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What changed in Natera, Inc.'s 10-K — 2023 vs 2024

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Paragraph-level year-over-year comparison of Natera, Inc.'s 2023 and 2024 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 2024 report.

+358 added−406 removedSource: 10-K (2025-02-28) vs 10-K (2024-02-29)

Top changes in Natera, Inc.'s 2024 10-K

358 paragraphs added · 406 removed · 302 edited across 8 sections

Item 1. Business

Business — how the company describes what it does

105 edited+35 added−12 removed219 unchanged
Biggest changeWe believe the principal competitive factors in our molecular diagnostic testing markets include the following: ● test performance, as demonstrated in clinical and analytical studies and clinical trials as well as in commercial experience; ​ ● comprehensiveness of coverage and ease of use, including user experience for both patients and providers; ​ ● value of product offerings, including pricing and impact on other healthcare spending; ​ ● scope and extent of reimbursement and payer coverage; ​ ● effectiveness of sales and marketing efforts; ​ ● breadth of distribution of products and partnership base; ​ ● reputation among patients and providers for development and introduction of new, innovative products; ​ ● operational execution, including test turn-around time and test failures; ​ ● key opinion leader support; and ​ ● brand awareness. 14 Table of Contents We believe that we compare favorably against our competitors based on various key differentiators, including in particular: ● our core technology, which can be applied across a range of conditions and disease types with a high degree of specificity and sensitivity; ​ ● our continued investment in generating scientific data through clinical trials and publication in peer-reviewed studies; ​ ● our strong commercial teams; and ​ ● our user experience, including ease of use for patients through offerings such as mobile phlebotomy and for physicians through ordering efficiencies and EMR integrations, and patient and provider educational materials.
Biggest changeWe believe the principal competitive factors in our molecular diagnostic testing markets include the following: ● test performance, as demonstrated in clinical and analytical studies and clinical trials as well as in commercial experience; ​ 14 Table of Contents ● comprehensiveness of coverage and ease of use, including user experience for both patients and providers; ​ ● value of product offerings, including pricing and impact on other healthcare spending; ​ ● scope and extent of reimbursement and payer coverage; ​ ● effectiveness of sales and marketing efforts; ​ ● breadth of distribution of products and partnership base; ​ ● reputation among patients and providers for development and introduction of new, innovative products; ​ ● operational execution, including test turn-around time and test failures; ​ ● key opinion leader support; and ​ ● brand awareness.
Renasight Chronic kidney disease, or CKD, affects more than one in seven adults in the United States; however, the Centers for Disease Control and Prevention estimates that as many as nine in ten adults with CKD do not know that they have it, and as many as one in three adults with severe CKD do not know that they have it.
Renasight Chronic kidney disease, or CKD, affects more than one in seven adults in the United States; however, the Centers for Disease Control and Prevention estimates that as many as nine in ten adults with CKD, and as many as one in three adults with severe CKD, do not know that they have it.
State Genetic Testing Laws Many states have implemented genetic testing and privacy laws imposing specific patient consent requirements and protecting test results. Under some state laws, we are prohibited from conducting genetic tests without appropriate documentation of patient (or parental/guardian) consent from the physician ordering the test.
State Genetic Testing and Privacy Laws Many states have implemented genetic testing and privacy laws imposing specific patient consent requirements and protecting test results. Under some state laws, we are prohibited from conducting genetic tests without appropriate documentation of patient (or parental/guardian) consent from the physician ordering the test.
Unlike the federal Anti-Kickback Statute, EKRA is not limited to federal health care programs and extends the prohibitions to services covered by commercial health plans. Additionally, not all of the safe harbors available under the federal Anti-Kickback Statute are not reiterated under EKRA, and certain EKRA exceptions conflict with the federal Anti-Kickback Statute safe harbors.
Unlike the federal Anti-Kickback Statute, EKRA is not limited to federal health care programs and extends the prohibitions to services covered by commercial health plans. Additionally, not all of the safe harbors available under the federal Anti-Kickback Statute are reiterated under EKRA, and certain EKRA exceptions conflict with the federal Anti-Kickback Statute safe harbors.
We do not incorporate the information on, or accessible through, our website into this Annual Report on Form 10-K or any other report we file with or furnish to the SEC, and you should not consider any information on, or accessible through, our website as part of this Annual Report on Form 10-K or any other report we file with or furnish to the SEC.
We do not incorporate the information on, or accessible through, our website into this Annual Report on Form 10-K or any other report we file with or furnish to the SEC, and you should not consider any information on, or accessible through, our website as part of this Annual Report on Form 10-K or any other report we file with or furnish to the SEC.
We periodically conduct employee engagement surveys, the results of which inform internal company and management goals to help ensure impactful and meaningful actions in response to feedback received. Our annual employee evaluation process helps us to support developing employees as well as identify and cultivate high performers, and we have various initiatives underway to further develop leaders and managers.
We periodically conduct employee engagement surveys, the results of which inform internal company and management goals to help ensure impactful and meaningful actions in response to feedback received. Our employee evaluation process helps us to support developing employees as well as identify and cultivate high performers, and we have various initiatives underway to further develop leaders and managers.
Screening for these conditions early in a pregnancy can facilitate early diagnosis, enable patients to be referred to MFMs and other specialists for targeted evaluations, to guide labor and delivery management, and to allow families to mobilize resources, ask questions and anticipate future needs. We have received a CE Mark for Vistara from the European Commission.
Screening for these conditions early in a pregnancy can facilitate early diagnosis, enable patients to be referred to MFMs and other specialists, guide labor and delivery management, and allow families to mobilize resources, ask questions and anticipate future needs. We have received a CE Mark for Vistara from the European Commission.
We must also comply with the standards for the privacy of individually identifiable health information, which limit the use and disclosure of most paper and oral communications, as well as those in electronic form, regarding an individual’s past, present or future physical or mental health or condition, or relating to the provision of 21 Table of Contents healthcare to the individual or payment for that healthcare, if the individual can or may be identified by such information.
We must also comply with the standards for the privacy of individually identifiable health information, which limit the use and disclosure of most paper and oral communications, as well as those in electronic form, regarding an individual’s past, present or future physical or mental health or condition, or relating to the provision of healthcare to the individual or payment for that healthcare, if the individual can or may be identified by such information.
These conditions are often rare and usually there is no family history, and although certain conditions are more common in certain ethnic groups, ethnicity may not be a reliable predictor of carrier status, as patients are increasingly of mixed or uncertain ethnicities.
These conditions are often rare and usually there is no family history, and although certain conditions are more common in certain ethnic groups, ethnicity may not be a reliable predictor of carrier status, as people are increasingly of mixed or uncertain ethnicities.
Horizon screens for up to 445 inherited conditions across a selection of screening panels, including Cystic Fibrosis, Duchenne Muscular Dystrophy, or DMD, Spinal Muscular Atrophy, Fragile X Syndrome and other conditions, and performs with a 99% detection rate for most conditions.
Horizon screens for up to 613 inherited conditions across a selection of screening panels, including Cystic Fibrosis, Duchenne Muscular Dystrophy, or DMD, Spinal Muscular Atrophy, Fragile X Syndrome and other conditions, and performs with a 99% detection rate for most conditions.
Reimbursement by third-party payers may depend on a number of factors, including the payer’s determination that tests using our technologies are: not experimental or investigational; medically necessary; demonstrated to lead to improved patient outcomes; appropriate for the specific patient; cost-saving or cost-effective; supported by peer-reviewed medical journals; and included in clinical guidelines.
Reimbursement by third-party payers may depend on a number of factors, including the payer’s determination that tests using our technologies are: not experimental or investigational; medically necessary; demonstrated to lead to 16 Table of Contents improved patient outcomes; appropriate for the specific patient; cost-saving or cost-effective; supported by peer-reviewed medical journals; and included in clinical guidelines.
A violation of Section 102.001 or 102.006 is punishable by civil penalties (up to $10,000 per violation). The Texas Medicaid anti-kickback laws, 1 TAC 371.1669, cross-references the Texas Patient Solicitation Act and include other prohibited self-referrals that are grounds for enforcement and sanctions.
A violation of Section 102.001 or 102.006 is punishable by civil penalties (up to $10,000 per violation). The Texas Medicaid anti-kickback laws, 1 TAC 371.1669, cross-references 24 Table of Contents the Texas Patient Solicitation Act and include other prohibited self-referrals that are grounds for enforcement and sanctions.
Anora, our products of conception, or POC, test, analyzes miscarriage tissue from women who have experienced one or more pregnancy losses to determine whether there was an underlying chromosomal reason for the loss. Anora can 9 Table of Contents detect trisomy, triploidy, extra or missing chromosome pieces, and uniparental disomy.
Anora, our products of conception, or POC, test, analyzes miscarriage tissue from women who have experienced one or more pregnancy losses to determine whether there was an underlying chromosomal reason for the loss. Anora can detect trisomy, triploidy, extra or missing chromosome pieces, and uniparental disomy.
As discussed in more detail in “Risk Factors—Reimbursement and Regulatory Risks Related to our Business— If the validity of an informed consent from a patient intake for Panorama or our other tests is challenged, we could be precluded from billing for such testing, forced to stop performing such tests, or required to repay amounts previously received, which would adversely affect our business and financial results ,” while we rely on physicians to obtain the required patient consent to perform genetic testing, the regulatory burden may be deemed to be our responsibility and such consents, or our compliance with applicable laws and regulations, could be challenged.
As discussed in more detail in “ Risk Factors—Reimbursement and Regulatory Risks Related to our Business—If the validity of an informed consent from a patient intake for Panorama or our other tests is challenged, we could be precluded from billing for such testing, forced to stop performing such tests, or required to repay amounts previously received, which would adversely affect our business and financial results ,” while we rely on physicians to obtain the required patient consent to perform genetic testing, the regulatory burden may be deemed to be our responsibility and such consents, or our compliance with applicable 21 Table of Contents laws and regulations, could be challenged.
The California Insurance Code includes similar prohibitions against any consideration for the 23 Table of Contents referral or procurement of patients if a claim is submitted to a commercial insurer, CA Ins. Code § 750, which is punishable by criminal penalties mirroring those that apply to violations of Business and Professions Code Section 650.
The California Insurance Code includes similar prohibitions against any consideration for the referral or procurement of patients if a claim is submitted to a commercial insurer, CA Ins. Code § 750, which is punishable by criminal penalties mirroring those that apply to violations of Business and Professions Code Section 650.
Our Prospera test is designed for use by physicians to help rule in or rule out active rejection when evaluating the need for diagnostic testing or the results of an invasive biopsy, and thereby potentially lowering the overall costs associated with transplant care and improving graft survival.
Our Prospera test is designed for use by physicians to help rule in or rule out active rejection when evaluating the need for diagnostic testing or the results of an invasive 11 Table of Contents biopsy, and thereby potentially lowering the overall costs associated with transplant care and improving graft survival.
We may become subject to and/or initiate future intellectual property litigation as our product portfolio, and the level of competition in our industry segments, grow. The field of molecular diagnostics is complex and rapidly evolving, and we expect that we and others in our industry will continue to be subject to third-party infringement claims.
We may become subject to and/or initiate future intellectual property litigation as our product portfolio, and the level of competition in our industry segments, 15 Table of Contents grow. The field of molecular diagnostics is complex and rapidly evolving, and we expect that we and others in our industry will continue to be subject to third-party infringement claims.
Based on data published in the journals Obstetrics & Gynecology , American Journal of Obstetrics & Gynecology , Prenatal Diagnosis , and others, we believe Panorama is the most accurate NIPT commercially available in the United States.
Based on data published in journals including Obstetrics & Gynecology , American Journal of Obstetrics & Gynecology , and Prenatal Diagnosis , we believe Panorama is the most accurate NIPT commercially available in the United States.
Sensitivity is calculated as the ratio between the number of individuals that test positive for the condition over the total number of individuals in the tested cohort who actually have the condition. 28 Table of Contents SNP – single nucleotide polymorphism; a position on the chromosome at which single DNA base changes are common in the population.
Sensitivity is calculated as the ratio between the number of individuals that test positive for the condition over the total number of individuals in the tested cohort who actually have the condition. SNP – single nucleotide polymorphism; a position on the chromosome at which single DNA base changes are common in the population.
An RUO product promoted for diagnostic use may be viewed by the FDA as adulterated and misbranded under the FDC Act and the manufacturer of such product could be subject to FDA enforcement activities. Our LDTs use instruments and reagents labeled as RUO. Laboratory-developed tests .
An RUO product promoted for diagnostic use may be viewed by the FDA as 18 Table of Contents adulterated and misbranded under the FDC Act and the manufacturer of such product could be subject to FDA enforcement activities. Our LDTs use instruments and reagents labeled as RUO. Laboratory-developed tests .
The test is covered by Medicare for use in the surveillance setting for lung transplant patients. As with oncology, we are continuing to generate data in multiple clinical studies designed to demonstrate clinical utility and other benefits of our Prospera test.
The test is covered by Medicare for use in the surveillance setting for lung transplant patients, including for single lung transplant recipients in the surveillance setting. As with oncology, we are continuing to generate data in multiple clinical studies designed to demonstrate clinical utility and other benefits of our Prospera test.
Outside of the United States, where our products are sold in over 80 countries, we currently sell predominantly through partner laboratories. Enhanced User Experience NateraCore is our suite of resources designed to enhance the patient and provider experience.
Outside of the United States, where our products are sold in over 80 countries, we currently sell predominantly through partner laboratories. 13 Table of Contents Enhanced User Experience NateraCore is our suite of resources designed to enhance the patient and provider experience.
AUC – area under the receiver operating curve; a measure of the diagnostic performance of a test, based on sensitivity and specificity. cfDNA – cell-free DNA. 27 Table of Contents CLIA – Clinical Laboratory Improvement Amendments. CMS – Centers for Medicare and Medicaid Services.
AUC – area under the receiver operating curve; a measure of the diagnostic performance of a test, based on sensitivity and specificity. cfDNA – cell-free DNA. CLIA – Clinical Laboratory Improvement Amendments. CMS – Centers for Medicare and Medicaid Services.
For example, California has a direct bill rule specific to anatomic pathology services that prohibits any provider from billing for anatomic pathology services if those services were not actually rendered by that person or under his or her direct supervision with some exemptions (CA Business and Professions Code Section 655.7).
For example, 26 Table of Contents California has a direct bill rule specific to anatomic pathology services that prohibits any provider from billing for anatomic pathology services if those services were not actually rendered by that person or under his or her direct supervision with some exemptions (CA Business and Professions Code Section 655.7).
The Special Fraud Alerts set forth a number of practices allegedly engaged in by some clinical laboratories and healthcare providers that raise issues under the federal fraud and abuse laws, including the federal Anti-Kickback Statute.
The Special 23 Table of Contents Fraud Alerts set forth a number of practices allegedly engaged in by some clinical laboratories and healthcare providers that raise issues under the federal fraud and abuse laws, including the federal Anti-Kickback Statute.
Oncology In oncology, we have been initially focused on detecting molecular residual disease, which we refer to as MRD, and recurrence monitoring in solid tumors, where we have generated data in over a dozen different cancer types and have published data in, among others, colorectal, bladder, breast, and lung cancer, as well as multiple myeloma and other tumor types.
Oncology In oncology, we have been initially focused on detecting molecular residual disease, or MRD, and recurrence monitoring in solid tumors, where we have generated data in over a dozen different cancer types and have published data in, among others, colorectal, bladder, breast, and lung cancer, as well as multiple myeloma and other tumor types.
Class III devices are generally the highest risk devices and are subject to the highest level of regulatory control to provide reasonable assurance of the device's safety and effectiveness. Class III devices typically require a PMA by the FDA before they are marketed.
Class III devices are generally the highest risk devices and are subject to the highest level of regulatory control to provide reasonable assurance of the device's safety and 17 Table of Contents effectiveness. Class III devices typically require a PMA by the FDA before they are marketed.
Generally, courts have taken a broad interpretation of the scope of 22 Table of Contents the federal Anti-Kickback Statute, holding that the statute may be violated if merely one purpose of a payment arrangement is to induce future referrals.
Generally, courts have taken a broad interpretation of the scope of the federal Anti-Kickback Statute, holding that the statute may be violated if merely one purpose of a payment arrangement is to induce future referrals.
Each patient receives a custom assay that tracks the presence of 16 tumor-specific clonal mutations that are selected based on the unique mutational signature found in that patient’s tumor tissue, which is intended to maximize accuracy for detecting the presence or absence of residual disease in a blood sample, even at variant allele frequency, or VAF, of mutations as low as 0.01% in the blood.
Each patient receives a custom assay that tracks the presence of tumor-specific clonal mutations that are selected based on the unique mutational signature found in that patient’s tumor tissue, which is intended to maximize accuracy for detecting the presence or absence of residual disease in a blood sample, even at a sample-level average variant allele frequency, or VAF, of mutations as low as 0.0002% in the blood.
We have received CE Marks from the European Commission for our Constellation software and for the key reagents that our laboratory licensees use to run their NIPT test prior to accessing our Constellation software. These CE 12 Table of Contents Marks enable us to offer Constellation in the European Union and other countries that accept a CE Mark.
We have received CE Marks from the European Commission for our Constellation software and for the key reagents that our laboratory licensees use to run their NIPT test prior to accessing our Constellation software. These CE Marks enable us to offer Constellation in the European Union and other countries that accept a CE Mark.
A violation of the federal Anti-Kickback Statute may result in imprisonment for up to ten years and/or criminal or civil fines – up to $104,330 (or $27,018 for each wrongful act) in 2023 – and exclusion from participation in federal health care programs.
A violation of the federal Anti-Kickback Statute may result in imprisonment for up to ten years and/or criminal or civil fines – up to $104,330 (or $27,894 for each wrongful act) in 2024 – and exclusion from participation in federal health care programs.
We have obtained licenses in the states that we believe require us to do so based on our current operations, and believe we are in compliance with applicable state laboratory licensing laws, including Maryland, 20 Table of Contents Pennsylvania and Rhode Island.
We have obtained licenses in the states that we believe require us to do so based on our current operations, and believe we are in compliance with applicable state laboratory licensing laws, including Maryland, Pennsylvania and Rhode Island.
Altera can be ordered as a stand-alone test, as well as in conjunction with our Signatera MRD test to combine therapy selection with ongoing monitoring. Empower We offer Empower, our hereditary cancer test, to oncologists, in addition to physicians through our women’s health commercial channel.
Altera can be ordered as a stand-alone test, as well as in conjunction with our Signatera MRD test to combine therapy selection with ongoing monitoring. Empower We offer Empower, our hereditary cancer test, through our oncology commercial channel as well as our women’s health channel.
In the year ended December 31, 2023, approximately three-quarters of customers who ordered the basic Panorama panel directly from us also ordered screening for 22q11.2 deletion syndrome or the full microdeletions panel, and approximately 43% of customers who ordered Panorama directly from us also ordered Horizon carrier screening.
In the year ended December 31, 2024, approximately three-quarters of customers who ordered the basic Panorama panel directly from us also ordered screening for 22q11.2 deletion syndrome or the full microdeletions panel, and approximately 44% of customers who ordered Panorama directly from us also ordered Horizon carrier screening.
To obtain 510(k) clearance, a manufacturer must submit a premarket notification demonstrating to the FDA's satisfaction that the proposed device is substantially equivalent to a legally marketed predicate device, which can be either a previously 510(k)-cleared device or a device that was in commercial distribution before May 28, 1976 for which the FDA has not called for submission of a PMA application.
To obtain 510(k) clearance, a manufacturer must submit a premarket notification demonstrating to the FDA’s satisfaction that the proposed device is substantially equivalent to a legally marketed predicate device, which can be a previously 510(k)-cleared device, a previously granted request for de novo classification, or a device that was in commercial distribution before May 28, 1976 for which the FDA has not called for submission of a PMA application.
Any revocation of a CLIA certificate or exclusion from participation in Medicare or Medicaid programs may also result in suspension of the California state laboratory license.
Any revocation of a 20 Table of Contents CLIA certificate or exclusion from participation in Medicare or Medicaid programs may also result in suspension of the California state laboratory license.
A violation of the federal Civil Monetary Penalty statute may result in maximum civil fines – up to $120,816 in 2023 – plus treble damages and exclusion from participation in any federal health care program. Because we operate a laboratory facility located in California and licensed by California’s DHS, California law is applicable to our business arrangements.
A violation of the federal Civil Monetary Penalty statute may result in maximum civil fines – up to $124,732 in 2024 – plus treble damages and exclusion from participation in any federal health care program. Because we operate a laboratory facility located in California and licensed by California’s DHS, California law is applicable to our business arrangements.
Violation of the federal False Claims Act may result in fines of up to three times the actual damages sustained by the government, plus mandatory civil penalties – up to approximately $27,018 in 2023 – per false claim or statement, imprisonment or both, reimbursement of the whistleblower’s attorneys’ fees, and possible exclusion from any federal health care programs.
Violation of the federal False Claims Act may result in fines of up to three times the actual damages sustained by the government, plus mandatory civil penalties – up to approximately $28,619 in 2024 – per false claim or statement, imprisonment or both, reimbursement of the whistleblower’s attorneys’ fees, and possible exclusion from any federal health care programs.
Any person who presents or causes to be presented a claim to the Medicare or Medicaid programs in violation of the Stark Law may be subject to civil monetary penalties – up to $29,899 in 2023 – per claim submission, an assessment of up to three times the amount claimed, and exclusion from participation in any federal health care program.
Any person who presents or causes to be presented a claim to the Medicare or Medicaid programs in violation of the Stark Law may be subject to civil monetary penalties – up to $30,868 in 2024 – per claim submission, an assessment of up to three times the amount claimed, and exclusion from participation in any federal health care program.
A PMA application must provide extensive preclinical and clinical trial data as well as information about the device and its 17 Table of Contents components regarding, among other things, device design, manufacturing, and labeling.
A PMA application must provide extensive preclinical and clinical trial data as well as information about the device and its components regarding, among other things, device design, manufacturing, and labeling.
Most commercial health insurers, as well as an increasing number of state Medicaid programs, have a positive coverage determination for NIPT for average-risk pregnancies. As of December 31, 2023, we and our laboratory distribution partners had in-network contracts with health plans that accounted for over 231 million covered lives in the United States.
Most commercial health insurers, as well as an increasing number of state Medicaid programs, have a positive coverage determination for NIPT for average-risk pregnancies. As of December 31, 2024, we and our laboratory distribution partners had in-network contracts with health plans that accounted for close to 250 million covered lives in the United States.
Constellation Our Constellation software forms the core of our cloud-based distribution model. Through this model, we have been able to expand access to our molecular and bioinformatics capabilities worldwide, enabling laboratories, under a license from us, to run the molecular workflows themselves and then access our computation-intensive bioinformatics algorithms through Constellation, which runs in the cloud, to analyze the results.
Through this model, we have been able to expand access to our molecular and bioinformatics capabilities worldwide, enabling laboratories, under a license from us, to run the molecular workflows themselves and then access our computation-intensive bioinformatics algorithms through Constellation, which runs in the cloud, to analyze the results.
We processed approximately 2.5 million tests in 2023, compared to approximately 2.1 million tests in 2022 and 1.6 million tests in 2021. We are headquartered in Austin, Texas, and our laboratory facilities are located in Austin, Texas and San Carlos, California.
We processed approximately 3.1 million tests in 2024, compared to approximately 2.5 million tests in 2023 and 2.1 million tests in 2022. We are headquartered in Austin, Texas, and our laboratory facilities are located in Austin, Texas and San Carlos, California.
Entities found in violation may be liable for civil monetary penalties – up to $100,000 (or $24,164 for each wrongful act) in 2023.
Entities found in violation may be liable for civil monetary penalties – up to $100,000 (or $24,947 for each wrongful act) in 2024.
Our development, performance, and compensation programs are designed to attract and reward talented, diverse individuals who possess the skills necessary to support our business objectives, assist in the achievement of our strategic goals and ultimately create long term value for our stockholders.
Our development, performance, and compensation programs are designed to attract and reward talented individuals from a broad range of backgrounds and experiences who possess the skills necessary to support our business objectives, assist in the achievement of our strategic goals, and ultimately create long term value for our stockholders.
For example, the Colorado Privacy Act, the Virginia Consumer Data Protection Act, the Utah Privacy Act, and the Connecticut Data Privacy Act, and updates to the California Consumer Privacy Act, all became effective in 2023, and the Texas Data Privacy and Security Act is expected to come into effect in 2024.
For example, the Colorado Privacy Act, the Virginia Consumer Data Protection Act, the Utah Privacy Act, and the Connecticut Data Privacy Act, and updates to the California Consumer Privacy Act, all became effective in 2023, and the Texas Data Privacy and Security Act became effective in 2024.
Empower, our hereditary cancer screening test, screens for over 80 genes associated with increased risk for certain common hereditary cancers, such as breast, ovarian, endometrial, and colorectal cancers.
Empower, our hereditary cancer screening test, screens up to 192 genes associated with increased risk for certain common hereditary cancers, such as breast, ovarian, endometrial, and colorectal cancers.
Our Prospera Heart test assesses acute rejection, exhibiting sensitivity and specificity of 79% and 77%, respectively, as well as an overall AUC of 0.86, in our clinical validation study published in the Journal of Heart and Lung Transplantation . The Prospera Heart test is covered by Medicare for heart transplant patients.
Our Prospera Heart test assesses acute rejection, exhibiting sensitivity and specificity of 79% and 77%, respectively, as well as an overall AUC of 0.86, in our clinical validation study published in the Journal of Heart and Lung Transplantation .
In addition, in June 2021, Congress 18 Table of Contents introduced legislation called the Verifying Accurate, Leading-edge IVCT Development Act, or VALID Act, which would have established a new risk-based regulatory framework for in vitro clinical tests, or IVCTs, a category that would have included IVDs, LDTs, collection devices, and instruments used with such tests.
In June 2021, Congress introduced the Verifying Accurate, Leading-edge IVCT Development Act, or VALID Act, which would have established a new risk-based regulatory framework for in vitro clinical tests (“IVCTs”), a category which would have included IVDs, LDTs, collection devices and instruments used with such tests.
The only 24 Table of Contents case law issued to date involves decisions interpreting the EKRA as it applies to compensation of laboratory sales personnel hired as independent contractors, and the courts differ on interpretation and application of the law.
The only case law issued to date involves decisions interpreting the EKRA as it applies to compensation of laboratory sales personnel hired as independent contractors, and the courts differ on interpretation and application of the law; these decisions are currently on appeal.
The Protecting Access to Medicare Act of 2014, or PAMA, introduced a multi-year pricing program and new payment methodology to calculate the rates for tests listed under the CLFS that are reimbursable by Medicare Part B.
The Protecting Access to Medicare Act of 2014, or PAMA, introduced a multi-year pricing program and new payment methodology to calculate the rates for tests listed under the CLFS that are reimbursable by Medicare Part B. Under the payment methodology, the Medicare Part B CLFS payment rate is derived from a volume-weighted median of private payer rates for tests.
Our Vistara single-gene NIPT screens for 25 single-gene disorders that cause severe skeletal, cardiac and neurological conditions which affect quality of life, are often associated with cognitive disabilities and could benefit from medical and/or surgical intervention.
Our Vistara single-gene NIPT screens for 25 single-gene conditions which affect quality of life, are often associated with cognitive disabilities and could benefit from early medical and/or surgical intervention.
Information from the test can lead to earlier detection of cancer, identify cancer risk-reducing strategies, inform surgical and therapeutic decisions following a cancer diagnosis, and provide an opportunity to notify family members who may be at similar risk for hereditary cancer.
Information from the test can lead to earlier detection of cancer, identify cancer risk-reducing strategies, inform surgical and therapeutic decisions following a cancer diagnosis, and provide an opportunity to notify family members who may be at similar risk for hereditary cancer. We sell this test through both our women’s health and oncology commercial channels.
As of December 31, 2023, we held approximately 170 issued U.S. and foreign patents, which expire between November 2026 and November 2044, and approximately 250 pending U.S. and foreign patent applications.
As of December 31, 2024, we held approximately 220 issued U.S. and foreign patents, which expire between November 2026 and November 2044, and over 290 pending U.S. and foreign patent applications.
The GDPR applies not only to organizations within the EU, but also applies to organizations outside of the EU, such as Natera, that offer goods or services to EU data subjects or that process personal data of EU data subjects.
In particular, the EU’s General Data Protection Regulation, or GDPR, became effective in 2018. The GDPR applies not only to organizations within the EU, but also applies to organizations outside of the EU, such as Natera, that offer goods or services to EU data subjects or that process personal data of EU data subjects.
A violation of this statute is a felony and may result in fines, imprisonment or exclusion from government sponsored programs. The false statements statute prohibits 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.
The false statements statute prohibits 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.
Human Capital Management As of December 31, 2023, our global workforce comprised 3,293 employees, of whom 3,282 were full time employees. We also engage consultants and temporary employees. We have not been subject to labor action or union activities, and our management considers its relationships with employees to be good. Our global voluntary turnover rate for 2023 was approximately 22.04%.
Human Capital Management As of December 31, 2024, our global workforce comprised 4,434 employees, of whom 4,424 were full time employees. We also engage consultants and temporary employees. We have not been subject to labor action or union activities, and our management considers its relationships with employees to be good.
Set forth below are highlights of certain key regulatory frameworks applicable to our business. FDA In the United States, medical devices are subject to extensive regulation by the FDA under the Federal Food, Drug, and Cosmetic Act, or FDC Act, and its implementing regulations, and other federal and state statutes and regulations.
FDA In the United States, medical devices are subject to extensive regulation by the FDA under the Federal Food, Drug, and Cosmetic Act, or FDC Act, and its implementing regulations, and other federal and state statutes and regulations.
A person who engages in a scheme to circumvent the Stark Law’s referral prohibition may be fined – up to $199,338 in 2023 – for each such arrangement or scheme.
A person who engages in a scheme to circumvent the 25 Table of Contents Stark Law’s referral prohibition may be fined – up to $205,799 in 2024 – for each such arrangement or scheme.
Other states may have self-referral restrictions with which we have to comply that differ from those imposed by federal and California law. 25 Table of Contents We are also subject to applicable state client billing laws, which specify whether a person that did not perform the service is permitted to submit the claim for payment and if so, whether the non-performing person is permitted to mark up the cost of the services in excess of the price the purchasing provider paid for such services.
We are also subject to applicable state client billing laws, which specify whether a person that did not perform the service is permitted to submit the claim for payment and if so, whether the non-performing person is permitted to mark up the cost of the services in excess of the price the purchasing provider paid for such services.
In addition, Signatera has been granted Breakthrough Device Designations by the FDA covering its use in various applications. 10 Table of Contents Signatera has been shown in various clinical studies – including close to 60 peer-reviewed publications as of February 1, 2024 – to identify MRD significantly earlier than standard diagnostic tools, and that Signatera test status is a significant indicator of long-term patient outcomes after surgery and treatment, relative to other clinical and pathological factors.
Signatera has been shown in various clinical studies – including over 100 peer-reviewed publications as of February 1, 2025 – to identify MRD significantly earlier than standard diagnostic tools, and that Signatera test status is a significant indicator of long-term patient outcomes after surgery and treatment, relative to other clinical and pathological factors.
Our revenues were $1,082.6 million in 2023 compared to $820.2 million in 2022 and $625.5 million in 2021. Our product revenues were $1,068.5 million, $797.3 million, and $580.1 million for the years ended December 31, 2023, 2022, and 2021, respectively. Our net losses decreased to $434.8 million in 2023, from $547.8 million in 2022 and $471.7 million in 2021.
Our product revenues were $1,685.1 million, $1,068.5 million, and $797.3 million for the years ended December 31, 2024, 2023, and 2022, respectively. Our net losses decreased to $190.4 million in 2024, from $434.8 million in 2023 and $547.8 million in 2022.
In addition, Massachusetts law requires that any company that obtains personal information of any resident of the Commonwealth of Massachusetts implement and maintain a security program that adequately protects such information from unauthorized use or disclosure. State privacy laws continue to evolve. Several other states’ privacy laws came into effect in 2023, and more are expected to come into effect.
In addition, Massachusetts law requires that any company that obtains 22 Table of Contents personal information of any resident of the Commonwealth of Massachusetts implement and maintain a security program that adequately protects such information from unauthorized use or disclosure. State consumer protection and data privacy laws continue to evolve.
Based on self-identification data, in 2023, women comprised approximately 61.7% of our global workforce, approximately 65% of global new hires, and over 61% of internal promotions. Also based on self-identification data, minorities comprised approximately 32% of our U.S. workforce.
Based on self-identification data, in 2024, women comprised approximately 56% of our global workforce, approximately 67% of global new hires, and approximately 64% of internal promotions. Also based on self-identification data, minorities comprised approximately 41% of our U.S. workforce.
The FDA historically has taken the position that it has the authority to regulate such tests as medical devices under the FDC Act but has historically exercised enforcement discretion and has not required clearance, de novo classification, or approval of LDTs prior to marketing. There have been various legislative initiatives in recent years regarding the FDA’s approach to LDT oversight.
The FDA historically has taken the position that it has the authority to regulate such tests as medical devices under the FDC Act but had historically exercised enforcement discretion and did not require clearance, de novo classification, or approval of most LDTs prior to marketing.
In addition to our mobile phlebotomy service, we have a network of over 2,000 phlebotomy centers across the United States. Competition The markets in which we operate are characterized by innovation and rapid change, and we primarily face competition from various companies that develop and commercialize molecular diagnostic tests in women’s health, oncology, and organ transplant rejection.
Competition The markets in which we operate are characterized by innovation and rapid change, and we primarily face competition from various companies that develop and commercialize molecular diagnostic tests in women’s health, oncology, and organ transplant rejection.
In 2023, over 93% of people managers completed annual diversity training in furtherance of our 2025 Environmental, Social and Governance, or ESG, goals. Sustainability We recognize that in our work to improve the state of disease globally, it is important to develop and maintain a strong ethos of sustainability, responsibility, and stewardship with respect to environmental matters.
Sustainability We recognize that in our work to improve the state of disease globally, it is important to develop and maintain a strong ethos of sustainability, responsibility, and stewardship with respect to environmental matters.
Rather, it is intended to detect and assess how much cancer is left in the body (offering both a qualitative and quantitative measurement), detect recurrence earlier, and help optimize treatment decisions. Signatera can detect residual disease earlier than clinical or radiological recurrence in patients with solid tumors who have received treatment.
Rather, it is intended to detect and assess how much cancer is left in the body (offering both a qualitative and quantitative measurement), detect recurrence earlier, and help optimize treatment decisions.
Signatera is also covered under the coverage policies of certain commercial third-party payers, including a pan-cancer coverage policy for adjuvant, recurrence monitoring and treatment monitoring for solid tumors.
Signatera is also covered under the coverage policies of certain commercial third-party payers, including a pan-cancer coverage policy for adjuvant, recurrence monitoring and treatment monitoring for solid tumors. Signatera has been granted Advanced Diagnostic Laboratory Test, or ADLT, status by the Centers for Medicare & Medicaid Services.
Specificity is calculated as the ratio between the number of individuals that test negative for a condition over the total number of individuals in the tested cohort who do not have the condition. Triploidy – a type of fetal aneuploidy in which an individual has three copies of every chromosome instead of two.
Specificity is calculated as the ratio between the number of individuals that test negative for a condition over the total number of individuals in the tested cohort who do not have the condition.
CS test – carrier screening test. dd-cfDNA – donor-derived cell-free DNA; DNA that is shed into the blood of a transplant recipient from a transplanted organ undergoing rejection. DNA – deoxyribonucleic acid. FDA – Food and Drug Administration. Fetal aneuploidy – an inherited genetic condition in which a fetus has a different number of chromosomes than are typical.
CS test – carrier screening test. 28 Table of Contents dd-cfDNA – donor-derived cell-free DNA; DNA that is shed into the blood of a transplant recipient from a transplanted organ undergoing rejection. DNA – deoxyribonucleic acid. FDA – Food and Drug Administration.
Under the new payment methodology, the Medicare Part B CLFS payment rate is derived from a volume-weighted median 15 Table of Contents of private payer rates for tests. This requires an “applicable laboratory” to report to CMS the private payment rates and the volume of tests associated with each payment rate for a specific data reporting period.
This requires an “applicable laboratory” to report to CMS the private payment rates and the volume of tests associated with each payment rate for a specific data reporting period.
In addition to our direct sales force in the United States, we have a global network of over 100 laboratory and distribution partners, including many of the largest international laboratories. We are committed to generating peer-reviewed clinical evidence for our tests, and have 85 peer-reviewed publications in women’s health, over 60 in oncology, and over 30 in organ health.
In addition to our direct sales force in the United States, we have a global network of over 100 laboratory and distribution partners, including many of the largest international laboratories.
For more information on state licensing requirements, see “—California Laboratory Licensing”, “—New York Laboratory Licensing,” and “—Other State Laboratory Licensing Laws.” Our laboratories have each also been accredited by the College of American Pathologists, or CAP, which means that our laboratories have been certified as following CAP standards and guidelines in operating the laboratory facility and in performing tests that ensure the quality of our test results. 19 Table of Contents California Laboratory Licensing In addition to federal certification requirements for laboratories under CLIA, we are required under California law to maintain a California state license for both our San Carlos, California and Austin, Texas clinical laboratories, and to comply with California state laboratory laws and regulations, because our San Carlos facility is located in, and both facilities test specimens originating from, California.
For more information on state licensing requirements, see “—California Laboratory Licensing”, “—New York Laboratory Licensing,” and “—Other State Laboratory Licensing Laws.” Our laboratories have each also been accredited by the College of American Pathologists, or CAP, which means that our laboratories have been certified as following CAP standards and guidelines in operating the laboratory facility and in performing tests that ensure the quality of our test results.
Violation of EKRA carries potential penalties of up to $200,000 in fines and imprisonment of up to ten years for each occurrence, and potential exclusion from participation in any federal health care program.
As currently drafted, EKRA potentially expands the universe of arrangements that could be subject to government enforcement under federal fraud and abuse laws. Violation of EKRA carries potential penalties of up to $200,000 in fines and imprisonment of up to ten years for each occurrence, and potential exclusion from participation in any federal health care program.
Our target markets for each of women’s health, oncology and organ health represent a smaller subset of these covered lives, because our markets exclude certain populations who would not be users of our tests (for example, our target market for NIPT excludes men, children and post-menopausal women). 16 Table of Contents Government Regulations Our business is subject to and impacted by extensive and frequently changing laws and regulations in the United States (at both the federal and state levels) and internationally.
Our target markets for each of women’s health, oncology and organ health represent a smaller subset of these covered lives, because our markets exclude certain populations who would not be users of our tests (for example, our target market for NIPT excludes men, children and post-menopausal women).
MFM – maternal fetal medicine; an MFM physician specialist is an obstetrician who has completed a medical education specialty in high-risk pregnancy. Microdeletion – a deletion of a region of DNA from one copy of one chromosome. mmPCR – massively multiplexed polymerase chain reaction. NGS – next-generation sequencing; a DNA sequencing technology. NIPT – non-invasive prenatal test.
Microdeletion – a deletion of a region of DNA from one copy of one chromosome. mmPCR – massively multiplexed polymerase chain reaction. NGS – next-generation sequencing; a DNA sequencing technology. NIPT – non-invasive prenatal test.
Panorama screens twin pregnancies for Down, Edwards and Patau syndromes and, for identical twins, Turner syndrome and 22q11.2 deletion syndrome, 8 Table of Contents among others.
Panorama screens twin pregnancies for Down, Edwards and Patau syndromes and, for identical twins, Turner syndrome and 22q11.2 deletion syndrome, among others. In validation studies, Panorama identified identical twins with over 99% sensitivity and specificity and achieved a combined sensitivity of over 99% and specificity of over 99% for Down, Edwards and Patau syndromes in twin pregnancies.
We consider such potential risks in our business continuity planning, including reviewing investment opportunities in renewable energy, and reducing energy and water consumption, greenhouse gas emissions, and waste production.
Climate change may impact our business by increasing operating costs due to additional regulatory requirements, physical risks to our facilities, energy limitations, and disruptions to our supply chain. We consider such potential risks in our business continuity planning, including reviewing investment opportunities in renewable energy, and reducing energy and water consumption, greenhouse gas emissions, and waste production.
Depending on the condition, if one or both parents are carriers, it could result in a child affected with the condition. Many people do not know they are a carrier for an inherited genetic condition until they have an affected child.
Many people do not know they are a carrier for an inherited genetic condition until they have an affected child.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeFood and Drug Administration, or the FDA, or other U.S. or foreign regulatory or legislative bodies may adopt new regulations or policies, or take other actions that impose significant restrictions on our ability to market and sell our tests, including requiring FDA clearance or approval for the sale of our tests (for example, the VALID Act or a proposed rule published by the FDA in September 2023), as further discussed in the risk factor entitled “ Regulatory and Compliance Risks — If the FDA were to begin actively regulating our tests, we could incur substantial costs and delays associated with trying to obtain premarket 510(k) clearance, de novo classification, or premarket approval and incur costs associated with complying with 30 Table of Contents post market controls ”) or of the sequencers, reagents, kits and other consumable products that we purchase from third parties in order to perform our testing; • our laboratory partners may choose to develop their own tests that are competitive with ours or offer tests provided by our competitors due to pricing or other reasons as has happened in the past, or otherwise fail to effectively market our tests; and competitors may develop and commercialize more effective and/or less expensive tests that deliver comparable results to our tests; • we may fail to adequately protect or enforce our intellectual property relating to our tests, leading to increased competition; or other parties may claim that the practice of our technology by us or our licensees and collaborators infringes such other party’s intellectual property rights, as certain of our competitors have claimed in lawsuits filed against us, as discussed further in “Note 8—Commitments and Contingencies—Legal Proceedings” in the Notes to Consolidated Financial Statements; if we are required to pay litigation judgments or settlements or pay license fees in order to license third-party intellectual property rights due to actual or alleged infringement based on our running our tests, our results of operations or financial condition could be adversely impacted; • we may be unable to dedicate adequate resources to the maintenance and further technological advancement of our current tests that are necessary for such tests to be competitive in the marketplace because of the demands placed on our research and development and product teams with respect to our continuously expanding portfolio of products and programs, in particular our efforts and focus on developing our oncology and organ health product offerings; • in the event that it is in our commercial or financial interest or we are forced to transition sequencing platforms for Panorama, we may be unable to do so in a commercially sustainable way and that could survive claims of infringement of intellectual property rights of Illumina and other competitors, in a timely manner or at all; and • we may not be successful in commercializing our cloud-based distribution model.
Biggest changeFood and Drug Administration, or the FDA, or other U.S. or foreign regulatory or legislative bodies may adopt new regulations or policies, or take other actions that impose significant restrictions on our ability to market and sell our tests, including requiring FDA clearance or approval for the sale of our tests, as further discussed in the risk factor entitled “ Regulatory and Compliance Risks — If the FDA were to begin actively regulating our tests, we could incur substantial costs and delays associated with trying to obtain premarket 510(k) clearance, de novo classification, or premarket approval and incur costs associated with complying with post market controls ”) or of the sequencers, reagents, kits and other consumable products that we purchase from third parties in order to perform our testing; • changes in the funding of the FDA or other government agencies or comparable foreign regulatory authorities could hinder, prevent or delay their regulatory review and approval processes or otherwise prevent those agencies from performing normal business functions on which the operation of our business may rely; • our laboratory partners may choose to develop their own tests that are competitive with ours or offer tests provided by our competitors due to pricing or other reasons as has happened in the past, or otherwise fail to effectively market our tests; and competitors may develop and commercialize more effective and/or less expensive tests that deliver comparable results to our tests; • we may fail to adequately protect or enforce our intellectual property relating to our tests, leading to increased competition; or other parties may claim that the practice of our technology by us or our licensees and collaborators infringes such other party’s intellectual property rights, as certain of our competitors have 31 Table of Contents claimed in lawsuits filed against us, as discussed further in “Note 8—Commitments and Contingencies—Legal Proceedings” in the Notes to Consolidated Financial Statements; if we are required to pay litigation judgments or settlements or pay license fees in order to license third-party intellectual property rights due to actual or alleged infringement based on our running our tests, our results of operations or financial condition could be adversely impacted; • we may be unable to dedicate adequate resources to the maintenance and further technological advancement of our current tests that are necessary for such tests to be competitive in the marketplace because of the demands placed on our research and development and product teams with respect to our continuously expanding portfolio of products and programs, in particular our efforts and focus on developing our oncology and organ health product offerings; • in the event that it is in our commercial or financial interest or we are forced to transition sequencing platforms for Panorama, we may be unable to do so in a commercially sustainable way and that could survive claims of infringement of intellectual property rights of Illumina and other competitors, in a timely manner or at all; and • we may not be successful in commercializing our cloud-based distribution model.
Accordingly, the market price of our common stock is likely to be subject to wide fluctuations in response to numerous factors, many of which are beyond our control, such as those in this “Risk Factors” section and others including: • actual or anticipated variations in our and our competitors’ results of operations, as well as how those results compare to analyst and investor expectations; • announcements by us or our competitors of new products, significant acquisitions, other strategic transactions, including strategic and commercial partnerships and relationships, joint ventures, divestitures, collaborations or capital commitments; • changes in reimbursement practices by current or potential payers; • failure of analysts to initiate or maintain coverage of our company, issuance of new securities analysts’ reports or changed recommendations for our stock; • negative publicity, including misinformation, about our company, our tests, or the commercial markets in which we operate; • forward-looking statements related to our financial guidance or projections, our failure to meet or exceed our financial guidance or projections or changes in our financial guidance or projections; • actual or anticipated changes in regulatory oversight of our products; • development of disputes concerning our intellectual property or other proprietary rights; • commencement of, or our involvement in, litigation and the outcomes of our litigation matters; • announcement or expectation of additional debt or equity financing efforts; • any major change in our management; • general economic conditions and slow or negative growth of our markets, including as a result of changes in the rate of inflation (including the cost of raw materials, commodities, and supplies) and interest rates; and 63 Table of Contents • changes in business, economic, and political conditions, including war, political instability and related military action.
Accordingly, the market price of our common stock is likely to be subject to wide fluctuations in response to numerous factors, many of which are beyond our control, such as those in this “Risk Factors” section and others including: • actual or anticipated variations in our and our competitors’ results of operations, as well as how those results compare to analyst and investor expectations; • announcements by us or our competitors of new products, significant acquisitions, other strategic transactions, including strategic and commercial partnerships and relationships, joint ventures, divestitures, collaborations or capital commitments; • changes in reimbursement practices by current or potential payers; • failure of analysts to initiate or maintain coverage of our company, issuance of new securities analysts’ reports or changed recommendations for our stock; • negative publicity, including misinformation, about our company, our tests, or the commercial markets in which we operate; • forward-looking statements related to our financial guidance or projections, our failure to meet or exceed our financial guidance or projections or changes in our financial guidance or projections; • actual or anticipated changes in regulatory oversight of our products; • development of disputes concerning our intellectual property or other proprietary rights; • commencement of, or our involvement in, litigation and the outcomes of our litigation matters; • announcement or expectation of additional debt or equity financing efforts; • any major change in our management; • general economic conditions and slow or negative growth of our markets, including as a result of changes in the rate of inflation (including the cost of raw materials, commodities, and supplies) and interest rates; and 60 Table of Contents • changes in business, economic, and political conditions, including war, political instability and related military action.
Our ability to increase sales and establish significant levels of adoption and reimbursement for our tests is uncertain, and it may be challenging for us to achieve profitability for many reasons, including, among others: • the market for our tests may not grow as we expect; in particular, NIPTs may not gain acceptance for use as a screen for microdeletions, which would limit the market for Panorama, and we may fail to compete successfully in this market, whatever its size; • if we are unable to demonstrate that our tests are superior to competing tests, laboratories, clinics, clinicians, physicians, payers and patients may not adopt the use of our tests on a broad basis, and may not be willing to pay the price premium over competing tests that we have, to date, been able to achieve; • third-party payers, such as commercial insurance companies and government insurance programs, may decide not to reimburse for our tests, such as for the screening of microdeletions, may set the amounts of any reimbursements at prices that do not allow us to cover our expenses, or may otherwise adopt regulations, programs, policies or procedures that restrict or harm our business; for example, with respect to Panorama, many third-party payers currently have negative coverage determinations or otherwise do not reimburse for microdeletions screening and we expect low reimbursement rates for microdeletions screening to continue, at least in the near term; also, most state Medicaid programs currently either reimburse at low rates or do not reimburse for our tests; • billing operations, including managing various requirements by third-party payers to obtain reimbursement for our tests, are complex and time-consuming, and if we are unable to successfully manage such requirements, we may experience reduced and/or delayed reimbursement for our tests, which may impact our results of operations, as has happened in the past with respect to evolving prior authorization requirements; • the results of our SMART Study evaluating the performance of Panorama may fail to convince laboratories, clinics, clinicians, physicians or patients of the benefits of utilizing Panorama for microdeletions and may not increase reimbursement for Panorama; • the results of our clinical trials and any additional clinical and economic utility data that we may develop, present and publish in the future, or that comes from the commercial use of our tests, may be inconsistent with our existing data and may raise questions about the performance of our tests, or may fail to convince laboratories, clinics, clinicians, physicians, payers or patients of the value of our tests; • we may experience supply constraints, including those due to the failure of our key suppliers to provide required sequencers and reagents in sufficient amounts or of adequate quality or disputes with our key suppliers, including those with respect to the required sequencers and reagents from our supplier, Illumina, Inc., or Illumina, who is also one of our main NIPT competitors through its subsidiary, Verinata Health Inc., or Verinata, and with whom we have historically been involved in patent proceedings; • we may experience increased cost of product revenues, and cost of licensing and other revenues, as a percentage of total revenues, as has been the case in previous fiscal periods; • the U.S.
Our ability to increase sales and establish significant levels of adoption and reimbursement for our tests is uncertain, and it may be challenging for us to achieve profitability for many reasons, including, among others: • the market for our tests may not grow as we expect; in particular, NIPTs may not gain acceptance for use as a screen for microdeletions, which would limit the market for Panorama, and we may fail to compete successfully in this market, whatever its size; • if we are unable to demonstrate that our tests are superior to competing tests, laboratories, clinics, clinicians, physicians, payers and patients may not adopt the use of our tests on a broad basis, and may not be willing to pay the price premium over competing tests that we have, to date, been able to achieve; 30 Table of Contents • third-party payers, such as commercial insurance companies and government insurance programs, may decide not to reimburse for our tests, such as for the screening of microdeletions, may set the amounts of any reimbursements at prices that do not allow us to cover our expenses, or may otherwise adopt regulations, programs, policies or procedures that restrict or harm our business; for example, with respect to Panorama, many third-party payers currently have negative coverage determinations or otherwise do not reimburse for microdeletions screening and we expect low reimbursement rates for microdeletions screening to continue, at least in the near term; also, most state Medicaid programs currently either reimburse at low rates or do not reimburse for our tests; • billing operations, including managing various requirements by third-party payers to obtain reimbursement for our tests, are complex and time-consuming, and if we are unable to successfully manage such requirements, we may experience reduced and/or delayed reimbursement for our tests, which may impact our results of operations, as has happened in the past with respect to evolving prior authorization requirements; • the results of our SMART Study evaluating the performance of Panorama may fail to convince laboratories, clinics, clinicians, physicians or patients of the benefits of utilizing Panorama for microdeletions and may not increase reimbursement for Panorama; • the results of our clinical trials and any additional clinical and economic utility data that we may develop, present and publish in the future, or that comes from the commercial use of our tests, may be inconsistent with our existing data and may raise questions about the performance of our tests, or may fail to convince laboratories, clinics, clinicians, physicians, payers or patients of the value of our tests; • we may experience supply constraints, including those due to the failure of our key suppliers to provide required sequencers and reagents in sufficient amounts or of adequate quality or disputes with our key suppliers, including those with respect to the required sequencers and reagents from our supplier, Illumina, Inc., or Illumina, who is also one of our main NIPT competitors through its subsidiary, Verinata Health Inc., or Verinata, and with whom we have historically been involved in patent proceedings; • we may experience increased cost of product revenues, and cost of licensing and other revenues, as a percentage of total revenues, as has been the case in previous fiscal periods; • the U.S.
We are subject to healthcare fraud and abuse regulation and enforcement by both the U.S. federal government and the states in which we conduct our business, including: • HIPAA, which created federal civil and criminal laws that prohibit executing a scheme to defraud any healthcare benefit program or making false statements relating to healthcare matters and also imposes significant obligations with respect to maintenance of the privacy and security, and transmission, of individually identifiable health information; • federal and state laws and regulations governing informed consent for genetic testing and the use of genetic material; • federal and state laws and regulations governing the submission of claims, as well as billing and collection practices, for healthcare services; • the federal Anti-Kickback Statute, which prohibits, among other things, the knowing and willful solicitation, receipt, offer or payment of remuneration, directly or indirectly, in exchange for or to induce either the referral of an individual for, or the purchase, order or recommendation of, any good or service for which payment may be made under federal health care programs, such as Medicare; • the federal False Claims Act which prohibits, among other things, the presentation of false or fraudulent claims for payment from Medicare, Medicaid, or other government-funded third-party payers; • federal laws and regulations governing the Medicare program, providers of services covered by the Medicare program, and the submission of claims to the Medicare program, as well as the manuals and guidance issued by CMS and the local medical policies promulgated by the Medicare Administrative Contractors with respect to the implementation and interpretation of such laws and regulations; • the federal Stark law, also known as the physician self-referral law, which, subject to certain exceptions, prohibits a physician from making a referral for certain designated health services covered by the Medicare program (and according to case law in some jurisdictions, the Medicaid program as well), including laboratory and pathology services, if the physician or an immediate family member has a financial relationship with the entity providing the designated health services; • the federal Civil Monetary Penalties Law, which, subject to certain exceptions, prohibits, among other things, the offer or transfer of remuneration to a Medicare or state healthcare program beneficiary if the person knows or should know it is likely to influence the beneficiary’s selection of a particular provider, practitioner or supplier of services reimbursable by Medicare or a state healthcare program; • EKRA, which applies to items or services reimbursed by any health care benefits program, including commercial insurers, that, among other things, prohibits the knowing or willful payment or offer, or the solicitation or receipt, of any remuneration, whether directly or indirectly, overtly or covertly, in cash or in kind, in exchange for the referral or inducement of laboratory testing; 56 Table of Contents • the prohibition on reassignment by the program beneficiary of Medicare claims to any party; and • state law equivalents to the above laws, which may apply to items or services reimbursed by any third-party payer, including commercial insurers, and state data privacy and security laws which may be more stringent than HIPAA.
We are subject to healthcare fraud and abuse regulation and enforcement by both the U.S. federal government and the states in which we conduct our business, including: • HIPAA, which created federal civil and criminal laws that prohibit executing a scheme to defraud any healthcare benefit program or making false statements relating to healthcare matters and also imposes significant obligations with respect to maintenance of the privacy and security, and transmission, of individually identifiable health information; • federal and state laws and regulations governing consumer protections, data privacy, informed consent for genetic testing, and the use of genetic material; • federal and state laws and regulations governing the submission of claims, as well as billing and collection practices, for healthcare services; • the federal Anti-Kickback Statute, which prohibits, among other things, the knowing and willful solicitation, receipt, offer or payment of remuneration, directly or indirectly, in exchange for or to induce either the referral of an individual for, or the purchase, order or recommendation of, any good or service for which payment may be made under federal health care programs, such as Medicare; • the federal False Claims Act which prohibits, among other things, the presentation of false or fraudulent claims for payment from Medicare, Medicaid, or other government-funded third-party payers; • federal laws and regulations governing the Medicare program, providers of services covered by the Medicare program, and the submission of claims to the Medicare program, as well as the manuals and guidance issued by CMS and the local medical policies promulgated by the Medicare Administrative Contractors with respect to the implementation and interpretation of such laws and regulations; 54 Table of Contents • the federal Stark law, also known as the physician self-referral law, which, subject to certain exceptions, prohibits a physician from making a referral for certain designated health services covered by the Medicare program (and according to case law in some jurisdictions, the Medicaid program as well), including laboratory and pathology services, if the physician or an immediate family member has a financial relationship with the entity providing the designated health services; • the federal Civil Monetary Penalties Law, which, subject to certain exceptions, prohibits, among other things, the offer or transfer of remuneration to a Medicare or state healthcare program beneficiary if the person knows or should know it is likely to influence the beneficiary’s selection of a particular provider, practitioner or supplier of services reimbursable by Medicare or a state healthcare program; • EKRA, which applies to items or services reimbursed by any health care benefits program, including commercial insurers, that, among other things, prohibits the knowing or willful payment or offer, or the solicitation or receipt, of any remuneration, whether directly or indirectly, overtly or covertly, in cash or in kind, in exchange for the referral or inducement of laboratory testing; • the prohibition on reassignment by the Medicare or Medicaid program beneficiary of claims to any party; and • state law equivalents to the above laws, which may apply to items or services reimbursed by any third-party payer, including commercial insurers, and state data privacy and security laws which may be more stringent than HIPAA.
These provisions, among other things: • authorize the issuance of “blank check” preferred stock that our board of directors could use to implement a stockholder rights plan; • prohibit stockholder action by written consent, which requires all stockholder actions to be taken at a meeting of our stockholders; • eliminate the ability of our stockholders to call special meetings of stockholders; • establish advance notice requirements for nominations for election to our board of directors or for proposing matters that can be acted upon by stockholders at annual stockholder meetings; • establish a classified board of directors so that not all members of our board are elected at one time; • permit the board of directors to establish the number of directors; • provide that directors may only be removed “for cause” and only with the approval of 75% of our stockholders; 65 Table of Contents • require super-majority voting to amend some provisions in our amended and restated certificate of incorporation and amended and restated bylaws; and • provide that the board of directors is expressly authorized to make, alter or repeal our amended and restated bylaws.
These provisions, among other things: • authorize the issuance of “blank check” preferred stock that our board of directors could use to implement a stockholder rights plan; • prohibit stockholder action by written consent, which requires all stockholder actions to be taken at a meeting of our stockholders; • eliminate the ability of our stockholders to call special meetings of stockholders; • establish advance notice requirements for nominations for election to our board of directors or for proposing matters that can be acted upon by stockholders at annual stockholder meetings; • establish a classified board of directors so that not all members of our board are elected at one time; • permit the board of directors to establish the number of directors; • provide that directors may only be removed “for cause” and only with the approval of 75% of our stockholders; 62 Table of Contents • require super-majority voting to amend some provisions in our amended and restated certificate of incorporation and amended and restated bylaws; and • provide that the board of directors is expressly authorized to make, alter or repeal our amended and restated bylaws.
Any such consequences could materially and adversely affect our business by prohibiting or limiting our ability to offer testing. Changes in government healthcare policy could increase our costs and negatively impact coverage and reimbursement for our tests by governmental and commercial third-party payers. The U.S. government has shown significant interest in pursuing healthcare reform and reducing healthcare costs.
Any such consequences could materially and adversely affect our business by prohibiting or limiting our ability to offer testing. Changes in government spending or healthcare policy could increase our costs and negatively impact coverage and reimbursement for our tests by governmental and commercial third-party payers. The U.S. government has shown significant interest in pursuing healthcare reform and reducing healthcare costs.
Our laboratories are currently regulated under CLIA and must comply with CAP requirements, and we are subject to extensive federal and state laws and regulations. The FDA has historically taken the position that it has the authority to regulate LDTs as medical devices under the FDC Act, but it has generally exercised enforcement discretion with regard to such tests.
Our laboratories are currently regulated under CLIA and must comply with CAP requirements, and we are subject to extensive federal and state laws and regulations. The FDA has historically taken the position that it has the authority to regulate LDTs as medical devices under the FDC Act, but it had generally exercised enforcement discretion with regard to such tests.
In addition, if we obtain FDA clearance, approval or de novo classification for any of our tests as an in vitro diagnostic, or IVD, such issues with suppliers or the components that we source from suppliers could affect our commercialization efforts for such an IVD, as further described in the risk factor entitled “ Regulatory and Compliance Risks—If the FDA were to begin actively regulating our tests, we could incur substantial costs and delays associated with trying to obtain premarket clearance or approval and incur costs 38 Table of Contents associated with complying with post-market controls. ” Our failure to maintain a continued supply of components, or a supply that meets our quality control requirements, or changes to or termination of our agreements or inability to renew our agreements with these parties or enter into new agreements with other suppliers, particularly in the case of sole suppliers such as Streck and Illumina, could result in the loss of access to important components of our tests and impact our test performance or affect our ability to perform our tests in a timely manner or at all, which could impair, delay or suspend our commercialization activities.
In addition, if we obtain FDA clearance, approval or de novo classification for any of our tests as an in vitro diagnostic, or IVD, such issues with suppliers or the components that we source from suppliers could affect our commercialization efforts for such an IVD, as further described in the risk factor entitled “ Regulatory and Compliance Risks—If the FDA were to begin actively regulating our tests, we could incur substantial costs and delays associated with trying to obtain premarket clearance or approval and incur costs associated with complying with post-market controls. ” Our failure to maintain a continued supply of components, or a supply that meets our quality control requirements, or changes to or termination of our agreements or inability to renew our agreements with these parties or enter into new agreements with other suppliers, particularly in the case of sole suppliers such as Streck and Illumina, could result in the loss of access to important components of our tests and impact our test performance or affect our ability to perform our tests in a timely manner or at all, which could impair, delay or suspend our commercialization activities.
In addition, regulatory processes are subject to change, and new or changed regulations can result in unanticipated delays and cost increases. For example, the European Commission has adopted revised in-vitro diagnostic regulations, or IVDR, which became effective in 2022.
In addition, regulatory processes are subject to change, and new or changed regulations can result in unanticipated delays and cost increases. For example, the European Commission adopted revised in-vitro diagnostic regulations, or IVDR, which became effective in 2022.
Furthermore, to the extent that we are unable to retain our employees and they leave our company to join one of our competitors, we cannot assure you that any invention, non-disclosure or non-compete agreements we have in place will provide meaningful protection against a departing employee’s unauthorized use or disclosure of our confidential information, as further discussed in “— Risks Relating to our Intellectual Property—If we are not able to adequately protect our trade secrets and other proprietary information, the value of our technology and products could be significantly diminished .” In addition, our growth may place a significant strain on our operating and financial systems and our management, sales, marketing and administrative resources.
Furthermore, to the extent that we are unable to retain our employees and they leave our company to join one of our competitors, we cannot assure you that any invention, non-disclosure or non-compete agreements we have in place will provide meaningful protection against a departing employee’s unauthorized 40 Table of Contents use or disclosure of our confidential information, as further discussed in “— Risks Relating to our Intellectual Property—If we are not able to adequately protect our trade secrets and other proprietary information, the value of our technology and products could be significantly diminished .” In addition, our growth may place a significant strain on our operating and financial systems and our management, sales, marketing and administrative resources.
In addition, after a test has been cleared, approved or reclassified, certain kinds of changes that we may make to improve the test, or certain modifications by a supplier of a component upon which our approval relies, may result in the need for additional clearance, approval, or de novo classification by the FDA before we can implement them, which could increase the time and expense involved in implementing such changes commercially.
In addition, after a test has been cleared, approved or reclassified through the de novo pathway, certain kinds of changes that we may make to improve the test, or certain modifications by a supplier of a component upon which our approval relies, may result in the need for additional clearance, approval, or de novo classification by the FDA before we can implement them, which could increase the time and expense involved in implementing such changes commercially.
As further described in the risk factor entitled “Uncertainty in the development and commercialization of our enhanced or new tests or services could materially adversely affect our business, financial condition and results of operations,” completing such submissions requires the expenditure of time, attention and financial and other resources, and may not yield the desired results, which may delay, limit or prevent regulatory clearances, approvals or de novo classifications.
As further described in the risk factor entitled “ Uncertainty in the development and commercialization of our enhanced or new tests or services could materially adversely affect our business, financial condition and results of operations ,” completing such submissions requires the expenditure of time, attention and financial and other resources, and may not yield the desired results, which may delay, limit or prevent regulatory clearances, approvals or de novo classifications.
If we identify material weaknesses in our internal controls over financial reporting, if we are unable to comply with the requirements of Section 404 in a timely manner, if we are unable to assert that our internal controls over financial reporting are effective, or, when required in the future, if our independent registered public accounting firm is unable to express an opinion as to the effectiveness of our internal controls over financial reporting, investors may lose confidence in the accuracy and completeness of our financial reports and the market price of our common stock could be adversely affected, and we could become subject to investigations by the stock exchange on which our securities are listed, the SEC, or other regulatory authorities.
If we identify material weaknesses in our internal controls over financial reporting, if we are unable to comply with the requirements of Section 404 in a timely manner, if we are unable to assert that our internal controls over financial reporting are effective, or if our independent registered public accounting firm is unable to express an opinion as to the effectiveness of our internal controls over financial reporting, investors may lose confidence in the accuracy and completeness of our financial reports and the market price of our common stock could be adversely affected, and we could become subject to investigations by the stock exchange on which our securities are listed, the SEC, or other regulatory authorities.
In addition, new testing methods may be developed which may displace or be preferred over NIPTs, such as whole genome sequencing or single cell analysis with respect to NIPTs, or tracking more tumor-specific variants and/or other biomarkers in addition to ctDNA, or testing without the need for a sample of the tumor tissue, with respect to MRD testing.
In addition, new testing methods may be developed which may displace or be preferred over our current methods, such as whole genome sequencing or single cell analysis with respect to NIPTs, or tracking more tumor-specific variants and/or other biomarkers in addition to ctDNA, or testing without the need for a sample of the tumor tissue, with respect to MRD testing.
In addition, sales and marketing activities in the healthcare space are subject to various rules and regulations, as described in the risk factor entitled “ Reimbursement and Regulatory Risks Related to Our Business—If we or our laboratory distribution partners, consultants or commercial partners act in a manner that violates healthcare fraud and abuse laws or otherwise engage in misconduct, we may be subject to civil or criminal penalties .” Moreover, our billing and marketing messaging can be complex and 50 Table of Contents nuanced, and there may be errors or misunderstandings in our employees’ communication of such messaging.
In addition, sales and marketing activities in the healthcare space are subject to various rules and regulations, as described in the risk factor entitled “ Reimbursement and Regulatory Risks Related to Our Business—If we or our laboratory distribution partners, consultants or commercial partners act in a manner that violates healthcare fraud and abuse laws or otherwise engage in misconduct, we may be subject to civil or criminal penalties .” Moreover, our billing and marketing messaging can be complex and nuanced, and there may be errors or misunderstandings in our employees’ communication of such messaging.
The development and launch of enhanced or new tests requires the completion of certain clinical development and commercialization activities that are complex, costly, time-intensive and uncertain, and requires us to accurately anticipate the preferences and needs of patients, clinicians, payers, and other counterparties, as well as emerging technology and industry trends.
The development and launch of enhanced or new tests requires the completion of certain clinical development and commercialization activities that are complex, costly, time-intensive and uncertain, and requires us to accurately anticipate the preferences and needs of patients, clinicians, payers, and other counterparties, as well as emerging technology, industry trends, and the competitive environment.
The Sarbanes-Oxley Act also requires that our management report on internal controls over financial reporting be attested to by our independent registered public accounting firm. Although we determined that our internal controls over financial reporting were effective as of December 31, 2023, we must continue to monitor and assess our internal controls over financial reporting.
The Sarbanes-Oxley Act also requires that our management report on internal controls over financial reporting be attested to by our independent registered public accounting firm. Although we determined that our internal controls over financial reporting were effective as of December 31, 2024, we must continue to monitor and assess our internal controls over financial reporting.
To the extent that there is any violation, whether actual, perceived or alleged, of our policies or applicable laws and regulations, we may incur additional training and compliance costs; may, and from time to time do, receive inquiries, such as informal requests for documents, civil investigative demands, and subpoenas, from third-party payers or other third parties, including government entities; or may be held liable or otherwise responsible for such acts of non-compliance.
To the extent that there is any violation, whether actual, perceived or alleged, of our 49 Table of Contents policies or applicable laws and regulations, we may incur additional training and compliance costs; may, and from time to time do, receive inquiries, such as informal requests for documents, civil investigative demands, and subpoenas, from third-party payers or other third parties, including government entities; or may be held liable or otherwise responsible for such acts of non-compliance.
Ongoing geopolitical matters have also contributed to difficult macroeconomic conditions and exacerbated supply chain issues, resulting in significant economic uncertainty as well as volatility in the financial markets, particularly in the United States. Such conditions may adversely impact our business, financial results, and prospects.
Ongoing geopolitical matters in recent years have also contributed to difficult macroeconomic conditions and exacerbated supply chain issues, resulting in significant economic uncertainty as well as volatility in the financial markets, particularly in the United States. Such conditions may adversely impact our business, financial results, and prospects.
If we are found to be out of compliance with either California or New York requirements, CDPH or NYSDOH may suspend, restrict or revoke our license or laboratory permit, 54 Table of Contents respectively (and, with respect to California, may exclude persons or entities from owning, operating or directing a laboratory for two years following such license revocation), assess civil monetary penalties, or impose specific corrective action plans, among other sanctions.
If we are found to be out of compliance with either California or New York requirements, CDPH or NYSDOH may suspend, restrict or revoke our license or laboratory permit, respectively (and, with respect to California, may exclude persons or entities from owning, operating or directing a laboratory for two years following such license revocation), assess civil monetary penalties, or impose specific corrective action plans, among other sanctions.
Furthermore, because our licensees under our cloud-based distribution model also exclusively use such sole-sourced components to run the tests they develop based on our technology, and our laboratory distribution partners must use certain of such sole-sourced components in order to utilize our tests, any enforcement action against the supplier by the FDA or any other regulatory authority in the jurisdictions in which our licensees and laboratory distribution partners are located could have an adverse impact on our business.
Furthermore, because our licensees under our cloud-based distribution model also exclusively use such sole-sourced components to run the tests they develop based on our technology, and our laboratory distribution partners must use certain of such sole-sourced components in order to 37 Table of Contents utilize our tests, any enforcement action against the supplier by the FDA or any other regulatory authority in the jurisdictions in which our licensees and laboratory distribution partners are located could have an adverse impact on our business.
Unauthorized access, loss or dissemination could also disrupt our operations, including our ability to perform tests, provide test results, bill payers or patients, process claims and appeals, provide customer assistance services, conduct research and development activities, develop and commercialize tests, collect, process and prepare company financial 39 Table of Contents information, provide information about our tests, and manage the administrative aspects of our business, any of which could damage our reputation and adversely affect our business.
Unauthorized access, loss or dissemination could also disrupt our operations, including our ability to perform tests, provide test results, bill payers or patients, process claims and appeals, provide customer assistance services, conduct research and development activities, develop and commercialize tests, collect, process and prepare company financial information, provide information about our tests, and manage the administrative aspects of our business, any of which could damage our reputation and adversely affect our business.
Therefore, while we have implemented policies and 57 Table of Contents procedures related to compliance with the HIPAA regulations, we are also required to comply with various state privacy and security laws and regulations, and could incur penalties, compliance costs as a result of non-compliance, or damages under state laws pursuant to an action brought by a private party for the wrongful use or disclosure of confidential health information or other private personal information.
Therefore, while we have implemented policies and procedures related to compliance with the HIPAA regulations, we are also required to comply with various state privacy and security laws and regulations, and could incur penalties, compliance costs as a result of non-compliance, or damages under state laws pursuant to an action brought by a private party for the wrongful use or disclosure of confidential health information or other private personal information.
Due to our increased billing for our Signatera and Prospera testing, and in particular the significant and growing percentage of our revenues attributable to Signatera, any decrease in the reimbursement we receive under the CLFS due to PAMA may negatively impact our revenue when they are implemented.
Due to our increased billing for our Signatera and Prospera testing, and in particular the significant and growing percentage of our revenues attributable to Signatera, any decrease in the reimbursement we receive under the CLFS due to PAMA may negatively impact our revenue when the PAMA rates are implemented.
Disagreements or disputes with our partners, including disagreements over customers, proprietary rights or our or their compliance with contractual obligations, might cause delays or impair the commercialization of Panorama, Signatera or our other tests, lead to additional responsibilities for us with respect to new tests, or result in litigation or arbitration, any of which would divert management attention and resources and be time-consuming and expensive.
Disagreements or disputes with our partners, including disagreements over customers, proprietary rights or our or their compliance with contractual obligations, might cause delays or impair the commercialization of our tests, lead to additional responsibilities for us with respect to new tests, or result in litigation or arbitration, any of which would divert management attention and resources and be time-consuming and expensive.
Government and commercial third-party payers continue to increase their efforts to control the cost, utilization and delivery of healthcare services by demanding price discounts or rebates and limiting coverage of, and amounts they will pay for, molecular diagnostic tests. These measures have resulted in reduced payment rates and decreased utilization in the clinical laboratory industry.
Government and commercial third-party payers continue to 48 Table of Contents increase their efforts to control the cost, utilization and delivery of healthcare services by demanding price discounts or rebates and limiting coverage of, and amounts they will pay for, molecular diagnostic tests. These measures have resulted in reduced payment rates and decreased utilization in the clinical laboratory industry.
In addition, federal budgetary limitations and changes in healthcare policy, such as the creation of broad limits for our tests and requirements that beneficiaries of federal health care programs pay for, or pay for higher portions 55 Table of Contents of, clinical laboratory tests or services received, could substantially diminish the utilization of our tests, increase costs and adversely affect our ability to generate revenues and achieve profitability.
In addition, federal budgetary limitations and changes in healthcare policy, such as the creation of broad limits for our tests and requirements that beneficiaries of federal health care programs pay for, or pay for higher portions of, clinical laboratory tests or services received, could substantially diminish the utilization of our tests, increase costs and adversely affect our ability to generate revenues and achieve profitability.
Specifically, fee-for-service Medicaid programs generally do not reimburse at rates that exceed Medicare’s fee-for-service rates, and many commercial third-party payers set their payment rates at a percentage of the amounts that Medicare pays for such testing services. Medicare reimbursement rates are typically based on the Clinical Laboratory Fee Schedule, or CLFS, set by CMS.
Specifically, fee-for-service Medicaid programs generally do not 47 Table of Contents reimburse at rates that exceed Medicare’s fee-for-service rates, and many commercial third-party payers set their payment rates at a percentage of the amounts that Medicare pays for such testing services. Medicare reimbursement rates are typically based on the Clinical Laboratory Fee Schedule, or CLFS, set by CMS.
Any of these or other adverse outcomes could prevent us from offering our tests or otherwise have a material adverse effect on our business, financial condition and our results of operations. 59 Table of Contents We cannot predict whether, or offer any assurance that, the patent infringement claims we have initiated or may initiate in the future will be successful.
Any of these or other adverse outcomes could prevent us from offering our tests or otherwise have a material adverse effect on our business, financial condition and our results of operations. We cannot predict whether, or offer any assurance that, the patent infringement claims we have initiated or may initiate in the future will be successful.
In the event of any adverse developments with these third-party laboratories or their ability to perform their obligations to us in a timely manner and in accordance with the standards that we and our customers expect, 36 Table of Contents our ability to service our customers may be delayed, interrupted or otherwise adversely affected, which could result in a loss of customers and harm to our reputation.
In the event of any adverse developments with these third-party laboratories or their ability to perform their obligations to us in a timely manner and in accordance with the standards that we and our customers expect, our ability to service our customers may be delayed, interrupted or otherwise adversely affected, which could result in a loss of customers and harm to our reputation.
Furthermore, any changes to our testing process may require us to use new or different suppliers or materials with whom or which we are unfamiliar, and which may not perform as we anticipate, and could cause delays, downtime or other operational issues. We rely on third-party laboratories to perform portions of our service offerings.
Furthermore, any changes to our testing process may require us to use new or different suppliers or 35 Table of Contents materials with whom or which we are unfamiliar, and which may not perform as we anticipate, and could cause delays, downtime or other operational issues. We rely on third-party laboratories to perform portions of our service offerings.
Because of Illumina’s ownership of Verinata, we face increased risk and uncertainty regarding continuity of a successful working relationship with Illumina under our supply agreement, as well as in our ability to compete with Verinata in the marketplace in view of economic advantages enjoyed by Verinata with respect to the cost of sequencers and related 37 Table of Contents consumables.
Because of Illumina’s ownership of Verinata, we face increased risk and uncertainty regarding continuity of a successful working relationship with Illumina under our supply agreement, as well as in our ability to compete with Verinata in the marketplace in view of economic advantages enjoyed by Verinata with respect to the cost of sequencers and related consumables.
If we sell or 64 Table of Contents issue common stock, convertible securities, or other equity securities, or common stock is issued pursuant to equity incentive plans, investors in our common stock may be materially diluted.
If we sell or 61 Table of Contents issue common stock, convertible securities, or other equity securities, or common stock is issued pursuant to equity incentive plans, investors in our common stock may be materially diluted.
Where we are considered to be an out of network provider, which is the case with some third-party payers from whom we receive reimbursement, such third-party payers could deny coverage and decline to reimburse for our tests 49 Table of Contents according to each plan enrollee’s policy.
Where we are considered to be an out of network provider, which is the case with some third-party payers from whom we receive reimbursement, such third-party payers could deny coverage and decline to reimburse for our tests according to each plan enrollee’s policy.
Any of these factors could adversely affect our ability to obtain commercially relevant or competitively advantageous patent protection for our products. 60 Table of Contents If we are not able to adequately protect our trade secrets and other proprietary information, the value of our technology and products could be significantly diminished.
Any of these factors could adversely affect our ability to obtain commercially relevant or competitively advantageous patent protection for our products. If we are not able to adequately protect our trade secrets and other proprietary information, the value of our technology and products could be significantly diminished.
We rely on internal and third-party data centers and platforms to host our laboratory and cloud-based software, and any interruptions of service or failures may impair our laboratory operations or the delivery of our cloud-based services and harm our business. We currently maintain a data center at our laboratory facilities in San Carlos, California.
We rely on internal and third-party data centers and platforms to host our laboratory and cloud-based software, and any interruptions of service or failures may impair our operations and harm our business. We currently maintain a data center at our laboratory facilities in San Carlos, California.
Without sequencers and the related reagents, we would be unable to run our tests and commercialize our products. In addition, all of the licensees under our Constellation cloud-based distribution model do not have alternatives other than to use Illumina sequencers and reagents to run the tests that they develop based on our technology.
Without sequencers and the related reagents, we would be unable to run our tests and commercialize our products. All of the licensees under our Constellation cloud-based distribution model also do not have alternatives other than to use Illumina sequencers and reagents to run the tests that they develop based on our technology.
Any change in the federal or state laws or regulations, 53 Table of Contents including as a result of political pressure, relating to our business may require us to implement changes to our business or practices, and we may not be able to do so in a timely or cost-effective manner.
Any change in the federal or state laws or regulations, including as a result of political pressure, relating to our business may require us to implement changes to our business or practices, and we may not be able to do so in a timely or cost-effective manner.
The State of Texas imposes CLIA requirements on laboratories operating within Texas but does not impose additional state licensure or registration requirements. Additionally, all personnel involved in testing in our California laboratory must maintain a California state license or be supervised by licensed personnel.
The State of Texas imposes CLIA requirements on laboratories operating within Texas but does not impose additional state licensure or registration requirements. 52 Table of Contents Additionally, all personnel involved in testing in our California laboratory must maintain a California state license or be supervised by licensed personnel.
Similarly, certain results of the CIRCULATE-Japan study have recently been published, and we cannot assure you that such results will impact professional society or practice guidelines, or coverage and reimbursement determinations from third-party payers, as we anticipate.
Similarly, certain results of the CIRCULATE-Japan study have recently been published, and we cannot assure you that such results 33 Table of Contents will impact professional society or practice guidelines, or coverage and reimbursement determinations from third-party payers, as we anticipate.
We are highly dependent on information technology networks and systems, including a combination of on-site systems, managed data center systems and cloud-based data center systems, and the Internet, to securely process, transmit, and store a wide variety of business-critical information, including research and development information, commercial information and business and financial information.
We are highly dependent on information technology networks and systems, including a combination of on-site systems, managed data center systems and cloud-based data center systems, and the Internet, to securely process, transmit, and store a wide variety of 38 Table of Contents business-critical information, including research and development information, commercial information and business and financial information.
In addition, if the market for life sciences stocks or the stock market in general experiences uneven investor confidence, as has been the case in recent months, the market price of our common stock could decline for reasons unrelated to our business, operating results or financial condition.
In addition, if the market for life sciences stocks or the stock market in general experiences uneven investor confidence, as has been the case in the past, the market price of our common stock could decline for reasons unrelated to our business, operating results or financial condition.
If our sales and marketing efforts are not successful outside of the United States, we may not achieve market acceptance for our tests outside of the United States, which would harm our business. Operating internationally requires significant management attention and financial resources.
If our sales and marketing efforts are not successful outside of the United States, we may not achieve market acceptance for our tests outside of the United States, which would harm our business. 42 Table of Contents Operating internationally requires significant management attention and financial resources.
In addition, we may have to work with a partner on one or more of our tests or programs, which could lower the economic value of those programs to our company. We have incurred substantial indebtedness that may decrease our business flexibility, access to capital, and/or increase our borrowing costs, which may adversely affect our operations and financial results.
In addition, we may have to work with a partner on one or more of our tests or programs, which could lower the economic value of those programs to our company. 44 Table of Contents We have incurred indebtedness that may decrease our business flexibility, access to capital, and/or increase our borrowing costs, which may adversely affect our operations and financial results.
If we are unable to obtain such required cooperation, we may be unable to achieve the desired regulatory clearances, approvals or de novo classifications or may be delayed or be required to expend additional costs 51 Table of Contents and other resources in doing so. For example, Illumina currently is our sole sequencer and sequencing reagent supplier.
If we are unable to obtain such required cooperation, we may be unable to achieve the desired regulatory clearances, approvals or de novo classifications or may be delayed or be required to expend additional costs and other resources in doing so. For example, Illumina currently is our sole sequencer and sequencing reagent supplier.
Our current and future competitors could have greater technological, financial, reputational and market access advantages than us, and we may not be able to compete effectively against them. Increased competition is likely to result in pricing pressures, which could harm our revenues, operating income or market share.
Our current and future competitors could have greater technological, financial, reputational and market access advantages than us, and we may not be able to compete effectively 34 Table of Contents against them. Increased competition is likely to result in pricing pressures, which could harm our revenues, operating income or market share.
These types of problems may be caused by a variety of 35 Table of Contents factors, including infrastructure changes, human or software errors, viruses, security attacks, fraud, spikes in customer usage and denial of service issues.
These types of problems may be caused by a variety of factors, including infrastructure changes, human or software errors, viruses, security attacks, fraud, spikes in customer usage and denial of service issues.
As of December 31, 2023, we had an accumulated deficit of $2.4 billion. We may continue to experience such losses in the future as we continue to devote a substantial portion of our resources to efforts to increase the adoption of, and reimbursement for, our products, improve these products, and research and develop and commercialize new products.
As of December 31, 2024, we had an accumulated deficit of $2.6 billion. We may continue to experience such losses in the future as we continue to devote a substantial portion of our resources to efforts to increase the adoption of, and reimbursement for, our products, improve these products, and research and develop and commercialize new products.
The value of our tests to patients and physicians depends on our ability to perform the 40 Table of Contents tests on a timely basis and at an exceptionally high standard of quality, and on maintaining our reputation for such timeliness and quality.
The value of our tests to patients and physicians depends on our ability to perform the tests on a timely basis and at an exceptionally high standard of quality, and on maintaining our reputation for such timeliness and quality.
Our actual liquidity and capital funding requirements will depend on numerous factors, including: • our ability to achieve broader commercial success with our tests and product offerings; • the costs and success of our research, development, and commercialization efforts for potential new products and additional indications for, and enhancements to, current products; 44 Table of Contents • our ability to obtain more extensive coverage and reimbursement for our tests, including for microdeletions screening in NIPT, as well as in additional indications in oncology and organ health as we continue to invest in expanding our offerings in these fields; • our ability to generate sufficient revenues from our cloud-based distribution model; • our ability to collect on our accounts receivable; • our need to finance capital expenditures and further expand our clinical laboratory operations; • our ability to manage our operating costs; • costs and expenses to protect or enforce our intellectual property rights or to defend against infringement claims brought against us, including any associated litigation settlements or judgments we are required to pay; and • the timing and results of any regulatory authorizations that we are required to obtain for our tests.
Our actual liquidity and capital funding requirements will depend on numerous factors, including: • our ability to achieve broader commercial success with our tests and product offerings; • the costs and success of our research, development, and commercialization efforts for potential new products and additional indications for, and enhancements to, current products; • our ability to obtain more extensive coverage and reimbursement for our tests, including for microdeletions screening in NIPT, as well as in additional indications in women’s health, oncology, and organ health as we continue to invest in expanding our offerings in these fields; • our ability to collect on our accounts receivable; • our need to finance capital expenditures and further expand our clinical laboratory operations; • our ability to manage our operating costs; • costs and expenses to protect or enforce our intellectual property rights or to defend against infringement claims brought against us, including any associated litigation settlements or judgments we are required to pay; and • the timing and results of any regulatory authorizations that we are required to obtain for our tests.
Distributing Panorama, Signatera and our other products through partners reduces our control over our revenues, our 41 Table of Contents market penetration and our gross margin on sales by the partner if we could have otherwise made that sale through our direct sales force.
Distributing Panorama, Signatera and our other products through partners reduces our control over our revenues, our market penetration and our gross margin on sales by the partner if we could have otherwise made that sale through our direct sales force.
Other U.S. companies in the medical device and pharmaceutical field have faced criminal penalties under the FCPA for allowing their agents to deviate from appropriate practices in doing business with foreign government officials.
Other U.S. companies in the medical device and pharmaceutical field have faced 41 Table of Contents criminal penalties under the FCPA for allowing their agents to deviate from appropriate practices in doing business with foreign government officials.
In addition, in some cases, our tests or their uses within certain populations, such as for microdeletions, are considered experimental by third-party payers and, as a result, some payers have decided not to cover or reimburse for such tests.
In addition, in some cases, our tests or their uses 46 Table of Contents within certain populations, such as for microdeletions, are considered experimental by third-party payers and, as a result, some payers have decided not to cover or reimburse for such tests.
If FDA premarket clearance, approval or de novo classification is required for any of our existing or future tests, or for any components or materials we use in tests, we may be forced to stop selling our tests or we may be required to modify claims for or make other changes to our tests while we or our suppliers work to obtain FDA clearance, approval or de novo classification.
If FDA premarket clearance, approval or de novo classification is required for any of our existing or future tests, or for any components or materials we use in, or software that we or our customers use as part of, our tests, we may be forced to stop selling our tests or we may be required to modify claims for or make other changes to our tests while we or our suppliers work to obtain FDA clearance, approval or de novo classification.
We have worked to procure patents protecting our technologies, but our procurement efforts may not always be successful, and any patents we successfully procure may be challenged in ways that lead to post-procurement scope reduction or invalidity.
We have worked to procure patents protecting our technologies, but our procurement efforts may not always be successful, 58 Table of Contents and any patents we successfully procure may be challenged in ways that lead to post-procurement scope reduction or invalidity.
We have incurred net losses each year since our inception in 2003. To date, we have financed our operations primarily through convertible debt and other debt instruments, our initial public offering, and our registered public equity offerings. Our net loss for the years ended December 31, 2023, 2022 and 2021 was $434.8 million, $547.8 million, and $471.7 million, respectively.
We have incurred net losses each year since our inception in 2003. To date, we have financed our operations primarily through convertible debt and other debt instruments, our initial public offering, and our registered public equity offerings. Our net loss for the years ended December 31, 2024, 2023, and 2022 was $190.4 million, $434.8 million, and $547.8 million, respectively.
As of December 31, 2023, we had federal, state, and foreign NOL carryforwards of approximately $1.6 billion, $1.1 billion and $3.8 million, respectively, which, if not utilized, begin to expire in 2027, 2024, and 2027, respectively. Approximately $1.3 billion of these federal NOLs can be carried forward indefinitely.
As of December 31, 2024, we had federal, state, and foreign NOL carryforwards of approximately $1.6 billion, $1.1 billion and $4.1 million, respectively, which, if not utilized, begin to expire in 2033, 2025, and 2027, respectively. Approximately $1.3 billion of these federal NOLs can be carried forward indefinitely.
Among others, the new regulations introduce risk-based classification for IVDs and will require notified body involvement for various classes of devices, including reproductive health tests such as Panorama, which will be classified as a Class C product. As such, we will also be required to submit clinical evidence and post-market performance data to regulators.
Among others, the new regulations introduced risk-based classification for IVDs and require notified body involvement for various classes of devices, including reproductive health tests such as Panorama, which are classified as a Class C product. As such, we are required to submit clinical evidence and post-market performance data to regulators.
Continued and additional market demand for our tests, and reimbursement for our tests, particularly for NIPT for the average-risk population and for microdeletions, are key elements to our future success. The market demand for NIPTs, 29 Table of Contents carrier screening tests and our other tests continue to evolve.
Continued and additional market demand for our tests, and reimbursement for our tests, particularly for NIPT for the average-risk population and for microdeletions, are key elements to our future success. The market demand for NIPTs, carrier screening tests and our other tests continue to evolve.
We may be subject to claims that our employees, consultants or independent contractors have wrongfully used or disclosed confidential information of third parties. We employ individuals who were previously employed at other biotechnology or diagnostic companies, including our competitors in the various markets in which we operate.
We employ individuals who were previously employed at other biotechnology or diagnostic companies, including our competitors in the various markets in which we operate. We may be subject to claims that we or our employees, consultants or independent contractors have inadvertently or willfully used or disclosed confidential information of our employees’ former employers or other third parties.
Similarly, Panorama could provide a so-called false positive, which is a high-risk result for a fetus that may not, in fact, have the relevant condition.
Similarly, Panorama could provide a so-called false positive, which is a high-risk result for 39 Table of Contents a fetus that may not, in fact, have the relevant condition.
In recent years we have developed and launched several new products or enhanced versions of existing products, including our first offerings in oncology and in organ health, and we expect to continue our efforts in all of these areas.
In recent years we have developed and launched several new products or enhanced versions of existing products, including our first offerings and subsequent updated offerings in oncology and in organ health, and we expect to 32 Table of Contents continue our efforts in all of these areas.
Current or potential future federal legislation and the expansion of government’s role in the U.S. healthcare industry, as well as changes to the reimbursement amounts paid by third-party payers for our current and future tests, may adversely affect our test volumes and adversely affect our business, financial condition, results of operations, and cash flows.
Current or potential future federal legislation and the expansion of government’s role in the U.S. healthcare industry, changes to the reimbursement amounts paid by third-party payers for our current and future tests, or limited or inadequate funding for regulatory authorities, may adversely affect our test volumes and adversely affect our business, financial condition, results of operations, and cash flows.
The GDPR data privacy regulations comprehensively reform the prior data protection rules of the European Union, and are more stringent, provide for higher potential liabilities, and apply to a broader range of personal data than those in the United States.
The GDPR data privacy regulations govern data protection in the European Union, and are more stringent, provide for higher potential liabilities, and apply to a broader range of personal data than those in the United States.
When an entity is determined to have violated the False Claims Act, it is subject to mandatory damages of three times the actual damages sustained by the government, plus mandatory civil penalties – up to approximately $27,108 in 2023 – for each false claim or statement.
When an entity is determined to have violated the False Claims Act, it is subject to mandatory damages of three times the actual damages sustained by the government, plus mandatory civil penalties – up to approximately $28,619 in 2025 – for each false claim or statement.
In addition, while we have received positive coverage determinations for certain specified uses and indications of our Signatera test from commercial third-party payers as well as the Molecular Diagnostic Services Program, or MolDx, which identifies and establishes Medicare coverage and reimbursement for molecular diagnostic tests, we cannot guarantee that our test will be reimbursed at the rate we expect.
In addition, while we have received positive coverage determinations for certain specified uses and indications of our Signatera test from commercial third-party payers as well as the Molecular Diagnostic Services Program, or MolDx, which identifies and establishes Medicare coverage and reimbursement for molecular diagnostic tests, as well as for our Prospera Kidney and Lung tests, we cannot guarantee that our tests will be reimbursed at the rates we expect, or at the same or similar rates as we have received thus far.
Changes in laws and regulations, or in their application, may adversely affect our business, financial condition and results of operations. The clinical laboratory testing industry is highly regulated, and failure to comply with applicable regulatory, supervisory, accreditation, registration or licensing requirements may adversely affect our business, financial condition and results of operations.
The clinical laboratory testing industry is highly regulated, and failure to comply with applicable regulatory, supervisory, accreditation, registration or licensing requirements may adversely affect our business, financial condition and results of operations.
Our overall test volumes grew from approximately 1,570,000 to 2,066,500 and further to 2,496,100 tests processed during the years ended 2021, 2022 and 2023, respectively, and since 2009 we have launched over 15 product offerings or indications. In addition, we regularly evaluate and refine our testing process, often significantly updating our workflows.
Our overall test volumes grew from approximately 2,066,500 to 2,496,100 and further to 3,064,600 tests processed during the years ended 2022, 2023, and 2024, respectively, and since 2009 we have launched over 15 product offerings, enhancements, or indications. In addition, we regularly evaluate and refine our testing process, often significantly updating our workflows.
We may also face competition from companies located in the countries in which we or our partners or licensees offer our tests, and in which we may be at a competitive disadvantage because the country may favor a local provider or for other reasons. 42 Table of Contents By operating internationally, we may experience longer accounts receivable payment cycles and difficulties in collecting accounts receivable; realize lower margins due to lower pricing in many countries; incur potentially adverse tax consequences, including the complexities of foreign value added tax systems, tax inefficiencies related to our corporate structure and restrictions on the repatriation of earnings; experience financial accounting and reporting burdens and complexities; experience difficulties in staffing and managing foreign operations, including under labor and employment laws and regulations that are new or unfamiliar to us; be subject to trade barriers such as tariffs, quotas, preferential bidding or import or export licensing requirements; be exposed to political, social and economic instability abroad, including terrorist attacks and security concerns; be exposed to fluctuations in currency exchange rates; and experience reduced or varied protection for intellectual property rights and practical difficulties in enforcing intellectual property and other rights, including with respect to assignment of inventions to us by our consultants in foreign jurisdictions.
By operating internationally, we may experience longer accounts receivable payment cycles and difficulties in collecting accounts receivable; realize lower margins due to lower pricing in many countries; incur potentially adverse tax consequences, including the complexities of foreign value added tax systems, tax inefficiencies related to our corporate structure and restrictions on the repatriation of earnings; experience financial accounting and reporting burdens and complexities; experience difficulties in staffing and managing foreign operations, including under labor and employment laws and regulations that are new or unfamiliar to us; be subject to trade barriers such as tariffs, quotas, preferential bidding or import or export licensing requirements; be exposed to political, social and economic instability abroad, including terrorist attacks and security concerns; be exposed to fluctuations in currency exchange rates; and experience reduced or varied protection for intellectual property rights and practical difficulties in enforcing intellectual property and other rights, including with respect to assignment of inventions to us by our consultants in foreign jurisdictions.
If our operations, including the conduct of our employees, distributors, consultants and commercial partners, are found to be in violation of any laws or regulations that apply to us, we may be subject to penalties, including civil, criminal and administrative penalties, damages, fines, disgorgement of profits, exclusion from participation in federal health care programs, injunctions, recall or seizure of products, total or partial suspension of production, denial or withdrawal of pre-marketing product approvals, contractual damages, reputational harm, diminished profits and future earnings and the curtailment or restructuring of our operations, any of which could materially and adversely affect our business, financial condition and results of operations.
If our operations, including the conduct of our employees, distributors, consultants and commercial partners, are found to be in violation of any laws or regulations that apply to us, we may be subject to penalties, including civil, criminal and administrative penalties, damages, fines, disgorgement of profits, exclusion from participation in federal health care programs, injunctions, recall or seizure of products, total or partial suspension of production, denial or withdrawal of pre-marketing product approvals, contractual damages, reputational harm, diminished profits and future earnings and the curtailment or restructuring of our operations, any of which could materially and adversely affect our business, financial condition and results of operations. 55 Table of Contents Failure to comply with privacy and security laws and regulations could result in fines, penalties and damage to our reputation and have a material adverse effect on our business.
We have experienced low average reimbursement rates for microdeletions under this code, and we expect that this code will continue to cause our microdeletions reimbursement to remain low, at least in the near term, due to third-party payers declining to reimburse and as a result of reduced reimbursement, under the code, which has had, and we expect to continue to have, an adverse effect on our revenues.
In addition, although there is a CPT code in place for microdeletions testing, we have experienced low average reimbursement rates for microdeletions under this CPT code, and we expect our microdeletions reimbursement to remain low, at least in the near term, due to third-party payers declining to reimburse and as a result of reduced reimbursement, under the code, which has had, and we expect to continue to have, an adverse effect on our revenues.
We have experienced low average reimbursement rates for microdeletions testing under this code, and our microdeletions 31 Table of Contents reimbursement may continue to remain low, at least in the near term, either due to reduced reimbursement, or third-party payers declining to reimburse, under the microdeletions code, which has had and will likely continue to have an adverse effect on our revenues.
Furthermore, although there is a CPT code in place for microdeletions testing, we have experienced low average reimbursement rates for microdeletions testing under this CPT code, and our microdeletions reimbursement may continue to remain low, at least in the near term, either due to reduced reimbursement, or third-party payers declining to reimburse, under the microdeletions code, which has had and will likely continue to have an adverse effect on our revenues.
If we are unable to compete successfully, we may be unable to increase or sustain our revenues or achieve profitability. See the section entitled “ Business – Overview – Competition ” for additional information on our competitors. We may not be successful in commercializing our cloud-based distribution model.
If we are unable to compete successfully, we may be unable to increase or sustain our revenues or achieve profitability. See the section entitled “ Business – Overview – Competition ” for additional information on our competitors.
We also had federal research and development credit carryforwards of approximately $64.3 million, which begin to expire in 2027, and state research and development credit carryforwards of approximately $36.7 million, which begin to expire in 2031.
We also had federal research and development credit carryforwards of approximately $83.3 million, which begin to expire in 2027, and state research and development credit carryforwards of approximately $45.6 million, which begin to expire in 2031.
For example, our molecular diagnostics tests are currently only validated to perform on Illumina’s sequencing platform; in addition, Illumina is currently the sole supplier of our sequencers and related reagents for Panorama, Horizon, Signatera and Prospera, along with certain hardware and software, pursuant to a supply agreement that expires in August 2033.
In particular, our sequencers, many of our reagents, including for Panorama, Horizon and Signatera as described below, and our blood collection tubes, are sole sourced. 36 Table of Contents For example, our molecular diagnostics tests are currently only validated to perform on Illumina’s sequencing platform; in addition, Illumina is currently the sole supplier of our sequencers and related reagents for Panorama, Horizon, Signatera and Prospera, along with certain hardware and software, pursuant to a supply agreement that expires in August 2033.
Our ability to use these carryforwards could be limited if we experience an “ownership change.” 46 Table of Contents Our estimates of total addressable market opportunity and forecasts of market growth may prove to be inaccurate, and even if the market in which we compete achieves the forecasted growth, our business could fail to grow at similar rates.
Our ability to use these carryforwards could be limited if we experience an “ownership change” or if the tax laws are amended or otherwise changed. 45 Table of Contents Our estimates of total addressable market opportunity and forecasts of market growth may prove to be inaccurate, and even if the market in which we compete achieves the forecasted growth, our business could fail to grow at similar rates.
If third-party payers do not reimburse for NIPT for microdeletions in the future, our future revenues and results of operations would be adversely affected, particularly to the extent that we continue to perform large volumes of tests for which third-party payers do not reimburse. In addition, a CPT code for microdeletions took effect in January 2017.
If third-party payers do not reimburse for NIPT for microdeletions in the future, our future revenues and results of operations may be adversely affected, particularly to the extent that we continue to perform large volumes of tests for which third-party payers do not reimburse.
From time to time, we may enter into transactions to acquire or dispose of businesses, products or technologies or to engage in other strategic transactions, such as our recent acquisition of certain reproductive health assets related to 43 Table of Contents Invitae Corp.’s NIPT and carrier screening business.
From time to time, we may enter into transactions to acquire or dispose of businesses, products or technologies or to engage in other strategic transactions, such as our recent acquisition of certain reproductive health assets related to Invitae Corp.’s NIPT and carrier screening business. We may not be able to complete such transactions on favorable terms or at all.
We may not be able to complete such transactions on favorable terms or at all. Any acquisitions or other strategic transactions we consummate may not strengthen our competitive position, and these transactions may be viewed negatively by customers or investors.
Any acquisitions or other strategic transactions we consummate may not strengthen our competitive position, and these transactions may be viewed negatively by customers or investors.
We or our partners or licensees may not be able to obtain regulatory approvals on a timely basis, if at all, which may cause us to incur additional costs or prevent us from marketing our tests in the United States or in foreign countries.
We or our partners or licensees may not be able to obtain regulatory approvals on a timely basis, if at all, which may cause us to incur additional costs or prevent us from marketing our tests in the United States or in foreign countries. 51 Table of Contents Changes in laws and regulations, or in their application, may adversely affect our business, financial condition and results of operations.

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Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

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Biggest changeOur management team provides updates on cybersecurity matters to our audit committee on a quarterly basis, with more frequent or interim communications as warranted. 67 Table of Contents In addition to the oversight by our audit committee, our board of directors receives an annual report on cybersecurity matters from our Chief Technology Officer, or CTO.
Biggest changeIn addition to the oversight by our audit committee, our board of directors receives an annual report on cybersecurity matters from our Chief Technology Officer, or CTO.
We engage with a range of external experts, including cybersecurity assessors, consultants, and auditors, in evaluating and attesting to our risk management systems, including an annual Systems and Organization Controls 2, or SOC 2, audit with respect to the security, availability, and process integrity trust services criteria, or TSC.
We engage with a range of external experts, including cybersecurity assessors, consultants, and auditors, in evaluating and attesting to our risk management systems, including an annual Systems and Organization Controls 2, or SOC 2, audit with respect to the security, availability, confidentiality, and process integrity trust services criteria, or TSC.
Although we take measures to protect sensitive information from unauthorized access, use or disclosure, our information technology and infrastructure, and that of our technology and other third-party service providers and their subcontractors, are nevertheless inherently vulnerable to, and from time to time experience, various cybersecurity threats.
Although we take measures to protect sensitive information from unauthorized access, use or disclosure, our information technology and infrastructure, and that of our technology and other third-party service providers and their 63 Table of Contents subcontractors, are nevertheless inherently vulnerable to, and from time to time experience, various cybersecurity threats.
Management We maintain an Information Security Leadership Committee, or ISLC, that is accountable for enterprise-level information security risk strategy, identification, prioritization, and mitigation, including establishing objectives and priorities. The ISLC comprises company executives that, collectively, represent experience and expertise in information technology, enterprise security and risk management, cybersecurity, engineering, technology, privacy, data security, and healthcare compliance.
Management We maintain an Information Security Leadership Committee, or ISLC, that is accountable for enterprise-level information security risk strategy, identification, prioritization, and mitigation, including establishing objectives and 64 Table of Contents priorities. The ISLC comprises company executives that, collectively, represent experience and expertise in information technology, enterprise security and risk management, cybersecurity, engineering, technology, privacy, data security, and healthcare compliance.
CYBERSECURITY ​ Risk Management and Strategy 66 Table of Contents In the ordinary course of our business, we collect and store sensitive data, including legally protected personal information, such as test results and other patient health information, credit card and other financial information, insurance information, and personally identifiable information, as well as sensitive intellectual property and other proprietary business information, including that of our customers, payers and collaboration partners.
CYBERSECURIT Y ​ Risk Management and Strategy In the ordinary course of our business, we collect and store sensitive data, including legally protected personal information, such as test results and other patient health information, credit card and other financial information, insurance information, and personally identifiable information, as well as sensitive intellectual property and other proprietary business information, including that of our customers, payers and collaboration partners.
Our audit committee is composed of directors with diverse expertise relevant to such committee’s responsibilities, and includes two directors who have expertise or certifications in cybersecurity.
Our audit committee is composed of directors with diverse expertise relevant to such committee’s responsibilities, and includes two directors who have expertise or certifications in cybersecurity. Our management team provides updates on cybersecurity matters to our audit committee on a quarterly basis, with more frequent or interim communications as warranted.

Item 2. Properties

Properties — owned and leased real estate

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Biggest changeThe amendment also includes two additional office spaces, referred to as the First Expansion Premises and the Second Expansion Premises. The First Expansion Premises consists of 32,500 rentable square feet and commenced in February 2022. The Second Expansion Premises consists of 65,222 rentable square feet and commenced in September 2022.
Biggest changeIn December 2021, we entered into an amendment of the Austin lease agreement which extended the lease of the current premises through March 2033. The amendment also includes two additional office spaces, referred to as the First Expansion Premises and the Second Expansion Premises. The First Expansion Premises consists of 32,500 rentable square feet and commenced in February 2022.
In January 2023, we entered in an amendment to extend the lease term of the South San Francisco premises by three years, through November 2026. ​ We entered into a lease agreement in September 2023 to lease 16,319 square feet of space located in Pleasanton, California over a 60-month term.
In January 2023, we entered into an amendment to extend the lease term of the South San Francisco premises by three years, through November 2026. ​ We entered into a lease agreement in September 2023 to lease 16,319 square feet of space located in Pleasanton, California over a 60-month term.
The facility covers approximately 10,000 square feet, with a lease term of 62 months beginning in June 2018 and expiring in July 2023. In the third quarter of 2019, we sold the Evercord business and the facility was subleased to a third party.
The facility covers approximately 10,000 square feet, with a lease term of 62 months beginning in June 2018 and expired in July 2023. In the third quarter of 2019, we sold the Evercord business and the facility was subleased to a third party.
The annual lease payment starts at $0.2 million and expired in August 2023. ​ 68 Table of Contents We have also historically entered into leases of individual workspaces and storage spaces at various locations on both a month-to-month basis without an established lease term, and more recently for certain locations, have committed to terms approximating one to five years.
The annual lease payment starts at $0.2 million and expired in August 2023. ​ We have also historically entered into leases of individual workspaces and storage spaces at various locations on both a month-to-month basis without an established lease term, and more recently for certain locations, have committed to terms approximating one to five years.
For the facilities without a committed lease term, we have elected to not recognize them as the right-of-use assets on the balance sheet as they are all considered short-term leases. For individual workspaces where the committed lease term exceeds one year, we have recorded a right-of-use asset.
For the facilities without a committed lease term, we have elected to not 65 Table of Contents recognize them as the right-of-use assets on the consolidated balance sheets as they are all considered short-term leases. For individual workspaces where the committed lease term exceeds one year, we have recorded a right-of-use asset.
The terms of the First and Second Expansion Premises expire in March 2033. ​ We entered into a lease agreement in November 2020 to lease 11,395 square feet of space located in South San Francisco, California over a three-year term. The premises is used for general office, laboratory and research use.
The new lease arrangements have future commitments aggregating to approximately $12.8 million through 2033. ​ We entered into a lease agreement in November 2020 to lease 11,395 square feet of space located in South San Francisco, California over a three-year term. The premises is used for general office, laboratory and research use.
We did not exercise the option to renew the facility upon expiration. ​ We lease laboratory and office space in Austin, Texas, comprising approximately 94,000 square feet pursuant to a lease expiring in November 2026. In December 2021, we entered into an amendment of the Austin lease agreement which extended the lease of the current premises through March 2033.
As a result, we did not exercise the option to renew the facility upon expiration of the term in July 2023. ​ We lease laboratory and office space in Austin, Texas, comprising approximately 94,000 square feet pursuant to a lease expiring in November 2026.
Removed
The amended term of the lease commenced in October 2023 and will expire in October 2027 with a combined monthly rent for the First Space and Second Space of $776,671. ​ In Tukwila, Washington, we lease a facility initially to provide storage of our cord blood tissue units.
Added
The amended term of the lease commenced in October 2023 and will expire in October 2027. In July 2024, we entered into an amendment of the San Carlos lease to extend the term for 60 months to October 2032.
Added
The annual rent will be approximately $9.7 million beginning January 2025, escalating annually and may be increased if we elect to utilize additional tenant improvement allowances. ​ In Tukwila, Washington, we leased a facility to provide storage of our cord blood tissue units.
Added
The Second Expansion Premises consists of 65,222 rentable square feet and commenced in September 2022. The terms of the First and Second Expansion Premises expire in March 2033. ​ In the first quarter of 2025, we entered into new lease arrangements for additional space in Austin, Texas and San Carlos, California.

Item 4. Mine Safety Disclosures

Mine Safety Disclosures — required of mining issuers

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Biggest changeItem 4. Mine Safety Disclosures ​ 69 ​ ​ ​ ​ ​ PART II ​ ​ ​ ​ ​ ​ Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities ​ 69 Item 6. Selected Financial Data ​ 71 Item 7.
Biggest changeItem 4. Mine Safety Disclosures ​ 66 ​ ​ ​ ​ ​ PART II ​ ​ ​ ​ ​ ​ Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities ​ 66 Item 6. [Reserved.] ​ 67 Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations ​ 68 Item 7A.
Management’s Discussion and Analysis of Financial Condition and Results of Operations ​ 72 Item 7A. Quantitative and Qualitative Disclosures About Market Risk ​ 82 Item 8. Financial Statements and Supplementary Data ​ 83
Quantitative and Qualitative Disclosures About Market Risk ​ 79 Item 8. Financial Statements and Supplementary Data ​ 80

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeThe stock price performance on the following graph is not necessarily indicative of future stock price performance. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Nasdaq Nasdaq Trade Date ​ Natera, Inc. ​ Biotechnology ​ Composite Base period 7/2/2015 ​ $ 100.00 ​ $ 100.00 ​ $ 100.00 12/31/2015 ​ $ 47.49 ​ $ 91.34 ​ $ 99.96 12/31/2016 ​ $ 51.50 ​ $ 71.53 ​ $ 107.46 12/31/2017 ​ $ 39.53 ​ $ 86.60 ​ $ 137.81 12/31/2018 ​ $ 61.39 ​ $ 78.52 ​ $ 132.46 12/31/2019 ​ $ 147.45 ​ $ 97.34 ​ $ 178.59 12/31/2020 ​ $ 437.64 ​ $ 122.78 ​ $ 257.29 12/31/2021 ​ $ 408.40 ​ $ 122.00 ​ $ 312.32 12/31/2022 ​ $ 176.65 ​ $ 108.69 ​ $ 208.94 12/31/2023 ​ $ 275.46 ​ $ 112.76 ​ $ 299.67 ​ Recent Sales of Unregistered Securities ​ None. ​ 70 Table of Contents Purchases of Equity Securities by the Issuer and Affiliated Parties None. ​
Biggest changeThe stock price performance on the following graph is not necessarily indicative of future stock price performance. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Nasdaq Nasdaq Trade Date ​ Natera, Inc. ​ Biotechnology ​ Composite Base period 1/2/2020 ​ $ 100.00 ​ $ 100.00 ​ $ 100.00 12/31/2020 ​ $ 298.95 ​ $ 126.47 ​ $ 141.75 12/31/2021 ​ $ 278.97 ​ $ 125.67 ​ $ 172.07 12/31/2022 ​ $ 120.67 ​ $ 111.96 ​ $ 115.12 12/31/2023 ​ $ 188.16 ​ $ 116.14 ​ $ 165.10 12/31/2024 ​ $ 475.52 ​ $ 114.55 ​ $ 212.39 ​ Recent Sales of Unregistered Securities ​ None. ​ Purchases of Equity Securities by the Issuer and Affiliated Parties None. ​
Any future determination to declare cash dividends will be made at the discretion of our board of directors, subject to applicable laws, and will depend on our financial condition, results of operations, capital requirements, general business conditions and other factors our board of directors may deem relevant. ​ ​ 69 Table of Contents Performance Graph ​ This performance graph shall not be deemed “filed” for purposes of Section 18 of the Exchange Act, or incorporated by reference into any of our other filings under the Exchange Act or the Securities Act except to the extent we specifically incorporate it by reference into such filing.
Any future determination to declare cash dividends will be made at the discretion of our board of directors, subject to applicable laws, and will depend on our financial condition, results of operations, capital requirements, general business conditions and other factors our board of directors may deem relevant. ​ ​ 66 Table of Contents Performance Graph ​ This performance graph shall not be deemed “filed” for purposes of Section 18 of the Exchange Act, or incorporated by reference into any of our other filings under the Exchange Act or the Securities Act except to the extent we specifically incorporate it by reference into such filing.
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES ​ Market Price of Our Common Stock ​ Our common stock is listed on the Nasdaq Global Select Market under the symbol “NTRA”. ​ Holders ​ As of January 31, 2024, we had 25 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 Price of Our Common Stock ​ Our common stock is listed on the Nasdaq Global Select Market under the symbol “NTRA”. ​ Holders ​ As of January 31, 2025, we had 20 holders of record of our common stock.
The chart assumes $100 was invested at the close of market on July 2, 2015, and assumes the reinvestment of any dividends.
The chart assumes $100 was invested at the close of market on January 2, 2020, and assumes the reinvestment of any dividends.
The following graph compares the cumulative total stockholder return on our common stock between our initial public offering on July 2, 2015 and December 31, 2023 with the cumulative total return of (i) the NASDAQ Biotechnology Index and (ii) the NASDAQ Composite Index over the same period.
The following graph compares the cumulative total stockholder return on our common stock over the five-year period ending on December 31, 2024, with the cumulative total return of (i) the NASDAQ Biotechnology Index and (ii) the NASDAQ Composite Index over the same period.

Item 7. Management's Discussion & Analysis

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

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Biggest changeThe measurement of stock-based compensation is subject to periodic adjustments as the underlying equity instruments vest, and the resulting change in value, if any, is recognized in our statements of operations and comprehensive loss during the period that the related services are rendered. ​ Results of Operations ​ Comparison of the years ended December 31, 2023, 2022, and 2021 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended December 31, ​ ​ Changes (in thousands) 2023 2022 2021 2023 - 2022 ​ 2022 - 2021 ​ ​ ​ ​ ​ ​ ​ ​ ​ Amount ​ Percent ​ ​ Amount ​ Percent ​ Revenues: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Product revenues $ 1,068,522 ​ $ 797,307 ​ $ 580,080 ​ ​ $ 271,215 ​ 34.0 % ​ $ 217,227 ​ 37.4 % Licensing and other revenues ​ 14,049 ​ ​ 22,915 ​ ​ 45,406 ​ ​ ​ (8,866) ​ (38.7) ​ ​ ​ (22,491) ​ (49.5) ​ Total revenues ​ 1,082,571 ​ ​ 820,222 ​ ​ 625,486 ​ ​ ​ 262,349 ​ 32.0 ​ ​ ​ 194,736 ​ 31.1 ​ Cost and expenses: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Cost of product revenues ​ 588,564 ​ ​ 453,632 ​ ​ 315,195 ​ ​ ​ 134,932 ​ 29.7 ​ ​ ​ 138,437 ​ 43.9 ​ Cost of licensing and other revenues ​ 1,267 ​ ​ 2,624 ​ ​ 3,223 ​ ​ ​ (1,357) ​ (51.7) ​ ​ ​ (599) ​ (18.6) ​ Research and development ​ 320,678 ​ ​ 316,415 ​ ​ 264,208 ​ ​ ​ 4,263 ​ 1.3 ​ ​ ​ 52,207 ​ 19.8 ​ Selling, general and administrative ​ 618,307 ​ ​ 588,591 ​ ​ 511,034 ​ ​ ​ 29,716 ​ 5.0 ​ ​ ​ 77,557 ​ 15.2 ​ Total cost and expenses ​ 1,528,816 ​ ​ 1,361,262 ​ ​ 1,093,660 ​ ​ ​ 167,554 ​ 12.3 ​ ​ ​ 267,602 ​ 24.5 ​ Loss from operations ​ (446,245) ​ ​ (541,040) ​ ​ (468,174) ​ ​ ​ 94,795 ​ 17.5 ​ ​ ​ (72,866) ​ (15.6) ​ Interest expense ​ (12,638) ​ ​ (9,319) ​ ​ (8,305) ​ ​ ​ (3,319) ​ (35.6) ​ ​ ​ (1,014) ​ (12.2) ​ Interest and other income, net ​ 24,353 ​ ​ 3,538 ​ ​ 5,381 ​ ​ ​ 20,815 ​ 588.3 ​ ​ ​ (1,843) ​ (34.3) ​ Loss before income taxes ​ (434,530) ​ ​ (546,821) ​ ​ (471,098) ​ ​ ​ 112,291 ​ 20.5 ​ ​ ​ (75,723) ​ (16.1) ​ Income tax expense ​ (271) ​ ​ (978) ​ ​ (618) ​ ​ ​ 707 ​ 72.3 ​ ​ ​ (360) ​ (58.3) ​ Net loss $ (434,801) ​ $ (547,799) ​ $ (471,716) ​ ​ $ 112,998 ​ 20.6 % ​ $ (76,083) ​ (16.1) % _______________________ ​ Revenues ​ Total revenues are comprised of product revenues, which are primarily driven by sales of our Panorama and HCS tests, and licensing and other revenues, which primarily includes development licensing revenue, licensing of our Constellation software to our licensees.
Biggest changeThe measurement of stock-based compensation is subject to periodic adjustments as the underlying equity instruments vest, and the resulting change in value, if any, is recognized in our statements of operations and comprehensive loss during the period that the related services are rendered. ​ 72 Table of Contents Results of Operations ​ Comparison of the years ended December 31, 2024, 2023, and 2022 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended December 31, ​ ​ Changes (in thousands) 2024 2023 2022 2024 - 2023 ​ 2023 - 2022 ​ ​ ​ ​ ​ ​ ​ ​ ​ Amount ​ Percent ​ ​ Amount ​ Percent ​ Revenues: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Product revenues $ 1,685,074 ​ $ 1,068,522 ​ $ 797,307 ​ ​ $ 616,552 ​ 57.7 % ​ $ 271,215 ​ 34.0 % Licensing and other revenues ​ 11,837 ​ ​ 14,049 ​ ​ 22,915 ​ ​ ​ (2,212) ​ (15.7) ​ ​ ​ (8,866) ​ (38.7) ​ Total revenues ​ 1,696,911 ​ ​ 1,082,571 ​ ​ 820,222 ​ ​ ​ 614,340 ​ 56.7 ​ ​ ​ 262,349 ​ 32.0 ​ Cost and expenses: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Cost of product revenues ​ 672,304 ​ ​ 588,564 ​ ​ 453,632 ​ ​ ​ 83,740 ​ 14.2 ​ ​ ​ 134,932 ​ 29.7 ​ Cost of licensing and other revenues ​ 1,449 ​ ​ 1,267 ​ ​ 2,624 ​ ​ ​ 182 ​ 14.4 ​ ​ ​ (1,357) ​ (51.7) ​ Research and development ​ 404,138 ​ ​ 320,678 ​ ​ 316,415 ​ ​ ​ 83,460 ​ 26.0 ​ ​ ​ 4,263 ​ 1.3 ​ Selling, general and administrative ​ 841,314 ​ ​ 618,307 ​ ​ 588,591 ​ ​ ​ 223,007 ​ 36.1 ​ ​ ​ 29,716 ​ 5.0 ​ Total cost and expenses ​ 1,919,205 ​ ​ 1,528,816 ​ ​ 1,361,262 ​ ​ ​ 390,389 ​ 25.5 ​ ​ ​ 167,554 ​ 12.3 ​ Loss from operations ​ (222,294) ​ ​ (446,245) ​ ​ (541,040) ​ ​ ​ 223,951 ​ 50.2 ​ ​ ​ 94,795 ​ 17.5 ​ Interest expense ​ (10,685) ​ ​ (12,638) ​ ​ (9,319) ​ ​ ​ 1,953 ​ 15.5 ​ ​ ​ (3,319) ​ (35.6) ​ Interest and other income, net ​ 43,248 ​ ​ 24,353 ​ ​ 3,538 ​ ​ ​ 18,895 ​ 77.6 ​ ​ ​ 20,815 ​ 588.3 ​ Loss before income taxes ​ (189,731) ​ ​ (434,530) ​ ​ (546,821) ​ ​ ​ 244,799 ​ 56.3 ​ ​ ​ 112,291 ​ 20.5 ​ Income tax expense ​ (695) ​ ​ (271) ​ ​ (978) ​ ​ ​ (424) ​ (156.5) ​ ​ ​ 707 ​ 72.3 ​ Net loss $ (190,426) ​ $ (434,801) ​ $ (547,799) ​ ​ $ 244,375 ​ 56.2 % ​ $ 112,998 ​ 20.6 % ​ Revenues ​ Total revenues are comprised of product revenues, which are primarily driven by sales of our Panorama and Horizon tests, oncology testing, and licensing and other revenues, which primarily includes development licensing revenue and licensing of our Constellation software.
We also offer our Signatera molecular residual disease test for oncology applications, which we commercialize as a test run in our CLIA (as defined below) laboratory and offer on a research use only basis to research laboratories and pharmaceutical companies; and our Prospera organ transplant assessment tests. ​ We process tests in our laboratories certified under the Clinical Laboratory Improvement Amendments of 1988, or CLIA, in Austin, Texas and San Carlos, California.
We also offer our Signatera molecular residual disease test for oncology applications, which we commercialize as a test run in our CLIA (as defined below) laboratories and offer on a research use only basis to research laboratories and pharmaceutical companies; and our Prospera organ transplant assessment tests. ​ We process tests in our laboratories certified under the Clinical Laboratory Improvement Amendments of 1988 (or CLIA) in Austin, Texas and San Carlos, California.
A portion of our testing is performed by third-party laboratories. Our customers include independent laboratories, national and regional reference laboratories, medical centers and physician practices for our screening tests, and research laboratories and pharmaceutical companies. We market and sell our tests through our direct sales force and, for our women’s health tests, through our laboratory distribution partners.
A portion of our testing is performed by third-party laboratories. Our customers include independent laboratories, national and regional reference laboratories, medical centers and physician practices for our screening tests, research laboratories and pharmaceutical companies. We market and sell our tests through our direct sales force and, for our women’s health tests, through our laboratory distribution partners.
The Credit Line was amended in July 2017 and bears interest at 30-day LIBOR plus 1.10%, and it is secured by a first priority lien and security interest in our money market and marketable securities held in our managed investment account with UBS.
The Credit Line was amended in July 2017 and bears interest at 30-day LIBOR plus 1.10%, and it is secured by a first priority lien and security interest in our money market and marketable securities held in our managed investment account with UBS.
Revenues recognized from tests processed through our Constellation model, and from our strategic partnership agreements, are reported in licensing and other revenues. 73 Table of Contents In cases where we sell our tests through our laboratory partners, the majority of our laboratory partners bill the patient, clinic or insurance carrier for the performance of our tests, and we are entitled to either a fixed price per test or a percentage of their collections. ​ Our ability to increase our revenues will depend on our ability to further penetrate the domestic and international markets and, in particular, generate sales through our direct sales force, develop and commercialize additional tests, obtain reimbursement from additional third-party payers and increase our reimbursement rates for tests performed.
Revenues recognized from tests processed through our Constellation model, and from our strategic partnership agreements, are reported in licensing and other revenues. 69 Table of Contents In cases where we sell our tests through our laboratory partners, the majority of our laboratory partners bill the patient, clinic or insurance carrier for the performance of our tests, and we are entitled to either a fixed price per test or a percentage of their collections. ​ Our ability to increase our revenues will depend on our ability to further penetrate the domestic and international markets and, in particular, generate sales through our direct sales force, develop and commercialize additional tests, obtain reimbursement from additional third-party payers and increase our reimbursement rates for tests performed.
These expenses consist of personnel costs, including stock-based compensation expense; direct marketing expenses; audit and legal expenses; consulting costs; training and medical education activities; payer outreach programs and allocated overhead, including rent, information technology, equipment depreciation, and utilities. ​ Interest Expense ​ Interest expense is attributable to borrowing under our Convertible Senior Notes (the “Convertible Notes”) and credit line with UBS (the “Credit Line”), including the amortization of debt discounts. ​ 75 Table of Contents Interest Income and Other (Expense) Income, Net ​ Interest income and other (expense) income, net is comprised of interest earned on our cash, realized gains and losses on investments and assets, sublease rental income, and foreign currency remeasurement gains and losses. ​ Critical Accounting Policies ​ Our management’s discussion and analysis of our financial condition and results of operations is based on our financial statements, which have been prepared in accordance with generally accepted accounting principles in the United States.
These expenses consist of personnel costs, including stock-based compensation expense; direct marketing expenses; audit and legal expenses; consulting costs; training and medical education activities; payer outreach programs and allocated overhead, including rent, information technology, equipment depreciation, and utilities. ​ Interest Expense ​ Interest expense is attributable to borrowing under our Convertible Senior Notes (the “Convertible Notes”) and the credit line with UBS (the “Credit Line”), including the amortization of debt discounts. ​ Interest Income and Other (Expense) Income, Net ​ Interest income and other (expense) income, net is comprised of interest earned on our cash, realized gains and losses on investments and assets, sublease rental income, and foreign currency remeasurement gains and losses. ​ Critical Accounting Policies ​ Our management’s discussion and analysis of our financial condition and results of operations is based on our financial statements, which have been prepared in accordance with generally accepted accounting principles in the United States.
We generate a majority of our revenues from the sale of Panorama, our non-invasive prenatal test, or NIPT, as well as Horizon, our Carrier Screening, or HCS, test.
We generate a majority of our revenues from the sale of Panorama, our non-invasive prenatal test, or NIPT, as well as Horizon, our Carrier Screening test.
We currently have 15 revenue generating licensing and service agreements with laboratories under our Constellation distribution model. We consider our cost of licensing and other revenues for the Constellation software platform to be relatively low, and therefore we expect its associated gross margin is higher. We expect our cost of licensing will increase in relation to volume growth.
We currently have 7 revenue generating licensing and service agreements with laboratories under our Constellation distribution model. We consider our cost of licensing and other revenues for the Constellation software platform to be relatively low, and therefore we expect its associated gross margin is higher. We expect our cost of licensing will increase in relation to volume growth.
We aim to make personalized genetic testing and diagnostics part of the standard of care to protect health and inform earlier and more targeted interventions that help lead to longer, healthier lives. ​ We currently provide a comprehensive suite of products in women’s health, as well as our oncology and organ health products, and our Constellation cloud-based platform.
We aim to make personalized genetic testing and diagnostics part of the standard of care to protect health and inform earlier and more targeted interventions that help lead to longer, healthier lives. ​ We currently provide a comprehensive suite of products in women’s health, oncology, and organ health, and our Constellation cloud-based platform.
In addition to Panorama and Horizon, our product offerings in women’s health include Spectrum Preimplantation Genetics, our Anora miscarriage test, and Vistara single-gene NIPT, as well as our Empower hereditary cancer screening test, which we also plan to offer to oncologists through our oncology sales channel.
In addition to Panorama and Horizon, our product offerings in women’s health include Spectrum Preimplantation Genetics, our Anora miscarriage test, and Vistara single-gene NIPT, as well as our Empower hereditary cancer screening test, which we also offer through our oncology sales channel.
As of December 31, 2023, we are recognizing revenues on 15 licensing and service arrangements with laboratories under our Constellation model. ​ Our strategy to offer access to our algorithm to laboratory licensees via our Constellation cloud-based software platform may also cause our revenues to decrease because we do not process the tests and perform the molecular biology analysis in our own laboratory under this model, and therefore are not able to charge as high an amount, and as a result realize lower revenues per test than when we perform the entire test ourselves.
As of December 31, 2024, we are recognizing revenues on 7 licensing and service arrangements with laboratories under our Constellation model. ​ Our strategy to offer access to our algorithm to laboratory licensees via our Constellation cloud-based software platform may also cause our revenues to decrease because we do not process the tests and perform the molecular biology analysis in our own laboratory under this model, and therefore are not able to charge as high an amount, and as a result realize lower revenues per test than when we perform the entire test ourselves.
As of December 31, 2023, we have $20.0 million available on the Credit Line. ​ While we have introduced multiple products that are generating revenues, these revenues have not been sufficient to fund all operations. Accordingly, we have funded the portion of operating costs that exceeds revenues through a combination of equity issuances and debt and other financings.
As of December 31, 2024, we have $20.0 million remaining and available on the Credit Line. ​ While we have introduced multiple products that are generating revenues, these revenues have not been sufficient to fund all operations. Accordingly, we have funded the portion of operating costs that exceeds revenues through a combination of equity issuances and debt and other financings.
We intend to mitigate any impact by driving more business from our most profitable accounts. ​ Licensing and Other Revenues ​ Revenues recognized from tests processed through our Constellation model, and from our strategic partnership agreements (which during the three years ended December 31, 2023, 2022 and 2021 comprised the Qiagen, BGI Genomics Co.
We intend to mitigate any impact by driving more business from our most profitable accounts. ​ Licensing and Other Revenues ​ Revenues recognized from tests processed through our Constellation model, and from our strategic partnership agreements (which during the three years ended December 31, 2024, 2023 and 2022 comprised BGI Genomics Co.
However, cost of licensing and other revenues for the Constellation software platform are relatively low, and therefore, its associated gross margin is higher. ​ 74 Table of Contents Cost of Product Revenues The components of our cost of product revenues are material and service costs, impairment charges associated with testing equipment, personnel costs, including stock-based compensation expense, equipment and infrastructure expenses associated with testing samples, electronic medical records, order and delivery systems, shipping charges to transport samples, costs incurred from third party test processing fees, and allocated overhead such as rent, information technology costs, equipment depreciation and utilities.
However, cost of licensing and other revenues for the Constellation software platform are relatively low, and therefore, its associated gross margin is higher. ​ Cost of Product Revenues The components of our cost of product revenues are material and service costs, equipment and related depreciation expense, personnel costs, including stock-based compensation expense, and infrastructure expenses associated with testing samples, electronic medical records, order and delivery systems, shipping charges to transport samples, costs incurred from third party test processing fees, and allocated overhead such as rent, information technology costs, equipment depreciation and utilities.
UBS has the right to demand full or partial payment of the Credit Line obligations and terminate it, in its discretion and without cause, 81 Table of Contents at any time. In October 2023, the interest rate was subsequently changed to the 30-day SOFR average, plus 0.5%.
UBS has the right to demand full or partial payment of the Credit Line obligations and terminate it, in its discretion and without cause, at any time. In October 2023, the interest rate was subsequently changed to the 30-day SOFR average, plus 0.5%.
These improvements also reduced the frequency of the need to require blood redraws from the patient. Cost of Licensing and Other Revenues ​ The components of our cost of licensing and other revenues are material costs associated with test kits sold to Constellation clients, development and support services relating to our strategic partnership agreements and other costs .
These improvements also reduced the frequency of the need to require blood redraws from the patient. 70 Table of Contents Cost of Licensing and Other Revenues ​ The components of our cost of licensing and other revenues are material costs associated with test kits sold to Constellation clients, development and support services relating to our strategic partnership agreements and other costs .
As of December 31, 2023, the total principal amount outstanding with accrued interest was $80.4 million and $20.0 million is remaining as available under the Credit Line.
As of December 31, 2024, the total principal amount outstanding with accrued interest was $80.4 million and $20.0 million is remaining and available under the Credit Line.
Operating assets had cash outflows of $57.0 million resulting from $33.9 million in increases in accounts receivable, $5.4 million in increases in inventory, and $26.1 million in increases in prepaid expenses and other current assets, offset by $8.4 million 80 Table of Contents from cash inflows in operating lease right-of-use assets.
Operating assets had cash outflows of $57.0 million resulting from $33.9 million in increases in accounts receivable, $5.4 million in increases in inventory, and $26.1 million in increases in prepaid expenses and other current assets, offset by $8.4 million from cash inflows in operating lease right-of-use assets.
Based on our current business plan, we believe that our existing cash and marketable securities will be sufficient to meet our anticipated cash requirements for at least 12 months after February 28, 2024. 79 Table of Contents Credit Line Agreement In September 2015, we entered into a Credit Line with UBS, or the Credit Line, providing for a $50.0 million revolving line of credit which could be drawn in increments at any time.
Based on our current business plan, we believe that our existing cash and marketable securities will be sufficient to meet our anticipated cash requirements for at least 12 months after February 27, 2025. 75 Table of Contents Credit Line Agreement In September 2015, we entered into a Credit Line with UBS, or the Credit Line, providing for a $50.0 million revolving line of credit which could be drawn in increments at any time.
We are required to maintain a minimum of at least $150.0 million in our UBS accounts as collateral which has been classified as short-term investments in the consolidated balance sheet. The interest rate was subsequently changed to the 30-day SOFR average, plus 1.21%. The SOFR rate is variable.
We are required to maintain a minimum of at least $150.0 million in our UBS accounts as collateral which has been classified as cash, cash equivalents, and short-term investments in the consolidated balance sheets. The interest rate was subsequently changed to the 30-day SOFR average, plus 1.21%. The SOFR rate is variable.
Discussions of year-to-year comparisons between 2022 and 2021 that are not included in this Annual Report on Form 10-K can be found in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Item 7 of Part II of our Annual Report on Form 10-K for the fiscal year ended December 31, 2022, filed with the SEC on March 1, 2023. ​ Revenues ​ Product Revenues ​ We generate revenues from the sale of our tests, primarily from the sale of our Panorama and HCS tests.
Discussions of year-to-year comparisons between 2023 and 2022 that are not included in this Annual Report on Form 10-K can be found in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Item 7 of Part II of our Annual Report on Form 10-K for the fiscal year ended December 31, 2023, filed with the SEC on February 28, 2024. ​ Revenues ​ Product Revenues ​ We generate revenues from the sale of our tests, primarily from the sale of our Signatera, Panorama and HCS tests.
Such arrangements include those related to our lease commitments, Credit Line (as defined below), Convertible Notes, commercial supply agreements and other agreements. ​ Credit Line ​ The short-term debt obligations consist of the $80.4 million principal amount drawn from the UBS Credit Line, or the Credit Line, and applicable interest.
Such arrangements include those related to our lease commitments, Credit Line (as defined below), commercial supply agreements and other agreements. ​ 77 Table of Contents Credit Line ​ The short-term debt obligations consist of the $80.4 million principal amount drawn from the UBS Credit Line, or the Credit Line, and applicable interest.
For the year ended December 31, 2022, revenues from customers outside the United States were $34.4 million, representing approximately 4% of total revenues.
For the year ended December 31, 2023, revenues from customers outside the United States were $34.9 million, representing approximately 3% of total revenues. For the year ended December 31, 2022, revenues from customers outside the United States were $34.4 million, representing approximately 4% of total revenues.
As of December 31, 2023, we had an accumulated deficit of $2.4 billion. ​ Components of the Results of Operations ​ The section of this Management’s Discussion and Analysis generally discusses year-to-year comparisons between 2023 and 2022.
As of December 31, 2024, we had an accumulated deficit of $2.6 billion. ​ Components of the Results of Operations ​ The section of this Management’s Discussion and Analysis generally discusses year-to-year comparisons between 2024 and 2023.
The percent of our revenues attributable to international laboratory partners and other international sales was 3%, 4% and 6% for the years ended December 31, 2023, 2022 and 2021, respectively. ​ For the year ended December 31, 2023, total revenues were $1,082.6 million, compared to $820.2 million and $625.5 million in the years ended December 31, 2022 and 2021, respectively.
The percent of our revenues attributable to international laboratory partners and other international sales was 2%, 3% and 4% for the years ended December 31, 2024, 2023 and 2022, respectively. ​ For the year ended December 31, 2024, total revenues were $1,696.9 million, compared to $1,082.6 million and $820.2 million in the years ended December 31, 2023 and 2022, respectively.
For the year ended December 31, 2023, we had a net loss of $434.8 million, and we expect to continue to incur losses in future periods as we continue to devote a substantial portion of our resources to our research and development and commercialization efforts for our existing and new products.
For the year ended December 31, 2024, we had a net loss of $190.4 million, and we expect to continue to incur losses in future periods as we continue to devote a substantial portion of our resources to our research and development and commercialization efforts for our existing and new products.
Product revenues generated from our testing accounted for $1,068.5 million or 99% of total revenues for the year ended December 31, 2023, compared to $797.3 million or 97% of total revenues for the year ended December 31, 2022 and $580.1 million or 93% of total revenues for the year ended December 31, 2021.
Product revenues generated from our testing accounted for $1,685.1 million or 99% of total revenues for the year ended December 31, 2024, compared to $1,068.5 million or 99% of total revenues for the year ended December 31, 2023 and $797.3 million or 97% of total revenues for the year ended December 31, 2022.
This increase in volume represents continuous commercial growth of Panorama and HCS, both as tests performed in our laboratories as well as through our Constellation software platform. ​ The percent of our revenues attributable to our U.S. direct sales force were 91%, 89% and 89% for the years ended December 31, 2023, 2022, 2021, respectively.
This increase in volume primarily represents continued commercial growth of Signatera, Panorama and Horizon, both as tests performed in our laboratories as well as through our Constellation software platform. ​ The percent of our revenues attributable to our U.S. direct sales force were 94%, 91% and 89% for the years ended December 31, 2024, 2023, and 2022, respectively.
This included non-cash stock compensation expense of $191.8 million, $152.4 million, and $115.2 million for the years ended December 31, 2023, 2022, and 2021, respectively.
This included non-cash stock compensation expense of $274.4 million, $191.8 million, and $152.4 million for the years ended December 31, 2024, 2023, and 2022, respectively.
Payments due upon cancellation generally consist only of payments for services provided or expenses incurred, including non-cancellable obligations of our service providers, up to the date of cancellation. These payments have not been included separately within these contractual and other obligations disclosures.
Payments due upon cancellation generally consist only of payments for services provided or expenses incurred, including non-cancellable obligations of our service providers, up to the date of cancellation. These payments have not been included separately within these contractual and other obligations disclosures. Please refer to Note 8, Commitments and Contingencies for further details.
For the years ended December 31, 2023, 2022, and 2021, there were no customers exceeding 10% of the total revenues on an individual basis. Revenues from customers outside the United States were $34.9 million, representing 3% of total revenues for the year ended December 31, 2023.
For the years ended December 31, 2024, 2023, and 2022, there were no customers exceeding 10% of the total revenues on an individual basis. Revenues from customers outside the United States were $39.2 million, representing 2% of total revenues for the year ended December 31, 2024.
As cash flows from our operations are currently negative, our contractual obligations and other commitments are satisfied by the equity financing described above, our convertible note financing conducted in April 2020 described below, the Credit Facility described below, and our product, licensing, and other sales. For our commitments, refer to the “Contractual Obligations and Other Commitments” section below.
Additionally, our contractual obligations and other commitments are satisfied by the equity financing described above, our convertible note financing conducted in April 2020 described below, the Credit Facility described below, and our product, licensing, and other sales. For our commitments, refer to the “Contractual Obligations and Other Commitments” section below.
Total revenues for the year ended December 31, 2023 increased by $262.3 million, or 32.0%, when compared to the year ended December 31, 2022. We derive our revenues from tests based on units reported to customers—tests delivered with a result. All reported units are either accessioned in our laboratories or processed outside of our laboratories.
Total revenues for the year ended December 31, 2024 increased by $614.3 million, or 56.7%, when compared to the year ended December 31, 2023. We derive our revenues from tests based on units reported to customers—tests delivered with a result. All reported units are either accessioned in our laboratory or processed outside of our laboratory.
The number of tests that we process is a key metric as it tracks overall 72 Table of Contents volume growth, particularly as our laboratory partners may transition from sending samples to our laboratory to our cloud-based distribution model, as a result of which our tests accessioned would decrease but our tests processed would remain unchanged. ​ During the year ended December 31, 2023, we processed approximately 2,496,100 tests, comprised of approximately 2,426,500 tests accessioned in our laboratories.
The number of tests that we process is a key metric as it tracks overall volume growth, particularly as our laboratory partners may transition from sending samples to our laboratory to our cloud- 68 Table of Contents based distribution model, as a result of which our tests accessioned would decrease but our tests processed would remain unchanged. ​ During the year ended December 31, 2024, we processed approximately 3,064,600 tests, comprised of approximately 3,001,900 tests accessioned in our laboratories.
We consider our critical accounting policies and estimates to be revenue recognition and stock-based compensation attributable to performance-based awards. Recent Accounting Pronouncements We believe that the impact of accounting standards updates recently issued that are not yet effective will not have a material impact on our financial position or results of operations upon adoption.
We consider our critical accounting policies and estimates to be product revenues recognition and stock-based compensation attributable to restricted stock units and stock options with performance metrics. 71 Table of Contents Recent Accounting Pronouncements We believe that the impact of accounting standards updates recently issued that are not yet effective will not have a material impact on our financial position or results of operations upon adoption.
The decrease was primarily due to a decrease in revenue from our collaborative agreements. ​ Cost of Product Revenues ​ During the year ended December 31, 2023, cost of product revenues increased by $134.9 million or 29.7% when compared to the year ended December 31, 2022, primarily due to higher costs related to inventory consumption of $42.1 million driven by an increase in accessioned cases, a $42.5 million increase in third-party fees, a $6.1 million increase in shipping related charges, a $10.7 million increase in equipment and related depreciation expense, and a $33.5 million increase in labor, overhead, and other related costs driven by headcount growth and product support. ​ Cost of Licensing and Other Revenues ​ Cost of licensing and other revenues for the year ended December 31, 2023, when compared to the year ended December 31, 2022, decreased by approximately $1.4 million, or 51.7%, primarily due to a net decrease in costs to support our collaborative agreements. ​ Expenses ​ Research and Development ​ Research and development expenses during the year ended December 31, 2023 increased by $4.3 million, or 1.3%, when compared to the year ended December 31, 2022.
The decrease was primarily due to a decrease in revenue from our collaborative agreements. ​ Cost of Product Revenues ​ During the year ended December 31, 2024, cost of product revenues increased by $83.7 million or 14.2% when compared to the year ended December 31, 2023, primarily due to higher costs related to inventory consumption of $28.1 million driven by an increase in accessioned cases, a $32.0 million increase in third-party fees, a $23.6 million increase in shipping, equipment and related depreciation expense, labor, overhead, and other related costs driven by headcount growth and product support. ​ Cost of Licensing and Other Revenues ​ Cost of licensing and other revenues for the year ended December 31, 2024, when compared to the year ended December 31, 2023, increased by approximately $0.2 million, or 14.4%, primarily due to a net increase in costs to support our collaborative agreements. ​ Expenses ​ Research and Development ​ Research and development expenses during the year ended December 31, 2024 increased by $83.5 million, or 26.0%, when compared to the year ended December 31, 2023.
Operating liabilities resulted in cash inflows of $48.4 million resulting from a $5.5 million increase in accounts payable, a $3.1 million increase in accrued compensation, a $47.7 million increase in other accrued liabilities, a $2.1 million increase in deferred revenue offset by a $10.0 million decrease in operating lease liabilities. ​ Cash Provided by Investing Activities ​ Cash provided by investing activities for the year ended December 31, 2023 totaled $168.5 million, which was comprised of $306.0 million proceeds of investments maturities, offset by $98.3 million purchases of new investments and $39.2 million in cash paid for the purchase of property and equipment. ​ Cash provided by investing activities for the year ended December 31, 2022 totaled $330.3 million, which was comprised of $248.4 million in proceeds from sale of investments and $216.5 million proceeds of investments maturities, offset by $86.9 million purchases of new investments and $47.7 million in cash paid for the purchase of property and equipment. ​ Cash Provided by Financing Activities ​ Cash provided by financing activities for the year ended December 31, 2023 totaled $254.4 million comprised of $235.4 million net proceeds from our equity offering completed in the third quarter of 2023, $15.1 million in issuance of common stock under the employee stock purchase plan, and $3.9 million cash proceeds from the exercise of stock options. ​ Cash provided by financing activities for the year ended December 31, 2022 totaled $482.6 million comprised of $433.2 million net proceeds from our equity offering completed in the fourth quarter of 2022, $30.0 million proceeds from Credit Line, $13.0 million in issuance of common stock under the employee stock purchase plan, and $6.4 million cash proceeds from the exercise of stock options. ​ Contractual Obligations and Other Commitments ​ We have entered into arrangements that contractually obligate us to make payments that will affect our liquidity and cash flows in future periods.
Operating liabilities resulted in cash inflows of $9.0 million resulting from a $21.6 million increase in accrued compensation, a $10.3 million increase in other accrued liabilities, and a $5.0 million increase in deferred revenue, offset by a $15.5 million decrease in accounts payable and a $12.4 million decrease in operating lease liabilities. ​ Cash Provided by Investing Activities ​ Cash provided by investing activities for the year ended December 31, 2024 totaled $137.6 million, which was comprised of $24.8 million from proceeds from sale of investments and $314.4 million from proceeds of investment maturities, offset by $122.0 million in purchasing of new investments, $66.4 million in acquisitions of property and equipment, $2.7 million for investment in related party, and $10.5 million for an intangible asset acquisition. ​ Cash provided by investing activities for the year ended December 31, 2023 totaled $168.5 million, which was comprised of $306.0 million proceeds of investment maturities, offset by $98.3 million purchases of new investments and $39.2 million in cash paid for the purchase of property and equipment. ​ Cash Provided by Financing Activities ​ Cash provided by financing activities for the year ended December 31, 2024 totaled $30.2 million comprised of $13.0 million from proceeds from the exercise of stock options and $17.3 million from the issuance of common stock under our employee stock purchase plan, offset by $0.1 million related to cash redemption on the Convertible Notes. ​ Cash provided by financing activities for the year ended December 31, 2023 totaled $254.4 million comprised of $235.4 million net proceeds from our equity offering completed in the third quarter of 2023, $15.1 million in issuance of common stock under our employee stock purchase plan, and $3.9 million cash proceeds from the exercise of stock options. ​ Contractual Obligations and Other Commitments ​ We have entered into arrangements that contractually obligate us to make payments that will affect our liquidity and cash flows in future periods.
Operating liabilities resulted in cash inflows of $9.0 million resulting from a $21.6 million increase in accrued compensation, a $10.3 million increase in other accrued liabilities, and a $5.0 million increase in deferred revenue, offset by a $15.5 million decrease in accounts payable and a $12.4 million decrease in operating lease liabilities.
Operating liabilities resulted in cash inflows of $31.2 million resulting from a $13.2 million increase in accounts payable, a $40.3 million increase in accrued compensation, a $0.9 million increase in deferred revenue, offset by a $16.8 million decrease in lease liabilities and a $6.4 million decrease in other accrued liabilities.
As noted in “Overview,” the number of tests that we process is a key metric as it tracks overall volume growth. During the year ended December 31, 2023, total reported units were approximately 2,388,200, comprised of approximately 2,323,400 tests reported in our laboratories.
As noted in the section titled “Overview” above, the number of tests that we process is a key metric as it tracks our overall volume growth. During the year ended December 31, 2024, total reported units were approximately 2,926,400, comprised of approximately 2,867,400 tests reported in our laboratories.
During the year ended December 31, 2022, we processed approximately 2,066,500 tests, comprised of approximately 2,004,000 tests accessioned in our laboratories. During the year ended December 31, 2021, we processed approximately 1,570,000 tests, comprised of approximately 1,513,400 tests accessioned in our laboratories.
During the year ended December 31, 2023, we processed approximately 2,496,100 tests, comprised of approximately 2,426,500 tests accessioned in our laboratories. During the year ended December 31, 2022, we processed approximately 2,066,500 tests, comprised of approximately 2,004,000 tests accessioned in our laboratories.
Cash used in operating activities during the year ended December 31, 2022 was $431.5 million.
Cash used in operating activities during the year ended December 31, 2023 was $247.0 million.
The fair value is recognized as expense over the requisite service period, which is generally the vesting period of the respective awards. No compensation cost is recognized on stock options for employees and non-employees who do not render the requisite service and therefore forfeit their rights to the stock options.
No compensation cost is recognized on stock options for employees and non-employees who do not render the requisite service and therefore forfeit their rights to the stock options.
As of December 31, 2023, we had an accumulated deficit of $2.4 billion. As of December 31, 2023, we had $642.1 million in cash and cash equivalents and restricted cash, $236.9 million in marketable securities, $80.4 million of outstanding balance of the Credit Line including accrued interest, and $287.5 million outstanding principal balance on the Convertible Notes.
As of December 31, 2024, we had an accumulated deficit of $2.6 billion. As of December 31, 2024, we had $945.6 million in cash and cash equivalents and restricted cash, $22.7 million in marketable securities, and $80.4 million of outstanding balance on the Credit Line including accrued interest.
Costs associated with Whole Exome Sequencing, or WES, are also included, as well as labor costs, relating to our Signatera CLIA and Signatera research use only offerings . Costs associated with performing tests are recorded when the test is accessioned. We expect cost of product revenues in absolute dollars to increase as the number of tests we perform increases.
Costs associated with Whole Exome Sequencing, or WES, are also included, as well as labor costs, relating to our Signatera CLIA and Signatera research use only offerings . Costs associated with performing tests are recorded when the test is accessioned. Costs associated with collection kits are recorded upon shipment to the clinics.
Please refer to contractual commitments disclosures provided in Note 8, Commitments and Contingencies for additional information. ​ Off-Balance Sheet Arrangements ​ We do not have any off-balance sheet arrangements during the periods presented. ​
(2) Represents interest accrued on our Credit Line. (3) Represents various inventory purchase and other contractual obligations. Please refer to contractual commitments disclosures provided in Note 8, Commitments and Contingencies for additional information. ​ Off-Balance Sheet Arrangements ​ We do not have any off-balance sheet arrangements during the periods presented. ​ 78 Table of Contents
As we continue to achieve scale, we have increased our focus on more efficient use of labor, automation, and DNA sequencing.
We expect cost of product revenues in absolute dollars to increase as the number of tests we perform increases. As we continue to achieve scale, we have increased our focus on more efficient use of labor, automation, and DNA sequencing.
During the year ended December 31, 2023 and 2022, total oncology units processed were approximately 340,700 and 196,400, respectively. 77 Table of Contents Product Revenues ​ During the year ended December 31, 2023, product revenues increased by $271.2 million, or 34.0% compared to the year ended December 31, 2022, as a result of the continued revenue growth from increased test volumes as well as average selling price improvements. ​ Licensing and Other Revenues ​ Licensing and other revenues decreased by $8.9 million, or 38.7%, during the year ended December 31, 2023 compared to the year ended December 31, 2022.
Product Revenues ​ During the year ended December 31, 2024, product revenues increased by $616.6 million, or 57.7% compared to the year ended December 31, 2023, as a result of the continued revenue growth from increased test volumes as well as average selling price improvements. ​ 73 Table of Contents Licensing and Other Revenues ​ Licensing and other revenues decreased by $2.2 million, or 15.7%, during the year ended December 31, 2024 compared to the year ended December 31, 2023.
Upon conversion, the Convertible Notes are convertible into cash, shares of our common stock or a combination of cash and shares of our common stock, at our election.
The Convertible Notes mature in May 2027, unless earlier converted, repurchased or redeemed in accordance with their terms. Upon conversion, the Convertible Notes are convertible into cash, shares of our common stock or a combination of cash and shares of our common stock, at our election.
Operating assets had cash outflows of $131.4 million resulting from $122.3 million in increases in accounts receivable, $8.5 million in increases in inventory, and $1.2 million in increases in prepaid expenses and other current assets , offset by $0.6 million from cash inflows in operating lease right-of-use assets .
Operating assets had cash outflows of $29.1 million resulting from a $35.9 million increase in accounts receivable, a $4.0 million increase in inventory, offset by a $10.8 million decrease in prepaid expenses and other assets.
Please refer to Note 8, Commitments and Contingencies for further details. ​ The following table summarizes our unconditional purchase and contractual commitments as of December 31, 2023: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Payments Due by Period ​ ​ Less Than 1 to 3 3 to 5 More Than ​ ​ Total ​ 1 Year ​ Years ​ Years ​ 5 Years ​ ​ (in thousands) Short-term debt obligations (1) ​ 80,000 ​ 80,000 ​ — ​ — ​ — ​ Long-term debt obligations (2) ​ ​ 287,500 ​ ​ — ​ ​ — ​ ​ 287,500 ​ ​ — ​ Interest accrued on debt (3) ​ ​ 1,480 ​ ​ 1,480 ​ ​ — ​ ​ — ​ ​ — ​ Inventory purchase and other contractual obligations (4) ​ 94,533 ​ 58,875 ​ 17,658 ​ 18,000 ​ — ​ Total ​ $ 463,513 ​ $ 140,355 ​ $ 17,658 ​ $ 305,500 ​ $ — ​ ​ ​ (1) Represents proceeds drawn from our Credit Line.
The following table summarizes our contractual commitments as of December 31, 2024: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Payments Due by Period ​ ​ Less Than 1 to 3 3 to 5 More Than ​ ​ Total ​ 1 Year ​ Years ​ Years ​ 5 Years ​ ​ (in thousands) Short-term debt obligations (1) ​ $ 80,000 ​ $ 80,000 ​ $ — ​ $ — ​ $ — ​ Interest accrued on debt (2) ​ ​ 362 ​ ​ 362 ​ ​ — ​ ​ — ​ ​ — ​ Inventory purchase and other contractual obligations (3) ​ 171,262 ​ 113,818 ​ 44,085 ​ 11,359 ​ 2,000 ​ Total ​ $ 251,624 ​ $ 194,180 ​ $ 44,085 ​ $ 11,359 ​ $ 2,000 ​ ​ (1) Represents proceeds drawn from our Credit Line.
This was offset by a $9.1 million decrease in marketing costs and a $3.2 million net decrease in travel, facilities, office and other costs. ​ Interest Expense ​ Interest expense increased by $3.3 million, 35.6%, in the year ended December 31, 2023 compared to the same period in the prior year due to an increase in interest rate as well as a $30.0 million drawdown from November 2022 for the UBS Credit Line. ​ 78 Table of Contents Interest and Other Income ​ Interest and other income increased by $20.8 million, or 588.3%, in the year ended December 31, 2023, compared to the same period in the prior year, primarily due to higher interest rates and greater average cash and investment balances. ​ Liquidity and Capital Resources ​ We have incurred net losses each year since our inception.
The increase was attributable to a $124.4 million increase in salary and related expenditures, which includes a $55.5 million increase in stock-based compensation expense, a $57.2 million increase in consulting and legal expenses, a $8.9 million increase in marketing costs, a $7.4 million increase in travel expenses, a $7.4 million increase in office related expenses, a $16.5 million increase in vendor expenses, and a $1.2 million net increase in facilities and other costs. ​ Interest Expense ​ Interest expense decreased by $2.0 million, 15.5%, in the year ended December 31, 2024 compared to the same period in the prior year primarily as a result of the slight decrease in interest rate and the redemption of the Convertible Notes in October 2024. ​ Interest and Other Income ​ Interest and other income increased by $18.9 million, or 77.6%, in the year ended December 31, 2024, compared to the same period in the prior year, primarily due to greater average cash and investment balances driving higher interest income. ​ 74 Table of Contents Liquidity and Capital Resources ​ We have incurred net losses each year since our inception.
The percent of our revenues attributable to U.S. laboratory partners for the year ended the year ended December 31, 2023, 2022, 2021, was 6%, 7% and 5%, respectively.
The percent of our revenues attributable to U.S. laboratory partners for the years ended December 31, 2024, 2023, and 2022, was 4%, 6% and 7%, respectively. Our ability to increase our revenues and gross profit will depend on our ability to further penetrate the U.S. market with our direct sales force.
The net loss of $547.8 million includes $199.3 million in non-cash charges resulting from $16.7 million of depreciation and amortization, $9.3 million milestone expense for in-process research and development, $13.8 million of non-cash lease expense, $152.4 million of stock-based compensation expense, $4.8 million premium amortization and discount accretion on investment securities, $0.9 million loss on investments, $1.3 million for amortization of debt discount and issuance cost, and $0.3 million in non-cash interest expense.
The net loss of $190.4 million includes $324.0 million in non-cash charges resulting from $31.0 million of depreciation and amortization, $274.4 million of stock-based compensation expense, $15.3 million of non-cash lease expense, $1.0 million for amortization of debt discount and issuance cost, $0.5 million for foreign exchange adjustment, and $2.8 million of non-cash interest expense, offset by a $0.6 million decrease in amortization of premiums and accretion of purchase discounts on investment securities and a $0.4 million decrease in non-cash expense recovery.
We used approximately $79.2 million of the net proceeds from the Convertible Notes offering to repay our obligations under the 2017 Term Loan with OrbiMed in 2020. ​ Cash Flows ​ The following table summarizes our cash flows for the periods indicated: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended ​ ​ ​ December 31, ​ ​ 2023 2022 ​ 2021 ​ ​ (in thousands) Cash used in operating activities ​ $ (246,955) ​ $ (431,501) ​ $ (335,236) ​ Cash provided by (used in) investing activities ​ 168,498 ​ 330,338 ​ ​ (205,193) ​ Cash provided by financing activities ​ 254,461 ​ 482,640 ​ ​ 576,188 ​ Net change in cash, cash equivalents and restricted cash ​ 176,004 ​ ​ 381,477 ​ ​ 35,759 ​ Cash, cash equivalents and restricted cash, beginning of period ​ 466,091 ​ 84,614 ​ ​ 48,855 ​ Cash, cash equivalents and restricted cash, end of year ​ $ 642,095 ​ $ 466,091 ​ $ 84,614 ​ ​ Cash Used in Operating Activities ​ Cash used in operating activities during the year ended December 31, 2023 was $247.0 million.
The remaining Convertible Notes not converted under the redemption notice were redeemed in exchange for cash at face value plus any accrued interest totaling $0.1 million. ​ Cash Flows ​ The following table summarizes our cash flows for the periods indicated: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended ​ ​ ​ December 31, ​ ​ 2024 2023 ​ 2022 ​ ​ (in thousands) Cash provided by (used in) operating activities ​ $ 135,664 ​ $ (246,955) ​ $ (431,501) ​ Cash provided by investing activities ​ 137,624 ​ 168,498 ​ ​ 330,338 ​ Cash provided by financing activities ​ 30,204 ​ 254,461 ​ ​ 482,640 ​ Net change in cash, cash equivalents and restricted cash ​ 303,492 ​ ​ 176,004 ​ ​ 381,477 ​ Cash, cash equivalents and restricted cash, beginning of period ​ 642,095 ​ 466,091 ​ ​ 84,614 ​ Cash, cash equivalents and restricted cash, end of year ​ $ 945,587 ​ $ 642,095 ​ $ 466,091 ​ ​ 76 Table of Contents Cash Provided by (Used in) Operating Activities ​ Cash provided by operating activities during the year ended December 31, 2024 was $135.7 million.
Comparatively, during the year ended December 31, 2022, total reported units were approximately 1,919,600, comprised of approximately 1,861,000 tests reported in our laboratories.
Comparatively, during the year ended December 31, 2023, total reported units were approximately 2,388,200, comprised of approximately 2,323,400 tests reported in our laboratories. During the year ended December 31, 2024 and 2023, total oncology units processed were approximately 528,200 and 341,000 respectively.
The Convertible Notes are senior, unsecured obligations of the Company and bear interest at a rate of 2.25% per year, payable in cash semi-annually in arrears in May and November of each year, beginning in November 2020. The Convertible Notes mature in May 2027, unless earlier converted, repurchased or redeemed in accordance with their terms.
We used approximately $79.2 million of the net proceeds from the Convertible Notes offering to repay our obligations under our credit agreement with OrbiMed Royalty Opportunities II, LP. ​ The Convertible Notes are senior, unsecured obligations of the Company and bear interest at a rate of 2.25% per year, payable in cash semi-annually in arrears in May and November of each year, beginning in November 2020.
Convertible Notes In April 2020, we issued $287.5 million aggregate principal amount of Convertible Notes in a private placement offering to qualified institutional buyers pursuant to Rule 144A under the Securities Act of 1933, as amended. ​ The Convertible Notes are senior, unsecured obligations of the Company and bear interest at a rate of 2.25% per year, payable in cash semi-annually in arrears in May and November of each year, beginning in November 2020.
Convertible Notes ​ In April 2020, we issued $287.5 million aggregate principal amount of Convertible Notes in a private placement offering to qualified institutional buyers pursuant to Rule 144A under the Securities Act of 1933, as amended. We received net proceeds from the Convertible Notes of $278.3 million, after deducting the initial purchasers’ discounts and debt issuance costs.
The increase was driven by a $27.7 million increase in salary and related expenditures, which includes a $20.4 million increase in stock-based compensation expense, and a $3.6 million net increase in office, facilities, and other expenses.
The increase was driven by a $48.3 million increase in salary and related expenditures, which includes a $24.2 million increase in stock-based compensation expense, a $25.7 million increase in lab and clinical trial related expenses, a $6.7 million increase in consulting expenses, and a $2.8 million net increase in office, facilities, and other expenses. ​ Selling, General and Administrative ​ Selling, general and administrative expenses increased by $223.0 million, or 36.1%, in the year ended December 31, 2024 compared to the year ended December 31, 2023.
We also record revenues from the sale of IVD kits in licensing and other revenues. ​ 76 Table of Contents Stock-Based Compensation Attributable to Performance-Based Awards ​ Stock-based compensation expense for stock options with performance metrics is calculated based upon probability of achievement of the metrics specified in the grant.
Stock-Based Compensation Attributable to Performance-Based Awards Stock-based compensation expense for restricted stock units and stock options with performance metrics is calculated based upon probability of achievement of the metrics specified in the grant. The fair value is recognized as expense over the requisite service period, which is generally the vesting period of the respective awards.
Further, we sell tests to a number of domestic and international laboratory partners and identify the laboratory partners as customers provided that there is a test services agreement between us and them. ​ Licensing and Other Revenues ​ We recognize licensing revenues from our Constellation cloud-based distribution model, pursuant to which we grant licenses to laboratories to access our proprietary bioinformatics algorithms through our cloud-based software to analyze the results of molecular workflows that such licensees develop and perform in their laboratories.
Further, we sell tests to a number of domestic and international laboratory partners and identify the laboratory partners as customers provided that there is a test services agreement between us and them.
For the year ended December 31, 2021, revenues from customers outside the United States were $34.6 million, representing approximately 6% of total revenues. ​ Our net losses for the years ended December 31, 2023, 2022, and 2021, were $434.8 million, $547.8 million, and $471.7 million, respectively.
Most of our revenues have been denominated in U.S. dollars, though we generate some revenue in foreign currency, primarily denominated in Euros and Singapore Dollars. ​ Our net losses for the years ended December 31, 2024, 2023, and 2022, were $190.4 million, $434.8 million, and $547.8 million, respectively.
Removed
In addition, the royalties we receive from our arrangement with a prenatal paternity licensee are recognized Constellation revenues. ​ We also recognize revenues from our strategic partnership agreements. The performance obligations are unique in each agreement and would typically require the license of intellectual property, development services, support services, and future test work.
Added
On July 19, 2024, we elected to exercise our optional redemption right to redeem all $287.5 million aggregate principal amount of our outstanding 2.25% Convertible Notes due 2027 and instructed Wilmington Trust, National Association, as trustee under the Indenture Agreement governing the Convertible Notes, to issue a redemption notice to registered holders of the Convertible Notes.
Removed
This was offset by a $12.7 million decrease in IPR&D expense mainly related to the milestone payments for the September 2021 acquisition, a $7.7 million decrease in consulting expenses, and a $6.6 million decrease in lab and clinical trial related expenses. ​ Selling, General and Administrative ​ Selling, general and administrative expenses increased by $29.7 million, or 5.0%, in the year ended December 31, 2023 compared to the year ended December 31, 2022.
Added
The Redemption Date fixed for the redemption of the Convertible Notes was October 11, 2024. The redemption price for the Convertible Notes was equal to 100% of the principal amount of the Convertible Notes redeemed plus accrued and unpaid interest to, but excluding, the Redemption Date.
Removed
The increase was attributable to a $18.0 million increase in consulting and legal expenses, a $16.0 million increase in third party billing expenses, and a net increase of $8.0 million in salary and related compensation expenditures primarily related to an increase in stock-based compensation expense.
Added
We elected physical settlement with shares of our common stock as the settlement method to apply to all conversions of the Convertible Notes. On the Redemption Date, $287.4 million of Convertible Notes were converted for approximately 7.5 million shares of our common stock under the terms of the redemption notice.
Removed
In July 2021, we completed an additional underwritten equity offering and sold 5,175,000 shares of our common stock at a price of $113 per share to the public. Before offering expenses of $0.4 million, we received proceeds of $551.2 million net of the underwriting discount.
Added
Operating leases Our future minimum lease payments consist of $140.6 million, as described in Note 7, Leases , which excludes $0.7 million of lease commitments related to payments for leases executed but not yet commenced to be paid over the respective terms of such leases.
Removed
The Convertible Notes mature in May 2027, unless earlier converted, repurchased or redeemed in accordance with their terms.
Added
The leases have not commenced under Accounting Standards Codification, or ASC, Topic 842, Leases (ASC 842), as of December 31, 2024. As a result, these leases are not reflected within the consolidated balance sheets.
Removed
Upon conversion, the Convertible Notes are convertible into cash, shares of our common stock or a combination of cash and shares of our common stock, at our election. ​ We received net proceeds from the Convertible Notes of $278.3 million, after deducting the initial purchasers’ discounts and debt issuance costs.
Removed
Please refer to Note 10, Debt , for further details. ​ Convertible Notes ​ The long-term debt obligations consist of the $287.5 million principal amount from a private placement offering to qualified institutional buyers and applicable interest.
Removed
(2) Represents the principal amount of our Convertible Notes due 2027. (3) Represents interest accrued on our Convertible Notes and Credit Line. (4) Represents various inventory purchase and other contractual obligations.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

4 edited+0 added−1 removed6 unchanged
Biggest changeAn incremental change in the investment yield of 100 basis points would increase our annual interest income by approximately $2.4 million annually in relation to amounts we would expect to earn, based on our short-term investments as of December 31, 2023.
Biggest changeThis risk is mitigated as we have maintained a relatively short average maturity for our investment portfolio. An incremental change in the investment yield of 100 basis points would increase our annual interest income by approximately $0.2 million annually in relation to amounts we would expect to earn, based on our short-term investments as of December 31, 2024.
The Company’s inability or failure to fully offset any such higher costs could harm the Company’s business, financial condition, and results of operations.
The Company’s inability or failure to fully offset any such higher costs could harm the Company’s business, financial condition, and results of operations. ​ ​ 79 Table of Contents
For the fiscal year ending December 31, 2023, compared to the fiscal year ending December 31, 2022, our unrealized loss on available for sale securities decreased due to the change in average yield rate, resulting in an unrealized gain of $13.3 million for the year ended December 31, 2023. ​ Foreign Currency Exchange Rate Fluctuations ​ Our operations are currently conducted primarily in the United States.
For the fiscal year ending December 31, 2024, compared to the fiscal year ending December 31, 2023, our unrealized loss on available for sale securities decreased due to the change in average yield rate, resulting in an unrealized gain of $2.4 million for the year ended December 31, 2024. ​ Foreign Currency Exchange Rate Fluctuations ​ Our operations are currently conducted primarily in the United States.
An incremental change in the borrowing rate of 100 basis points would increase our annual interest expense by $0.8 million based on our 82 Table of Contents $80.4 million gross debt outstanding on our Credit Line, including principal and accrued interest as of December 31, 2023.
An incremental change in the borrowing rate of 100 basis points would increase our annual interest expense by $0.8 million based on our $80.4 million gross debt outstanding on our Credit Line, including principal and accrued interest as of December 31, 2024. Our investment portfolio is exposed to market risk from changes in interest rates.
Removed
The interest rate for our Convertible Notes is fixed at 2.25% and not exposed market risk related to interest rates. Our investment portfolio is exposed to market risk from changes in interest rates. This risk is mitigated as we have maintained a relatively short average maturity for our investment portfolio.

Other NTRA 10-K year-over-year comparisons