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

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Paragraph-level year-over-year comparison of Personalis, 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.

+403 added−412 removedSource: 10-K (2025-02-27) vs 10-K (2024-02-28)

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

403 paragraphs added · 412 removed · 330 edited across 6 sections

Item 1. Business

Business — how the company describes what it does

56 edited+17 added−17 removed87 unchanged
Biggest changeThese patents and patent applications generally fall into five broad categories: • our Accuracy and Content Enhanced ("ACE") assay and NeXT platform technology, including claims directed to methods for enriching nucleic acids from a sample based on differences in various genomic features, such as GC-content, molecular size, presence of genetic variations or rearrangements, identification of biomedically interpretable variants, epigenetic modifications, and/or species-origin (e.g., human and non-human); 5 Table of Contents • hybrid exome-genome technologies, including claims directed to methods for combining exome and/or whole genome sequencing data generated from a sample, along with the identification of other variants to identify or detect disease; • liquid biopsy methods, including claims directed to methods of analyzing sequenced nucleic acids obtained from a patient sample in comparison with nucleic acids representing the reference genome, obtained from a blood sample, to identify disease, or recommend a drug treatment; • clinical interpretation and neoantigen identification and prediction methods, including claims directed to methods of ranking genes associated with a phenotype and inheritance pattern or identifying neoantigens expressed in a disease sample that may be used for targeted treatments; and • personalized genetic testing assays, including claims directed to methods for using sequencing data to create a personalized genetic test to monitor cancer progression, identify neoantigen candidates for personalized cancer vaccine treatment, or detect the recurrence of disease at the earliest possible timepoint.
Biggest changeThese patents and patent applications generally fall into five broad categories: • personalized genetic testing assays, including claims directed to methods for using sequencing data to create a personalized genetic test to monitor cancer progression, identify neoantigen candidates for personalized cancer therapy treatment, or detect the recurrence of disease at the earliest possible timepoint; • liquid biopsy methods, including claims directed to methods of analyzing sequenced nucleic acids obtained from a patient sample in comparison with nucleic acids representing the reference genome, obtained from a blood sample, to identify disease, or recommend a drug treatment; • clinical interpretation and neoantigen identification and prediction methods, including claims directed to methods of ranking genes associated with a phenotype and inheritance pattern or identifying neoantigens expressed in a disease sample that may be used for targeted treatments; and • hybrid exome-genome technologies, including claims directed to methods for combining exome and/or whole genome sequencing data generated from a sample, along with the identification of other variants to identify or detect disease; • our Accuracy and Content Enhanced ("ACE") assay and NeXT platform technology, including claims directed to methods for enriching nucleic acids from a sample based on differences in various genomic features, such as GC-content, molecular size, presence of genetic variations or rearrangements, identification of biomedically interpretable variants, epigenetic modifications, and/or species-origin (e.g., human and non-human).
Federal and State Laboratory Licensing Requirements Under the CLIA, a laboratory is any facility that performs laboratory testing on specimens derived from humans for the purpose of providing information for the diagnosis, prevention or treatment of disease, or the impairment of or assessment of health.
Federal and State Laboratory Licensing Requirements Under CLIA, a laboratory is any facility that performs laboratory testing on specimens derived from humans for the purpose of providing information for the diagnosis, prevention or treatment of disease, or the impairment of or assessment of health.
The FDA has broad post-market enforcement powers, and if unanticipated problems with our products arise, or if we or our suppliers fail to comply with regulatory requirements following FDA clearance or approval, we may become subject to enforcement actions such as: • restrictions on manufacturing processes; • restrictions on product marketing; • warning letters; • withdrawal or recall of products from the market; • refusal to approve pending PMAs, 510(k)s, or supplements to approved PMAs or cleared 510(k)s that we submit; • fines, restitution, or disgorgement of profits or revenue; • suspension or withdrawal of regulatory clearances or approvals; • limitation on, or refusal to permit, import or export of our products; • product seizures; • injunctions; or • imposition of civil or criminal penalties.
The FDA has broad post-market enforcement powers, and if unanticipated problems with our products arise, or if we or our suppliers fail to comply with regulatory requirements following FDA clearance or approval, we may become subject to enforcement actions such as: • restrictions on manufacturing processes; • restrictions on product marketing; • warning letters; • withdrawal or recall of products from the market; 10 Table of Contents • refusal to approve pending PMAs, 510(k)s, or supplements to approved PMAs or cleared 510(k)s that we submit; • fines, restitution, or disgorgement of profits or revenue; • suspension or withdrawal of regulatory clearances or approvals; • limitation on, or refusal to permit, import or export of our products; • product seizures; • injunctions; or • imposition of civil or criminal penalties.
Because of the ultra-high analytical sensitivity of our technology, we are initially focusing on three indications: breast cancer, lung cancer, and immunotherapy (IO) monitoring.
Because of the ultra-high sensitivity of our technology, we are initially focusing on three indications: breast cancer, lung cancer, and immunotherapy (IO) monitoring.
This includes, but is not limited to, having an Injury and Illness Prevention Program, a Hazard Communication Program, an Emergency Action Plan, a Chemical Hygiene Plan and an Exposure Control Plan, which are captured in written standard operating procedures (“SOPs”). We provide training to our employees on these SOPs.
This includes, but is not limited to, having an Injury and Illness Prevention Program, a Hazard Communication Program, an Emergency Action Plan, a Chemical Hygiene Plan, a Bloodborne Pathogens Program, and an Exposure Control Plan, which are captured in written standard operating procedures (“SOPs”). We provide training to our employees on these SOPs.
All statements made in any of our securities filings, including all forward-looking statements or information, are made as of the date of the document in which the statement is included, and we do not assume or undertake any obligation to update any of those statements or documents unless we are required to do so by law. 12 Table of Contents
All statements made in any of our securities filings, including all forward-looking statements or information, are made as of the date of the document in which the statement is included, and we do not assume or undertake any obligation to update any of those statements or documents unless we are required to do so by law. 15 Table of Contents
The use of independent contractors is not a material part of our workforce strategy. Environment We believe we are in compliance with the regulations established by the state of California Division of Occupational Safety and Health Requirements and California Environmental Protection Agency applicable to our operations in Fremont, California.
The use of independent contractors is not a material part of our workforce strategy. Environment We are in compliance with the regulations established by the state of California Division of Occupational Safety and Health Requirements, and California Environmental Protection Agency applicable to our operations based in Fremont, California.
The commercial success of future products in both domestic and international markets may depend in part on the availability of coverage and adequate reimbursement from third-party payors, including government payors, such as the Medicare and Medicaid programs, managed care organizations, and other third-party payors.
The commercial success of our current and future products in both domestic and international markets may depend in part on the availability of coverage and adequate reimbursement from third-party payors, including government payors, such as the Medicare and Medicaid programs, managed care organizations, and other third-party payors.
To this end, one of our key strategies is working with a growing number of leading cancer centers and world-class academic research institutions to build and publish the clinical evidence-base to support our products and our key indications.
To this end, one of our key strategies is working with a growing number of leading cancer centers and world-class academic research institutions to build and publish the clinical evidence-base to support our products and services in our key indications.
Information on our website is not part of this Annual Report on Form 10-K or any of our other securities filings unless specifically incorporated herein or therein by reference. In addition, our filings with the SEC may be accessed through the SEC’s Interactive Data Electronic Applications system at http://www.sec.gov.
Information on our website or our social media accounts is not part of this Annual Report on Form 10-K or any of our other securities filings unless specifically incorporated herein or therein by reference. In addition, our filings with the SEC may be accessed through the SEC’s Interactive Data Electronic Applications system at http://www.sec.gov.
The AKS prohibits, among other things, knowingly and willfully offering, paying, soliciting, or receiving remuneration, directly or indirectly, overtly or covertly, in cash or in kind, in return for or to induce such person to refer an individual, or to purchase, lease, order, 8 Table of Contents arrange for, or recommend purchasing, leasing, or ordering, any good, facility, item, or service that is reimbursable, in whole or in part, under a federal healthcare program.
The AKS prohibits, among other things, knowingly and willfully offering, paying, soliciting, or receiving remuneration, directly or indirectly, overtly or covertly, in cash or in kind, in return for or to induce such person to refer an individual, or to purchase, lease, order, arrange for, or recommend purchasing, leasing, or ordering, any good, facility, item, or service that is reimbursable, in whole or in part, under a federal healthcare program.
It is unclear how any such challenges and the health reform measures of the Biden administration will impact the ACA. Other legislative changes have been proposed and adopted since the ACA was enacted.
It is unclear how any such challenges and the health reform measures of the current administration will impact the ACA. Other legislative changes have been proposed and adopted since the ACA was enacted.
It is possible for a manufacturer to obtain a Class I or Class II designation without an appropriate predicate by submitting a de novo request for reclassification. 7 Table of Contents The process for submitting a 510(k) premarket notification and receiving FDA clearance usually takes from three to 12 months, but it can take significantly longer and clearance is never guaranteed.
It is possible for a manufacturer to obtain a Class I or Class II designation without an appropriate predicate by submitting a de novo request for reclassification. The process for submitting a 510(k) premarket notification and receiving FDA clearance usually takes from three to 12 months, but it can take significantly longer and clearance is never guaranteed.
In addition, the U.S. government, state legislatures and foreign governments have shown significant interest in implementing cost containment programs to limit the growth of government-paid healthcare costs, including price controls and restrictions on reimbursement. Additionally, the coverage and reimbursement status of newly-approved or cleared laboratory tests, including our NeXT Personal Dx offering, is uncertain.
In addition, the U.S. government, state legislatures and foreign governments have shown significant interest in implementing cost containment programs to limit the growth of government-paid healthcare costs. Additionally, the coverage and reimbursement status of newly-approved or cleared laboratory tests, including our NeXT Personal Dx offering, is uncertain.
For diagnostics companies and population sequencing initiatives WES We perform whole exome sequencing ("WES") of cancer tissue and matched blood samples for diagnostic companies as an input to their products. WGS We perform whole genome sequencing ("WGS") on human samples for research projects, such as population sequencing initiatives.
For diagnostics companies and population sequencing initiatives WES We perform whole exome sequencing ("WES") of cancer tissue and matched blood samples for diagnostic companies as an input to their products. 6 Table of Contents WGS We perform whole genome sequencing ("WGS") on human samples for research projects, such as population sequencing initiatives.
If the FDA determines that our tests are subject to enforcement as medical devices, we could be subject to enforcement action, including administrative and judicial sanctions, and additional regulatory controls and submissions for our tests, all of which could be burdensome.
If the FDA determines that our tests are subject to enforcement as medical devices, we could be subject to enforcement action, including administrative and judicial sanctions, and additional regulatory controls and submissions for our tests, all of which could be 9 Table of Contents burdensome.
Therefore, compliance with a federal Anti-Kickback safe harbor does not guarantee protection under EKRA. Because EKRA is a new law, there is very little additional guidance to indicate how and to what extent it will be interpreted, applied and enforced by the government.
Therefore, compliance with a federal Anti-Kickback safe harbor does not guarantee protection under EKRA. Because EKRA is a new law, there is very little additional guidance to 11 Table of Contents indicate how and to what extent it will be interpreted, applied and enforced by the government.
CMS will use this data to calculate a weighted median payment rate for each test, which will be used to establish revised Medicare reimbursement rates for the tests. Laboratories that fail to report the required payment information may be subject to substantial civil monetary penalties.
CMS will use this data to calculate a weighted median payment rate for each 13 Table of Contents test, which will be used to establish revised Medicare reimbursement rates for the tests. Laboratories that fail to report the required payment information may be subject to substantial civil monetary penalties.
As of January 31, 2024, more than 40% of our employees had completed a Ph.D. or other advanced science or medical degree. 11 Table of Contents None of our employees are represented by a labor union or covered by collective bargaining agreements, and we have not experienced any work stoppages. We consider our relations with our employees to be good.
As of January 31, 2025, more than 40% of our employees had completed a Ph.D. or other advanced science or medical degree. None of our employees are represented by a labor union or covered by collective bargaining agreements, and we have not experienced any labor work stoppages. We consider our relations with our employees to be good.
Regulatory framework for medical devices in the United States Pursuant to its authority under the Federal Food, Drug and Cosmetic Act (“FDC Act”), the FDA has jurisdiction over medical devices, which are defined to include, among other things, in vitro diagnostic devices (“IVDs”).
Regulatory framework for medical devices in the United States Pursuant to its authority under the Federal Food, Drug and Cosmetic Act (“FDC Act”), the U.S. Food and Drug Administration (“FDA") has jurisdiction over medical devices, which are defined to include, among other things, in vitro diagnostic devices (“IVDs”).
Our turnover rates over the last three years have been consistent with such benchmarks. Reports of our position relative to the benchmarks are reported to management and the compensation committee of our board of directors on a periodic basis. As of January 31, 2024, we had 225 employees, of which 223 were full-time employees.
Our turnover rates over the last three years have been consistent with such benchmarks. Reports of our position relative to the benchmarks are reported to management and the compensation committee of our board of directors on a periodic basis. As of January 31, 2025, we had 229 employees, of which 228 were full-time employees.
If the FDA determines that our tests and associated software do not fall within the definition of an LDT, or the Proposed Rule is finalized in its present form, or there are other regulatory or legislative changes, or if we voluntarily submit one or more of our tests for premarket notification, review, clearance or approval by the FDA as medical devices, we may be required to obtain premarket clearance for our tests and associated software under Section 510(k) of the FDC Act or approval of a PMA.
If the FDA determines that our tests and associated software do not fall within the definition of an LDT, or there are other regulatory or legislative changes, or if we voluntarily submit one or more of our tests for premarket notification, review, clearance or approval by the FDA as medical devices, we may be required to obtain premarket clearance for our tests and associated software under Section 510(k) of the FDC Act or approval of a PMA.
Laboratories performing high complexity testing are required to meet more stringent requirements than laboratories performing less complex tests. In addition, a laboratory that is certified 6 Table of Contents as “high complexity” under CLIA may develop, manufacture, validate, and use proprietary tests referred to as laboratory developed tests (“LDTs”).
Laboratories performing high complexity testing are required to meet more stringent requirements than laboratories performing less complex tests. In addition, a laboratory that is certified as “high complexity” under CLIA may develop, manufacture, validate, and market proprietary tests referred to as laboratory developed tests (“LDTs”).
Further, on 10 Table of Contents August 16, 2022, President Biden signed the Inflation Reduction Act of 2022 (“IRA 2022”) into law, which among other things, extends enhanced subsidies for individuals purchasing health insurance coverage in ACA marketplaces through plan year 2025.
Further, on August 16, 2022, the Inflation Reduction Act of 2022 (“IRA 2022”) was signed into law, which among other things, extends enhanced subsidies for individuals purchasing health insurance coverage in ACA marketplaces through plan year 2025.
As of December 31, 2023, we own 27 issued U.S. patents and 14 issued foreign patents. Issued U.S. patents in our portfolio of company-owned patents are expected to expire between 2033 and 2038, excluding any additional term for patent term adjustments or patent term extensions.
As of December 31, 2024, we own 30 issued U.S. patents and 16 issued foreign patents. Issued U.S. patents in our portfolio of company-owned patents are expected to expire between 2033 and 2038, excluding any additional term for patent term adjustments or patent term extensions.
To renew our CLIA certificate, we are subject to survey and inspection every two years to assess compliance with program standards. Because we are a CAP accredited laboratory, the CMS does not perform this survey and inspection and relies on our CAP survey and inspection. We also may be subject to additional unannounced inspections.
To renew our CLIA certificate, we are subject to survey and inspection every two years to assess compliance with program standards. Because we are a CAP accredited laboratory, the Centers for Medicare & Medicaid Services (“CMS”) does not perform this survey and inspection and relies on our CAP survey and inspection. We also may be subject to additional unannounced inspections.
Markets and Distribution Our customers include pharmaceutical companies, biopharmaceutical companies, diagnostics companies, universities, non-profits, government entities, and patients. We sell through a small direct sales force, organized by geography. In November 2023, we entered into an agreement with Tempus AI, Inc.
Markets and Distribution Our customers include pharmaceutical companies, biopharmaceutical companies, diagnostics companies, universities, non-profits, government entities, and patients. We sell through a small direct sales force, organized by geography. In November 2023, we entered into an agreement with Tempus AI, Inc. ("Tempus") to co-commercialize NeXT Personal Dx in the clinical diagnostics market.
Of these full-time employees, 80 were in research and development, 70 in laboratory operations, 38 in commercial operations and 35 in general and administrative functions. 221 of our full-time employees were located in the United States, with the remaining two located in Europe (including the U.K.).
Of these full-time employees, 83 were in research and development, 67 in laboratory operations, 40 in commercial operations and 38 in general and administrative functions. 226 of our full-time employees were located in the United States, with the remaining two located in Europe (including the U.K.).
We previously derived a significant portion of our revenue from the U.S. Department of Veterans Affairs Million Veteran Program ("VA MVP"), which is a large-scale population sequencing initiative. VA MVP accounted for 13%, 13%, and 53% of our revenue for the years ended December 31, 2023, 2022, and 2021, respectively.
Natera accounted for 30% and 43% and Moderna accounted for 28% and 5% of our revenue for the years ended December 31, 2024 and 2023, respectively. We previously derived a significant portion of our revenue from the U.S. Department of Veterans Affairs Million Veteran Program ("VA MVP"), which is a large-scale population sequencing initiative.
Specifically, our success is dependent on our ability to obtain and maintain proprietary protection for our technology and the know-how related to our business, defend and enforce our intellectual property rights, and operate our business without infringing, misappropriating, or otherwise violating valid and enforceable intellectual property rights of others.
Intellectual Property Protection of our intellectual property is fundamentally important in our business. Specifically, our success is dependent on our ability to obtain and maintain proprietary protection for our unique technology, processes, and approaches, defend and enforce our intellectual property rights, and operate our business without infringing, misappropriating, or otherwise violating valid and enforceable intellectual property rights of others.
We are committed to evaluate our compliance to such regulations on a recurring basis. Available Information Our website is located at https://www.personalis.com.
We are committed to evaluating our compliance with such regulations on a recurring basis. 14 Table of Contents Available Information Our website is located at https://www.personalis.com.
The ACA contained a number of provisions expected to impact the clinical laboratory industry, such as changes governing enrollment in state and federal health care programs, reimbursement changes, and fraud and abuse. There have been executive, judicial and Congressional challenges to certain aspects of the ACA.
The ACA contained a number of provisions expected to impact the clinical laboratory industry, such as changes governing enrollment in state and federal health care programs, reimbursement changes, and fraud and abuse.
Item 1. Bu siness. Company Background Personalis develops and markets advanced cancer genomic tests and analytics. Our tests and analytics are used by pharmaceutical companies for translational research, biomarker discovery, the development of personalized cancer therapies, and we expect in the near future, for clinical trial enrollment.
Item 1. Bu siness. Company Background Personalis develops, markets, and sells advanced cancer genomic tests and services. Our services are used by pharmaceutical companies for translational research, biomarker discovery, the development of personalized cancer therapies, and for clinical trials.
Pursuant to the Coronavirus Aid, Relief, and Economic Security Act ("CARES Act"), the statutory phase-in of the payment reductions has been extended through 2024 with a 0% reduction cap for 2021-2022 and a 15% reduction cap for 2023 through 2025.
Pursuant to the Coronavirus Aid, Relief, and Economic Security Act ("CARES Act"), as amended by Section 221 of the Continuing Appropriations and Extensions Act, 2025 the statutory phase-in of the payment reductions has been extended through 2025 with a 0% reduction cap for 2021-2025 and a 15% reduction cap for 2026 through 2028.
Separate from their instrumentation product lines, both Illumina and Thermo Fisher Scientific Inc., for example, currently market next-generation sequencing clinical oncology kits that are sold to customers who have bought and operate their respective sequencing instruments. We believe that we compete favorably because of the high sensitivity and comprehensiveness of the data generated by our products.
Separate from their instrumentation product lines, both Illumina and Thermo Fisher Scientific Inc., for example, currently market next-generation sequencing clinical oncology kits that are sold to customers who have bought and operate their respective sequencing instruments.
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 (California Business and Professions Code Section 655.7). 9 Table of Contents In addition, we may be subject to state laws that prohibit other specified practices, such as billing physicians for testing that they order; waiving coinsurance, copayments, deductibles, and other amounts owed by patients; billing a state Medicaid program at a price that is higher than what is charged to one or more other payors; employing, exercising control over, licensed professionals in violation of state laws prohibiting corporate practice of medicine and other professions, and prohibitions against the splitting of professional fees with licensed professionals.
In addition, we may be subject to state laws that prohibit other specified practices, such as billing physicians for testing that they order; waiving coinsurance, copayments, deductibles, and other amounts owed by patients; billing a state Medicaid program at a price that is higher than what is charged to one or more other payors; employing, exercising control over, licensed professionals in violation of state laws prohibiting corporate practice of medicine and other professions, and prohibitions against the splitting of professional fees with licensed professionals.
NeXT Dx NeXT Dx is a comprehensive tumor profiling test that unlocks the entire exome (DNA) and transcriptome (RNA) with matched tumor-normal analysis. We believe it improves chances of finding an effective therapy or clinical trial. NeXT Dx answers the question: What are the actionable therapies and clinical trials for the patient?
NeXT Dx NeXT Dx is a comprehensive tumor profiling test that is used to help select therapy for a cancer patient and identify potential clinical trials for a patient. It analyzes a patient’s exome and transcriptome with matched tumor-normal analysis. We believe it improves chances of finding an effective therapy or help a doctor find an appropriate clinical trial.
Coverage can differ from payor to payor, and the process for determining whether a payor will provide coverage may be separate from the process for setting the reimbursement rate.
In the U.S., there is no uniform policy for determining coverage and reimbursement. Coverage can differ from payor to payor, and the process for determining whether a payor will provide coverage is 8 Table of Contents separate from the process for setting the reimbursement rate.
HIPAA and HITECH Under the administrative simplification provisions of HIPAA, as amended by the Health Information Technology for Economic and Clinical Health Act (“HITECH”), HHS issued regulations that establish uniform standards governing the conduct of certain electronic healthcare transactions and requirements for protecting the privacy and security of protected health information (“PHI”), used or disclosed by covered entities and business associates.
If any of the physicians or other healthcare providers or entities with whom we do business is found to be not in compliance with applicable laws, they may be subject to significant criminal, civil or administrative sanctions, including exclusions from government-funded healthcare programs. 12 Table of Contents HIPAA and HITECH Under the administrative simplification provisions of HIPAA, as amended by the Health Information Technology for Economic and Clinical Health Act (“HITECH”), HHS issued regulations that establish uniform standards governing the conduct of certain electronic healthcare transactions and requirements for protecting the privacy and security of protected health information (“PHI”), used or disclosed by covered entities and business associates.
Our advanced tests are used by physicians to detect cancer recurrence, monitor cancer evolution, and uncover insights for therapy selection. We also provide sequencing and data analysis services to support population sequencing initiatives.
Our tests are used by physicians to detect residual or recurrent cancer in patients, monitor cancer response to therapy, and uncover insights for therapy selection. We also provide whole exome and whole genome sequencing services for other diagnostic companies and population sequencing initiatives.
Following is a list of our core company values: • Integrity • Passion • Scientific excellence and innovation • Respect and inclusion • Teamwork and collaboration At a foundational level, employees receive training related to workplace safety and emergency preparedness, awareness and expectations of inclusion and diversity, required data protection, and other regulatory matters.
Our core company values include striving to be: • Patient-centric • Teachers • Learners • Execution-oriented • Inclusive At a foundational level, employees receive training related to workplace safety and emergency preparedness, awareness and expectations of inclusion, required data protection, and other regulatory matters.
For cancer patients NeXT Personal Dx NeXT Personal Dx is a tumor-informed liquid biopsy test for detection of MRD and recurrence in cancer. We believe it provides for earlier detection of cancer than other technologies and has been shown to detect cancer recurrence ahead of traditional imaging. It is designed to aid decision making throughout a patient's cancer journey.
NeXT Personal Dx has been shown to potentially detect cancer recurrence ahead of traditional imaging and is designed to aid decision making throughout a patient's cancer journey.
Regulatory Environment Coverage and Reimbursement Our ability, and the ability of our customers, to commercialize diagnostic tests based on our technology will depend in part on the extent to which coverage and reimbursement for these tests will be available from third-party payors.
Regulatory Environment Coverage and Reimbursement Our ability to commercialize diagnostic tests based on our technology will depend in large part on the extent to which coverage and reimbursement for our tests can be achieved. Coverage and reimbursement of new products and services is uncertain, and whether we can obtain coverage and adequate reimbursement is unknown.
We perform large-scale, high quality next-generation sequencing ("NGS") in our Clinical Laboratory Improvement Amendments of 1988 (“CLIA”) certified and College of American Pathologists (“CAP”) accredited 100,000 square foot laboratory located in Fremont, California. We were incorporated under the laws of the state of Delaware in 2011 under the name Personalis, Inc. and became a publicly-traded company in 2019.
We perform our testing services in a large-scale, high quality, Clinical Laboratory Improvement Amendments of 1988 ("CLIA") certified and College of American Pathologists (“CAP”) accredited, laboratory located in our 100,000 square foot headquarters in Fremont, California.
What are the kinetics of circulating tumor DNA ("ctDNA")? ImmunoID NeXT ImmunoID NeXT is a tissue-based test that combines whole exome (DNA) and whole transcriptome (RNA) sequencing data with advanced analytics to provide a multi-dimensional view of the tumor and the tumor microenvironment from a single sample.
ImmunoID NeXT ImmunoID NeXT is a tissue-based service that combines whole exome and whole transcriptome sequencing data with advanced analytics to provide a multi-dimensional view of the tumor and the tumor microenvironment from a single sample. It is designed to enable the development of more efficacious cancer (immuno) therapies and the next-generation of composite biomarkers to better predict patient response.
Customer Concentration We currently derive a significant portion of our revenue from Natera, Inc. ("Natera") under our partnership to provide advanced tumor analysis for use in Natera's MRD testing offerings. Natera accounted for 43%, 41%, and 10% of our revenue for the years ended December 31, 2023, 2022, and 2021, respectively.
Customer Concentration We currently derive a significant portion of our revenue from Moderna, Inc. ("Moderna") by providing genomic testing in its ongoing clinical trials evaluating a personalized cancer therapy and Natera, Inc. ("Natera") under our partnership to provide advanced tumor analysis for use in Natera's MRD testing offerings.
(“Foresight”), Freenome, Inc., Fulgent Genetics, Inc., Geneseeq Technology Inc., GRAIL, Guardant Health, Inc., Haystack Oncology, Inc., which was acquired by Quest Diagnostics Incorporated in June 2023, Invitae Corporation (which on February 13, 2024 filed a voluntary petition to commence proceedings under chapter 11 of title 11 of the United States Code in the United States Bankruptcy Court for the District of New Jersey), MedGenome Inc., Myriad Genetics, Inc., Natera, NeoGenomics, Inc., Novogene Corporation, Predicine, Inc., Roche Molecular Systems, Inc., Tempus, Inc., and Veracyte, Inc.
(“Foresight”), Foundation Medicine, Inc., Freenome, Inc., Fulgent Genetics, Inc., Geneseeq Technology Inc., GRAIL, Inc., Guardant Health, Inc., Haystack Oncology, Inc., which was acquired by Quest Diagnostics Incorporated in June 2023, Laboratory Corporation of America Holdings, MedGenome Inc., Myriad Genetics, Inc., Natera, Inc. ("Natera"), NeoGenomics, Inc., Novogene Corporation, Predicine, Inc., Roche Molecular Systems, Inc., SAGA Diagnostics AB, Tempus, and Veracyte, Inc.
The principal markets for our products are in the United States, Europe (including the U.K.), and Asia-Pacific, which accounted for 90%, 8%, and 2% of our revenue for the year ended December 31, 2023, respectively. Clinical Evidence and Reimbursement Generating clinical evidence is critical for driving adoption of our tests in the clinical market (i.e., for cancer patients).
The principal markets for our products are in the United States, Europe (including the U.K.), and rest of the world, including Asia-Pacific, which accounted for 96%, 3%, and 1%, respectively, of our revenue for the year ended December 31, 2024.
Our patent strategy is focused on seeking coverage for our core technology, our NeXT platform, including applications and implementations for enhancing sequencing coverage of certain genomic regions, identifying neoantigens, analyzing cell-free nucleic acids, and creating personalized cancer recurrence detection assays.
We protect our research and development investments, inventions, and unique processes by relying on a combination of patents, trademarks, copyrights, trade secrets, know-how, confidentiality agreements and procedures, non-disclosure agreements with third parties, employee disclosure and invention assignment agreements, and other contractual rights. 7 Table of Contents Our patent strategy is focused on seeking coverage for our core technology, our NeXT platform, including applications and implementations for enhancing sequencing coverage of certain genomic regions, identifying neoantigens, analyzing cell-free nucleic acids, and creating personalized cancer recurrence detection assays.
These companies offer services that implement various technological approaches including next-generation sequencing and microarray analyses. Some of our present or potential competitors include Adela, Inc., BostonGene Corporation, Caris Life Sciences, Inc., Foresight Diagnostics Inc.
Some of our present or potential competitors include Adela, Inc., BostonGene Corporation, Caris Life Sciences, Inc., DELFI Diagnostics, Inc., Exact Sciences Corporation, Foresight Diagnostics Inc.
Our top five customers, including the VA MVP and Natera, accounted for 74%, 76% and 84% of our revenue for the years ended December 31, 2023, 2022 and 2021, respectively. Segments We manage our business as one operating segment, which is the sale of sequencing and data analysis services.
VA MVP accounted for 9% and 13% of our revenue for the years ended December 31, 2024 and 2023, respectively. Our top five customers, including the VA MVP, Moderna and Natera, accounted for 81% and 74% of our revenue for the years ended December 31, 2024 and 2023, respectively.
NeXT Personal Dx involves an initial test (whole genome sequencing of a tumor and normal sample) and subsequent blood/plasma tests based on a tumor-informed personalized panel for each patient. NeXT Personal Dx answers the questions: Does the patient have MRD? Has the cancer returned?
NeXT Personal Dx involves the initial whole genome sequencing of matched tumor and normal samples from a patient in order to create a personalized detection assay for that patient based on the biology of the patient's cancer and the subsequent use of that personalized assay to test one or more samples of the patient's blood/plasma.
We have collaborations with Cancer Research UK, University College London, and the Francis Crick Institute (the TRACERx study); The Royal Marsden; the Vall d'Hebron Institute of Oncology (VHIO); Duke University; the Dana-Farber Cancer Institute; University Medical Center Hamburg-Eppendorf (also known as UKE); and Criterium and the Academic Breast Cancer Consortium that will focus on building the evidence-base for our technology and these indications.
We currently have collaborations with Cancer Research UK, University College London, and the Francis Crick Institute (the TRACERx study); Institut Curie, The Royal Marsden; the Vall d'Hebron Institute of Oncology (VHIO); the University of California, San Diego, Duke University; Vanderbilt University and Johns Hopkins University (the PREDICT study); the Dana-Farber Cancer Institute; the University of Texas M.D.
We are striving to obtain reimbursement coverage for NeXT Personal Dx and NeXT Dx. In January 2024, we received a final Medicare coverage determination for our NeXT Dx offering, extended retroactively to August 29, 2023. We estimate that approximately half of new solid tumor cancer cases will be diagnosed in patients covered by Medicare.
One of our 2025 goals is to submit for Medicare reimbursement for NeXT Personal Dx upon publication of compelling clinical evidence, and receive Medicare coverage, in at least two of our three key indications. In January 2024, we received a final Medicare coverage determination for our NeXT Dx offering, extended retroactively to August 29, 2023.
One of our 2024 goals is to submit for Medicare reimbursement for NeXT Personal Dx upon publication of compelling clinical evidence in three key indications. Competition Our principal competition comes from commercial and academic organizations using established and new laboratory tests to produce information that is similar to the information that we generate for our customers.
We estimate that approximately half of new solid tumor cancer cases will be diagnosed in patients covered by Medicare. Competition Our principal competition comes from commercial and academic organizations that employ various approaches to produce information that is similar to the information that we generate for our customers.
Products For pharmaceutical and biopharmaceutical companies NeXT Personal NeXT Personal is a tumor-informed liquid biopsy test for detection of minimal residual disease ("MRD") and recurrence in cancer. It delivers industry-leading, ultra-high analytical sensitivity, which we believe allows for detection of cancer earlier than other technologies. NeXT Personal answers the questions: Does the patient have MRD?
We were incorporated under the laws of the state of Delaware in 2011 under the name Personalis, Inc. and became a publicly-traded company in 2019. Products For pharmaceutical and biopharmaceutical companies NeXT Personal NeXT Personal is a tumor-informed liquid biopsy test for detection of minimal residual disease ("MRD"), therapy response and recurrence monitoring, in solid tumor cancers.
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It is designed to enable the development of more efficacious cancer immunotherapies and the next-generation of composite biomarkers to better predict patient response. ImmunoID NeXT answers the question: What are the composite biomarkers in the tumor and the tumor microenvironment?
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It delivers industry-leading, ultra-high sensitivity, which we believe allows for detection of cancer earlier than other technologies. NeXT Personal helps answer these questions: Who are the right patients to enroll into a clinical trial? How are patients responding to the investigational therapy? Can circulating tumor DNA ("ctDNA") potentially be used as an endpoint in clinical trials?
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(formerly known as Tempus Labs, Inc., and referred to herein as "Tempus") to commercialize NeXT Personal Dx in the clinical diagnostics market. As a result, we will also leverage the sales force of Tempus beginning 4 Table of Contents in 2024.
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ImmunoID NeXT helps answer these questions: What are the markers and composite biomarkers in the tumor and the tumor microenvironment that contribute to therapy response and resistance? What are the neoantigens in the tumor that can be used in individualized neoantigen therapy (INT)?
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If the key opinion leaders ("KOLs") we are collaborating with have a positive experience using our products, we are optimistic this will support broader use of our products by other KOLs, as well as clinicians in the future. Furthermore, generating clinical evidence is crucial to obtaining reimbursement coverage from Medicare and other payors.
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For cancer patients NeXT Personal Dx NeXT Personal Dx is a tumor-informed liquid biopsy test for the detection of MRD. We believe NeXT Personal Dx is the first ultra-sensitive test on the market to detect MRD and monitor therapy response in patients with solid tumor cancers.
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Maximizing insights into both the tumor- and immune-related components of the tumor microenvironment is essential in identifying and understanding the reasons why certain cancer patients respond more favorably to oncology therapies than others.
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NeXT Personal Dx helps answer these questions: Does the patient still have cancer after curative intent treatment? How is the patient's cancer responding to therapy? And, importantly, has the cancer potentially recurred?
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It is via access to such a comprehensive dataset for each patient that our customers can begin to discover new, clinically relevant biomarkers for the immunotherapy era, and ultimately improve cancer patient outcomes with the development of more efficacious therapeutics. Intellectual Property Protection of our intellectual property is fundamental to the long-term success of our business.
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NeXT Dx helps answer the question: What are the tumor mutations with actionable therapies and clinical trials for the patient?
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We seek to protect our investments made into the development of our technology by relying on a combination of patents, trademarks, copyrights, trade secrets, know-how, confidentiality agreements and procedures, non-disclosure agreements with third parties, employee disclosure and invention assignment agreements, and other contractual rights.
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In December 2024, we agreed to expand the relationship to include biopharma industry customers. Under this expanded relationship, Tempus can offer our NeXT Personal MRD product to pharmaceutical and biotech customers who wish to bundle our tumor-informed MRD testing with other Tempus offerings in a given study.
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Coverage and reimbursement of new products and services is uncertain, and whether the companies that use our instruments to develop their own products or services will attain coverage and adequate reimbursement is unknown. In the U.S., there is no uniform policy for determining coverage and reimbursement.
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Clinical Evidence and Reimbursement Generating clinical evidence is critical for driving adoption of our tests in the clinical market (i.e., for cancer patients) and establishing reimbursement by Medicare and private insurance companies.
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If we are inadequately covered by insurance or ineligible for such reimbursement, this could limit our ability to market tests in the future.
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Anderson Cancer Center; University Medical Center Hamburg-Eppendorf (also known as UKE); and Criterium and the Academic Breast Cancer Consortium. Furthermore, generating clinical evidence is crucial to obtaining reimbursement coverage from Medicare and other payors.
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We currently market our diagnostic tests as LDTs. On October 3, 2023, the FDA published a Notice of Proposed Rulemaking (the “Proposed Rule”) to regulate LDTs as medical devices under the FDC Act. The Proposed Rule outlines a 5-stage, 4-year, risk-based timeline for all LDTs to come within the existing medical device regulatory framework.
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We believe that we compete favorably because of our differentiated technology, such as our ultra-sensitive approach for MRD that is able to detect cancer recurrence many months before imaging or other technologies, comprehensive data and variant calling we provide to our biopharmaceutical customers, high-quality results, and exceptional service.
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In early December 2023, following the close of a public comment period, the FDA announced its intention to publish the Proposed Rule in final form in April 2024.
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Segments We manage our business as one operating segment, which is providing advanced cancer genomic tests and services for precision oncology applications, personalized testing, and other tests. We derive revenue primarily in the United States and manage our business activities on a consolidated basis.
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On January 18, 2024, the Director of FDA’s Center for Devices and Radiological Health, which oversees IVD regulation within the FDA, and the Chief Medical Officer and Acting Director of CMS’ Center for Clinical Standards and Quality, which oversees CLIA within CMS, issued a joint press release supporting the Proposed Rule, indicating broad support within the Department of Health and Human Services for FDA’s Proposed Rule.
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Our chief executive officer (“CEO”) is our chief operating decision maker (“CODM”) who reviews consolidated operating results to make decisions about allocating resources and assessing performance for the entire company.
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If finalized as proposed, we would be required to obtain PMA approval for certain of our tests by October 1, 2027. We would also be subject to device registration and listing requirements, medical device reporting requirements and the requirements of the FDA’s Quality System Regulation.
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We currently market our diagnostic tests as LDTs. On April 29, 2024, the FDA published final regulations to make explicit that IVD products are devices under the FDC Act, removing much of the FDA’s historical enforcement discretion for most LDTs.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeIf we are unable to successfully obtain rights to required third-party intellectual property rights or maintain the existing intellectual property rights we have, we may have to abandon development of that program and our business and financial condition could suffer.
Biggest changeSee “ — We may need to continue to invest in our infrastructure in advance of increased demand for our services; our failure to accurately forecast demand would have a negative impact on our business and our ability to achieve and sustain profitability.” and “ — Expansion into international markets would subject us to increased regulatory oversight and regulatory, economic, social, health and political uncertainties, which could cause a material adverse effect on our business, financial position, and results of operations.” If we are unable to successfully obtain rights to required third-party intellectual property rights or maintain the existing intellectual property rights we have, we may have to abandon development of that program and our business and financial condition could suffer.
Such litigation or proceedings could substantially increase our operating losses and reduce the resources available for development activities or any future sales, marketing, or distribution activities. We may not have sufficient financial or other resources to conduct such litigation or proceedings adequately.
Such litigation or proceedings could substantially increase our operating losses and reduce the resources available for development activities or any future sales, marketing, or distribution activities. We may not have sufficient financial or other resources to conduct such litigation or proceedings adequately.
Any of these events could have a material adverse effect on our reputation, business, or financial condition, including but not limited to: loss of customers; interruptions or stoppages in our business operations (including, clinical trials); interruptions or stoppages of data collection needed to train our algorithms; inability to process personal information or to operate in certain jurisdictions; limited ability to develop or commercialize our platform, products, and services; expenditure of time and resources to defend any claim or inquiry; adverse publicity; or substantial changes to our business model or operations.
Any of these events could have a material adverse effect on our reputation, business, or financial condition, including but not limited to: loss of customers; interruptions or stoppages in our business operations (including, clinical trials); interruptions or stoppages of data collection needed to train our algorithms; inability to process personal information or to operate in certain jurisdictions; limited ability to develop or commercialize our products and services; expenditure of time and resources to defend any claim or inquiry; adverse publicity; or substantial changes to our business model or operations.
In addition, there can be no assurance that: • others will not or may not be able to make, use, offer to sell, or sell tests that are the same as or similar to our products or services but that are not covered by the claims of the patents that we own or license; • we or our future licensors or collaborators are the first to make the inventions covered by each of our issued patents and pending patent applications that we own or license; • we or our future licensors or collaborators are the first to file patent applications covering certain aspects of our inventions; • others will not independently develop similar or alternative technologies or duplicate any of our technologies without infringing our intellectual property rights; 41 Table of Contents • a third party may not challenge our patents and, if challenged, a court would hold that our patents are valid, enforceable, and infringed; • any issued patents that we own or may license will provide us with any competitive advantages, or will not be challenged by third parties; • we may develop or in-license additional proprietary technologies that are patentable; • pending patent applications that we own or may license will lead to issued patents; • the patents of others will not have a material or adverse effect on our business, financial condition, results of operations, and prospects; and • our competitors do not conduct research and development activities in countries where we do not have enforceable patent rights and then use the information learned from such activities to develop competitive products or services for sale in our major commercial markets.
In addition, there can be no assurance that: • others will not or may not be able to make, use, offer to sell, or sell tests that are the same as or similar to our products or services but that are not covered by the claims of the patents that we own or license; • we or our future licensors or collaborators are the first to make the inventions covered by each of our issued patents and pending patent applications that we own or license; • we or our future licensors or collaborators are the first to file patent applications covering certain aspects of our inventions; • others will not independently develop similar or alternative technologies or duplicate any of our technologies without infringing our intellectual property rights; • a third party may not challenge our patents and, if challenged, a court would hold that our patents are valid, enforceable, and infringed; • any issued patents that we own or may license will provide us with any competitive advantages, or will not be challenged by third parties; • we may develop or in-license additional proprietary technologies that are patentable; • pending patent applications that we own or may license will lead to issued patents; 43 Table of Contents • the patents of others will not have a material or adverse effect on our business, financial condition, results of operations, and prospects; and • our competitors do not conduct research and development activities in countries where we do not have enforceable patent rights and then use the information learned from such activities to develop competitive products or services for sale in our major commercial markets.
We are aware that Natera has at least one third party supplier of DNA sequencing and analysis services, such that Natera has elected, and may continue to elect in the future, to send a portion (or all) of its samples to its other supplier(s) instead of us, which it is not contractually prohibited from doing, given the non-exclusive nature of our agreement.
We are also aware of at least one third party supplier of DNA sequencing and analysis services, such that Natera has elected, and may continue to elect in the future, to send a portion (or all) of its samples to its other supplier(s) instead of us, which it is not contractually prohibited from doing, given the non-exclusive nature of our agreement.
Private individuals can bring False Claims Act “qui tam” actions, on behalf of the government and such individuals, commonly known as “whistleblowers,” may share in amounts paid by the entity to the government in fines or settlement; • the federal Civil Monetary Penalties Law, which prohibits, among other things, the offering 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, unless an exception applies; • the federal Physician Payments Sunshine Act, which requires certain manufacturers of drugs, biologicals, and medical devices or supplies that require premarket approval by or notification to the FDA, and for which payment is available under Medicare, Medicaid, or the Children’s Health Insurance Program, with certain exceptions, to report annually to CMS information related to (i) payments and other transfers of value to physicians (defined to include doctors, dentists, optometrists, podiatrists, and chiropractors), other healthcare professionals (such as physicians assistants and nurse practitioners) and teaching hospitals, and (ii) ownership and investment interests held by physicians and their immediate family members; • the HIPAA fraud and abuse provisions, which created federal civil and criminal statutes that prohibit, among other things, defrauding healthcare programs, willfully obstructing a criminal investigation of a healthcare offense, and falsifying or concealing a material fact or making any materially false statements in connection with the payment for healthcare benefits, items or services.
Private individuals can bring False Claims Act “qui tam” actions, on behalf of the government and such individuals, commonly known as “whistleblowers,” may share in amounts paid by the entity to the government in fines or settlement; • the federal Civil Monetary Penalties Law, which prohibits, among other things, the offering 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, unless an exception applies; 36 Table of Contents • the federal Physician Payments Sunshine Act, which requires certain manufacturers of drugs, biologicals, and medical devices or supplies that require premarket approval by or notification to the FDA, and for which payment is available under Medicare, Medicaid, or the Children’s Health Insurance Program, with certain exceptions, to report annually to CMS information related to (i) payments and other transfers of value to physicians (defined to include doctors, dentists, optometrists, podiatrists, and chiropractors), other healthcare professionals (such as physicians assistants and nurse practitioners) and teaching hospitals, and (ii) ownership and investment interests held by physicians and their immediate family members; • the HIPAA fraud and abuse provisions, which created federal civil and criminal statutes that prohibit, among other things, defrauding healthcare programs, willfully obstructing a criminal investigation of a healthcare offense, and falsifying or concealing a material fact or making any materially false statements in connection with the payment for healthcare benefits, items or services.
The market price of our common stock may fluctuate or decline significantly in response to numerous factors, many of which are beyond our control, including: • actual or anticipated fluctuations in our operating results; • failure to meet or exceed financial estimates and projections of the investment community or that we provide to the public; • issuance of new or updated research reports by securities analysts or changed recommendations for our stock; • competition from existing tests or new tests that may emerge; • announcements by us or our competitors relating to significant acquisitions, strategic partnerships, joint ventures, collaborations, capital commitments, or by or pertaining to our customers, particularly the VA MVP and Natera, as our largest customers; • the timing and amount of our investments in the growth of our business; 46 Table of Contents • actual or anticipated changes in regulatory oversight of our business or issues we may face with regulators; • additions or departures of key management or other personnel; • inability to obtain additional funding; • sales of our common stock by us or our stockholders in the future; • disputes or other developments related to our intellectual property or other matters, including litigation; • health epidemics or pandemics, geopolitical conflicts, inflation, global supply chain issues, regional or national economic slowdowns, recessions, depressions or other economic downturns; and • other general economic, industry, and market conditions, including factors unrelated to our operating performance or the operating performance of our competitors.
The market price of our common stock may fluctuate or decline significantly in response to numerous factors, many of which are beyond our control, including: • actual or anticipated fluctuations in our operating results; • failure to meet or exceed financial estimates and projections of the investment community or that we provide to the public; • issuance of new or updated research reports by securities analysts or changed recommendations for our stock; • competition from existing tests or new tests that may emerge; • announcements by us or our competitors relating to significant acquisitions, strategic partnerships, joint ventures, collaborations, capital commitments, or by or pertaining to our customers, particularly the VA MVP, Moderna and Natera, as our largest customers; 48 Table of Contents • the timing and amount of our investments in the growth of our business; • actual or anticipated changes in regulatory oversight of our business or issues we may face with regulators; • additions or departures of key management or other personnel; • inability to obtain additional funding; • sales of our common stock by us or our stockholders in the future; • disputes or other developments related to our intellectual property or other matters, including litigation; • health epidemics or pandemics, geopolitical conflicts, inflation, global supply chain issues, regional or national economic slowdowns, recessions, depressions or other economic downturns; and • other general economic, industry, and market conditions, including factors unrelated to our operating performance or the operating performance of our competitors.
In addition to data privacy and security laws, because we process some credit card payments through a third-party payment processing partner, we are contractually subject to industry standards adopted by industry groups and may become subject to such obligations in the future. For example, we may also be subject to the Payment Card Industry Data Security Standard (“PCI DSS”).
In addition to data privacy and security laws, because we process some credit card payments through a third-party payment processing partner, we are contractually subject to industry standards adopted by industry groups and may become subject to such obligations in the future. For example, we also are subject to the Payment Card Industry Data Security Standard (“PCI DSS”).
While we have attempted to grow our customer base and diversify our revenue concentration beyond the VA MVP and Natera, we may not be able to successfully do so in the future. Our predictions regarding the future level of demand for our services that will be generated by these customers may be wrong.
While we have attempted to grow our customer base and diversify our revenue concentration beyond Natera, Moderna, and the VA MVP, we may not be able to successfully do so in the future. Our predictions regarding the future level of demand for our services that will be generated by these customers may be wrong.
The U.K. and the EU have signed the EU-U.K. Trade and Cooperation Agreement ("TCA"), which became provisionally applicable on January 1, 2021 and entered into force on May 1, 2021. This agreement provides details on how some aspects of the U.K. and EU's relationship will operate in the future. However, there are still many uncertainties.
The U.K. and the EU have signed the EU-U.K. Trade and Cooperation Agreement which became provisionally applicable on January 1, 2021 and entered into force on May 1, 2021. This agreement provides details on how some aspects of the U.K. and EU's relationship will operate in the future. However, there are still many uncertainties.
For example, Washington’s My Health My Data Act (“MHMD”) broadly defines consumer health data, places restrictions on processing consumer health data (including imposing stringent requirements for consents), provides consumers certain rights with respect to their health data, and creates a private right of action to allow individuals to sue for violations of the law.
For example, Washington’s My Health My Data Act broadly defines consumer health data, places restrictions on processing consumer health data (including imposing stringent requirements for consents), provides consumers certain rights with respect to their health data, and creates a private right of action to allow individuals to sue for violations of the law.
We are a smaller reporting company, and any decision on our part to avail ourselves of certain reduced reporting and disclosure requirements applicable to smaller reporting companies could make our common stock less attractive to investors. We are a “smaller reporting company” as defined in the Exchange Act.
We currently are a smaller reporting company, and any decision on our part to avail ourselves of certain reduced reporting and disclosure requirements applicable to smaller reporting companies could make our common stock less attractive to investors. We currently are a “smaller reporting company” as defined in the Exchange Act.
IVDs must comply with the General Safety and Performance Requirements (“GSPRs”) set out in Annex I of the IVDR. Compliance with these requirements is a prerequisite to be able to affix the CE Mark to IVDs, without which they cannot be marketed or sold in the EEA.
IVDs must comply with the General Safety and Performance Requirements set out in Annex I of the IVDR. Compliance with these requirements is a prerequisite to be able to affix the CE Mark to IVDs, without which they cannot be marketed or sold in the EEA.
For example, the General Data Protection Regulation 2016/679 (“EU GDPR”), the United Kingdom’s GDPR (“UK GDPR”), Brazil’s General Data Protection Law (Lei Geral de Proteção de Dados Pessoais) (Law No. 13,709/2018), and China’s Personal Information Protection Law (“PIPL”) impose strict requirements for processing personal information.
For example, the General Data Protection Regulation 2016/679 (“EU GDPR”), the United Kingdom’s GDPR (“UK GDPR”), Brazil’s General Data Protection Law (Lei Geral de Proteção de Dados Pessoais) (Law No. 13,709/2018), and China’s Personal Information Protection Law impose strict requirements for processing personal information.
Conformity Assessed ("UKCA") mark to replace the CE Mark for placing IVDs on the market in Great Britain (“G.B.”). Northern Ireland will, however, continue to be covered by the regulations governing CE Marks (a CE Mark or a CE Mark and UKNI Mark will be required to place products on the Northern Ireland market).
Conformity Assessed mark to replace the CE Mark for placing IVDs on the market in Great Britain (“G.B.”). Northern Ireland will, however, continue to be covered by the regulations governing CE Marks (a CE Mark or a CE Mark and UKNI Mark will be required to place products on the Northern Ireland market).
Inferior internal control over financial reporting could also cause investors to lose confidence in our reported financial information, which could have a negative effect on the trading price of our common stock. We are a non-accelerated filer.
Inferior internal control over financial reporting could also cause investors to lose confidence in our reported financial information, which could have a negative effect on the trading price of our common stock. We currently are a non-accelerated filer.
If we are found to infringe, misappropriate, or otherwise violate a third party’s intellectual property rights, and we are unsuccessful in demonstrating that such rights are invalid or unenforceable, we may be required to pay substantial damages, including treble damages and attorneys’ fees for willful infringement; obtain one or more licenses from third parties in order to continue developing and marketing our products, services and technology, which may not be available on commercially reasonable terms (if at all) or may be non-exclusive, thereby giving our competitors and other third parties access to the same technologies licensed to us; pay substantial royalties and other fees; and redesign any infringing tests or other activities, which may be impossible or require substantial time and monetary expenditure; or be prohibited from commercializing certain tests, all of which could have a material adverse effect on our business, financial condition, results of operations, and prospects.
If we are found to infringe, misappropriate, or otherwise violate a third party’s intellectual property rights, and we are unsuccessful in demonstrating that such rights are invalid or unenforceable, we may be required to pay substantial damages, including treble damages and attorneys’ fees for willful infringement; obtain one or more licenses from third parties in order to continue developing and marketing our products, services and technology, which may not be available on commercially reasonable terms (if at all) or may be non-exclusive, thereby giving our competitors and other third parties access to the same technologies licensed to us; 41 Table of Contents pay substantial royalties and other fees; and redesign any infringing tests or other activities, which may be impossible or require substantial time and monetary expenditure; or be prohibited from commercializing certain tests, all of which could have a material adverse effect on our business, financial condition, results of operations, and prospects.
Personalized cancer therapies represent new therapeutic approaches that could result in heightened regulatory scrutiny, delays in clinical development, or delays in or inability to achieve regulatory approval, commercialization, or payor coverage, any of which could adversely affect our business.
Personalized cancer therapies represent new therapeutic approaches that could result in heightened regulatory scrutiny, delays in clinical development, or delays in achieving, or inability to achieve, regulatory approval, commercialization, or payor coverage, any of which could adversely affect our business.
In September 2022, we entered into a new contract with the VA MVP to continue providing them WGS services and received an initial task order with a value of up to $10.0 million.
In September 2022, we entered into a new contract with the VA MVP to continue providing them WGS services and received an initial task order with a value of up to $10.0 million (the "2022 VA MVP Agreement").
Likewise, if Natera or any of our other significant customers were to reduce or cease their use of our services, then our revenue, cash position, and results of operations may be materially adversely impacted.
Likewise, if Natera, Moderna or any of our other significant customers were to reduce or cease their use of our services, then our revenue, cash position, and results of operations may be materially adversely impacted.
Security incidents and attendant consequences may prevent or cause customers or partners to stop using our platform, products, and services, deter new customers or partners from using our platform, products, and services, and negatively impact our ability to grow and operate our business.
Security incidents and attendant consequences may prevent or cause customers or partners to stop using our products and services, deter new customers or partners from using our products and services, and negatively impact our ability to grow and operate our business.
The FDA has broad post-market enforcement powers, and if unanticipated problems with our services or products arise, or if we or our suppliers fail to comply with regulatory requirements following FDA clearance or approval, we may become subject to enforcement actions such as: • restrictions on manufacturing processes; • restrictions on service or product marketing; • warning letters; • withdrawal or recall of services or products from the market; • refusal to approve pending PMAs, 510(k)s, or supplements to approved PMAs or cleared 510(k)s that we submit; • fines, restitution, or disgorgement of profits or revenue; • suspension or withdrawal of regulatory clearances or approvals; • limitation on, or refusal to permit, import or export of our products; • product seizures; • injunctions; or • imposition of civil or criminal penalties.
The FDA has broad post-market enforcement powers, and if unanticipated problems with our services or products arise, or if we or our suppliers fail to comply with regulatory requirements following FDA clearance or approval, we may become subject to enforcement actions such as: • restrictions on manufacturing processes; • restrictions on service or product marketing; • warning letters; • withdrawal or recall of services or products from the market; • refusal to approve pending PMAs, 510(k)s, or supplements to approved PMAs or cleared 510(k)s that we submit; • fines, restitution, or disgorgement of profits or revenue; 29 Table of Contents • suspension or withdrawal of regulatory clearances or approvals; • limitation on, or refusal to permit, import or export of our products; • product seizures; • injunctions; or • imposition of civil or criminal penalties.
See “—Litigation or other proceedings or third-party claims of intellectual property infringement, misappropriation or other violations may require us to spend significant time and money, and could in the future prevent us from selling our tests or impact our stock price, any of which could have a material adverse effect.” We cannot 19 Table of Contents assure you that, if we were forced to replace Illumina or another supplier on which we rely, we would be able to secure alternative equipment, reagents, and other materials, and bring such equipment, reagents, and other materials on-line and revalidate them without experiencing interruptions in our workflow.
See “—Litigation or other proceedings or third-party claims of intellectual property infringement, misappropriation or other violations may require us to spend significant time and money, and could in the future prevent us from selling our tests or impact our stock price, any of which could have a material adverse effect.” We cannot assure you that, if we were forced to replace Illumina or another supplier on which we rely, we would be able to secure alternative equipment, reagents, and other materials, and bring such equipment, reagents, and other materials on-line and revalidate them without experiencing interruptions in our workflow.
If any such actions are instituted against us, and we are not successful in defending ourselves or asserting our rights, those actions could have a significant impact on our business and results of operations, including the imposition of significant administrative, civil and criminal penalties, damages, fines, imprisonment, exclusion from government healthcare programs, contractual damages, refunding of payments received by us, reputational harm, additional reporting, or oversight obligations if we become subject to a corporate integrity agreement or other agreement to resolve allegations of non-compliance with the law and curtailment or restructuring of our operations.
If any such actions are instituted against us, and we are not successful in defending ourselves or asserting our rights, those actions could have a significant impact on our business and results of operations, including the imposition of significant administrative, civil and criminal penalties, damages, fines, imprisonment, exclusion from government healthcare programs, contractual damages, refunding of payments received by us, reputational harm, additional reporting, or oversight obligations if we become subject to a corporate integrity agreement or other agreement to resolve allegations of non-compliance with the law and curtailment or restructuring 35 Table of Contents of our operations.
Any of the foregoing could have a material adverse effect on our business, financial condition, results of operations, and prospects. 45 Table of Contents If our trademarks and trade names are not adequately protected, then we may not be able to build name recognition in our markets of interest and our business may be adversely affected.
Any of the foregoing could have a material adverse effect on our business, financial condition, results of operations, and prospects. 47 Table of Contents If our trademarks and trade names are not adequately protected, then we may not be able to build name recognition in our markets of interest and our business may be adversely affected.
If the parts of our laboratory facilities where we store these biological samples were damaged or compromised, or if these biological samples or the resulting data were otherwise lost, damaged or compromised due to equipment malfunction, human error or other causes, our ability to pursue our research and development projects or provide our services, as well as our reputation, could be jeopardized.
If the parts of our laboratory facility where we store these biological samples were damaged or compromised, or if these biological samples or the resulting data were otherwise lost, damaged or compromised due to equipment malfunction, human error or other causes, our ability to pursue our research and development projects or provide our services, as well as our reputation, could be jeopardized.
An independent assessment of the effectiveness of our internal control over financial reporting could detect problems that our management’s assessment might not. Undetected material weaknesses in our internal control over financial reporting could lead to financial statement restatements and require us to incur the expense of remediation. 52 Table of Contents Item 1B. Unresolve d Staff Comments. Not applicable.
An independent assessment of the effectiveness of our internal control over financial reporting could detect problems that our management’s assessment might not. Undetected material weaknesses in our internal control over financial reporting could lead to financial statement restatements and require us to incur the expense of remediation. 54 Table of Contents Item 1B. Unresolve d Staff Comments. Not applicable.
Following the result of a referendum in 2016, the U.K. left the EU on January 31, 2020, commonly referred to as “Brexit.” Pursuant to the formal withdrawal arrangements agreed between the U.K. and the EU, the U.K. was subject to a transition period until December 31, 2020 (the “Transition Period”), during which EU rules continued to apply.
Following the result of a referendum in 2016, the U.K. left the EU on January 31, 2020, commonly referred to as “Brexit.” Pursuant to the formal withdrawal arrangements agreed between the U.K. and the EU, the U.K. was subject to a transition period until December 31, 2020 during which EU rules continued to apply.
Our business could be adversely impacted by the effects of a health crisis that could cause significant disruption in the operations of our customers and third-party suppliers upon whom we rely. Our laboratory facilities, executive team, and most of our employees are located in the San Francisco Bay Area.
Our business could be adversely impacted by the effects of a health crisis that could cause significant disruption in the operations of our customers and third-party suppliers upon whom we rely. Our laboratory facility, executive team, and most of our employees are located in the San Francisco Bay Area.
The issuance of a patent is not conclusive as to its inventorship, scope, validity, or enforceability. Some of our patents or patent applications may be challenged at a future point in time in opposition, derivation, reexamination, inter partes review, post-grant review, or interference proceedings.
The issuance of a patent is not conclusive as to its inventorship, scope, validity, or enforceability. Some of our patents or patent applications have been challenged or may be challenged at a future point in time in opposition, derivation, reexamination, inter partes review, post-grant review, or interference proceedings.
Many of our customers are biopharmaceutical companies engaged in clinical trials of new drug candidates, which trials are expensive, can take many years to complete, and have inherently uncertain outcomes. Our customers other than the VA MVP and Natera are primarily biopharmaceutical companies that use our services to support clinical trials.
Many of our customers are biopharmaceutical companies engaged in clinical trials of new drug candidates, which trials are expensive, can take many years to complete, and have inherently uncertain outcomes. Our customers, other than the VA MVP and Natera, are primarily biopharmaceutical companies that use our services to support clinical trials, including Moderna.
Moreover, while the Regulation includes only limited exemptions for devices that are manufactured and used only within health institutions established in the EEA, diagnostic and therapeutic services undertaken outside of the EEA (for example at our facilities in the U.S.) would not fall within the scope of such exemptions.
Moreover, while the Regulation includes only limited exemptions for devices that are manufactured and used only within health institutions established in the EEA, diagnostic and therapeutic services undertaken outside of the EEA (for example at our facility in the U.S.) would not fall within the scope of such exemptions.
If our tests are considered medical devices that are not subject to enforcement discretion, or if we voluntarily submit one or more of our tests for premarket notification, review, clearance or approval by the FDA as medical devices, and one or more of our tests is considered to fall under the 21 C.F.R. § 866.5950 classification regulation for GHR tests, or under another Class II classification that is subject to a premarket notification requirement, we would be required to obtain marketing clearance for such tests.
If our tests are considered medical devices that are not subject to enforcement discretion, or if we voluntarily submit one or more of our tests for premarket notification, review, clearance or approval by the FDA as medical devices, and one or more of our tests is considered to fall under the 21 C.F.R. § 866.5950 classification regulation for GHR tests, or under another Class II classification that is subject to a 28 Table of Contents premarket notification requirement, we would be required to obtain marketing clearance for such tests.
Unauthorized access, loss, or dissemination could also damage our reputation or disrupt our operations, including our ability to conduct our analyses, deliver test results, process claims and appeals, provide customer assistance, conduct research and development activities, collect, process, and prepare company financial information, provide information about our tests and other patient and physician education and outreach efforts through our website, and manage the administrative aspects of our business.
Unauthorized access, loss, or dissemination could also damage our reputation or disrupt our operations, including our ability to conduct our analyses, deliver test results, process claims and appeals, provide customer assistance, conduct research and development 32 Table of Contents activities, collect, process, and prepare company financial information, provide information about our tests and other patient and physician education and outreach efforts through our website, and manage the administrative aspects of our business.
If we (or a third party upon whom we rely) experience a security incident or are perceived to have experienced a security incident, we may experience adverse consequences, such as government enforcement actions (for example, investigations, fines, penalties, audits, and inspections); additional reporting requirements and/or oversight; restrictions on processing sensitive information (including personal information); litigation (including class claims) and mass arbitration; indemnification obligations; negative publicity; reputational harm; monetary fund diversions; interruptions in our operations (including availability of data); financial loss; and other similar harms.
If we (or a third party with whom we work) experience a security incident or are perceived to have experienced a security incident, we may experience adverse consequences, such as government enforcement actions (for example, investigations, fines, penalties, audits, and inspections); additional reporting requirements and/or oversight; restrictions on processing sensitive information (including personal information); litigation (including class claims) and mass arbitration; indemnification obligations; negative publicity; reputational harm; monetary fund diversions; interruptions in our operations (including availability of data); financial loss; and other similar harms.
For instance, in February 2022, Russia initiated military action against Ukraine and the two countries are now at war. In addition, in October 2023, Hamas attacked Israel which provoked a state of war, and there is a risk of a larger conflict.
For instance, in February 2022, Russia initiated military action against Ukraine and the two countries are now at war. In addition, in October 2023, Hamas attacked Israel which provoked a state of war, and there is now a larger regional conflict.
In addition, there is a risk that one or more of our current service providers, manufacturers and other partners may not survive an economic downturn or rising inflation, which could directly affect our ability to attain our operating goals on schedule and on budget. Other international and geo-political events could also have a serious adverse impact on our business.
In addition, there is a risk that one or more of our current service providers, manufacturers and other partners may not survive an economic downturn or rising inflation, which could directly affect our ability to attain our operating goals on schedule and on budget. 49 Table of Contents Other international and geo-political events could also have a serious adverse impact on our business.
In February 2021, we entered into a partnership in the field of personalized oncology with Natera, pairing our NeXT tumor profiling and diagnostic services and products with Natera’s personalized ctDNA platform Signatera™ for treatment monitoring and MRD assessment.
In February 2021, we entered into a partnership in the field of personalized oncology with Natera, pairing our NeXT tumor profiling and diagnostic services and products with Natera’s personalized ctDNA test Signatera™ for treatment monitoring and MRD assessment.
Relatedly, we have incurred expenses in connection with our scale-up activities under our agreement with Natera, and we may incur additional expenses to increase our laboratory’s capacity to process increased sample volumes from Natera, in addition to those from our other customers, in the future.
Relatedly, we have incurred expenses in connection with our scale-up activities under our agreement with Natera, and we may incur additional expenses in the future to increase our laboratory’s capacity to process increased sample volumes from our other customers.
Additionally, our sensitive information could be leaked, disclosed, or revealed as a result of or in connection with our employee’s, personnel’s, or vendor’s use of generative AI technologies. 31 Table of Contents We are subject to stringent and evolving U.S. and foreign laws, regulations, rules, contractual obligations, industry standards, policies and other obligations related to data privacy and security.
Additionally, our sensitive information could be leaked, disclosed, or revealed as a result of or in connection with our employee’s, personnel’s, or vendor’s use of generative AI technologies. We are subject to stringent and evolving U.S. and foreign laws, regulations, rules, contractual obligations, industry standards, policies and other obligations related to data privacy and security.
The IRA 2022 also eliminates the “donut hole” under the Medicare Part D program beginning 36 Table of Contents in 2025 by significantly lowering the beneficiary maximum out-of-pocket cost and through a newly established manufacturer discount program. It is possible that the ACA will be subject to judicial or Congressional challenges in the future.
The IRA 2022 also eliminates the “donut hole” under the Medicare Part D program beginning in 2025 by significantly lowering the beneficiary maximum out-of-pocket cost and through a newly established manufacturer discount program. It is possible that the ACA will be subject to judicial or Congressional challenges in the future.
Despite the contractual provisions employed when working with third parties, the need to share trade secrets, know-how, and other confidential information increases the risk that such trade secrets and know-how become known by our competitors, are inadvertently incorporated into the technology of others, or are disclosed or used in violation of 43 Table of Contents these agreements.
Despite the contractual provisions employed when working with third parties, the need to share trade secrets, know-how, and other confidential information increases the risk that such trade secrets and know-how become known by our competitors, are inadvertently incorporated into the technology of others, or are disclosed or used in violation of these agreements.
As we continue to commercialize our tests in their current or an updated form, launch different and expanded tests, and enter new markets, other competitors or potential competitors might claim that our tests infringe, misappropriate, or violate their intellectual 39 Table of Contents property rights as part of business strategies designed to impede our successful commercialization and entry into new markets.
As we continue to commercialize our tests in their current or an updated form, launch different and expanded tests, and enter new markets, other competitors or potential competitors might claim that our tests infringe, misappropriate, or violate their intellectual property rights as part of business strategies designed to impede our successful commercialization and entry into new markets.
The outcome of such proceedings is uncertain. No assurance can be given that other patent applications will not have priority over our patent applications. In addition, changes to the patent laws of the U.S. allow for various post-grant opposition proceedings, such as inter partes review proceedings, providing additional methods for others to challenge our patents.
No assurance can be given that other patent applications will not have priority over our patent applications. In addition, changes to the patent laws of the U.S. allow for various post-grant opposition proceedings, such as inter partes review proceedings, providing additional methods for others to challenge our patents.
Our suppliers, including Illumina, could cease supplying these materials and equipment at any time, could increase the price of these materials or equipment (including the promotional pricing offered to us by Illumina for our 2022 VA MVP Agreement and certain other projects) or fail to provide us with sufficient quantities of materials or equipment that meet our specifications.
Our suppliers, including Illumina, could cease supplying these materials and equipment at any time, could increase the price of these materials or equipment (including the promotional pricing offered to us by Illumina for our 2022 VA MVP Agreement and certain other 21 Table of Contents projects) or fail to provide us with sufficient quantities of materials or equipment that meet our specifications.
Most of our employees are working remotely at least part of the time and such remote work has increased risks to our information technology systems and data, as more of our employees utilize network connections, computers and devices outside our premises or network, including working at home, while in transit and in public locations.
Most of our employees are working remotely at least part of the time and such remote work has increased risks to our information technology systems and data, as more of our employees 31 Table of Contents utilize network connections, computers and devices outside our premises or network, including working at home, while in transit and in public locations.
Proceedings to defend or enforce our patent rights in foreign jurisdictions could result in substantial cost and divert our efforts and attention from other aspects of our business. 40 Table of Contents Patent terms may be inadequate to protect our competitive position for an adequate amount of time. Patents have a limited lifespan.
Proceedings to defend or enforce our patent rights in foreign jurisdictions could result in substantial cost and divert our efforts and attention from other aspects of our business. Patent terms may be inadequate to protect our competitive position for an adequate amount of time. Patents have a limited lifespan.
Any of these outcomes could result in SEC enforcement actions, monetary fines or other penalties, damage to our reputation, and harm to our financial condition. 51 Table of Contents If we fail to maintain effective internal control over financial reporting in the future, the accuracy and timing of our financial reporting may be adversely affected.
Any of these outcomes could result in SEC enforcement actions, monetary fines or other penalties, damage to our reputation, and harm to our financial condition. If we fail to maintain effective internal control over financial reporting in the future, the accuracy and timing of our financial reporting may be adversely affected.
Our new Fremont facility expanded our laboratory capacity and, in order to execute our business model, we may need to make additional investments to further scale our infrastructure, including purchases of additional equipment, some of which can take several months or more to procure, setup, and validate, or increases to our software and computing capacity.
Our Fremont facility expanded our laboratory capacity and, in order to execute our business model, we will need to make additional investments to further scale our infrastructure, including purchases of additional equipment, some of which can take several months or more to procure, setup, and validate, or increases to our software and computing capacity.
Additionally, we use certain consumables in our operations, and we have faced, and may face in the future, difficulties in acquiring such consumables if our suppliers prioritize orders related to a health epidemic or pandemic or if other supply chain issues arise as a result of such a public health crisis.
Additionally, we use certain consumables in our operations, and we have faced, and may face in the future, difficulties in acquiring such 26 Table of Contents consumables if our suppliers prioritize orders related to a health epidemic or pandemic or if other supply chain issues arise as a result of such a public health crisis.
Third parties may also raise similar claims before administrative bodies in the U.S. or abroad, even outside the context of litigation. Such mechanisms include re-examination, post grant review, inter partes review, and equivalent proceedings in foreign jurisdictions (e.g., opposition proceedings).
Third 44 Table of Contents parties may also raise similar claims before administrative bodies in the U.S. or abroad, even outside the context of litigation. Such mechanisms include re-examination, post grant review, inter partes review, and equivalent proceedings in foreign jurisdictions (e.g., opposition proceedings).
If we or the third parties on which we rely fail, or are perceived to have failed, to address or comply with applicable data privacy and security obligations, we could face significant consequences, including but not limited to: government enforcement actions (e.g., investigations, fines, penalties, audits, inspections, and similar); litigation (including class-action claims) and mass arbitration demands; additional reporting requirements and/or oversight; bans on processing personal information; orders to destroy or not use personal information; and imprisonment of company officials.
If we or the third parties with whom we work fail, or are perceived to have failed, to address or comply with applicable data privacy and security obligations, we could face significant consequences, including but not limited to: government enforcement actions (e.g., investigations, fines, penalties, audits, inspections, and similar); litigation (including class-action claims) and mass arbitration demands; additional reporting requirements and/or oversight; bans or restrictions on processing personal information; orders to destroy or not use personal information; and imprisonment of company officials.
Collaborations are subject to numerous risks, which include that: • we may incur increased research and development expenses, and such activities may also divert management attention and resources and/or create competing internal priorities for us, which could prevent us from successfully conducting other parts of our business or collaborating with others; • collaborators have significant discretion in determining the efforts and resources that they will apply to collaborations; • collaborators may not pursue development and commercialization of our services or products or may elect not to continue or renew development or commercialization programs based on trial or test results, changes in their strategic focus due to the acquisition of competitive services or products, availability of funding, or other external factors, such as a business combination that diverts resources or creates competing priorities for our collaborator; • collaborators could independently develop, or develop with third parties, services or products that compete directly or indirectly with our services or products; • collaborators with marketing, manufacturing, and distribution rights to one or more services or products may not commit sufficient resources to or otherwise not perform satisfactorily in carrying out these activities; 24 Table of Contents • we could grant exclusive rights to our collaborators that would prevent us from collaborating with others; • a large percentage of our revenue may be concentrated with the collaborators if the collaborations are successful and we may experience further losses if they are or later become unsuccessful; • collaborators may not properly maintain or defend our intellectual property rights or may use our intellectual property or proprietary information in a way that gives rise to actual or threatened litigation that could jeopardize or invalidate our intellectual property or proprietary information or expose us to potential liability; • disputes may arise between us and a collaborator that causes the delay or termination of the research, development, or commercialization of our current or future services or products or that results in costly litigation or arbitration that diverts management attention and resources; • collaborations may be terminated, and, if terminated, may result in a need for additional capital to pursue further development or commercialization of the applicable current or future services or products; • collaborators may own or co-own intellectual property covering our services or products that results from our collaborating with them, and in such cases, we would not have the exclusive right to develop or commercialize such intellectual property; • collaborators’ activities or use of our services or deliverables may create additional regulatory obligations and could lead to side effects or adverse events in patients, exposing us to potential liability or regulatory review; and • collaborators’ sales and marketing activities or other operations may not be in compliance with applicable laws resulting in civil or criminal proceedings.
Collaborations are subject to numerous risks, which include that: • we may incur increased research and development expenses, and such activities may also divert management attention and resources and/or create competing internal priorities for us, which could prevent us from successfully conducting other parts of our business or collaborating with others; • collaborators have significant discretion in determining the efforts and resources that they will apply to collaborations; • collaborators may not pursue development and commercialization of our services or products or may elect not to continue or renew development or commercialization programs based on trial or test results, changes in their strategic focus due to the acquisition of competitive services or products, availability of funding, or other external factors, such as a business combination that diverts resources or creates competing priorities for our collaborator; • collaborators could independently develop, or develop with third parties, services or products that compete directly or indirectly with our services or products; • collaborators with marketing, manufacturing, and distribution rights to one or more services or products may not commit sufficient resources to or otherwise not perform satisfactorily in carrying out these activities; • we could grant exclusive rights to our collaborators that would prevent us from collaborating with others; • a large percentage of our revenue may be concentrated with the collaborators if the collaborations are successful and we may experience further losses if they are or later become unsuccessful; • collaborators may not properly maintain or defend our intellectual property rights or may use our intellectual property or proprietary information in a way that gives rise to actual or threatened litigation that could jeopardize or invalidate our intellectual property or proprietary information or expose us to potential liability; • disputes may arise between us and a collaborator that causes the delay or termination of the research, development, or commercialization of our current or future services or products or that results in costly litigation or arbitration that diverts management attention and resources; • collaborations may be terminated, and, if terminated, may result in a need for additional capital to pursue further development or commercialization of the applicable current or future services or products; • collaborators may own or co-own intellectual property covering our services or products that results from our collaborating with them, and in such cases, we would not have the exclusive right to develop or commercialize such intellectual property; • collaborators’ activities or use of our services or deliverables may create additional regulatory obligations and could lead to side effects or adverse events in patients, exposing us to potential liability or regulatory review; • collaborators’ sales and marketing activities or other operations may not be in compliance with applicable laws resulting in civil or criminal proceedings; and • we may choose or our collaborators may request or require us to expand our facilities and/or establish new facilities domestically and/or internationally, which may significantly increase our expenses and divert resources and management’s attention.
If we were to develop one or more FDA-approved companion diagnostics, we would incur increased research and development expenses, and such activities may also divert our resources or the attention of our management and may create competing internal priorities for us.
If we were to develop one or more FDA-approved companion diagnostics, 17 Table of Contents we would incur increased research and development expenses, and such activities may also divert our resources or the attention of our management and may create competing internal priorities for us.
In Canada, the Personal Information Protection and Electronic Documents Act (“PIPEDA”) and various related provincial laws, as well as Canada’s Anti-Spam Legislation (“CASL”), applies to our operations.
In Canada, the Personal Information Protection and Electronic Documents Act and various related provincial laws, as well as Canada’s Anti-Spam Legislation, applies to our operations.
Our quarterly financial results may fluctuate as a result of a variety of factors, many of which are outside of our control. For example, Natera and other large customers are not obliged to deliver tissue samples or other specimens to us at any particular time or at all.
Our quarterly financial results may fluctuate as a result of a variety of factors, many of which are outside of our control. For example, most of our large customers are not obliged to deliver tissue samples or other specimens to us at any particular time or at all.
Data Privacy Framework (and U.K. extension thereto) (which allows for transfers for relevant U.S.-based organizations who self-certify compliance and participate in such 32 Table of Contents framework), these mechanisms are susceptible to legal challenges, and there is no assurance that we can satisfy or rely on these measures to lawfully transfer personal information to the U.S.
Data Privacy Framework (and U.K. extension thereto) (which allows for transfers for relevant U.S.-based organizations who self-certify compliance and participate in such framework), these mechanisms are susceptible to legal challenges, and there is no assurance that we can satisfy or rely on these measures to lawfully transfer personal information to the U.S.
A health epidemic or pandemic may negatively impact the value of any potential new VA MVP contract or order. If we cannot maintain our current customer relationships, or fail to acquire new customers, our revenue prospects will be reduced.
A health epidemic or pandemic may negatively impact the value of any potential new VA MVP contract or order. 19 Table of Contents If we cannot maintain our current customer relationships, or fail to acquire new customers, our revenue prospects will be reduced.
Currently, our only clinical reference or research and development laboratory facilities are in Fremont, California. Our facilities and equipment could be harmed or rendered inoperable by natural or man-made disasters, including fires, earthquakes, flooding, and power outages, which may render it difficult or impossible for us to sell or perform our services for some period of time.
Currently, our only clinical reference or research and development laboratory facility is in Fremont, California. Our laboratory facility and equipment could be harmed or rendered inoperable by natural or man-made disasters, including fires, earthquakes, flooding, and power outages, which may render it difficult or impossible for us to sell or perform our services for some period of time.
Our activities under our agreement with Natera have had, and may continue to have, an impact on our business, including diversion of our resources and the attention of our management, including with respect to our internal research and development objectives and projects for our other customers, collaborators and/or partners.
Our activities under our agreement with Natera have had, and activities with our other customers may in the future have, an impact on our business, including diversion of our resources and the attention of our management, including with respect to our internal research and development objectives and projects for our other customers, collaborators and/or partners.
The products must bear the statement: “For Research Use Only. Not for Use in Diagnostic Procedures.” Manufacturers of RUO products cannot make any claims related to safety, 28 Table of Contents effectiveness or diagnostic utility, and RUO products cannot be intended by the manufacturer for clinical diagnostic use.
The products must bear the statement: “For Research Use Only. Not for Use in Diagnostic Procedures.” Manufacturers of RUO products cannot make any claims related to safety, effectiveness or diagnostic utility, and RUO products cannot be intended by the manufacturer for clinical diagnostic use.
Further, 44 Table of Contents we may be subject to ownership disputes in the future arising, for example, from conflicting obligations of consultants or others who are involved in developing our intellectual property. Litigation may be necessary to defend against these claims.
Further, we may be subject to ownership disputes in the future arising, for example, from conflicting obligations of consultants or others who are involved in developing our intellectual property. Litigation may be necessary to defend against these claims.
For example, we have an agreement with Natera to provide advanced tumor analysis for use in Natera’s MRD testing offerings. During the year ended December 31, 2023, revenue under our agreement accounted for 43% of our total revenue. See “—We currently derive a substantial portion of our revenue from DNA sequencing and data analysis services that we provide to Natera.
For example, we have an agreement with Natera to provide advanced tumor analysis for use in Natera’s MRD testing offerings. During the year ended December 31, 2024, revenue under our agreement accounted for 30% of our total revenue. See “—We currently derive a substantial portion of our revenue from DNA sequencing and data analysis services that we provide to Natera.
We and the third parties upon which we rely are subject to a variety of evolving threats, including but not limited to social-engineering attacks (including through deep fakes, which may be increasingly more difficult to identify as fake, and phishing attacks), malicious code (such as viruses and worms), malware (including as a result of advanced persistent threat intrusions), denial-of-service attacks, credential stuffing, credential harvesting, personnel misconduct or error, ransomware attacks, supply-chain attacks, software bugs, server malfunctions, attacks enhanced or facilitated by artificial intelligence ("AI"), software or hardware failures, loss of data or other information technology assets, adware, telecommunications failures, natural disasters, terrorism, and other similar threats.
We and the third parties with whom we work are subject to a variety of evolving threats, including but not limited to social-engineering attacks (including through deep fakes, which are increasingly more difficult to identify as fake, and phishing attacks), malicious code (such as viruses and worms), malware (including as a result of advanced persistent threat intrusions), denial-of-service attacks, credential stuffing, credential harvesting, personnel misconduct or error, ransomware attacks, supply-chain attacks, software bugs, server malfunctions, attacks enhanced or facilitated by artificial intelligence ("AI"), software or hardware failures, loss of data or other information technology assets, adware, telecommunications failures, natural disasters, terrorism, and other similar threats.
Failure to achieve broad market acceptance of our services would materially harm our business, financial condition, and results of operations. 15 Table of Contents If we cannot compete successfully with our competitors, we may be unable to increase or sustain our revenue or achieve and sustain profitability.
Failure to achieve broad market acceptance of our services would materially harm our business, financial condition, and results of operations. If we cannot compete successfully with our competitors, we may be unable to increase or sustain our revenue or achieve and sustain profitability.
In addition, supply-chain attacks have increased in frequency and severity, and we cannot guarantee that third parties and infrastructure in our supply chain or our third-party partners’ supply chains have not been compromised or that they do not contain exploitable defects or bugs that could result in a breach of or disruption to our information technology systems or the third-party information technology systems that support us and our services.
In addition, supply-chain attacks have increased in frequency and severity, and we cannot guarantee that third parties and infrastructure in our supply chain or that of the third parties with whom we work supply chains have not been compromised or that they do not contain exploitable defects or bugs that could result in a breach of or disruption to our information technology systems or the third-party information technology systems that support us and our services.
If one or more equity research analysts cease coverage of our company, we could lose visibility in the market, which in turn could cause our stock price to decline. Holders of our common stock could be adversely affected if we issue preferred stock.
If one or more equity research analysts cease coverage of our company, we could lose visibility in the market, which in turn could cause our stock price to decline. 51 Table of Contents Holders of our common stock could be adversely affected if we issue preferred stock.
Any of these factors could cause us to experience an effective tax rate significantly different from previous periods or our current expectations and may result in tax obligations in excess of amounts accrued in our financial statements.
Any of these factors could cause us to experience an effective 39 Table of Contents tax rate significantly different from previous periods or our current expectations and may result in tax obligations in excess of amounts accrued in our financial statements.
If these policies, materials or statements are found to be deficient, lacking in transparency, deceptive, unfair, or misrepresentative of our practices, we may be subject to investigation, enforcement actions by regulators or other adverse consequences.
If these policies, materials or 34 Table of Contents statements are found to be deficient, lacking in transparency, deceptive, unfair, or misrepresentative of our practices, we may be subject to investigation, enforcement actions by regulators or other adverse consequences.
In addition, CE marks may cease to have affect before the deadlines established in the amended UK MDR – if CE Certificates of Conformity expire, or if related application of European Union law renders the CE Certificates of Conformity invalid at an earlier date.
In addition, CE marks may cease to have affect before the deadlines established in the amended UK MDR – if CE Certificates of Conformity expire, or if related application of EU law renders the CE Certificates of Conformity invalid at an earlier date.
Any of the previously identified or similar threats could cause a security incident or other interruption that could result in unauthorized, unlawful, or accidental acquisition, modification, destruction, loss, alteration, encryption, disclosure of, or access to our sensitive information or our information technology systems, or those of the third parties upon whom we rely.
Any of the previously identified or similar threats could cause a security incident or other interruption that could result in unauthorized, unlawful, or accidental acquisition, modification, destruction, loss, alteration, encryption, disclosure of, or access to our sensitive information or our information technology systems, or those of the third parties with whom we work.
The foregoing items, as well as any other future changes in tax laws, could have a material adverse effect on our business, cash flow, financial condition, 37 Table of Contents or results of operations.
The foregoing items, as well as any other future changes in tax laws, could have a material adverse effect on our business, cash flow, financial condition, or results of operations.
In the ordinary course of our business, we, and the third parties upon which we rely, collect, process, receive, generate, use, transfer, disclose, make accessible, protect, secure, dispose of, transmit, share and store (collectively, “process”) proprietary, confidential, and sensitive information, including protected health information (“PHI”), personal information, credit card and other financial information, intellectual property, trade secrets, medical information, biometric information and genomic information (collectively, “sensitive information”) owned or controlled by ourselves or our customers, payors, and other parties.
In the ordinary course of our business, we, and the third parties with whom we work, collect, process, receive, generate, use, transfer, disclose, make accessible, protect, secure, dispose of, transmit, share and store (collectively, “process”) proprietary, confidential, and sensitive information, including protected health information (“PHI”), personal information, credit card and other financial information, intellectual property, trade secrets, medical information, biometric information and genomic information (collectively, “sensitive information”) owned or controlled by ourselves or our customers, payors, and other parties.
In addition, many states also have “direct-bill” laws, which 34 Table of Contents means that the services actually performed by an individual or entity must be billed by such individual or entity, thus preventing ordering physicians from purchasing services from a laboratory and rebilling for the services they order.
In addition, many states also have “direct-bill” laws, which means that the services actually performed by an individual or entity must be billed by such individual or entity, thus preventing ordering physicians from purchasing services from a laboratory and rebilling for the services they order.
The inability to sell or to perform our sequencing and analysis services, disruptions in our operations, or the backlog of samples that could develop if our facilities are inoperable for even a short period of time, may result in the loss of customers or harm to our reputation or relationships with scientific or clinical collaborators, and we may be unable to regain those customers or repair our reputation or such relationships in the future.
The inability to sell or to perform our sequencing and analysis services, disruptions in our operations, or the backlog of samples that could develop if our laboratory facility is inoperable for even a short period of time, may result in the loss of customers or harm to our reputation or relationships with scientific or clinical collaborators, and we may be unable to regain those customers or repair our reputation or such relationships in the future.
If we fail in defending any such claims, in addition to paying monetary damages, we may lose valuable intellectual property rights or personnel. Even if we are successful in defending against such claims, litigation could result in substantial costs and be a distraction to management and other employees.
If we fail in defending any 46 Table of Contents such claims, in addition to paying monetary damages, we may lose valuable intellectual property rights or personnel. Even if we are successful in defending against such claims, litigation could result in substantial costs and be a distraction to management and other employees.
This program provides clinicians with two ways to participate, including through the APMs, and the Merit-based Incentive Payment System. Under both APMs and MIPS, performance data collected each performance year will affect Medicare payments in later years, including potentially reducing payments.
This program provides clinicians with two ways to participate, including through the APMs, and the 38 Table of Contents Merit-based Incentive Payment System. Under both APMs and MIPS, performance data collected each performance year will affect Medicare payments in later years, including potentially reducing payments.
Pursuant to the Consolidated Appropriations Act, the statutory phase-in of the payment reductions has been extended through 2026 with a 0% reduction cap for 2021-2023 and a 15% reduction cap for 2024 through 2026.
Pursuant to the Consolidated Appropriations Act, the statutory phase-in of the payment reductions has been extended through 2025 with a 0% reduction cap for 2021-2023 and a 15% reduction cap for 2026 through 2028.
If patents are issued on our pending patent applications, the resulting patents are projected to expire on dates ranging from 2033 to 2042.
If patents are issued on our pending patent applications, the resulting patents are projected to expire on dates ranging from 2033 to 2045.
Since that time, Natera’s sample volumes have increased such that we currently derive a significant portion of our revenue from sales of our DNA sequencing and data analysis services to Natera under our agreement. For example, in 2023, revenue under our agreement accounted for 43% of our total revenue.
Since that time, Natera’s sample volumes have increased such that we currently derive a significant portion of our revenue from sales of our DNA sequencing and data analysis services to Natera under our agreement. For example, in 2024, revenue under our agreement accounted for 30% of our total revenue.

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Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

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Biggest changeOur cybersecurity incident response and vulnerability management processes are designed to escalate certain cybersecurity incidents to members of management depending on the circumstances, including the internal cybersecurity team and others, depending 53 Table of Contents on severity. The cybersecurity team works with our incident response team to help the company mitigate and remediate cybersecurity incidents of which they are notified.
Biggest changeThe cybersecurity team works with our incident response team to help the company mitigate and remediate cybersecurity incidents of which they are notified. In addition, our incident response processes include reporting to the audit committee of the board of directors for certain cybersecurity incidents.
Risk Factors in this Annual Report on Form 10-K, including “If our information technology systems or data, or those of third parties upon which we rely, are or were compromised, we could experience adverse consequences resulting from such compromise, including but not limited to regulatory investigations or actions; litigation; fines and penalties; disruptions of our business operations; reputational harm; loss of revenue or profits; loss of customers or sales; and other adverse consequences.” Governance Our board of directors addresses our cybersecurity risk management as part of its general oversight function.
Risk Factors in this Annual Report on Form 10-K, including “ If our information technology systems or data, or those of third parties upon which we rely, are or were compromised, we could experience adverse consequences resulting from such compromise, including but not limited to regulatory investigations or actions; litigation; fines and penalties; disruptions of our business operations; reputational harm; loss of revenue or profits; loss of customers or sales; and other adverse consequences. ” Governance Our board of directors addresses our cybersecurity risk management as part of its general oversight function.
We use third-party service providers to assist us from time to time to identify, assess, and manage material risks from cybersecurity threats, including for example cybersecurity consultants, threat intelligence service providers, and professional services firms.
We use third-party service providers to assist us from time to time to identify, assess, and manage material risks from cybersecurity threats, including for example cybersecurity consultants , threat intelligence service providers, forensic investigators, and professional services firms.
Our cybersecurity team identifies and assesses risks from cybersecurity threats by monitoring and evaluating our threat environment and Personalis’ risk profile using various methods including, for example: using manual and automated tools, conducting scans of the threat environment, evaluating our and our industry’s risk profile, evaluating threats reported to us, conducting threat assessments, employee reporting, and regular reviews and internal and external audits.
Our cybersecurity team identifies and assesses risks from cybersecurity threats by monitoring and evaluating our threat environment and Personalis’ risk profile using various methods including, for example: using manual and automated tools, conducting scans of the threat environment, evaluating our and our industry’s risk profile, evaluating threats reported to us, conducting threat assessments, employee reporting, encryption of data, penetration testing, and regular reviews and internal and external audits.
Our cybersecurity risk assessment and management processes are implemented and maintained by certain of our management, including the Vice President of Informatics, who has more than 20 years of experience in information technology and oversees the Informatics department which includes the Company’s hardware, software, help desk, and cybersecurity team.
Our cybersecurity risk assessment and management processes are implemented and maintained by our executive leadership team and led by the Vice President of Informatics , who has more than 20 years of experience in information technology and oversees the Informatics department which includes the Company’s hardware, software, help desk, and cybersecurity team.
In addition, our incident response processes include reporting to the audit committee of the board of directors for certain cybersecurity incidents. The board of directors receives periodic updates from certain members of the cybersecurity team concerning the Company’s significant cybersecurity threats and risk and the processes we have implemented to address them.
The board of directors receives periodic updates from certain members of the cybersecurity team concerning the Company’s significant cybersecurity threats and risk and the processes we have implemented to address them. The audit committee and board also have access to various reports, summaries or presentations related to cybersecurity threats, risk and mitigation.
The Vice President of Informatics is responsible for approving budgets, helping prepare for cybersecurity incidents, approving cybersecurity processes, and reviewing security assessments and other security-related reports.
The Vice President of Informatics is responsible for approving budgets, helping prepare for cybersecurity incidents, approving cybersecurity processes, and reviewing security assessments and other security-related reports. 55 Table of Contents Our cybersecurity incident response and vulnerability management processes are designed to escalate certain cybersecurity incidents to members of management depending on the circumstances, including the internal cybersecurity team and others, depending on severity.
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The audit committee and board also have access to various reports, summaries or presentations related to cybersecurity threats, risk and mitigation.

Item 2. Properties

Properties — owned and leased real estate

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Biggest changeWe believe that our facilities are sufficient to meet our current and foreseeable future needs. We also believe we will be able to obtain additional space, as needed, on commercially reasonable terms. Item 3. Legal Proceedings. See the disclosure under the heading "Contingencies" in Note 11 to our consolidated financial statements. Item 4. Mine Safe ty Disclosures.
Biggest changeWe moved all laboratory operations to the Fremont facility during the third quarter of 2023 and are actively marketing the space for sublease. We believe that our facilities are sufficient to meet our current and foreseeable future needs. We also believe we will be able to obtain additional space, as needed, on commercially reasonable terms. Item 3. Legal Proceedings.
This facility is used for our CLIA-certified and CAP-accredited laboratory operations, research and development, and corporate functions. We also lease 31,280 square feet of space in Menlo Park, California, pursuant to a lease that expires in 2027. This facility was previously used for laboratory operations and our former corporate headquarters. We are actively marketing the space for sublease.
This facility is used for our CLIA-certified and CAP-accredited laboratory operations, research and development, and corporate functions. We also lease 31,280 square feet of space in Menlo Park, California, pursuant to a lease that expires in 2027. This facility was previously used for laboratory operations and our former corporate headquarters.
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Not applicable. 54 Table of Contents PART II
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See the disclosure under the heading "Contingencies" in Note 12 to our consolidated financial statements. Item 4. Mine Safe ty Disclosures. Not applicable. 56 Table of Contents PART II

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changePayment of cash dividends, if any, in the future will be at the discretion of our board of directors and will depend on then-existing conditions, including our financial condition, operating results, contractual restrictions, capital requirements, business prospects and other factors our board of directors may deem relevant. Item 6. [Res erved] 55 Table of Contents
Biggest changePayment of cash dividends, if any, in the future will be at the discretion of our board of directors and will depend on then-existing conditions, including our financial condition, operating results, contractual restrictions, capital requirements, business prospects and other factors our board of directors may deem relevant.
Item 5. Market for Registrant’s Common Equity, Related Stock holder Matters and Issuer Purchases of Equity Securities. Market Information Our common stock is listed on The Nasdaq Global Market under the symbol “PSNL.” Holders As of February 22, 2024, there were approximately 60 holders of record of our common stock.
Item 5. Market for Registrant’s Common Equity, Related Stock holder Matters and Issuer Purchases of Equity Securities. Market Information Our common stock is listed on The Nasdaq Global Market under the symbol “PSNL.” Holders As of February 21, 2025, there were approximately 47 holders of record of our common stock.

Item 7. Management's Discussion & Analysis

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

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Biggest changeYear Ended December 31, 2023 2022 2021 2020 2019 Consolidated Statements of Operations: (in thousands, except share and per share data) Revenue $ 73,481 $ 65,047 $ 85,494 $ 78,648 $ 65,207 Costs and expenses Cost of revenue 55,273 51,697 53,837 58,534 43,127 Research and development 64,776 64,912 49,312 28,568 22,418 Selling, general and administrative 49,726 63,969 47,698 33,692 22,080 Lease impairment 5,565 — — — — Restructuring and other charges 8,077 — — — — Total costs and expenses 183,417 180,578 150,847 120,794 87,625 Loss from operations (109,936 ) (115,531 ) (65,353 ) (42,146 ) (22,418 ) Interest income 5,901 2,396 367 949 1,620 Interest expense (110 ) (201 ) (184 ) (2 ) (1,133 ) Loss on debt extinguishment — — — — (1,704 ) Other income (expense), net (4,068 ) 61 (42 ) (24 ) (1,440 ) Loss before income taxes (108,213 ) (113,275 ) (65,212 ) (41,223 ) (25,075 ) Provision for income taxes 83 40 14 57 9 Net loss $ (108,296 ) $ (113,315 ) $ (65,226 ) $ (41,280 ) $ (25,084 ) Net loss per share, basic and diluted $ (2.25 ) $ (2.48 ) $ (1.49 ) $ (1.20 ) $ (1.39 ) Weighted-average shares outstanding, basic and diluted 48,175,201 45,704,805 43,886,730 34,374,903 18,011,470 December 31, 2023 2022 2021 2020 2019 (in thousands) Cash and cash equivalents, and short-term investments $ 114,179 $ 167,658 $ 287,064 $ 203,290 $ 128,289 Working capital 99,510 166,568 286,918 180,083 89,616 Total assets 225,099 292,700 396,528 244,842 157,291 Total debt 2,880 2,596 3,494 — — Long-term obligations 48,424 41,430 54,914 9,261 639 Total liabilities 95,658 74,561 86,227 49,897 50,601 Total stockholders' equity 129,441 218,139 310,301 194,945 106,690 Results of Operations This section generally discusses 2023 and 2022 items and year-to-year comparisons between 2023 and 2022.
Biggest changeYear Ended December 31, 2024 2023 2022 2021 2020 Consolidated Statements of Operations: (in thousands, except share and per share data) Revenue (1) $ 84,614 $ 73,481 $ 65,047 $ 85,494 $ 78,648 Costs and expenses Cost of revenue 57,789 55,273 51,697 53,837 58,534 Research and development 48,905 64,776 64,912 49,312 28,568 Selling, general and administrative (2) 46,187 49,726 63,969 47,698 33,692 Lease impairment — 5,565 — — — Restructuring and other charges — 8,077 — — — Total costs and expenses 152,881 183,417 180,578 150,847 120,794 Loss from operations (68,267 ) (109,936 ) (115,531 ) (65,353 ) (42,146 ) Interest income 5,510 5,901 2,396 367 949 Interest expense (24 ) (110 ) (201 ) (184 ) (2 ) Other income (expense), net (3) (18,485 ) (4,068 ) 61 (42 ) (24 ) Loss before income taxes (81,266 ) (108,213 ) (113,275 ) (65,212 ) (41,223 ) Provision for income taxes 18 83 40 14 57 Net loss $ (81,284 ) $ (108,296 ) $ (113,315 ) $ (65,226 ) $ (41,280 ) Net loss per share, basic and diluted $ (1.37 ) $ (2.25 ) $ (2.48 ) $ (1.49 ) $ (1.20 ) Weighted-average shares outstanding, basic and diluted 59,251,013 48,175,201 45,704,805 43,886,730 34,374,903 (1) Includes related party revenue of $2.0 million for the year ended December 31, 2024.
We expect variability in our gross margins over the medium-term due to fluctuations in customer mix and volume, investments in newer sequencing platforms and new capabilities such as automation of laboratory workflows, processing of diagnostic tests for the clinical market while we work to secure reimbursement, and costs related to our new Fremont facility.
We expect variability in our gross margins over the medium-term due to fluctuations in customer mix and volume, investments in newer sequencing platforms and new capabilities such as automation of laboratory workflows, processing of diagnostic tests for the clinical market while we work to secure reimbursement, and costs related to our Fremont facility.
To fund our material cash requirements in the short- and long-term, we may also seek to sell additional common or preferred equity or convertible debt securities, enter into an additional credit facility or another form of third-party funding or seek other debt financing. Variable costs of revenue .
To fund our material cash requirements in the short-term and long-term, we may also seek to sell additional common or preferred equity or convertible debt securities, enter into an additional credit facility or another form of third-party funding or seek other debt financing. Variable costs of revenue .
Based on this evaluation, we determined that the right-of-use asset with a carrying amount of $6.7 million was no longer recoverable and was impaired and wrote it down to its estimated fair value of $1.1 million, which resulted in a noncash impairment loss of $5.6 million.
Based on this evaluation, we determined that the right-of-use asset with a carrying amount of $6.7 million was no longer recoverable and was impaired and wrote it down to its estimated fair value of $1.1 million, which resulted in a noncash impairment loss of $5.6 million.
Estimated fair value was based on expected future sublease cash flows (with the assistance of a third-party real estate broker), net of brokerage commissions and estimated tenant incentives, discounted at a market rate of return on similar assets. The estimation of fair value also included expected downtime prior to the commencement of a future sublease.
Estimated fair value was based on expected future sublease cash flows (with the assistance of a third-party real estate broker), net of brokerage commissions and estimated tenant incentives, discounted at a market rate of return on similar assets. The estimation of fair value also included expected downtime prior to the commencement of a future sublease.
In August 2021, we entered into a 13.5-year lease for our new corporate headquarters in Fremont, California. We estimated our incremental borrowing rate as the rate implicit in the lease was not readily determinable.
In August 2021, we entered into a 13.5-year lease for our corporate headquarters in Fremont, California. We estimated our incremental borrowing rate as the rate implicit in the lease was not readily determinable.
The timing of these future payments, by year, can be found in Part II, Item 8 of this Form 10-K in the Notes to Consolidated Financial Statements in Note 7, “Leases.” Other . As of December 31, 2023, we have an outstanding noninterest bearing loan that was used to finance the purchase of equipment for our laboratory.
The timing of these future payments, by year, can be found in Part II, Item 8 of this Form 10-K in the Notes to Consolidated Financial Statements in Note 7, “Leases.” Other . As of December 31, 2024, we have an outstanding noninterest bearing loan that was used to finance the purchase of equipment for our laboratory.
We have the capacity to sequence and analyze over 300 trillion bases of DNA per week in our facility. We believe that our capacity is already larger than most cancer genomics companies, and we continue to build automation and other infrastructure to scale further as demand increases.
We have the capacity to sequence and analyze over 350 trillion bases of DNA per week in our facility. We believe that our capacity is already larger than most cancer genomics companies, and we continue to build automation and other infrastructure to scale further as demand increases.
We have analyzed such discounts if they represent a material right provided to a customer. We have concluded that such discounts generally do not represent a material right provided to a customer since they are not deemed to be incremental to the pricing offered to the customer or are not enforceable options to acquire additional goods.
We have concluded that such discounts generally do not represent a material right provided to a customer since they are not deemed to be incremental to the pricing offered to the customer or are not enforceable options to acquire additional goods.
Because of the ultra-high analytical sensitivity of our technology, we are initially focusing on three indications: breast cancer, lung cancer, and immunotherapy (IO) monitoring.
Because of the ultra-high analytical sensitivity of our technology, we are primarily focusing on three indications: breast cancer, lung cancer, and immunotherapy (IO) monitoring.
We filed a sales agreement prospectus in December 2023 pursuant to which we may offer and sell up to $50.0 million of shares of our common stock through our ATM facility.
We filed a sales agreement prospectus supplement in December 2024, pursuant to which we may offer and sell up to $50.0 million of shares of our common stock through our ATM facility.
However, we generally do not have binding and enforceable purchase orders beyond the short term, and the timing and magnitude of purchase orders beyond such period is difficult to accurately project. We currently expect spending in this area to increase in 2024 relative to 2023 to support expected higher levels of revenue. Operating expenditures .
However, we generally do not have binding and enforceable purchase orders beyond the short term, and the timing and magnitude of purchase orders beyond such period is difficult to accurately project. We currently expect spending in this area to remain similar to the levels in 2024 to support expected higher levels of revenue. Operating expenditures .
Components of Operating Results Revenue We derive our revenue from sales of advanced sequencing and analytics to the following four customer types: • Pharma tests and services includes sales of testing services and data analytics for clinical trials and research to pharmaceutical companies in support of their drug development programs. • Enterprise sales includes sales of tumor profiling and diagnostic tests directly to another business as an input to their products.
Components of Operating Results Revenue We derive our revenue primarily from sales of genomic testing services to the following five customer types: • Pharma tests and services includes sales of testing services and data analytics for clinical trials and research to pharmaceutical companies in support of their drug development programs. • Enterprise sales includes sales of tumor profiling and diagnostic tests directly to another business as an input to their products.
Recent Accounting Pronouncements See the sections titled “Summary of Significant Accounting Policies—Recent Accounting Pronouncements” in Note 2 to our consolidated financial statements for additional information.
Recent Accounting Pronouncements See the sections titled “Summary of Significant Accounting Policies—Recent Accounting Pronouncements” in Note 2 to our consolidated financial statements for additional information. 67 Table of Contents
Our advanced genomic sequencing and analytics also support the development of personalized cancer vaccines and other next-generation cancer immunotherapies. For example, we are providing genomic testing to Moderna, Inc. ("Moderna") in its ongoing clinical trials evaluating a personalized cancer vaccine.
Our advanced genomic sequencing and analytics also support the development of personalized neoantigen therapies for cancer and other next-generation cancer immunotherapies. For example, we are providing genomic testing to Moderna, Inc. ("Moderna") in its ongoing clinical trials evaluating a personalized cancer therapy.
In addition, we partner with diagnostics companies by providing our advanced tumor profiling and analysis capabilities as an input to their products. More recently, we launched new diagnostic offerings for the clinical setting and, in November 2023, entered into an agreement with Tempus AI, Inc.
In addition, we partner with diagnostics companies by providing our advanced tumor profiling and analysis capabilities as an input to their products. More recently, we launched new diagnostic offerings for the clinical setting and, in November 2023, entered into an agreement with Tempus to commercialize our NeXT Personal Dx test.
As part of one of our new strategies for 2023 and beyond, we are working with a growing number of leading cancer centers and world-class academic research institutions to build and publish the clinical evidence-base to support our products and our key indications, as well as to obtain reimbursement coverage from Medicare and other payors.
We are working with a growing number of leading cancer centers and world-class academic research institutions to build and publish the clinical evidence-base to support our products and our key indications, as well as to obtain reimbursement coverage from Medicare and other payors.
We plan to fund our material cash requirements with our existing cash and cash equivalents and short-term investments, which amounted to $114.2 million as of December 31, 2023, as well as anticipated cash receipts from customers.
We plan to fund our material cash requirements with our existing cash and cash equivalents and short-term investments, which amounted to $185.0 million as of December 31, 2024, as well as anticipated cash receipts from customers.
We believe that the assumptions and estimates associated with revenue recognition, leases, and common stock warrants have the greatest potential impact on our consolidated financial statements. Therefore, we consider these to be our critical accounting policies and estimates. Revenue Recognition We generate our revenue from selling sequencing and data analysis services.
We believe that the assumptions and estimates associated with revenue recognition, leases, and common stock warrants have the greatest potential impact on our consolidated financial statements. Therefore, we consider these to be our critical accounting policies and estimates. Revenue Recognition We generate our revenue from the sale of genomic testing services.
Interest expense is the recognition of imputed interest on noninterest bearing loans. Other income (expense), net In connection with our November 2023 agreement with Tempus, we issued two warrants to purchase, in the aggregate, up to 9,218,800 shares of our common stock.
Interest expense is the recognition of imputed interest on noninterest bearing loans. Other income (expense), net In connection with our November 2023 agreement with Tempus, we issued two warrants to purchase, in the aggregate, up to 9,218,800 shares of our common stock ("Tempus Warrants") at an average exercise price of $2.00 per share.
Because the number of shares issuable upon settlement are subject to adjustment, the warrants are classified as liability instruments and are subject to remeasurement at each balance sheet date, with changes in fair value recognized as other income (expense).
Because the number of shares issuable upon settlement were subject to adjustment, the warrants were classified as liability instruments while outstanding and were subject to remeasurement at each balance 64 Table of Contents sheet date, with changes in fair value recognized as other income (expense), net.
To do this, we are developing a growing set of state-of-the-art services and products; advancing our operational infrastructure; building our regulatory credentials; focusing our marketing efforts on large pharmaceutical companies; building and publishing the clinical evidence-base to support our products and our key indications, as well as to obtain reimbursement coverage from Medicare and other payors; and seeking additional partnerships such 57 Table of Contents as ours with Natera.
To do this, we are developing a growing set of state-of-the-art services and products; advancing our operational infrastructure; building our regulatory credentials; focusing our marketing efforts on large pharmaceutical companies; building and publishing the clinical evidence-base to support our products and services in our key indications, pursuing reimbursement coverage from Medicare and other payors; and seeking additional partnerships.
Therefore, upon delivery of the services, there are no remaining performance obligations. Leases Lease liabilities are recognized at the present value of the fixed lease payments, reduced by landlord incentives, using a discount rate based on our current borrowing rate at the lease commencement date (the incremental borrowing rate), unless the rate implicit in the lease is readily determinable.
Leases Lease liabilities are recognized at the present value of the fixed lease payments, reduced by landlord incentives, using a discount rate based on our current borrowing rate at the lease commencement date (the incremental borrowing rate), unless the rate implicit in the lease is readily determinable.
Continued efforts to reduce expenses across the board. 56 Table of Contents Factors Affecting Our Performance We believe there are several important factors that we expect to impact our operating performance and results of operations, including: • The continued development of the market for genomic-based tests.
Factors Affecting Our Performance We believe there are several important factors that we expect to impact our operating performance and results of operations, including: • The continued development of the market for genomic-based tests.
If Tempus acquires any shares of common stock directly from us other than by exercising the warrants, then the total number of shares issuable upon exercise of the warrants will be reduced by such shares.
If Tempus acquired any shares of common stock directly from us other than by exercising the warrants, then the total number of shares issuable upon exercise of the warrants would have been reduced by such shares.
Otherwise, other income (expense), net consists primarily of foreign currency exchange gains and losses. 58 Table of Contents Trend Financial Information The following selected consolidated financial data should be read in conjunction with the consolidated financial statements and the notes thereto in Item 8 of Part II, “Financial Statements and Supplementary Data”.
Other income (expense), net also includes foreign currency exchange gains and losses. 61 Table of Contents Trend Financial Information The following selected consolidated financial data should be read in conjunction with the consolidated financial statements and the notes thereto in Item 8 of Part II, “Financial Statements and Supplementary Data”. Historical results are not necessarily indicative of future results.
We currently expect capital expenditures to be approximately $1 million in 2024 and between $4 million to $6 million in each of the years 2025 and 2026. Property leases . Our noncancelable operating lease payments were $78.6 million as of December 31, 2023.
We currently expect capital expenditures to be approximately $8.0 million in 2025 and between $7 million to $10 million in each of the years 2026 and 2027. Property leases . Our noncancelable operating lease payments were $70.5 million as of December 31, 2024.
We will make a payment of $0.4 million in September 2024 to pay off this loan. Further discussion of this loan can be found in Part II, Item 8 of this Form 10-K in the Notes to Consolidated Financial Statements in Note 6, “Loans.” Critical Accounting Policies and Estimates Our consolidated financial statements are prepared in accordance with U.S. GAAP.
We owe a total of $1.8 million, of which the majority is payable in 2025. Further discussion of this loan can be found in Part II, Item 8 of this Form 10-K in the Notes to Consolidated Financial Statements in Note 6, “Loans.” Critical Accounting Policies and Estimates Our consolidated financial statements are prepared in accordance with U.S. GAAP.
On a long-term basis, we manage future cash requirements relative to our long-term business plans. Capital expenditures . Capital expenditures are expected to decrease from 2023 levels as we have completed significant laboratory capacity additions. Going forward, our capital expenditures are expected to consist primarily of laboratory equipment and computer equipment.
On a long-term basis, we manage future cash requirements relative to our long-term business plans. Capital expenditures . Capital expenditures are expected to increase from 2024 levels as we expect to expand NeXT Personal Dx capacity. Going forward, our capital expenditures are expected to consist primarily of laboratory equipment and computer equipment.
We expect research and development expenses to decrease as a result of our reductions in workforce initiated in 2023 and our closure of operations in China. Selling, General and Administrative Expenses Selling expenses consist of personnel costs (salaries, commissions, bonuses, stock-based compensation, payroll taxes, and benefits), customer support expenses, direct marketing expenses, and market research.
We expect research and development expenses to remain consistent in the short-term since the completion of our reductions in workforce in 2023. Selling, General and Administrative Expenses Selling expenses consist of personnel costs (salaries, commissions, bonuses, stock-based compensation, payroll taxes, and benefits), customer support expenses, direct marketing expenses, and market research.
Lease Impairment We recognized an impairment loss for operating lease right-of-use assets as a result of the change in use of our Menlo Park facility during the third quarter of 2023.
Lease Impairment We recognized an impairment loss for operating lease right-of-use assets as a result of the change in use of our Menlo Park facility during the third quarter of 2023. Restructuring and Other Charges Restructuring and other charges consists of charges in connection with our reductions in workforce and charges in connection with the closure of our China operations.
Our primary use of cash relates to employee compensation, spend on professional services, spend related to research and development projects, and other costs related to our research and development, selling, general and administrative functions. We currently expect to decrease our spend in these areas as a result of our workforce reductions initiated in 2023.
Our primary use of cash relates to employee compensation, spend on professional services, spend related to research and development projects, and other costs related to our research and development, selling, general and administrative functions. We currently expect our spending in these areas to remain similar to the levels in 2024.
The sale of equity and convertible debt securities may result in dilution to our stockholders and, in the case of preferred equity securities or convertible debt, those securities could provide for rights, preferences or privileges senior to those of our common stock.
The sale of equity and convertible debt securities may result in dilution to our stockholders and, in the case of convertible debt, those securities could provide for rights, preferences or privileges senior to those of our common stock. The terms of debt securities issued or borrowings pursuant to a credit agreement could impose significant restrictions on our operations.
As a result, these discounts do not constitute a material right and do not meet the definition of a separate performance obligation, except in limited instances. We do not offer retrospective discounts or rebates. 63 Table of Contents Accordingly, all of the transaction price, net of any discounts, is allocated to one performance obligation.
As a result, these discounts do not constitute a material right and do not meet the definition of a separate performance obligation, except in limited instances. We do not offer retrospective discounts or rebates.
(formerly known as Tempus Labs, Inc., and referred to herein as "Tempus") to commercialize NeXT Personal Dx in the clinical diagnostics market. Finally, we have also pursued non-cancer related business opportunities, specifically within the population sequencing market, by providing whole genome sequencing ("WGS") services under contract with the U.S. Department of Veterans Affairs Million Veteran Program ("VA MVP").
We have also pursued non-cancer related business opportunities, specifically within the population sequencing market, by providing whole genome sequencing ("WGS") services under contract with the U.S. Department of Veterans Affairs Million Veteran Program ("VA MVP").
Our performance depends on the willingness of pharmaceutical companies, enterprise customers, and oncologists to continue to seek more comprehensive molecular information to develop more efficacious cancer therapies. • Increasing adoption of our products and solutions by existing customers. Our performance depends on our ability to retain and broaden adoption with existing customers.
Our performance depends on the willingness of pharmaceutical companies, enterprise customers, and oncologists to continue to seek more comprehensive molecular information to develop more efficacious cancer therapies. • The adoption of ultra-sensitive MRD testing.
The increase in fair value, plus the immediate loss of $0.9 million recognized upon issuance, resulted in a $4.0 million expense recognized in other income (expense), net during the year ended December 31, 2023. During 2022 and 2021, other income (expense), net consisted mainly of foreign currency remeasurements.
The increase in fair value, plus the immediate loss of $0.9 million, resulted in a $4.0 million expense, which was recognized in other income (expense), net in the consolidated statements of operations during the year ended December 31, 2023.
Selling, general and administrative The decrease in selling, general and administrative expenses of 22%, or $14.2 million was primarily due to cost savings from our reductions in workforce initiated in 2023.
Selling, general and administrative The decrease in selling, general and administrative expenses was primarily due to lower professional outside services expenses and cost savings from our workforce reductions in 2023.
Changes in the assumptions can materially affect the fair value and ultimately how much other income (or expense) is recognized.
Estimating fair value using the Black-Scholes option-pricing model requires a number of assumptions. Changes in the assumptions can materially affect the fair value and ultimately how much other income (or expense) is recognized.
Our advanced tests are used by physicians to detect cancer recurrence, monitor cancer evolution, and uncover insights for therapy selection. We also provide sequencing and data analysis services to support population sequencing initiatives. Today, our products are routinely used by many of the largest oncology-focused pharmaceutical companies for analysis of patient samples in their clinical trials and drug development programs.
We also provide whole exome and whole genome sequencing services for other diagnostic companies and population sequencing initiatives. Today, our products are routinely used by many of the largest oncology-focused pharmaceutical companies for analysis of patient samples in their clinical trials and drug development programs.
In September 2022, the lease commencement date for our new facility in Fremont, California was delayed from the original intended date due to delays in the completion of the work necessary for us to move into the facility, which resulted in a reassessment of the lease term and consequently a remeasurement of the lease liability and corresponding adjustment to the carrying amount of the right-of-use asset based on an updated incremental borrowing rate.
In September 2022, the lease commencement date for our facility in Fremont, California was delayed from the original intended date due to delays in the completion of the work necessary for us to move into the facility, which resulted in a reassessment of the lease term.
We have evaluated the performance obligations contained in contracts with customers to determine whether any of the performance obligations are distinct, such that the customers can benefit from the obligations on their own, and whether the obligations can be separately identifiable from other obligations in the contract.
We agree to provide services to our customers through a contract, which may be in the form of a combination of a signed agreement, statement of work and/or a purchase order. 66 Table of Contents We have evaluated the performance obligations contained in contracts with customers to determine whether any of the performance obligations are distinct, such that the customers can benefit from the obligations on their own, and whether the obligations can be separately identifiable from other obligations in the contract.
The terms of debt securities issued or borrowings pursuant to a credit agreement could impose significant restrictions on our operations. Additional capital may not be available on reasonable terms, or at all. Our short-term investments portfolio is primarily invested in highly rated securities, with the primary objective of minimizing the potential risk of principal loss.
Additional capital may not be available on reasonable terms, or at all. Our short-term investments portfolio is primarily invested in highly rated securities, with the primary objective of minimizing the potential risk of principal loss. Our investment policy generally requires securities to be investment grade and limits the amount of credit exposure to any one issuer.
Accessing these new customers through scientific engagement and marketing to gain initial buy-in is critical to our success and gives us the opportunity to demonstrate the utility of our products. • Our revenue and cost are affected by the volume of samples we receive from customers from period to period.
Accessing these new customers through scientific engagement and marketing to gain initial buy-in is critical to our success and gives us the opportunity to demonstrate the utility of our products. • Obtaining coverage and reimbursement status of our diagnostic tests.
Fees for our sequencing and data analysis services are predominantly based on a fixed price per sample. The fixed prices identified in the arrangements only change if a pricing amendment is agreed with a customer. In limited cases we provide our customers a discount if samples received above a certain volume are purchased. In such cases, the discount applies prospectively.
The fixed prices identified in the arrangements only change if a pricing amendment is agreed with a customer. In limited cases we provide our customers a discount if samples received above a certain volume are purchased. In such cases, the discount applies prospectively. We have analyzed such discounts if they represent a material right provided to a customer.
To date, we have sequenced more than 385,000 human samples, of which more than 175,000 were whole human genomes. 2023 Highlights Total revenue increased 13%, or $8.4 million, during 2023 compared to 2022, primarily driven by higher revenue from enterprise sales and pharma tests.
To date, we have sequenced approximately 500,000 human samples, of which approximately 200,000 were whole human genomes. 2024 Highlights Total revenue of $84.6 million increased 15%, or $11.1 million, during 2024 compared to 2023, primarily driven by higher revenue from pharma tests.
We then adjusted yields from publicly traded corporate bonds of companies of similar size and credit rating over a term approximating the term of our lease for the nature of the collateral. Our concluded incremental borrowing rate for this lease was 5.8%, which resulted in a lease liability and right-of-use asset of $44.7 million.
We then adjusted yields from publicly traded corporate bonds of companies of similar size and credit rating over a term approximating the term of our lease for the nature of the collateral.
We sell through a small direct sales force. In late 2023, we entered into an agreement with Tempus to commercialize NeXT Personal Dx in the clinical diagnostics market and will be leveraging Tempus' significantly larger sales force. We have one reportable segment from the sale of sequencing and data analysis services.
We market to biopharma customers and doctors through a small 60 Table of Contents direct sales force. In late 2023, we entered into an agreement with Tempus to co-commercialize NeXT Personal Dx in the clinical diagnostics market and will be leveraging Tempus' significantly larger sales force as a key vector to grow our clinical diagnostic business.
For the significant majority of our contracts to date, the customer orders a specified quantity of a sequencing; therefore, the delivery of the ordered quantity per the purchase order is accounted for as one performance obligation. Our contracts include only one performance obligation—the delivery of the sequencing and data analysis services to the customer.
For the significant majority of our contracts to date, the customer orders a specified quantity of sequencing and the delivery of each test to the customer is accounted for as one performance obligation. Fees for our genomic testing services are predominantly based on a fixed price per sample.
Liquidity and Capital Resources The following table presents selected financial information (in thousands): December 31, 2023 2022 2021 Cash and cash equivalents, and short-term investments $ 114,179 $ 167,658 $ 287,064 Property and equipment, net 57,366 61,935 19,650 Contract liabilities 7,216 1,264 3,982 Working capital 99,510 166,568 286,918 From our inception through December 31, 2023, we have funded our operations primarily from $279.0 million in net proceeds from our follow-on equity offerings in August 2020 and January 2021, $144.0 million in net proceeds from our IPO in June 2019, $89.6 million from issuance of redeemable convertible preferred stock, $3.5 million in net proceeds from our ATM facility (see Note 2, Summary of Significant Accounting Policies), as well as cash from operations and debt financings.
Liquidity and Capital Resources The following table presents selected financial information (in thousands): December 31, 2024 2023 Cash and cash equivalents, and short-term investments $ 185,009 $ 114,179 Property and equipment, net 48,274 57,366 Contract liabilities 3,100 7,216 Working capital 171,889 99,510 From our inception through December 31, 2024, we have funded our operations primarily from net proceeds from issuance of redeemable convertible preferred stock, IPO, follow-on equity offerings, At-the-Market ("ATM") facility (see Note 2, Summary of Significant Accounting Policies for additional information), Tempus exercising warrants and purchasing additional shares under an investment agreement, and Merck purchasing shares under an investment agreement (see Note 8, "Related Party Transactions" in our consolidated financial statements for additional information), as well as debt financings.
Overview We develop and market advanced cancer genomic tests and analytics. Our tests and analytics are used by pharmaceutical companies for translational research, biomarker discovery, the development of personalized cancer therapies, and we expect in the near future, for clinical trial enrollment.
Overview We develop, market, and sell advanced cancer genomic tests and services. Our services are used by pharmaceutical companies for translational research, biomarker discovery, the development of personalized cancer therapies, and for clinical trials. Our tests are used by physicians to detect residual or recurrent cancer in patients, monitor cancer response to therapy, and uncover insights for therapy selection.
We anticipate that our current cash and cash equivalents and short-term investments, together with cash provided by operating activities, are sufficient to fund our near-term capital and operating needs for at least the next 12 months.
As of December 31, 2024, we had cash and cash equivalents of $91.4 million and short-term investments of $93.6 million. We have incurred net losses since our inception. We anticipate that our current cash and cash equivalents and short-term investments are sufficient to fund our near-term capital and operating needs for at least the next 12 months.
Specific offsetting components of research and development expense include a $5.0 million increase in sample processing costs incurred in our laboratory for product development, collaborations, and clinical evidence generation, and a $2.2 million increase in facilities costs; offset by a $7.3 million decrease in personnel-related costs driven by our reductions in workforce.
Specific components of the decrease include a $6.3 million decrease in personnel-related costs driven by our workforce reductions, a $4.7 million decrease in allocated facilities costs (primarily due to a reduction in R&D usage of our facilities relative to other functions, as well as lower facilities costs in general), and a $4.9 million decrease in sample processing costs incurred in our laboratory for product development, collaborations, and clinical evidence generation.
Specific components of the increase were a $4.9 million increase in direct material costs due to higher revenue levels, a $2.0 million increase in facilities and equipment costs (partly due to movement of our laboratory from our prior Menlo Park facility to the new Fremont facility), and a $2.0 million increase in laboratory supplies and consumables (enterprise customer orders require more supplies to process as compared to other customer categories); partially offset by a $5.3 million decrease in shared laboratory costs due to greater usage of our laboratory capacity for R&D activities. 60 Table of Contents Research and development Research and development expenses remained flat in 2023 as compared to 2022.
Specific components of the increase were a $4.0 million increase in direct material costs due to support higher revenue levels, a $2.1 million increase in allocated facilities and equipment costs (mainly due to moving our laboratory from our Menlo Park facility to our Fremont facility in the third quarter of 2023), partially offset by a 63 Table of Contents $2.8 million decrease in labor costs and a $0.7 million decrease in shared laboratory costs due to greater usage of our laboratory capacity for R&D projects.
Restructuring and other charges During 2023, we initiated two rounds of workforce reductions to reduce our cash burn and increase operating efficiencies. Combined, our headcount was reduced by almost 50% from 2022 levels. We also closed our China operations.
Restructuring and other charges We reduced our workforce during the first quarter of 2023 and the fourth quarter of 2023 to reduce our cash burn and increase operating efficiencies, which combined affected about 100 employees. We also closed our China operations.
The $9.7 million increase in cash provided by financing activities during 2023 as compared to 2022 was driven by $6 million in proceeds from issuance of warrants to Tempus and $3.5 million in net proceeds from sales of common stock under our ATM facility, both of which did not occur during 2022. 62 Table of Contents Material Cash Requirements Our material cash requirements in the short- and long-term consist primarily of variable costs of revenue, operating expenditures, capital expenditures, property leases, and other.
In addition, we received $6.0 million in proceeds from the issuance of Tempus Warrants and $3.4 million from loans in 2023, which did not occur in 2024. Material Cash Requirements Our material cash requirements in the short- and long-term consist primarily of variable costs of revenue, operating expenditures, capital expenditures, property leases, and other.
Our ability to increase revenue will depend on our ability to further increase sales to these groups of customers, expand our customer base within each group, and expand our business in the clinical diagnostics market.
Revenue in this category is derived from Medicare and private insurance reimbursements. • Other includes sales of genomic tests and analytics to universities and non-profits. Our ability to increase revenue will depend on our ability to further increase sales to these groups of customers and expand our customer base within each group.
Specific components of the decrease were a $11.7 million decrease in personnel-related costs driven by our reductions in workforce, a $5.1 million decrease in facilities costs as a result of the R&D function and additional lab teams moving into our Fremont facility and consequently receiving a share of such facility costs that were previously allocated to SG&A, and a $1.5 million decrease in professional services; partially offset by a $2.9 million increase in depreciation of office-related fixtures and furniture (driven by our Fremont headquarters), a $1.0 million increase in software and subscriptions costs, and a $0.2 million increase in marketing costs such as trade shows expenses.
Specific components of the decrease were a $3.1 million decrease in professional outside services, a $2.9 million decrease in personnel-related costs driven by our workforce reductions, and a $0.5 million decrease in office equipment costs; partially offset by a $1.4 million increase in allocated facilities costs, $1.0 million increase in other outside services and office expenses and a $0.6 million increase in other marketing costs, including trade shows expenses.
Revenue from enterprise sales was $31.7 million in 2023 compared to $26.6 million in 2022, an increase of 19%. Revenue from pharma tests was $31.9 million in 2023 compared to $29.6 million in 2022, an increase of 8%.
Revenue from pharma tests was $50.9 million in 2024 compared to $31.9 million in 2023, an increase of 60%. This increase was partially offset by lower revenue from enterprise sales, which declined $6.4 million, or 20%.
Revenue recognized each period is also impacted by timing of our fulfillment of samples under each annual task order. Our annual task orders received in 2023, 2022, and 2021 were $7.5 million, $10.0 million, and $9.7 million, respectively. Our contract with the VA MVP does not include specific testing turnaround times.
The decrease in revenue in 2024 was due to a decrease in the number of samples we processed in addition to a small decline in selling prices. Our annual task orders received in 2024 and 2023 were $7.5 million and $7.5 million, respectively. Our contract with the VA MVP does not include specific testing turnaround times.
Because the number of shares issuable upon settlement are subject to adjustment, the warrants are classified as liability instruments and are subject to remeasurement at each balance sheet date, with changes in fair value recognized as other income (expense).
Consequently, prior to the exercise, the Tempus Warrants were classified as liability instruments while outstanding and subject to remeasurement at each balance sheet date, with changes in fair value recognized as other income (expense), net in the consolidated statements of operations. Fair values of the warrants were estimated using the Black-Scholes option-pricing model.
The increase in our estimated borrowing rate between August 2021 and September 2022 mostly reflects the higher interest rate environment in 2022 as compared to 2021. During the third quarter of 2023, we completed the move of our laboratory operations from our Menlo Park facility to our Fremont facility and began actively marketing the Menlo Park space for sublease.
Our concluded incremental borrowing rate for this remeasured lease was 10.5%, which resulted in a lease liability and right-of-use asset of $31.8 million. During the third quarter of 2023, we completed the move of our laboratory operations from our Menlo Park facility to our Fremont facility and began actively marketing the Menlo Park space for sublease.
We have collaborations with Cancer Research UK, University College London, and the Francis Crick Institute (the TRACERx study); The Royal Marsden; the Vall d'Hebron Institute of Oncology (VHIO); Duke University; the Dana-Farber Cancer Institute; University Medical Center Hamburg-Eppendorf (also known as UKE); and Criterium and the Academic Breast Cancer Consortium that will focus on building the evidence-base for our technology and these indications.
Anderson Cancer Center; University Medical Center Hamburg-Eppendorf (also known as UKE); and Criterium and the Academic Breast Cancer Consortium, that will focus on building the evidence-base for our technology and these indications. Our work in oncology is underpinned by our experience and capacity for next-generation sequencing at scale.
Selling, general and administrative expenses have decreased significantly since the completion of our first quarter 2023 reduction in workforce. We expect expenses to remain around this lower level over the next couple of years.
Selling, general and administrative expenses have decreased since the completion of our reductions in workforce in 2023. But we expect them to increase over the medium term as we commercialize our clinical diagnostic offerings.
All of the revenue in this category is from our partnership with the VA MVP. • Other includes sales of genomic tests and analytics to universities and non-profits. This category also includes sales of diagnostics tests ordered by healthcare providers for cancer patients, which was insignificant for periods presented.
All of the revenue in this category is from our partnership with the VA MVP. • Clinical diagnostic includes sales of comprehensive tumor profiling test that is used to help select therapy for a cancer patient and identify potential clinical trials for a patient, and sales of ultra-sensitive, tumor-informed diagnostic tests, ordered by healthcare providers for cancer patients.
Restructuring and Other Charges Restructuring and other charges consists of charges in connection with our two reductions in workforce initiated in 2023 and charges in connection with the closure of our China operations. Interest Income and Interest Expense Interest income consists primarily of interest earned on our cash and cash equivalents and short-term investments.
Interest Income and Interest Expense Interest income consists primarily of interest earned on our cash, cash equivalents and short-term investments. Interest expense is the recognition of imputed interest on noninterest bearing loans.
This was due to an increase in the volume of samples we tested for Natera, partially offset by lower selling prices. The number of samples we processed for Natera increased by over 55% in 2023. We amended our agreement with Natera during the fourth quarter of 2023 to extend minimum volume commitments through the end of 2024.
Enterprise sales Revenue from enterprise sales decreased in 2024 due to lower average selling prices. The number of samples we processed for Natera increased by over 7%, but such increase was offset by lower selling prices.
Previously, Natera's volume commitments extended only through the first quarter of 2024. In addition, we plan to introduce a lower-cost version of our exome product offering for Natera in the first half of 2024 in order to support their price requirements, and we expect our total revenue from Natera in 2024 to decline, due to the lower prices.
We launched a reduced-cost version of our exome product offering for Natera near the end of the first quarter of 2024 to support their requirement for an overall reduction in price. Our agreement with Natera included minimum volume commitments through the end of 2024.
The $39.4 million decrease in cash provided by investing activities during 2023 as compared to 2022 was due to significantly lower net proceeds from short-term investment maturities, partially offset by a $39.0 million reduction in capital expenditures.
Furthermore, we paid more to vendors in 2024 as compared to 2023 due to timing of vendor shipments and billings. 65 Table of Contents The $48.2 million decrease in cash provided by investing activities in 2024 was due to increase in investments of our cash into short-term investments by $17.8 million and reduction in maturities of our short-term investments by $40.0 million, partially offset by a $9.3 million reduction in capital expenditures.
Additionally, since the initial fair value of the warrants of $6.9 million exceeded the total proceeds received from Tempus of $6 million, a loss of $0.9 million was immediately recognized within other income (expense). 61 Table of Contents Fair value of the warrants increased by $3.1 million as of December 31, 2023.
The initial fair value at the time of issuance of the warrants of $6.9 million exceeded the total proceeds received from Tempus of $6.0 million, which resulted in a loss of $0.9 million.
Revenue The following table shows revenue by customer type (in thousands): Years Ended December 31, Change 2023 2022 2021 2023 vs 2022 2022 vs 2021 Pharma tests and services $ 31,904 $ 29,552 $ 30,282 8% (2%) Enterprise sales 31,729 26,641 8,774 19% 204% Population sequencing 9,412 8,443 45,671 11% (82%) Other 436 411 767 6% (46%) Total revenue $ 73,481 $ 65,047 $ 85,494 13% (24%) 59 Table of Contents The following table shows customers that made up at least 10% of total revenue in each year presented: Year Ended December 31, 2023 2022 2021 Natera, Inc. 43% 41% 10% VA MVP 13% 13% 53% Merck & Co., Inc. * 11% * * Less than 10% of revenue Pharma tests and services Revenue from pharma tests and services increased 8%, or $2.4 million, in 2023.
Revenue The following table shows revenue by customer type (in thousands, except percentages): Year Ended December 31, 2024 2023 Change Pharma tests and services (1) $ 50,939 $ 31,904 $ 19,035 60% Enterprise sales 25,364 31,729 (6,365 ) (20%) Population sequencing 7,430 9,412 (1,982 ) (21%) Clinical diagnostic 759 38 721 1897% Other 122 398 (276 ) (69%) Total revenue $ 84,614 $ 73,481 $ 11,133 15% (1) Includes related party revenue of $2.0 million for the year ended December 31, 2024. 62 Table of Contents The following table shows customers that made up at least 10% of total revenue in each year presented: Year Ended December 31, 2024 2023 Natera, Inc. 30% 43% VA MVP * 13% Moderna, Inc. 28% * * Less than 10% of revenue Pharma tests and services The primary driver for the increase in pharma tests and services revenue in 2024 was due to increases in revenue from one of our personalized cancer therapy customers that ramped up clinical trial patient enrollments.
Interest Income, Interest Expense and Other Income (Expense), Net Year Ended December 31, Change 2023 2022 2021 2023 vs 2022 2022 vs 2021 (in thousands) Interest income $ 5,901 $ 2,396 $ 367 146% 553% Interest expense (110 ) (201 ) (184 ) (45%) 9% Other income (expense), net (4,068 ) 61 (42 ) NM NM Total $ 1,723 $ 2,256 $ 141 Interest income and interest expense The increase in interest income was due to increased yields on our investments.
Interest Income, Interest Expense and Other Income (Expense), Net The following table shows interest income and expense, and other income (expense), net (in thousands, except percentages): Year Ended December 31, 2024 2023 Change Interest income $ 5,510 $ 5,901 $ (391 ) (7%) Interest expense (24 ) (110 ) 86 (78%) Other income (expense), net (18,485 ) (4,068 ) (14,417 ) 354% Total $ (12,999 ) $ 1,723 $ (14,722 ) (854%) Interest income and interest expense The decrease in interest income was due to lower average investment balances in 2024, partially offset by increased yields on our investments.
Costs and Expenses Year Ended December 31, Change 2023 2022 2021 2023 vs 2022 2022 vs 2021 (in thousands) Cost of revenue $ 55,273 $ 51,697 $ 53,837 7% (4%) Research and development 64,776 64,912 49,312 (0%) 32% Selling, general and administrative 49,726 63,969 47,698 (22%) 34% Lease impairment 5,565 — — NM NM Restructuring and other charges 8,077 — — NM NM Total costs and expenses $ 183,417 $ 180,578 $ 150,847 2% 20% Cost of revenue The increase in cost of revenue of 7%, or $3.6 million, was primarily due to higher revenue levels (revenue increased 13% over the same period), partially offset by dedication of more laboratory resources to support sample processing required for clinical evidence generation, which is a non-revenue generating activity and thus reported as R&D expense.
Costs and Expenses The following table shows costs and expenses (in thousands, except percentages): Year Ended December 31, 2024 2023 Change Cost of revenue $ 57,789 $ 55,273 $ 2,516 5% Research and development 48,905 64,776 (15,871 ) (25%) Selling, general and administrative 46,187 49,726 (3,539 ) (7%) Lease impairment — 5,565 (5,565 ) * Restructuring and other charges — 8,077 (8,077 ) * Total costs and expenses $ 152,881 $ 183,417 $ (30,536 ) (17%) * Not meaningful Cost of revenue The increase in cost of revenue in 2024 was primarily due to higher revenue levels (revenue increased 15% over the same period).
Cash Flows Year Ended December 31, 2023 2022 2021 Net cash used in operating activities $ (56,258 ) $ (70,233 ) $ (70,828 ) Net cash provided by (used in) investing activities 13,099 52,537 (60,069 ) Net cash provided by financing activities 11,031 1,366 169,700 The $14.0 million decrease in cash used in operating activities during 2023 as compared to 2022 was primarily due to lower spend on operating expenses (particularly lower payroll expenses after our reductions in workforce initiated in 2023), higher customer deposits received (mostly in connection with our agreement with Moderna to support its ongoing clinical trials evaluating a personalized cancer vaccine), and efficient management of working capital; partially offset by lower landlord contributions received during 2023 versus 2022 in connection with our Fremont facility build-out.
Cash Flows Year Ended December 31, 2024 2023 Change Net cash used in operating activities $ (45,150 ) $ (56,258 ) $ 11,108 (20%) Net cash provided by (used in) investing activities (35,069 ) 13,099 (48,168 ) (368%) Net cash provided by financing activities 114,672 11,031 103,641 940% The $11.1 million decrease in cash used in operating activities in 2024 was primarily due to lower operating expenses, particularly lower payroll expenses as a result of our workforce reductions in 2023 and higher gross margin, due to a combination of higher revenue levels and higher gross margin percentage.
Therefore, we have the ability to modulate the volume of samples processed from the VA MVP up or down to complement sample volumes from other customers, which can vary from period to period. As of the end of 2023, our remaining unfulfilled task orders amounted to $7.4 million, which we expect to recognize as revenue within the next 12 months.
Therefore, we may modulate the volume of samples processed from the VA MVP to accommodate sample volumes from other customers, which can vary from period to period. We anticipate fulfilling the new task order received in September 2024 during the first three quarters of 2025.
Removed
If the key opinion leaders ("KOLs") we are collaborating with have a positive experience using our products, we are optimistic this will support broader use of our products by other KOLs, as well as clinicians in the future. Our work in oncology is underpinned by our experience and capacity for next-generation sequencing at scale.
Added
We have collaborations with Cancer Research UK, University College London, and the Francis Crick Institute (the TRACERx study); Institut Curie; The Royal Marsden; the Vall d'Hebron Institute of Oncology (VHIO); the University of California, San Diego; Duke University; Vanderbilt University and Johns Hopkins University (the PREDICT study); the Dana-Farber Cancer Institute; the University of Texas M.D.
Removed
Key business accomplishments and financial updates in 2023 and early 2024 include: • Received Medicare coverage for NeXT Dx. • Amended Natera agreement to extend volume commitments through the end of 2024. • Signed key partnership agreement with Tempus to commercialize NeXT Personal Dx in clinics or with oncologists. • Established a partnership with Myriad to market ImmunoID NeXT. • Completed the NeXT Personal Dx (LDT) early access launch. • Presented compelling early-stage lung cancer clinical MRD data with TRACERx for NeXT Personal. • Signed commercial agreement with Moderna to leverage NeXT platform in personalized mRNA cancer vaccine clinical trials. • Reduced cash burn through headcount reduction of nearly 50%, resulting in an estimated $35 million in annual cost savings.
Added
Key business accomplishments and financial updates in 2024 and early 2025 include: • Received Medicare coverage for NeXT Dx, our comprehensive tumor profiling test and we are currently seeking Medicare coverage for our separate liquid biopsy molecular residual disease ("MRD") test, Next Personal Dx. • Delivered 3,285 total molecular tests in 2024, compared with 177 tests in the prior year. • Announced a new publication validating our NeXT Personal test, an ultra-sensitive, tumor-informed circulating tumor DNA (ctDNA) assay for detecting MRD, monitoring therapy response, and detecting recurrence in patients diagnosed with solid tumor cancers. o The analytical validation study was published in Oncotarget on March 14, 2024. o The test demonstrated a detection threshold of 1.67 parts per million (PPM) of ctDNA with 100% analytical specificity; enabling an ultra-sensitive range leading to early cancer detection. • Multiple clinical data results demonstrating the clinical performance of NeXT Personal were presented at the American College of Clinical Oncology meeting in Chicago.
Removed
Interest expense is the recognition of imputed interest on noninterest bearing loans. Other Income (Expense), Net Other income (expense), net consists primarily of charges related to the issuance and remeasurement of warrants to Tempus during the year ended December 31, 2023.

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