we have licensed from others.
If our intellectual property rights do not provide adequate coverage of our products, services or technology, our competitive position could be adversely affected, as could our business. 56 Table of Contents As is the case with other biotechnology companies, our success depends in large part on our ability to obtain, maintain and protect the intellectual property we own or we have licensed from others.
The effectiveness of our controls and procedures may be limited by a variety of factors, including: • faulty human judgment and simple errors, omissions or mistakes; • fraudulent action of an individual or collusion of two or more people; 74 Table of Contents • inappropriate management override of procedures; and • the possibility that any enhancements to controls and procedures may still not be adequate to assure timely and accurate financial control.
The effectiveness of our controls and procedures may be limited by a variety of factors, including: • faulty human judgment and simple errors, omissions or mistakes; • fraudulent action of an individual or collusion of two or more people; 71 Table of Contents • inappropriate management override of procedures; and • the possibility that any enhancements to controls and procedures may still not be adequate to assure timely and accurate financial control.
Our license agreements impose, and we expect that future license agreements will impose, various development, diligence, commercialization and other obligations on us, including obligations to making payments to our licensors upon achievement of milestones. 62 Table of Contents In spite of our efforts, our licensors have asserted and may in the future assert that we have materially breached our obligations under such license agreements and could therefore seek or threaten to terminate the license agreements.
Our license agreements impose, and we expect that future license agreements will impose, various development, diligence, commercialization and other obligations on us, including obligations to making payments to our licensors upon achievement of milestones. 59 Table of Contents In spite of our efforts, our licensors have asserted and may in the future assert that we have materially breached our obligations under such license agreements and could therefore seek or threaten to terminate the license agreements.
To date, we have financed our operations principally from the sale of stock or convertible securities, and revenue from precision oncology testing and our development services.
To date, we have financed our operations principally from the sale of stock or convertible securities, and revenue from precision oncology testing, and development services and other.
Any intellectual property rights licensed by us may lose value or utility, including as a result of a change of in the industry, in our business objectives, others' technology, our dispute with the licensor, and other circumstances outside our control. 63 Table of Contents We may not be able to protect or enforce our intellectual property rights adequately throughout the world.
Any intellectual property rights licensed by us may lose value or utility, including as a result of a change of in the industry, in our business objectives, others' technology, our dispute with the licensor, and other circumstances outside our control. 60 Table of Contents We may not be able to protect or enforce our intellectual property rights adequately throughout the world.
We could also suffer severe penalties, including criminal and civil penalties, disgorgement and other remedial measures. 38 Table of Contents Risks related to our highly regulated industry We conduct business in a heavily regulated industry, and changes in regulations or violations of regulations may, directly or indirectly, reduce our revenue, adversely affect our results of operations and financial condition, and harm our business.
We could also suffer severe penalties, including criminal and civil penalties, disgorgement and other remedial measures. 35 Table of Contents Risks related to our highly regulated industry We conduct business in a heavily regulated industry, and changes in regulations or violations of regulations may, directly or indirectly, reduce our revenue, adversely affect our results of operations and financial condition, and harm our business.
Areas of the regulatory environment that may affect our ability to conduct business include, without limitation: • federal, state and foreign laws applicable to test ordering, documentation of tests ordered, billing practices and claims payment and/or regulatory agencies enforcing those laws and regulations; • federal, state and foreign health care fraud and abuse laws; • federal, state and foreign laboratory anti-mark-up laws; • coverage and reimbursement levels by Medicare, Medicaid, other governmental payers and private insurers; • restrictions on coverage of and reimbursement for tests; • federal, state and foreign laws governing laboratory testing, including CLIA, and state licensing laws; • federal, state and foreign laws and enforcement policies governing the development, use and distribution of diagnostic medical devices, including laboratory developed tests, or LDTs; • federal, state, local and foreign laws governing the handling and disposal of medical and hazardous waste; • federal and state Occupational Safety and Health Administration rules and regulations; • HIPAA, and similar state or foreign data privacy and security laws; and • consumer protection laws.
Areas of the regulatory environment that may affect our ability to conduct business include, without limitation: • federal, state and foreign laws applicable to test ordering, documentation of tests ordered, billing practices and claims payment and/or regulatory agencies enforcing those laws and regulations; • federal, state and foreign health care fraud and abuse laws; • federal, state and foreign laboratory anti-mark-up laws; • coverage and reimbursement levels by Medicare, Medicaid, other governmental payers and private insurers; • restrictions on coverage of and reimbursement for tests; • federal, state and foreign laws governing laboratory testing, including CLIA, and state licensing laws; • federal, state and foreign laws and enforcement policies governing the development, use and distribution of diagnostic medical devices, including laboratory developed tests, or LDTs; • federal, state, local and foreign laws governing the handling and disposal of medical and hazardous waste; • federal and state Occupational Safety and Health Administration rules and regulations; • HIPAA, GDPR, APPI, CCPA, CPRA and similar state or foreign data privacy and security laws; and • consumer protection laws.
If we are unable to obtain clearance or approval or certification for any tests for which we plan to seek clearance or approval or certification, our business may be harmed. 41 Table of Contents Modifications to our FDA-cleared or approved products may require new 510(k) clearances or premarket approvals, or may require us to cease marketing or recall the modified products until clearances are obtained.
If we are unable to obtain clearance or approval or certification for any tests for which we plan to seek clearance or approval or certification, our business may be harmed. 38 Table of Contents Modifications to our FDA-cleared or approved products may require new 510(k) clearances or premarket approvals, or may require us to cease marketing or recall the modified products until clearances are obtained.
We may not develop additional proprietary products, services, methods and technologies that are patentable. 60 Table of Contents Assuming that other requirements for patentability are met, prior to March 16, 2013, in the United States, the first to invent the claimed invention was entitled to the patent, while outside the United States, the first to file a patent application was entitled to the patent.
We may not develop additional proprietary products, services, methods and technologies that are patentable. 57 Table of Contents Assuming that other requirements for patentability are met, prior to March 16, 2013, in the United States, the first to invent the claimed invention was entitled to the patent, while outside the United States, the first to file a patent application was entitled to the patent.
We expect to incur costs associated with corporate governance requirements that are applicable to us as a public company, including rules and regulations of the SEC, under the Sarbanes-Oxley Act, the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, and the Securities Exchange Act of 1934, as amended, or the Exchange Act, as well as the rules of Nasdaq.
We have incurred, and expect to incur, costs associated with corporate governance requirements that are applicable to us as a public company, including rules and regulations of the SEC, under the Sarbanes-Oxley Act, the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, and the Securities Exchange Act of 1934, as amended, or the Exchange Act, as well as the rules of Nasdaq.
Accordingly, because of the inherent limitations in our control system, misstatements due to error or fraud may occur and not be detected. 75 Table of Contents Our employees, principal investigators, consultants and commercial partners may engage in misconduct or other improper activities, including non-compliance with regulatory standards and requirements and insider trading.
Accordingly, because of the inherent limitations in our control system, misstatements due to error or fraud may occur and not be detected. 72 Table of Contents Our employees, principal investigators, consultants and commercial partners may engage in misconduct or other improper activities, including non-compliance with regulatory standards and requirements and insider trading.
These companies may also use their own tests or others to develop an integrated system which could limit access for us to certain networks. 33 The sizes of the markets for our current and future products have not been established with precision, and may be smaller than we estimate.
These companies may also use their own tests or others to develop an integrated system which could limit access for us to certain networks. 31 The sizes of the markets for our current and future products have not been established with precision, and may be smaller than we estimate.
As a result of becoming a public company, we are required, under Section 404 of the Sarbanes-Oxley Act, to furnish annual reports by management on, among other things, the effectiveness of our internal control over financial reporting. This assessment needs to include disclosure of any material weaknesses identified by our management in our internal control over financial reporting.
As a result of being a public company, we are required, under Section 404 of the Sarbanes-Oxley Act, to furnish annual reports by management on, among other things, the effectiveness of our internal control over financial reporting. This assessment needs to include disclosure of any material weaknesses identified by our management in our internal control over financial reporting.
We currently sell to clinicians in the United States through our own sales organization and to biopharmaceutical companies through our business development team. 34 Each of our target markets is large, distinctive and diverse. As a result, we believe it is necessary for our sales representatives and business development managers to have established oncology-focused expertise.
We currently sell to clinicians in the United States through our own sales organization and to biopharmaceutical companies through our business development team. 32 Each of our target markets is large, distinctive and diverse. As a result, we believe it is necessary for our sales representatives and business development managers to have established oncology-focused expertise.
If the price of our common stock is low or volatile, we may not be able to acquire other companies or fund a joint venture project using our stock as consideration. 71 Table of Contents We may need to raise additional capital to fund our existing operations, develop our platform, commercialize new products or expand our operations.
If the price of our common stock is low or volatile, we may not be able to acquire other companies or fund a joint venture project using our stock as consideration. 68 Table of Contents We may need to raise additional capital to fund our existing operations, develop our platform, commercialize new products or expand our operations.
This could significantly increase the costs and expenses of conducting, or otherwise harm, our business. 39 Table of Contents Legislative and administrative proposals proposing to amend the FDA’s oversight of LDTs have been introduced in recent years and we expect that new legislative and administrative proposals will continue to be introduced from time to time.
This could significantly increase the costs and expenses of conducting, or otherwise harm, our business. 36 Table of Contents Legislative and administrative proposals proposing to amend the FDA’s oversight of LDTs have been introduced in recent years and we expect that new legislative and administrative proposals will continue to be introduced from time to time.
Our competitors within the liquid biopsy space for therapy selection include Foundation Medicine, Inc., which was acquired by Roche Holdings, Inc. in 2018; Roche Molecular Systems, Inc., Thermo Fisher Scientific, Inc., Illumina, Inc., Qiagen N.V., Invitae Corporation, Caris Life Science, Tempus Labs, Inc., and Agilent Technologies, Inc.
Our competitors within the liquid biopsy space for therapy selection include Foundation Medicine, Inc., which was acquired by Roche Holdings, Inc. in 2018; Roche Molecular Systems, Inc., Thermo Fisher Scientific, Inc., Illumina, Inc., Qiagen N.V., Invitae Corporation, Caris Life Science, and Tempus Labs, Inc.
We cannot assure that our tests will continue to maintain or gain market acceptance, and any failure to do so would materially harm our business and results of operations. 30 If our products do not meet the expectations of patients and our customers, our operating results, reputation and business could suffer.
We cannot assure that our tests will continue to maintain or gain market acceptance, and any failure to do so would materially harm our business and results of operations. 28 If our products do not meet the expectations of patients and our customers, our operating results, reputation and business could suffer.
If third parties bring actions against our owned or licensed patent rights, we could experience significant costs and management distraction. 61 Table of Contents In patent litigation in the United States or abroad, defendant counterclaims alleging invalidity or unenforceability of plaintiff’s patents are common.
If third parties bring actions against our owned or licensed patent rights, we could experience significant costs and management distraction. 58 Table of Contents In patent litigation in the United States or abroad, defendant counterclaims alleging invalidity or unenforceability of plaintiff’s patents are common.
Any of the above events could significantly harm our business, prospects, financial condition and results of operations and cause the price of our common stock to decline. 72 Table of Contents Our ability to use our net operating loss carryforwards and certain other tax attributes may be limited.
Any of the above events could significantly harm our business, prospects, financial condition and results of operations and cause the price of our common stock to decline. 69 Table of Contents Our ability to use our net operating loss carryforwards and certain other tax attributes may be limited.
We maintain cyber liability insurance; however, this insurance may not be sufficient to cover the financial, legal, business or reputational losses that may result from an interruption or breach of our systems. 78 Table of Contents Item 1B. Unresolved Staff Comments None.
We maintain cyber liability insurance; however, this insurance may not be sufficient to cover the financial, legal, business or reputational losses that may result from an interruption or breach of our systems. 75 Table of Contents Item 1B. Unresolved Staff Comments None.
In addition, we do not make any representation that the option counterparties will engage in these transactions or that these transactions, once commenced, will not be discontinued without notice. 69 Table of Contents We are subject to counterparty risk with respect to the 2027 Note Hedge transactions.
In addition, we do not make any representation that the option counterparties will engage in these transactions or that these transactions, once commenced, will not be discontinued without notice. 66 Table of Contents We are subject to counterparty risk with respect to the 2027 Note Hedge transactions.
We have provided testing services to patients with many cancer types and indications, some of the time as a non-participating provider through 2022. When we have received payment as a non-participating provider, the amounts, on average, were significantly lower than for participating providers.
We have provided testing services to patients with many cancer types and indications, some of the time as a non-participating provider through 2023. When we have received payment as a non-participating provider, the amounts, on average, were significantly lower than for participating providers.
If we fail to establish and maintain broad adoption of, and coverage and reimbursement for, our tests, our ability to generate revenue could be harmed and our business and prospects could suffer. 44 Table of Contents Our products may in the future be subject to product recalls.
If we fail to establish and maintain broad adoption of, and coverage and reimbursement for, our tests, our ability to generate revenue could be harmed and our business and prospects could suffer. 41 Table of Contents Our products may in the future be subject to product recalls.
In the United States, some of our products, including our GuardantOMNI test, are currently available for research use only, or RUO, or for investigational use only, or IUO, depending on the proposed application. We make our RUO and IUO products available to a variety of parties, including biopharmaceutical companies and research institutes.
In the United States, some of our products are currently available for research use only, or RUO, or for investigational use only, or IUO, depending on the proposed application. We make our RUO and IUO products available to a variety of parties, including biopharmaceutical companies and research institutes.
The risk of a security breach or disruption, particularly through cyberattacks or cyber intrusion, including by computer hackers, foreign governments and cyber terrorists, has generally increased as the number, intensity and sophistication of attempted attacks and intrusions from around the world have increased.
The risk of a security breach or disruption, particularly through cyberattacks or cyber intrusion, including by computer attackers, foreign governments and cyber terrorists, has generally increased as the number, intensity and sophistication of attempted attacks and intrusions from around the world have increased.
In addition, NeoGenomics Laboratories, Inc., Natera, Inc., Exact Sciences Corp., among others, are our competitors in minimal residual disease testing. Additionally, our competitors in the early screening testing space include GRAIL, Inc., Exact Sciences Corp., Freenome Holdings, Inc., Delfi Diagnostics and InterVenn Biosciences.
In addition, NeoGenomics Laboratories, Inc., Natera, Inc., Exact Sciences Corp., and Tempus Labs, Inc., among others, are our competitors in minimal residual disease testing. Additionally, our competitors in the early screening testing space include GRAIL, Inc., Exact Sciences Corp., Freenome Holdings, Inc., Delfi Diagnostics and InterVenn Biosciences.
Historic success and payments are not indicative of future success of and payments from such appeals. 32 If we cannot compete successfully with our competitors, we may be unable to increase or sustain our revenue or to achieve and then sustain profitability.
Historic success and payments are not indicative of future success of and payments from such appeals. 30 If we cannot compete successfully with our competitors, we may be unable to increase or sustain our revenue or to achieve and then sustain profitability.
As a result of the COVID-19 pandemic, and continued hybrid working environment, we and our third party service providers and partners may face increased cybersecurity risks due to our reliance on internet technology and the number of our employees who are working remotely, which may create additional opportunities for cybercriminals to exploit vulnerabilities.
As a result of the continued hybrid working environment, we and our third party service providers and partners may face increased cybersecurity risks due to our reliance on internet technology and the number of our employees who are working remotely, which may create additional opportunities for cybercriminals to exploit vulnerabilities.
Competitors within the broader genomics profiling space based on tissue include laboratory companies such as Bio-Reference Laboratories, Inc., Laboratory Corporation of America and Quest Diagnostics, Inc., as well as companies such as Foundation Medicine, Inc., Myriad Genetics, Inc., and most if not all of the competitors within the liquid biopsy space for therapy selection, that sell molecular diagnostic tests for cancer to physicians and have or may develop tests that compete with our tests.
Competitors within the broader genomics profiling space based on tissue include laboratory companies such as Bio-Reference Laboratories, Inc., Laboratory Corporation of America and Quest Diagnostics, Inc., as well as companies such as Caris Biosciences, Tempus Labs, Inc., Foundation Medicine, Inc., Myriad Genetics, Inc., and most if not all of the competitors within the liquid biopsy space for therapy selection, that sell molecular diagnostic tests for cancer to physicians and have or may develop tests that compete with our tests.
On November 2, 2022, CMS published its final rule for the Medicare Physician Fee Schedule for calendar year (CY) 2023, including changes for clinical laboratories that take effect on January 1, 2023.
On November 2, 2022, CMS published its final rule for the Medicare Physician Fee Schedule for calendar year (CY) 2023, including changes for clinical laboratories that took effect on January 1, 2023.
In the years ended December 31, 2022, 2021 and 2020, revenue from our top five biopharmaceutical customers, including their affiliated entities, accounted for 18%, 18% and 27% of our total revenue, respectively. The revenue attributable to our biopharmaceutical customers may also fluctuate in the future, which could have an adverse effect on our financial condition and results of operations.
In the years ended December 31, 2023, 2022 and 2021, revenue from our top five biopharmaceutical customers, including their affiliated entities, accounted for 14%, 18% and 18% of our total revenue, respectively. The revenue attributable to our biopharmaceutical customers may also fluctuate in the future, which could have an adverse effect on our financial condition and results of operations.
For instance, in the EU, we must inform the notified body that carried out the conformity assessment of the devices that we market or sell in the EU and EEA of any planned substantial changes to our quality system or substantial changes to our in vitro diagnostic medical devices that could affect compliance with the essential requirements laid down in Annex I to IVDD or cause a substantial change to the intended use for which the device has been CE marked.
For instance, in the EU, we must inform the notified body that carried out the conformity assessment of the devices that we market or sell in the EU and EEA of any planned substantial changes to our quality system or substantial changes to our in vitro diagnostic medical devices that could affect compliance with the essential requirements or cause a substantial change to the intended use for which the device has been CE marked.
Our ability to achieve and maintain sufficient commercial market acceptance of our existing and future products will depend on a number of factors, including: • our ability to increase awareness of our tests and the benefits of liquid biopsy; • the rate of adoption and/or endorsement of our tests by clinicians, KOLs, advocacy groups and biopharmaceutical companies; • the timing and scope of any approval or certification by regulatory agencies, including the FDA, or notified bodies for our tests; • our ability to obtain positive coverage decisions for our tests from additional commercial payers and to broaden the scope of indications included in such coverage decisions; • our ability to obtain reimbursement and expanded coverage from government payers, including Medicare; • the impact of our investments in product innovation and commercial growth; • negative publicity regarding ours or our competitors’ products resulting from defects or errors; and • our ability to further validate our technology through clinical research and accompanying publications. 28 We cannot assure that we will be successful in addressing each of these criteria or other criteria that might affect the market acceptance of our products.
Our ability to achieve and maintain sufficient commercial market acceptance of our existing and future products will depend on a number of factors, including: • our ability to increase awareness of our tests and the benefits of liquid biopsy; • the rate of adoption and/or endorsement of our tests by clinicians, KOLs, advocacy groups and biopharmaceutical companies; • the timing and scope of any approval or certification by regulatory agencies, including the FDA, or notified bodies for our tests; • our ability to obtain positive coverage decisions for our tests from additional commercial payers and to broaden the scope of indications included in such coverage decisions; • our ability to obtain reimbursement and expanded coverage from government payers, including Medicare; • the impact of our investments in product innovation and commercial growth; • negative publicity regarding ours or our competitors’ products resulting from defects or errors; and • our ability to further validate our technology through clinical research and accompanying publications.
In this competitive environment, our business could be adversely impacted by increases in labor costs triggered by regulatory actions regarding wages, scheduling and benefits, the need to attract and retain high quality employees with the requisite skill sets, and the ongoing effects of the COVID-19 pandemic.
In this competitive environment, our business could be adversely impacted by increases in labor costs triggered by regulatory actions regarding wages, scheduling and benefits, and the need to attract and retain high quality employees with the requisite skill sets.
If any of the following risks or others not specified below materialize, our business, financial condition and results of operations could be materially and adversely affected. In that case, the trading price of our common stock could decline.
The risks and uncertainties described below are not the only ones we face. If any of the following risks or others not specified below materialize, our business, financial condition and results of operations could be materially and adversely affected. In that case, the trading price of our common stock could decline.
Historic success and payments are not indicative of future success of and payments from such appeals. 29 Due to the inherent variability and unpredictability of the reimbursement landscape, including related to the amount that payers reimburse us for any of our tests, we estimate the amount of revenue to be recognized at the time a test is provided and record revenue adjustments if and when the cash subsequently received for a test differs from the revenue recorded for the test.
Due to the inherent variability and unpredictability of the reimbursement landscape, including related to the amount that payers reimburse us for any of our tests, we estimate the amount of revenue to be recognized at the time a test is provided and record revenue adjustments if and when the cash subsequently received for a test differs from the revenue recorded for the test.
On August 2, 2011, the Budget Control Act of 2011 was signed into law, which, among other things, reduced Medicare payments to providers, effective on April 1, 2013 and, due to subsequent legislative amendments to the statute, will remain in effect through 2032, with the exception of a temporary suspension from May 1, 2020 through March 31, 2022, unless additional Congressional action is taken.
On August 2, 2011, the Budget Control Act of 2011 was signed into law, which, among other things, reduced Medicare payments to providers, effective on April 1, 2013 and, due to subsequent legislative amendments to the statute, will remain in effect through 2032, unless additional Congressional action is taken.
Our reliance on independent distributors to sell our tests in ternationally demands a high degree of vigilance in maintaining our policy against participation in corrupt activity, because these distributors could be deemed to be our agents and we could be held responsible for their actions.
Our reliance on independent distributors and third party partner laboratories to market, sell and/or perform our tests internationally demands a high degree of vigilance in maintaining our policy against participation in corrupt activity, because these distributors could be deemed to be our agents and we could be held responsible for their actions.
Our ability to execute our growth strategy and become profitable is highly dependent on the continued adoption and use of our tests, which accounted for almost all of our revenue in the years ended December 31, 2022, 2021 and 2020.
Our ability to execute our growth strategy and become profitable is highly dependent on the continued adoption and use of our tests, which accounted for 91%, 87% and 81% of our revenue in the years ended December 31, 2023, 2022 and 2021, respectively.
For the years ended December 31, 2022, 2021 and 2020, we incurred net losses of $654.6 million, $384.8 million and $246.3 million, respectively. As of December 31, 2022, we had an accumulated deficit of $1.7 billion.
For the years ended December 31, 2023, 2022 and 2021, we incurred net losses of $479.4 million, $654.6 million and $384.8 million, respectively. As of December 31, 2023, we had an accumulated deficit of $2.1 billion.
In addition, pursuant to CMS regulations, we cannot bill Medicare directly for tests provided for Medicare beneficiaries in some situations. CMS adopted an exception to its laboratory date of service regulation, and if certain conditions are met, molecular testing laboratories such as us can rely on that exception to bill Medicare directly, instead of seeking payment from the hospital.
CMS adopted an exception to its laboratory date of service regulation, and if certain conditions are met, molecular testing laboratories such as us can rely on that exception to bill Medicare directly, instead of seeking payment from the hospital.
In the EU, notified bodies must be officially designated to certify products and services in accordance with the IVDR. Only a few notified bodies have been designated so far and the COVID-19 pandemic has significantly slowed down their designation process. Without IVDR designation, notified bodies may not yet start certifying devices in accordance with the new Regulation.
In the EU, notified bodies must be officially designated to certify products and services in accordance with the IVDR. Only a few notified bodies have been designated to date. Without IVDR designation, notified bodies may not yet start certifying devices in accordance with the new Regulation.
Specifically, a manufacturer must demonstrate that the device achieves its intended performance during normal conditions of use, that the known and foreseeable risks, and any adverse events, are minimized and acceptable when weighed against the benefits of its intended performance, and that any claims made about the performance and safety of the device are supported by suitable evidence. 40 Table of Contents Except for (general) in vitro diagnostic medical devices, where the manufacturer can self-declare the conformity of its products with the essential requirements of the IVDD, a conformity assessment procedure requires the intervention of a notified body.
Specifically, a manufacturer must demonstrate that the device achieves its intended performance during normal conditions of use, that the known and foreseeable risks, and any adverse events, are minimized and acceptable when weighed against the benefits of its intended performance, and that any claims made about the performance and safety of the device are supported by suitable evidence. 37 Table of Contents The conformity assessment procedure requires the intervention of a notified body.
We currently have limited international operations, but our business strategy incorporates potentially significant international expansion, including through Guardant AMEA, which we formed to accelerate the commercialization of our products in Asia, the Middle East and Africa. 37 We plan to maintain distributor and partner relationships, to conduct physician and patient association outreach activities, to extend laboratory capabilities and to expand payer relationships, outside of the United States.
We currently have limited international operations, but our business strategy incorporates potentially significant international expansion. 34 We plan to maintain distributor and partner relationships, to conduct physician and patient association outreach activities, to extend laboratory capabilities and to expand payer relationships, outside of the United States.
Compliance with these requirements is a prerequisite to be able to affix the European Conformity, or CE, mark to our products, without which they cannot be sold or marketed in the EU.
Compliance with these requirements is a prerequisite to be able to affix the European Conformity, or CE, mark to our products, without which they cannot be sold or marketed in the EU. All medical devices placed on the market in the EU must fulfill the clinical evidence and post-market performance evidence requirements.
Changes in funding for, or disruptions caused by global health concerns impacting, the FDA and other government agencies or notified bodies could hinder their ability to hire and retain key leadership and other personnel, or otherwise prevent new medical device products from being developed, authorized or commercialized in a timely manner, which could negatively impact our business.
Unlike directives, the IVDR does not need to be transposed into national law and therefore reduces the risk of discrepancies in interpretation across the different European markets. 45 Table of Contents Changes in funding for, or disruptions caused by global health concerns impacting, the FDA and other government agencies or notified bodies could hinder their ability to hire and retain key leadership and other personnel, or otherwise prevent new medical device products from being developed, authorized or commercialized in a timely manner, which could negatively impact our business.
Before we begin to label and market our products for use as clinical diagnostics in the United States, including as companion diagnostics, we may be required to obtain either 510(k) clearance or a premarket approval, or supplemental premarket approval, or respectively, PMA or PMA supplement, from the FDA, unless an exemption applies or FDA exercises its enforcement discretion and refrains from enforcing its medical device requirements.
In the event FDA rulemaking of oversight of LDTs were to be formalized, we may be required to obtain either 510(k) clearance or a premarket approval, or supplemental premarket approval, or respectively, PMA or PMA supplement, from the FDA, for some of our LDT products unless an exemption applies or FDA exercises its enforcement discretion and refrains from enforcing its medical device requirements.
The EU regulatory landscape concerning medical devices (including in vitro diagnostic medical devices) is evolving.
The EU regulatory landscape concerning medical devices (including in vitro diagnostic medical devices) has evolved in recent years.

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Item 2. Properties

Properties — owned and leased real estate

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Biggest changeWe believe we will be able to obtain such additional space on acceptable and commercially reasonable terms.
Biggest changeWhile we believe our existing facilities are adequate to meet our current requirements, we expect to expand our facilities as our operations grow over time. We believe we will be able to obtain such additional space on acceptable and commercially reasonable terms.
Item 2. Properties Our headquarters are located in Palo Alto, California, where we lease approximately 249,500 square feet of office space. The lease for the Palo Alto office was entered into in July 2020 and has a term of 12 years with an option to renew the lease term for an additional 10 years.
Item 2. Properties Our headquarters are located in Palo Alto, California, where we lease approximately 249,500 square feet of office and lab space. The lease for the Palo Alto office was entered into in July 2020 and has a term of 12 years with an option to renew the lease term for an additional 10 years.
We also have approximately 200,000 combined square feet of additional office space in Redwood City, California, and San Diego, California, and these leases currently have expiration dates ranging from 2025 to 2029. Our CAP-accredited and CLIA-certified laboratories are located in these two facilities, where testing for both clinical and biopharmaceutical customers is performed.
We have approximately 200,000 square feet of additional office and lab space in Redwood City and San Diego, California, with current lease expiration dates ranging from 2025 to 2029. Our domestic CAP-accredited and CLIA-certified laboratories are located in these two facilities, where testing for clinical and biopharmaceutical customers are performed.
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We also maintain domestic leased office spaces in Spring, Texas, and Seattle, Washington, and international leased office spaces in Japan and Singapore. While we believe our existing facilities are adequate to meet our current requirements, we expect to expand our facilities as our operations grow over time.
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We also maintain domestic leased office spaces in Dallas and Spring, Texas; Seattle, Washington; Washington, D.C.; and warehouse space in Union City, California. In addition, for international locations, we maintain leased office and lab space in Japan and leased office space in Singapore.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeItem 3. Legal Proceedings The information under the caption “ Commitments and Contingencies - Legal Proceedings ” in Note 10 to the consolidated financial statements included elsewhere in this Annual Report on Form 10-K, concerning certain legal proceedings in which we are involved, is hereby incorporated by reference.
Biggest changeItem 3. Legal Proceedings The information under the caption “ Commitments and Contingencies - Legal Proceedings ” in Note 9 to the consolidated financial statements included elsewhere in this Annual Report on Form 10-K, concerning certain legal proceedings in which we are involved, is hereby incorporated by reference.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeSecurities authorized for issuance under equity compensation plans The information required by this item with respect to our equity compensation plans is incorporated by reference to our definitive proxy statement relating to our 2023 Annual Meeting of Stockholders to be filed with the SEC within 120 days after the end of the fiscal year to which this Annual Report on Form 10-K relates, or the 2023 Proxy Statement. 79 Table of Contents Item 6. [Reserved]
Biggest changePurchases of equity securities by the issuer and affiliated purchasers None. 77 Table of Contents Securities authorized for issuance under equity compensation plans The information required by this item with respect to our equity compensation plans is incorporated by reference to our definitive proxy statement relating to our 2024 Annual Meeting of Stockholders to be filed with the SEC within 120 days after the end of the fiscal year to which this Annual Report on Form 10-K relates, or the 2024 Proxy Statement.
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Market information for common stock Our common stock is traded on the Nasdaq Global Select Market, or Nasdaq, under the symbol “GH.” Holders of record As of February 17, 2023, there were 37 holders of record of our common stock.
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Market information for common stock Our common stock is traded on the Nasdaq Global Select Market, or Nasdaq, under the symbol “GH.” Holders of record As of February 16, 2024, there were 56 holders of record of our common stock.
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Purchases of equity securities by the issuer and affiliated purchasers None.
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Stock performance graph The graph below shows a comparison of five-year cumulative total return to stockholders of our common stock relative to the Nasdaq Composite Index and the Nasdaq Biotechnology Index through December 31, 2023.
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The graph assumes that $100 was invested in each of our common stock, the Nasdaq Composite and the Nasdaq Biotechnology at their respective closing prices on December 31, 2018 and assumes reinvestment of gross dividends. The stock price performance shown in the graph represents past performance and should not be considered an indication of future stock price performance.
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This graph is not “soliciting material,” is not deemed “filed” with the SEC and is not to be incorporated by reference into any of our filings under the Securities Act or the Exchange Act, whether made before or after the date hereof and irrespective of any general incorporation language in any such filing. Item 6. [Reserved] 78

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeYear Ended December 31, 2022 2021 (in thousands) Revenue: Precision oncology testing $ 392,049 $ 304,312 Development services and other 57,489 69,341 Total revenue 449,538 373,653 Costs and operating expenses: Cost of precision oncology testing (1) 148,199 110,396 Cost of development services and other 8,126 12,516 Research and development expense (1) 373,807 263,221 Sales and marketing expense (1) 299,828 191,881 General and administrative expense (1) 163,956 206,640 Total costs and operating expenses 993,916 784,654 Loss from operations (544,378) (411,001) Interest income 6,069 3,930 Interest expense (2,577) (2,577) Other income (expense), net (12,778) 25,178 Fair value adjustments of noncontrolling interest liability (99,785) — Loss before provision for income taxes (653,449) (384,470) Provision for income taxes 1,139 300 Net loss $ (654,588) $ (384,770) (1) Amounts include stock-based compensation expense as follows: Year Ended December 31, 2022 2021 (in thousands) Cost of precision oncology testing $ 5,498 $ 3,468 Research and development expense 26,630 18,907 Sales and marketing expense 25,442 15,479 General and administrative expense 37,115 113,595 Total stock-based compensation expense $ 94,685 $ 151,449 87 Table of Contents Comparison of the Years Ended December 31, 2022 and 2021 Revenue Year Ended December 31, Change 2022 2021 $ % (in thousands) Precision oncology testing $ 392,049 $ 304,312 $ 87,737 29 % Development services and other 57,489 69,341 (11,852) (17) % Total revenue $ 449,538 $ 373,653 $ 75,885 20 % Total revenue was $449.5 million for the year ended December 31, 2022, compared to $373.7 million for the year ended December 31, 2021, an increase of $75.9 million, or 20%.
Biggest changeYear Ended December 31, 2023 2022 (in thousands) Revenue: Precision oncology testing $ 514,249 $ 392,049 Development services and other 49,699 57,489 Total revenue 563,948 449,538 Costs and operating expenses: Cost of precision oncology testing (1) 205,528 148,199 Cost of development services and other (1) 21,524 8,126 Research and development expense (1) 367,194 373,807 Sales and marketing expense (1) 295,227 299,828 General and administrative expense (1) 155,800 163,956 Other operating expense 83,400 — Total costs and operating expenses 1,128,673 993,916 Loss from operations (564,725) (544,378) Interest income 35,365 6,069 Interest expense (2,578) (2,577) Other income (expense), net 53,174 (12,778) Fair value adjustments of noncontrolling interest liability — (99,785) Loss before provision for income taxes (478,764) (653,449) Provision for income taxes 685 1,139 Net loss $ (479,449) $ (654,588) (1) Amounts include stock-based compensation expense as follows: Year Ended December 31, 2023 2022 (in thousands) Cost of precision oncology testing $ 4,614 $ 5,498 Cost of development services and other 1,851 — Research and development expense 34,682 26,630 Sales and marketing expense 24,764 25,442 General and administrative expense 24,848 37,115 Total stock-based compensation expense $ 90,759 $ 94,685 In November 2020, we granted restricted stock units with certain performance metrics, or PSUs, consisting of a performance period of 4 years combined with an additional service period requirement of six months should the vesting criteria be met.
Our Redwood City laboratory is certified pursuant to the Clinical Laboratory Improvement Amendments of 1988, or CLIA, accredited by the College of American Pathologists, or CAP, permitted by the New York State Department of Health, or NYSDOH, and licensed in California and four other states. Our San Diego laboratory is CAP-accredited and CLIA-certified.
Our Redwood City laboratory is certified pursuant to the Clinical Laboratory Improvement Amendments of 1988, or CLIA, accredited by the College of American Pathologists, or CAP, permitted by the New York State Department of Health, or NYSDOH, and licensed in California and four other states. Our San Diego laboratory is CAP-accredited, CLIA-certified, and licensed in California.
Effective January 1, 2022, Medicare has started to reimburse Guardant360 CDx services at the median rate of claims paid by commercial payers and this rate will apply until December 2023. In March 2022, Palmetto GBA, the Medicare administrative contractor for MolDX, has conveyed coverage for our Guardant360 TissueNext test under the existing local coverage determination.
Effective January 1, 2022, Medicare started to reimburse Guardant360 CDx services at the median rate of claims paid by commercial payers and this rate will apply until December 2023. In March 2022, Palmetto GBA, the Medicare administrative contractor for MolDX, has conveyed coverage for our Guardant360 TissueNext test under the existing local coverage determination.
If our available cash, cash equivalents and marketable debt securities and anticipated cash flows from operations are insufficient to satisfy our liquidity requirements including because of lower demand for our products as a result of lower than currently expected rates of reimbursement from our customers or other risks described in this Annual Report on Form 10-K, we may seek to sell additional common or preferred equity or convertible debt securities, enter into a credit facility or another form of third-party funding or seek other debt financing.
If our available cash, cash equivalents and marketable debt securities and anticipated cash flows from operations are insufficient to satisfy our liquidity requirements because of lower demand for our products as a result of lower than currently expected rates of reimbursement from our customers or other risks described in this Annual Report on Form 10-K, we may seek to sell additional common or preferred equity or convertible debt securities, enter into a credit facility or another form of third-party funding or seek other debt financing.
In December 2020, we signed our first public private partnership agreement with Vall D'Hebron Institute of Oncology, or VHIO, one of Europe’s leading cancer research institutions, and in May 2022, the first blood-based cancer testing services in Europe based on our industry-leading digital sequencing platform became available at the VHIO testing facility in Spain.
In December 2020, we signed our first public private partnership agreement with Vall D'Hebron Institute of Oncology, or VHIO, one of Europe’s leading cancer research institutions, and in May 2022, the first blood-based cancer testing services in Europe based on our digital sequencing platform became available at the VHIO testing facility in Spain.
Our general and administrative expenses include costs for our executive, accounting and finance, information technology, legal and human resources functions. These expenses consist principally of salaries, bonuses, employee benefits, travel expenses and stock-based compensation, as well as professional services fees such as consulting, audit, tax and legal fees, and general corporate costs and allocated overhead expenses.
Our general and administrative expenses include costs for our executive, accounting and finance, information technology, legal and human resources functions. These expenses consist principally of salaries, bonuses, employee benefits, travel expenses and stock-based compensation, as well as professional services fees such as consulting, audit, tax and legal fees, and general corporate costs and overhead expenses.
Research and development expenses consist of costs incurred to develop technology and include salaries and benefits including stock-based compensation, reagents and supplies used in research and development laboratory work, infrastructure expenses, including allocated facility occupancy and information technology costs, contract services, other outside costs and costs to develop our technology capabilities.
Research and development expenses consist of costs incurred to develop technology and include salaries and benefits including stock-based compensation, reagents and supplies used in research and development laboratory work, infrastructure expenses, including facility occupancy and information technology costs, contract services, other outside costs and costs to develop our technology capabilities.
These expenses consist primarily of salaries, commissions, bonuses, employee benefits, travel expenses and stock-based compensation, as well as marketing, sales incentives, and educational activities and allocated overhead expenses.
These expenses consist primarily of salaries, commissions, bonuses, employee benefits, travel expenses and stock-based compensation, as well as marketing, sales incentives, and educational activities and overhead expenses.
Factors that could cause or contribute to such differences include, but are not limited to, those discussed in Part I, Item 1A, “Risk Factors,” of this Annual Report on Form 10-K. The following generally compares our results of operations for the years ended December 31, 2022 and 2021.
Factors that could cause or contribute to such differences include, but are not limited to, those discussed in Part I, Item 1A, “Risk Factors,” of this Annual Report on Form 10-K. The following generally compares our results of operations for the years ended December 31, 2023 and 2022.
Investing activities Cash provided by investing activities during the year ended December 31, 2022 was $149.8 million, which resulted primarily from maturities of marketable debt securities of $555.0 million, partially offset by purchases of marketable debt securities of $303.8 million, purchases of property and equipment of $77.5 million, and purchases of non-marketable equity and other related assets of $24.0 million.
Cash provided by investing activities during the year ended December 31, 2022 was $149.8 million, which resulted primarily from maturities of marketable debt securities of $555.0 million, partially offset by purchases of marketable debt securities of $303.8 million, purchases of property and equipment of $77.5 million, and purchases of non-marketable equity security investments and other related assets of $24.0 million.
Depending on the nature of the technology licensing arrangements, and considering factors including but not limited to enforceable right to payment and payment terms, and if an asset with alternative use is created, these revenues are recognized in the period when royalty-bearing sales occur, when the technology transfer is complete, or during the technology transfer period.
Depending on the nature of the technology licensing arrangements, and considering factors including but not limited to enforceable right to payment and payment terms, and if an asset with alternative use is created, these technology licensing revenues are recognized in the period when royalty-bearing sales occur, when the technology transfer is complete or over the technology transfer period.
The net change in our operating assets and liabilities was primarily the result of a $60.3 million increase in accounts payable and accrued liabilities, primarily due to increase in purchases of goods and services, increased personnel and increase in accrued and other liabilities, a $20.4 million decrease in prepaid expenses and other current assets, primarily driven by a $25.0 million one-time payment pursuant to a settlement and license agreement entered into in December 2021, a $11.7 million decrease in other assets, and a $9.9 million increase in deferred revenue primarily due to upfront payments from international laboratory partners, partially offset by a $20.9 million increase in inventory, net due to forecasted higher testing volumes, and increased inventory level to offset potential disruption in supply chain, and a $20.2 million payment of operating lease liabilities net of receipt of tenant improvement allowance.
The cash effect of changes in our operating assets and liabilities was primarily the result of a $60.3 million increase in accounts payable and accrued liabilities, primarily due to increase in purchases of goods and services, increased personnel and increase in accrued and other liabilities, a $20.4 million decrease in prepaid expenses and other current assets, net primarily driven by a $25.0 million one-time payment pursuant to a settlement and license agreement entered into in December 2021, a $11.7 million decrease in other assets, net and a $9.9 million increase in deferred revenue primarily due to upfront payments from international laboratory partners, partially offset by a $20.9 million increase in inventory, net due to forecasted higher testing volumes, and increased inventory level to offset potential disruption in supply chain, and a $20.2 million payment of operating lease liabilities net of receipt of tenant improvement allowance.
In May 2022, we launched the Shield LDT test to address the needs of individuals eligible for colorectal cancer screening. From a simple blood draw, Shield uses a novel multimodal approach to detect colorectal cancer signals in the bloodstream, including DNA that is shed by tumors.
For early cancer detection, in May 2022, we launched the Shield LDT test to address the needs of individuals eligible for colorectal cancer screening. From a simple blood draw, Shield uses a novel multimodal approach to detect colorectal cancer signals in the bloodstream, including DNA that is shed by tumors.
Additionally, we have investments held in marketable debt securities consisting of United States treasury securities that can be immediately liquid.
Additionally, we have investments held in marketable debt securities consisting primarily of United States treasury securities that can be immediately liquid.
A detailed discussion comparing our results of operations for the years ended December 31, 2021 and 2020 can be found in Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” of our Annual Report on Form 10-K for the year ended December 31, 2021.
A detailed discussion comparing our results of operations for the years ended December 31, 2022 and 2021 can be found in Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” of our Annual Report on Form 10-K for the year ended December 31, 2022.
The provision for income taxes includes the effects of any accruals that we believe are appropriate, as well as the related net interest and penalties. 86 Table of Contents Results of operations The following tables set forth the significant components of our results of operations for the periods presented.
The provision for income taxes includes the effects of any accruals that we believe are appropriate, as well as the related net interest and penalties. 85 Table of Contents Results of operations The following tables set forth the significant components of our results of operations for the periods presented.
Results of our precision oncology services are delivered electronically, and as such there are no shipping or handling fees incurred by us or billed to customers. 94 Table of Contents Development services and other We perform development services for our biopharmaceutical customers utilizing our precision oncology information platform.
Results of our precision oncology services are delivered electronically, and as such there are no shipping or handling fees incurred by us or billed to customers. 92 Table of Contents Development services and other We perform development services for our biopharmaceutical customers utilizing our precision oncology information platform.
For example, our tests are being developed as companion diagnostics under collaborations with biopharmaceutical companies. 82 Table of Contents • Research and development. A significant aspect of our business is our investment in research and development, including the development of new products.
For example, our tests are being developed as companion diagnostics under collaborations with biopharmaceutical companies. 81 Table of Contents • Research and development. A significant aspect of our business is our investment in research and development, including the development of new products.
Stock-based compensation We measure stock-based compensation expense for stock options granted to our employees, directors, and nonemployee consultants on the date of grant based on the fair value of the awards and recognize the corresponding compensation expense of those awards over the requisite service period, which is generally the vesting period of the respective awards.
We measure stock-based compensation expense for stock options granted to our employees, directors, and non-employee consultants on the date of grant based on the fair value of the awards and recognize the corresponding compensation expense of those awards over the requisite service period, which is generally the vesting period of the respective awards.
A component of our long-term growth strategy is to expand our commercial footprint internationally, and we expect to increase our sales and marketing expense to execute on this strategy. We currently offer our tests in countries outside the United States primarily through distributor relationships, direct contracts with hospitals or partnerships with research organizations.
A component of our long-term growth strategy is to expand our commercial footprint internationally, and we expect to increase our sales and marketing expense to execute on this strategy. We currently offer our tests in countries outside the United States primarily through distributor relationships, direct contracts with hospitals, and partnerships with local research organizations and laboratory companies.
We expect our sales and marketing expenses to increase in absolute dollars as we expand our sales force, increase our presence within and outside of the United States, and increase our marketing activities to drive further awareness and adoption of our tests. 85 Table of Contents General and administrative expense .
We expect our sales and marketing expenses to increase in absolute dollars as we expand our sales force, increase our presence within and outside of the United States, and increase our marketing activities to drive further awareness and adoption of our tests. General and administrative expense .
We also collaborate with biopharmaceutical companies in clinical studies by providing the above-mentioned tests, as well as the GuardantOMNI blood test for advanced-stage cancer, and the GuardantINFINITY blood test, launched in September 2022, which is a next-generation smart liquid biopsy that provides new, multi-dimensional insights into the complexities of tumor molecular profiles and immune response to advance cancer research and therapy development.
We also collaborate with biopharmaceutical companies in clinical studies by providing the above-mentioned tests, as well as the GuardantOMNI blood test for advanced-stage cancer, and the GuardantINFINITY blood test, a next-generation smart liquid biopsy that provides new, multi-dimensional insights into the complexities of tumor molecular profiles and immune response to advance cancer research and therapy development.
Interest expense Year Ended December 31, Change 2022 2021 $ % (in thousands) Interest expense $ (2,577) $ (2,577) $ — — % Interest expense was primarily attributable to the amortization of debt issuance costs related to our convertible senior notes issued in November 2020, for the years ended December 31, 2022, and 2021.
Interest expense Year Ended December 31, Change 2023 2022 $ % (in thousands) Interest expense $ (2,578) $ (2,577) $ (1) — % Interest expense was primarily attributable to the amortization of debt issuance costs related to our convertible senior notes issued in November 2020, for the years ended December 31, 2023, and 2022.
Interest income Interest income consists of interest earned on our cash, cash equivalents and marketable debt securities. Interest expense Interest expense consists primarily of charges relating to amortization of debt issuance costs.
Interest income Interest income consists of interest earned on our cash, cash equivalents and marketable debt securities. 84 Table of Contents Interest expense Interest expense consists primarily of charges relating to amortization of debt issuance costs.
We also incurred net losses of $654.6 million, $384.8 million and $246.3 million in the years ended December 31, 2022, 2021 and 2020, respectively. We have funded our operations to date principally from the sale of our stock, convertible senior notes, and revenue from our precision oncology testing and development services and other.
We also incurred net losses of $479.4 million, $654.6 million and $384.8 million in the years ended December 31, 2023, 2022 and 2021, respectively. We have funded our operations to date principally from the sale of our stock, convertible senior notes, and revenue from our precision oncology testing and development services and other.
The assumptions used to calculate the fair value of our stock options were: Fair Value of Common Stock The fair value of our common stock is determined by the closing price, on the date of grant, of its common stock, which is traded on the Nasdaq Global Select Market.
The assumptions used to calculate the fair value of our stock options, including the Joint Venture, were: Fair Value of Common Stock The fair value of our common stock is determined by the closing price, on the date of grant, of our common stock, which is traded on the Nasdaq Global Select Market.
Expected Volatility Prior to the commencement of trading of our common stock on the Nasdaq Global Select Market on October 4, 2018 in connection with the IPO, there was no active trading market for our common stock.
Expected Volatility Prior to the commencement of trading of our common stock on the Nasdaq Global Select Market on October 4, 2018 in connection with our initial public offering, there was no active trading market for our common stock.
The grant date fair value of the Joint Venture’s common stock was determined using valuation methodologies which utilizes certain assumptions including probability weighting of events, volatility, time to liquidation, a risk-free interest rate and an assumption for a discount for lack of marketability.
The grant date fair value of the Joint Venture's common stock was determined by the board of directors of the Joint Venture, using valuation methodologies which utilize certain assumptions including probability weighting of events, volatility, time to liquidation, a risk-free interest rate and an assumption for a discount for lack of marketability.
Revenue from clinical tests for patients covered by Medicare represented approximately 45%, 45% and 42% of our precision oncology revenue from clinical customers for the years ended December 31, 2022, 2021 and 2020, respectively. 81 Table of Contents • Payer coverage and reimbursement .
Revenue from clinical tests for patients covered by Medicare represented approximately 43%, 45% and 45% of our precision oncology revenue from clinical customers for the years ended December 31, 2023, 2022 and 2021, respectively. 80 Table of Contents • Payer coverage and reimbursement .
In May 2018, we formed and capitalized a joint venture, Guardant Health AMEA, Inc., with SoftBank, which we refer to as the Joint Venture or Guardant AMEA, relating to the sale, marketing and distribution of our tests generally outside the Americas and Europe, and to accelerate commercialization of our products in Asia, the Middle East and Africa.
In May 2018, we formed and capitalized Guardant Health AMEA, Inc., with SoftBank, relating to the sale, marketing and distribution of our tests generally outside the Americas and Europe, and to accelerate commercialization of our products in Asia, the Middle East and Africa.
As of December 31, 2022, we had cash and cash equivalents of $141.6 million and marketable debt securities of $869.6 million. Cash in excess of immediate requirements is invested in accordance with our investment policy, primarily with a view to provide liquidity while ensuring capital preservation.
As of December 31, 2023, we had cash and cash equivalents of $1.1 billion and marketable debt securities of $35.1 million. Cash in excess of immediate requirements is invested in accordance with our investment policy, primarily with a view to provide liquidity while ensuring capital preservation.
Kit fulfillment related revenues are recognized when such products are delivered. 95 Table of Contents Contracts with multiple performance obligations Contracts with biopharmaceutical customers and international laboratory partners may include multiple distinct performance obligations, such as provision of precision oncology testing, the above-mentioned development services, and digital sequencing technology licensing, among others.
Other revenue also includes kit fulfillment which is recognized when such products are delivered. 93 Table of Contents Contracts with multiple performance obligations Contracts with biopharmaceutical customers and international laboratory partners may include multiple distinct performance obligations, such as provision of precision oncology testing, the above-mentioned development services, and digital sequencing technology licensing, among others.
Non-cash charges primarily consisted of $99.8 million of fair value adjustments of noncontrolling interest liability in connection with the Joint Venture Acquisition, $94.7 million of stock-based compensation, $36.0 million of depreciation and amortization, $28.6 million of non-cash operating lease costs, $7.8 million of unrealized losses on marketable equity securities, $5.3 million of impairment on the rights to purchase one of our non-marketable security investees, $4.6 million of amortization of premium on marketable debt security investments, $4.3 million of revaluation adjustments to contingent consideration, and $2.6 million of amortization of debt issuance costs.
Non-cash charges primarily consisted of $99.8 million of fair value adjustments of noncontrolling interest liability in connection with the Joint Venture Acquisition, $94.7 million of stock-based compensation, $36.0 million of depreciation and amortization, $28.6 million of operating lease costs, $7.8 million of unrealized losses on marketable equity security investment in Lunit, inc., $5.3 million of impairment on non-marketable equity security investments and other related assets, $4.6 million of amortization of premium on marketable debt securities, and $4.3 million of acquisition-related contingent consideration.
In addition, other revenue includes amounts derived from licensing our digital sequencing technologies to our domestic customers and international laboratory partners, and kit fulfillment. For the licensed technology, we are compensated through royalty-based payments, non-refundable upfront payments, guaranteed minimum payments, and/or sample milestone payments.
In addition, we license our digital sequencing technologies to our domestic customers and international laboratory partners. For the licensed technology, we are compensated through royalty-based payments, non-refundable upfront payments, guaranteed minimum payments, and/or sample milestone payments.
We expect that our general and administrative expenses will continue to increase as we incur additional costs to support the growth of our business.
In addition, our general and administrative expenses also include severance costs related to workforce reduction. We expect that our general and administrative expenses will continue to increase as we incur additional costs to support the growth of our business.
Cash used in financing activities during the year ended December 31, 2021 was $66.8 million, which was primarily due to taxes paid related to net share settlement of restricted stock units of $83.8 million, partially offset by proceeds of $9.8 million from issuances of common stock under our employee stock purchase plan, and proceeds of $8.1 million from exercise of stock options. 93 Table of Contents Critical accounting policies and estimates We have prepared our consolidated financial statements in accordance with accounting principles generally accepted in the United States of America, or GAAP.
Cash used in financing activities during the year ended December 31, 2022 was $189.1 million, which was primarily attributable to consideration payment for the Joint Venture Acquisition of $177.8 million, payment for the tender offer in connection with the Joint Venture Acquisition and acquisition related costs of $14.2 million, and taxes paid related to net share settlement of restricted stock units of $7.9 million, partially offset by proceeds of $9.3 million from issuances of common stock under our employee stock purchase plan. 91 Table of Contents Critical accounting policies and estimates We have prepared our consolidated financial statements in accordance with accounting principles generally accepted in the United States of America, or GAAP.
We also submit claims to Medicare for reimbursement for our Guardant360 CDx, Guardant360 LDT, Guardant360 TissueNext and Guardant Reveal clinical testing performed for qualifying patients.
We submit claims for payment for tests performed for patients covered by U.S. private payers. We also submit claims to Medicare for reimbursement for our Guardant360 CDx, Guardant360 LDT, Guardant360 TissueNext, Guardant Reveal and Guardant360 Response clinical testing performed for qualifying patients.
This increase in cost of precision oncology testing was primarily attributable to an increase in sample volumes, resulting in a $16.7 million increase in material costs, a $11.2 million increase in production labor and overhead costs, and a $10.0 million increase in other costs, including costs related to kits, freight and curation of test results for physicians. 88 Table of Contents Cost of development services and other was $8.1 million for the year ended December 31, 2022, compared to $12.5 million for the year ended December 31, 2021, a decrease of $4.4 million, or 35%.
This increase in cost of precision oncology testing was primarily attributable to an increase in sample volumes, resulting in a $33.0 million increase in material costs, a $19.9 million increase in production labor and overhead costs, and a $4.0 million increase in other costs, including costs related to collection kits, freight, professional services and reporting of test results for physicians. 87 Table of Contents Cost of development services and other was $21.5 million for the year ended December 31, 2023, compared to $8.1 million for the year ended December 31, 2022, an increase of $13.4 million.
Cost of development services and other primarily includes costs incurred for the performance of development services and other requested by our customers comprising of labor and material costs including any inventory write-downs.
Cost of development services and other primarily includes costs incurred for the performance of development services requested by our biopharmaceutical customers, and costs associated with our partnership agreements and delivery of screening tests, which comprise of labor and material costs including any inventory write-downs.
With respect to Shield, in December 2022, we announced positive results from ECLIPSE, an over 20,000 patient registrational study evaluating the performance of our Shield blood test for detecting colorectal cancer in average-risk adults. The test demonstrated 83% sensitivity in detecting individuals with colorectal cancer.
With respect to Shield, in December 2022, we announced that the ECLIPSE study, a registrational study evaluating the performance of our Shield blood test for detecting colorectal cancer in average-risk adults, met co-primary endpoints. The test demonstrated 83% sensitivity in detecting individuals with colorectal cancer.
Precision oncology testing revenue increased to $392.0 million for the year ended December 31, 2022, from $304.3 million for the year ended December 31, 2021, an increase of $87.7 million, or 29%.
Precision oncology testing revenue increased to $514.2 million for the year ended December 31, 2023, from $392.0 million for the year ended December 31, 2022, an increase of $122.2 million, or 31%.
Development services and other revenue decreased to $57.5 million for the year ended December 31, 2022, from $69.3 million for the year ended December 31, 2021, a decrease of $11.9 million, or 17%.
Development services and other revenue decreased to $49.7 million for the year ended December 31, 2023, from $57.5 million for the year ended December 31, 2022, a decrease of $7.8 million, or 14%.
Additionally, based on this new PLA code, we applied to the CMS for our Guardant360 CDx test to become an advanced diagnostic laboratory test, or ADLT. In March 2021, CMS approved ADLT status to the Guardant360 CDx test, based on which Medicare paid us at the lowest available commercial rate per test, from April 1, 2021 to December 31, 2021.
In March 2021, CMS approved ADLT status to the Guardant360 CDx test, based on which Medicare paid us at the lowest available commercial rate per test, from April 1, 2021 to December 31, 2021.
Operating Expenses Research and development expense Year Ended December 31, Change 2022 2021 $ % (in thousands) Research and development $ 373,807 $ 263,221 $ 110,586 42 % Research and development expenses were $373.8 million for the year ended December 31, 2022, compared to $263.2 million for the year ended December 31, 2021, an increase of $110.6 million, or 42%.
Operating Expenses Research and development expense Year Ended December 31, Change 2023 2022 $ % (in thousands) Research and development expense $ 367,194 $ 373,807 $ (6,613) (2) % Research and development expenses were $367.2 million for the year ended December 31, 2023, compared to $373.8 million for the year ended December 31, 2022, a decrease of $6.6 million, or 2%.
Fair value adjustments of noncontrolling interest liability Year Ended December 31, Change 2022 2021 $ % (in thousands) Fair value adjustments of noncontrolling interest liability $ (99,785) $ — $ (99,785) * * Not meaningful Fair value adjustments of noncontrolling interest liability for the year ended December 31, 2022 was made as a result of the Joint Venture Acquisition completed in June 2022.
Fair value adjustments of noncontrolling interest liability Year Ended December 31, Change 2023 2022 $ % (in thousands) Fair value adjustments of noncontrolling interest liability $ — $ (99,785) $ 99,785 * * Not meaningful Fair value adjustments of noncontrolling interest liability for the year ended December 31, 2022 was made as a result of the Joint Venture Acquisition completed in June 2022. 89 Table of Contents Provision for income taxes Year Ended December 31, Change 2023 2022 $ % (in thousands) Provision for income taxes $ 685 $ 1,139 $ (454) (40) % The change in the provision for income taxes between the years ended December 31, 2023 and 2022 was insignificant.
General and administrative expense Year Ended December 31, Change 2022 2021 $ % (in thousands) General and administrative $ 163,956 $ 206,640 $ (42,684) (21) % General and administrative expenses were $164.0 million for the year ended December 31, 2022, compared to $206.6 million for the year ended December 31, 2021, a decrease of $42.7 million, or 21%.
General and administrative expense Year Ended December 31, Change 2023 2022 $ % (in thousands) General and administrative expense $ 155,800 $ 163,956 $ (8,156) (5) % General and administrative expenses were $155.8 million for the year ended December 31, 2023, compared to $164.0 million for the year ended December 31, 2022, a decrease of $8.2 million, or 5%.
Total tests for clinical customers increased to approximately 124,800 for year ended December 31, 2022, from approximately 87,600 for the year ended December 31, 2021. Precision oncology revenue from tests for biopharmaceutical customers was $94.0 million for the year ended December 31, 2022, and $67.9 million for the year ended December 31, 2021, respectively.
Total tests for clinical customers increased to approximately 172,900 for the year ended December 31, 2023, from approximately 124,800 for the year ended December 31, 2022. Precision oncology revenue from tests for biopharmaceutical customers was $110.4 million for the year ended December 31, 2023, up 17% from $94.0 million for the year ended December 31, 2022.
In October 2021, we signed a partnership agreement with The Royal Marsden NHS Foundation Trust, a premier cancer center within the United Kingdom for patient care, research and teaching of all types of cancer.
In October 2021, we signed a partnership agreement with The Royal Marsden NHS Foundation Trust, or Royal Marsden, a premier cancer center within the United Kingdom, or the UK, for patient care, research and teaching of all types of cancer, and in April 2023, the blood-based cancer testing services based on our digital sequencing platform became available at Royal Marsden testing facility in the UK.
Cash used in operating activities during the year ended December 31, 2021 was $209.0 million, which resulted from a net loss of $384.8 million and net change in our operating assets and liabilities of $40.5 million, partially offset by non-cash charges of $216.2 million.
Cash used in operating activities during the year ended December 31, 2022 was $309.5 million, which resulted from a net loss of $654.6 million, partially offset by non-cash charges of $283.6 million and cash effect of changes in our operating assets and liabilities of $61.6 million.
Cost of precision oncology testing was $148.2 million for the year ended December 31, 2022, compared to $110.4 million for the year ended December 31, 2021, an increase of $37.8 million, or 34%.
Cost of precision oncology testing was $205.5 million for the year ended December 31, 2023, compared to $148.2 million for the year ended December 31, 2022, an increase of $57.3 million, or 39%.
Black-Scholes Assumptions The weighted-average assumptions used in our Black-Scholes option-pricing model, including the Joint Venture, were as follows for stock option granted to our employees, directors and nonemployees for the periods presented: Year Ended December 31, 2022 2021 2020 Expected term (in years) 5.50 – 6.10 5.49 – 6.06 5.50 – 6.10 Expected volatility 63.3% – 67.6% 63.6% – 66.7% 63.6% – 73.3% Risk-free interest rate 1.9% – 4.4% 0.3% – 1.3% 0.3% – 1.6% Expected dividend yield —% —% —% For market-based restricted stock units, we derive the requisite service period using the Monte Carlo simulation model.
Black-Scholes Assumptions The weighted-average assumptions used in our Black-Scholes option-pricing model, including the Joint Venture, were as follows for stock option granted to our employees, directors and non-employees for the periods presented: Year Ended December 31, 2023 2022 2021 Expected term (in years) 5.50 – 6.10 5.50 – 6.10 5.49 – 6.06 Expected volatility 69.3% – 70.5% 63.3% – 67.6% 63.6% – 66.7% Risk-free interest rate 3.4% – 4.5% 1.9% – 4.4% 0.3% – 1.3% Expected dividend yield —% —% —% We will continue to use judgment in evaluating the assumptions related to our stock-based compensation on a prospective basis, including probabilities of meeting performance metrics for our PSUs.
Development services revenue primarily represents services that we provide to biopharmaceutical companies, large medical institutions and international laboratory partners. We collaborate with biopharmaceutical companies in the development and clinical studies of new drugs. As part of these collaborations, we provide services related to regulatory filings to support companion diagnostic device submissions for our test panels.
We collaborate with biopharmaceutical companies in the development and clinical studies of new drugs. As part of these collaborations, we provide services related to regulatory filings to support companion diagnostic device submissions for our test panels. Under these arrangements, we generate revenue from progression of our collaboration efforts, as well as from provision of on-going support.
Cash flows The following table summarizes our cash flows for the periods presented: Year Ended December 31, 2022 2021 (in thousands) Net cash used in operating activities $ (309,463) $ (209,017) Net cash provided by (used in) investing activities 149,816 (63,155) Net cash used in financing activities (189,093) (66,824) 92 Table of Contents Operating activities Cash used in operating activities during the year ended December 31, 2022 was $309.5 million, which resulted from a net loss of $654.6 million, partially offset by non-cash charges of $283.6 million and net change in our operating assets and liabilities of $61.6 million.
Cash flows The following table summarizes our cash flows for the periods presented: Year Ended December 31, 2023 2022 (in thousands) Net cash used in operating activities $ (324,975) $ (309,463) Net cash provided by investing activities 840,250 149,816 Net cash provided by (used in) financing activities 477,375 (189,093) 90 Table of Contents Operating activities Cash used in operating activities during the year ended December 31, 2023 was $325.0 million, which resulted from a net loss of $479.4 million, partially offset by non-cash charges of $100.6 million and cash effect of changes in our operating assets and liabilities of $53.8 million.
For patients with advanced-stage cancer, we have commercially launched Guardant360 LDT and Guardant360 CDx, the first comprehensive liquid biopsy test approved by the U.S. Food and Drug Administration, or the FDA, to provide tumor mutation profiling with solid tumors and to be used as a companion diagnostic in connection with non-small cell lung cancer, or NSCLC, and breast cancer.
Food and Drug Administration, or the FDA, to provide tumor mutation profiling with solid tumors and to be used as a companion diagnostic in connection with non-small cell lung cancer, or NSCLC, and breast cancer.
The Joint Venture derived the expected volatility from the average historical volatility over a period approximately equal to the expected term of comparable publicly traded companies within its peer group that were deemed to be representative of future stock price trends as the Joint Venture does not have any trading history for its common stock. 97 Table of Contents Risk-Free Interest Rate The risk-free interest rate is based on the U.S. treasury zero coupon issues in effect at the time of grant for periods corresponding with the expected term of the stock option grants.
The Joint Venture derived the expected volatility from the average historical volatility over a period approximately equal to the expected term of comparable publicly traded companies within its peer group that were deemed to be representative of future stock price trends as the Joint Venture did not have any trading history for its common stock.
Compensation expense for stock options with performance metrics is calculated based upon expected achievement of the metrics specified in the grant.
Compensation expense for stock options with performance metrics is calculated based upon expected achievement of the metrics specified in the grant. We estimate the fair value of our stock options on the grant date using the Black-Scholes option-pricing model.
Sales and marketing expense Year Ended December 31, Change 2022 2021 $ % (in thousands) Sales and marketing $ 299,828 $ 191,881 $ 107,947 56 % Selling and marketing expenses were $299.8 million for the year ended December 31, 2022, compared to $191.9 million for the year ended December 31, 2021, an increase of $107.9 million, or 56%.
Sales and marketing expense Year Ended December 31, Change 2023 2022 $ % (in thousands) Sales and marketing expense $ 295,227 $ 299,828 $ (4,601) (2) % Selling and marketing expenses were $295.2 million for the year ended December 31, 2023, compared to $299.8 million for the year ended December 31, 2022, a decrease of $4.6 million, or 2%.
The study is anticipated to run in approximately 100 centers in the United States and Europe. We are continuing to enroll more patients for these on-going studies, and have expended considerable resources, and expect to increase such expenditures over the next few years, to support our research and development programs with the goal of fueling further innovation. • International expansion.
We have expended considerable resources, and expect to increase such expenditures over the next few years, to support our research and development programs with the goal of fueling further innovation. • International expansion.
Revenue from clinical tests for patients covered by Medicare represented approximately 45%, 45% and 42% of our precision oncology revenue from clinical customers for the years ended December 31, 2022, 2021 and 2020, respectively. 84 Table of Contents Development services and other.
Revenue from clinical tests for patients covered by Medicare represented approximately 43%, 45% and 45% of our precision oncology revenue from clinical customers for the years ended December 31, 2023, 2022 and 2021, respectively. Development services and other. Development services revenue primarily represents services that we provide to biopharmaceutical companies, large medical institutions and international laboratory partners.
Cash used in investing activities during the year ended December 31, 2021 was $63.2 million, which resulted primarily from purchases of marketable debt securities of $900.8 million, purchases of property and equipment of $75.0 million, and purchases of non-marketable equity and other related investments of $39.4 million, partially offset by maturities of marketable debt securities of $952.1 million.
Investing activities Cash provided by investing activities during the year ended December 31, 2023 was $840.3 million, which resulted primarily from maturities of marketable debt securities of $1.5 billion, partially offset by purchases of marketable debt securities of $629.9 million, purchases of property and equipment of $20.5 million, and purchases of non-marketable equity security investments and other related assets of $5.6 million.
This increase in research and development expense was primarily related to continued investment in the development of our technologies and products, and our clinical studies, resulting in an increase of $48.8 million in outside service fees, an increase of $36.4 million in personnel-related costs for employees in our research and development group, including a $7.7 million increase in stock-based compensation, an increase of $25.3 million related to allocated facilities and information technology infrastructure costs, an increase of $5.2 million in post-acquisition related contingent consideration, and an increase of $4.1 million in depreciation and amortization, partially offset by a decrease of $11.5 million in material costs.
This decrease was primarily due to a decrease of $11.2 million in material costs, a decrease of $5.6 million in information technology infrastructure costs, and a decrease of $3.1 million in post-acquisition contingent consideration, partially offset by an increase of $8.1 million in stock-based compensation, an increase of $3.3 million in personnel costs, and an increase of $2.7 million in depreciation and amortization.
Our performance depends on our ability to retain and broaden adoption with existing customers, as well as attract new customers. We believe that the test volume we receive from clinicians and biopharmaceutical companies are indicators of growth in each of these customer verticals.
We believe that the test volume we receive from clinicians and biopharmaceutical companies are indicators of growth in each of these customer verticals.
Total tests for biopharmaceutical customers increased to approximately 26,000 for the year ended December 31, 2022, from approximately 18,600 for the year ended December 31, 2021, primarily due to an increase in the number of biopharmaceutical customers and their contracted projects.
This increase in revenue was primarily due to an increase in sample volume. Total tests for biopharmaceutical customers increased to approximately 29,900 for the year ended December 31, 2023, from approximately 26,000 for the year ended December 31, 2022.
In February 2022, we received CAP accreditation for our laboratory in Japan where we expect to commence processing samples following receipt of additional certification for processing In Vitro Diagnostic, or IVD, samples and reimbursement approval. 80 Table of Contents We generated total revenue of $449.5 million, $373.7 million and $286.7 million for the years ended December 31, 2022, 2021 and 2020, respectively.
We have also received CAP accreditation and In Vitro Diagnostic, or IVD, sample processing approval from Japan's Ministry of Health, Labour and Welfare, or the MHLW, for our laboratory in Japan. 79 Table of Contents We generated total revenue of $563.9 million, $449.5 million and $373.7 million for the years ended December 31, 2023, 2022 and 2021, respectively.
Revenue recognition We derive revenue from the provision of precision oncology testing services, as well as from development services and other. Precision oncology testing services include genomic profiling and the delivery of other genomic information derived from our platform.
Revenue recognition We derive revenue from the provision of precision oncology testing services, as well as from development services and other. Precision oncology testing revenue includes amount derived from the delivery of our precision oncology tests, including those tests delivered by labs operated by our strategic partners.
Other income (expense), net Year Ended December 31, Change 2022 2021 $ % (in thousands) Other income (expense), net $ (12,778) $ 25,178 $ (37,956) * * Not meaningful For the year ended December 31, 2022, other income (expense), net was primarily related to $7.8 million of unrealized loss recorded for our marketable equity securities, and $5.3 million of impairment for the rights to purchase one of our non-marketable security investees.
Other income (expense), net was a $12.8 million expense for the year ended December 31, 2022, primarily due to $7.8 million of unrealized losses recorded for our marketable equity security investment in Lunit, Inc., and $5.3 million of impairment recorded for our non-marketable equity security investments and other related assets during the period.
Upon completion of the transaction, we obtained full control over operations throughout the Asia, Middle East and Africa region.
In June 2022, we purchased all of the shares held by SoftBank and its affiliates, and upon completion of the transaction, we obtained full control over operations of Guardant Health AMEA, Inc. throughout the Asia, Middle East and Africa region.
As of December 31, 2022, we had cash, cash equivalents and marketable debt securities of approximately $1.0 billion. Factors affecting our performance We believe there are several important factors that have impacted and that we expect will impact our operating performance and results of operations, including: • Testing volume, pricing and customer mix .
Factors affecting our performance We believe there are several important factors that have impacted and that we expect will impact our operating performance and results of operations, including: • Testing volume, pricing and customer mix . Our revenue and costs are affected by the volume of testing and mix of customers from period to period.
Financing activities Cash used in financing activities during the year ended December 31, 2022 was $189.1 million, which was primarily due to consideration payment for the Joint Venture Acquisition of $177.8 million, payment for the tender offer in connection with the Joint Venture Acquisition and acquisition related costs of $14.2 million, and taxes paid related to net share settlement of restricted stock units of $7.9 million, partially offset by proceeds of $9.3 million from issuances of common stock under our employee stock purchase plan, and proceeds of $2.6 million from exercise of stock options.
Financing activities Cash provided by financing activities during the year ended December 31, 2023 was $477.4 million, which was primarily attributable to proceeds of $493.1 million from equity offerings, and proceeds of $10.2 million from issuances of common stock under our employee stock purchase plan, partially offset by payment of equity offering costs of $21.1 million, and taxes paid related to net share settlement of restricted stock units of $11.2 million.
Our equity awards, including market-based and performance-based restricted stock units, are intended to retain and incentivize employees to lead us to sustained, long-term superior financial and operational performance. • COVID-19 Global Pandemic . The global coronavirus 2019, or COVID-19, pandemic has negatively affected, and we expect will continue to negatively affect, our revenue and our clinical studies.
Our equity awards, including market-based and performance-based restricted stock units, are intended to retain and incentivize employees to lead us to sustained, long-term superior financial and operational performance. • Other operating expense .
Precision oncology revenue from tests for clinical customers was $298.1 million for the year ended December 31, 2022, up 26% from $236.4 million for the year ended December 31, 2021.
Precision oncology revenue from tests for clinical customers was $403.9 million for the year ended December 31, 2023, up 35% from $298.1 million for the year ended December 31, 2022. This increase in clinical testing revenue was driven primarily by an increase in sample volume.
Our revenue and costs are affected by the volume of testing and mix of customers from period to period. We evaluate both the volume of tests that we perform for patients on behalf of clinicians and the number of tests we perform for biopharmaceutical companies.
We evaluate both the volume of tests that we perform for patients on behalf of clinicians and the number of tests we perform for biopharmaceutical companies. Our performance depends on our ability to retain and broaden adoption with existing customers, as well as attract new customers.
Under these arrangements, we generate revenue from progression of our collaboration efforts, as well as from provision of on-going support. In addition to companion diagnostic development and regulatory approval services, we also provide other development services, including clinical study setup, monitoring and maintenance, testing development and support, GuardantConnect and GuardantINFORM.
In addition to companion diagnostic development and regulatory approval services, we also provide other development services, including clinical study setup, monitoring and maintenance, testing development and support, GuardantConnect and GuardantINFORM. Other revenue includes amounts derived from licensing our technologies and kit fulfillment. 83 Table of Contents Costs and operating expenses Cost of precision oncology testing.
Cost of Revenue Year Ended December 31, Change 2022 2021 $ % (in thousands) Cost of precision oncology testing $ 148,199 $ 110,396 $ 37,803 34 % Cost of development services and other 8,126 12,516 (4,390) (35) % Total cost of revenue $ 156,325 $ 122,912 $ 33,413 27 % Total cost of revenue was $156.3 million for the year ended December 31, 2022, compared to $122.9 million for the year ended December 31, 2021, an increase of $33.4 million, or 27%.
Cost of Revenue Year Ended December 31, Change 2023 2022 $ % (in thousands) Cost of precision oncology testing $ 205,528 $ 148,199 $ 57,329 39 % Cost of development services and other 21,524 8,126 13,398 165 % Total cost of revenue $ 227,052 $ 156,325 $ 70,727 45 % Total cost of revenue was $227.1 million for the year ended December 31, 2023, compared to $156.3 million for the year ended December 31, 2022, an increase of $70.7 million, or 45%.
This decrease in development services and other revenue was primarily due to the change in collaboration projects with biopharmaceutical customers for companion diagnostic development and regulatory approval services, and discontinuation of our Guardant-19 tests in August 2021, partially offset by revenues earned from licensing our technologies, and providing data services during the year ended December 31, 2022.
This decrease in development services and other revenue was primarily due to revenue decrease of $6.9 million associated with our companion diagnostics collaboration projects and other service agreements with biopharmaceutical customers, and a reduction in royalty revenue of $3.8 million, partially offset by revenue increase from our data services of $2.4 million and partnership agreements of $1.4 million during the year ended December 31, 2023.
Other income (expense), net Other income (expense), net consists of foreign currency exchange gains and losses, fair value adjustments of marketable equity securities, impairment of other assets, non-recurring payments due and received in relation to the settlement of license and patent disputes, net of credit losses, and the relief fund grant from the Department of Health and Human Services, or HHS, under the U.S.
Other income (expense), net Other income (expense), net consists of foreign currency exchange gains and losses, fair value adjustments of marketable equity securities, and impairment of non-marketable equity securities and other related assets. We expect our foreign currency gains and losses to continue to fluctuate in the future due to changes in foreign currency exchange rates.
Components of results of operations Revenue We derive our revenue from two sources: (i) precision oncology testing, and (ii) development services and other. Precision oncology testing. Precision oncology testing revenue is generated from sales of our tests to clinical and biopharmaceutical customers.
See Part I, Item 1A, “Risk Factors ” of this Annual Report on Form 10-K for more information. Components of results of operations Revenue We derive our revenue from two sources: (i) precision oncology testing, and (ii) development services and other. Precision oncology testing.
We expect the partnership to help biopharmaceutical companies bring the next generation of cancer therapies to patients in the region. 83 Table of Contents The success of our international expansion strategy depends on a number of factors, including the internal and external constraints placed on our international laboratory partners and biopharmaceutical companies in the context of broader global, regional and U.S. economic and geopolitical conditions.
In June 2022, we signed a strategic partnership agreement with Adicon Holdings Limited, or Adicon, a leading independent clinical laboratory company based in China, and in December 2023, the blood-based cancer testing services based on our digital sequencing platform became available at Adicon's testing facility, which offers our industry-leading comprehensive genomic profiling tests to biopharmaceutical companies to advance clinical research and the development of new cancer therapies in China. 82 Table of Contents The success of our international expansion strategy depends on a number of factors, including the internal and external constraints placed on our international laboratory partners and biopharmaceutical companies in the context of broader global, regional and U.S. economic and geopolitical conditions.
In determining the fair value of the Joint Venture’s common stock, the methodologies used to estimate the enterprise value of the Joint Venture were performed using methodologies, approaches, and assumptions consistent with the American Institute of Certified Public Accountants Accounting and Valuation Guide, Valuation of Privately-Held-Company Equity Securities Issued as Compensation .
The methodologies used to estimate the enterprise value of the Joint Venture were performed using methodologies, approaches, and assumptions consistent with the American Institute of Certified Public Accountants Accounting and Valuation Guide, Valuation of Privately-Held-Company Equity Securities Issued as Compensation . 94 Table of Contents Expected Term The expected term represents the period that the stock options granted are expected to be outstanding and is determined using the simplified method (based on the mid-point between the vesting date and the end of the contractual term) as we have concluded that our stock option exercise history does not provide a reasonable basis upon which to estimate expected term.
In the United States, through December 31, 2022, we generally performed tests as an out-of-network service provider without contracts with health insurance companies. We submit claims for payment for tests performed for patients covered by U.S. private payers.
Precision oncology testing revenue is generated from sales of our tests to clinical and biopharmaceutical customers, including those tests delivered by labs operated by our strategic partners. In the United States, through December 31, 2023, we generally performed tests as an out-of-network service provider without contracts with health insurance companies.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeInterest rate risk We are exposed to market risk for changes in interest rates related primarily to our cash and cash equivalents, marketable debt securities and our indebtedness. As of December 31, 2022, we had cash and cash equivalents of $141.6 million held primarily in cash deposits and money market funds.
Biggest changeAs of December 31, 2023, we had cash and cash equivalents of $1.1 billion held primarily in cash deposits and money market funds. Our marketable debt securities are held in U.S. government debt securities. As of December 31, 2023, we had short-term marketable debt securities of $35.1 million.
This estimate is based on a sensitivity model that measures market value changes when changes in interest rates occur. Foreign currency risk The majority of our revenue is generated in the United States. Through December 31, 2022, we have generated an insignificant amount of revenues denominated in foreign currencies.
This estimate is based on a sensitivity model that measures market value changes when changes in interest rates occur. Foreign currency risk The majority of our revenue is generated in the United States. Through December 31, 2023, we have generated an insignificant amount of revenues denominated in foreign currencies.
As of December 31, 2022, the effect of a hypothetical 10% change in foreign currency exchange rates would not be material to our financial condition or results of operations. To date, we have not entered into any hedging arrangements with respect to foreign currency risk.
As of December 31, 2023, the effect of a hypothetical 10% change in foreign currency exchange rates would not be material to our financial condition or results of operations. To date, we have not entered into any hedging arrangements with respect to foreign currency risk.
As our international operations grow, we will continue to reassess our approach to manage our risk relating to fluctuations in currency rates. 99
As our international operations grow, we will continue to reassess our approach to manage our risk relating to fluctuations in currency rates. 96
Item 7A. Quantitative and Qualitative Disclosures About Market Risk We are exposed to market risk in the ordinary course of our business. Market risk represents the risk of loss that may impact our financial position due to adverse changes in financial market prices and rates.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk We are exposed to market risk in the ordinary course of our business.
As of December 31, 2022, a hypothetical 100 basis point increase in interest rates would have resulted in an approximate $4.2 million decline of the fair value of our available-for-sale securities and a hypothetical 100 basis point decrease in interest rates would have resulted in an approximate $4.2 million increase of the fair value of our available-for-sale securities.
Our primary exposure to market risk is interest income sensitivity, which is affected by changes in the general level of the interest rates in the United States. As of December 31, 2023, a hypothetical 100 basis point increase or decrease in interest rates would have resulted in immaterial decline or increase of the fair value of our available-for-sale securities.
Removed
Our marketable debt securities are held in U.S. government debt securities. As of December 31, 2022, we had short-term marketable debt securities of $869.6 million. Our primary exposure to market risk is interest income sensitivity, which is affected by changes in the general level of the interest rates in the United States.
Added
Market risk represents the risk of loss that may impact our financial position due to adverse changes in financial market prices and rates. 95 Interest rate risk We are exposed to market risk for changes in interest rates related primarily to our cash and cash equivalents, marketable debt securities and our indebtedness.

Other GH 10-K year-over-year comparisons