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

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

+484 added−481 removedSource: 10-K (2023-12-31) vs 10-K (2022-12-31)

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

484 paragraphs added · 481 removed · 367 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

150 edited+53 added−48 removed169 unchanged
Biggest changeWe are working closely with our customers, including KOLs, to generate clear use-cases, as well as peer-reviewed publications that illustrate the Proteograph’s performance claims and value proposition. • Commercial Partnerships: We have partnered with leading mass spectrometry instrumentation providers, including Thermo Fisher Scientific, Bruker Corporation and SCIEX to establish partnerships that include 21 lead sharing, co-marketing, and co-development of end-to-end workflows to enable broad education of the market as well as easy-to-implement workflows. • Geographic Partnerships: As we expand geographically, we have partnered to enable access in key regions, such as China, where Enlight Medical is our distribution partner and they educate, develop and expand the market for the Proteograph Product Suite.
Biggest changeWe expect that these COEs will actively promote the Proteograph solution and its capabilities, help us further raise awareness, and increase the accessibility of the Proteograph to a wider range of customers. • Commercial Partnerships: We have partnered with leading mass spectrometry instrumentation providers, including Thermo Fisher Scientific, Bruker Corporation and SCIEX to establish partnerships that include lead sharing, co-marketing, and co-development of end-to-end workflows to enable broad education of the market as well as easy-to-implement workflows. • Geographic Partnerships: We continue to expand geographically in order to enable access in key markets globally.
In human plasma, for example, the 22 most abundant plasma proteins account for 99% of the total protein mass, while the many thousands of less-abundant proteins comprise the remaining one percent. Given the important biological role of both high- and low-abundance proteins, it is critical to detect proteins accurately, precisely and reproducibly across the dynamic range.
In human plasma, for example, the 22 most abundant plasma proteins account for 99% of the total protein mass, while many thousands of less abundant proteins comprise the remaining one percent. Given the important biological role of both high- and low-abundance proteins, it is critical to detect proteins accurately, precisely, and reproducibly across the dynamic range.
Prior to the commercial availability of the Proteograph Product Suite, we believe the critical unmet need in proteomic analysis was how to collect unbiased proteomic data in a sample on thousands of proteins in a sample spanning more than ten orders of magnitude in concentration (dynamic range), and to repeat this across thousands of samples in a reasonable amount of time and cost.
Prior to the commercial availability of the Proteograph Product Suite, we believe the critical unmet need in proteomic analysis was how to collect unbiased proteomic data on thousands of proteins in a sample spanning more than ten orders of magnitude in concentration (dynamic range) and to repeat this across thousands of samples in a reasonable amount of time and cost.
We procure certain components of our consumables from third-party manufacturers, which includes the commonly-available raw materials needed for manufacturing our proprietary engineered NPs. We are currently manufacturing using our production-scale and pilot lines and continue to build out our manufacturing capabilities to support broad commercial availability of our products.
We procure certain components of our consumables from third-party manufacturers, which includes the commonly-available raw materials needed for manufacturing our proprietary engineered NPs. We are currently manufacturing using our production-scale and pilot lines and continue to build out our manufacturing capabilities to support the broad commercial availability of our products.
FDA defines a medical device as an instrument, apparatus, implement, machine, contrivance, implant, in vitro reagent or other similar or related article, including 23 any component part or accessory, which is (i) intended for use in the diagnosis of disease or other conditions, or in the cure, mitigation, treatment, or prevention of disease, in man or other animals, or (ii) intended to affect the structure or any function of the body of man or other animals and which does not achieve any of its primary intended purposes through chemical action within or on the body of man or other animals and which is not dependent upon being metabolized for the achievement of any of its primary intended purposes.
FDA defines a medical device as an instrument, apparatus, implement, machine, contrivance, implant, in vitro reagent or other similar or related article, including any component part or accessory, which is (i) intended for use in the diagnosis of disease or other conditions, or in the cure, mitigation, treatment, or prevention of disease, in man or other animals, or (ii) intended to affect the structure or any function of the body of man or other animals and which does not achieve any of its primary intended purposes through chemical action within or on the body of man or other animals and which is not dependent upon being metabolized for the achievement of any of its primary intended purposes.
We believe they are analogous to microarrays in genomics, where a specific DNA fragment is used in a targeted or biased manner to confirm the presence of a specific mutation or a 6 single nucleotide polymorphism (SNP). The fundamental limitation of affinity-based approaches is their inability to differentiate between protein variants and accurately survey the complexity of the proteome.
We believe they are analogous to microarrays in genomics, where a specific DNA fragment is used in a targeted or biased manner to confirm the presence of a specific mutation or a single nucleotide polymorphism (SNP). The fundamental limitation of affinity-based approaches is their inability to differentiate between protein variants and accurately survey the complexity of the proteome.
This discrepancy can arise from technical factors, such as noise and bias in methods for assessing both transcripts and proteins, and biological mechanisms such as mRNA translation and degradation. Although both transcriptomics and proteomics measurements have their uses, proteins are more closely linked to phenotype, making them more useful than 4 transcripts for understanding function.
This discrepancy can arise from technical factors, such as noise and bias in methods for assessing both transcripts and proteins, and biological mechanisms such as mRNA translation and degradation. Although both transcriptomics and proteomics measurements have their uses, proteins are more closely linked to phenotype, making them more useful than transcripts for understanding function.
In North America, the United Kingdom and select countries of the European Union, we have direct sales and customer experience personnel, including Regional Business Managers (RBM), Field Application Scientists and Field Service Engineers. In addition to these direct personnel, we have significant marketing, customer experience and technical support personnel located in our offices in Redwood City and San Diego, California.
In North America, the United Kingdom and select countries of the European Union, we have direct sales and customer experience personnel, including Regional Business Managers (RBM), Field Application Scientists and Field Service Engineers. In addition to these direct personnel, we have marketing, customer experience and technical support personnel located in our offices in Redwood City and San Diego, California.
To grant such a reclassification, FDA must determine that the FDC Act’s general controls alone, or general controls and 24 special controls together, are sufficient to provide a reasonable assurance of the device’s safety and effectiveness. The de novo classification route is generally less burdensome than the PMA approval process.
To grant such a reclassification, FDA must determine that the FDC Act’s general controls alone, or general controls and special controls together, are sufficient to provide a reasonable assurance of the device’s safety and effectiveness. The de novo classification route is generally less burdensome than the PMA approval process.
Our in-licensed patents and patent applications, if issued, are expected to expire between 2027 and 2037, in each case without taking into 27 account any possible patent term adjustments or extensions and assuming payment of all appropriate maintenance, renewal, annuity, or other governmental fees.
Our in-licensed patents and patent applications, if issued, are expected to expire between 2027 and 2037, in each case without taking into account any possible patent term adjustments or extensions and assuming payment of all appropriate maintenance, renewal, annuity, or other governmental fees.
Target Identification and Exploration We believe that large-scale access to protein variant information that map to different states of health and disease, as enabled by the Proteograph and concurrent advances in proteogenomics, could lead to the discovery of personalized 19 drug targets that could number in the hundreds of thousands.
Target Identification and Exploration We believe that large-scale access to protein variant information that map to different states of health and disease, as enabled by the Proteograph and concurrent advances in proteogenomics, could lead to the discovery of personalized drug targets that could number in the hundreds of thousands.
Across these studies, according to the dbSNP database, more than one billion individual genetic variants have been identified to date; however, less than 0.2% of those variants 1 have been cataloged in the ClinVar database with a reported relationship between variation and phenotype.
Across these studies, according to the dbSNP database, more than one billion individual genetic variants have been identified to date; however, less than 0.2% of those variants have been cataloged in the ClinVar database with a reported relationship between variation and phenotype.
Due to the lack of a common amplification mechanism, researchers often use ligands to measure proteins. However, because ligands such as antibodies or aptamers were designed to bind to specific areas of proteins, approaches utilizing them are considered targeted, or biased.
Because of the lack of a common amplification mechanism, researchers often use ligands to measure proteins. However, because ligands such as antibodies or aptamers were designed to bind to specific areas of proteins, approaches utilizing them are considered targeted, or biased.
In the event we commercialize a product in the therapeutic space, we are 28 also required to make certain drug-approval regulatory and commercialization milestone payments to BWH of up to a mid-seven digit figure in the aggregate for licensed products.
In the event we commercialize a product in the therapeutic space, we are also required to make certain drug-approval regulatory and commercialization milestone payments to BWH of up to a mid-seven digit figure in the aggregate for licensed products.
This data can be used in many of the same application areas as genomics 18 data, as well as proteomics applications that are uniquely possible with unbiased proteomic data, and in new applications that the field will develop in the future.
This data can be used in many of the same application areas as genomics data, as well as proteomics applications that are uniquely possible with unbiased proteomic data, and in new applications that the field will develop in the future.
Modified from Bludau et al. Recently, a study by Backman et al. published in Nature revealed the genomic variation identified in a cohort of approximately 455,000 participants of the UK Biobank exome sequencing study.
Modified from Bludau et al . A study by Backman et al. published in Nature revealed the genomic variation identified in a cohort of approximately 455,000 participants of the UK Biobank exome sequencing study.
Therefore, it is essential to study and understand proteins at the level of protein variants in the appropriate biosample, and this can be achieved only through large-scale analysis of the proteome at the peptide level. 3 Figure 2: Functional diversity exists through modifications and interactions of different molecules, from static indicators like the genome to increasingly numerous and complex indicators like the proteome and interactome.
Therefore, it is essential to study and understand proteins at the level of protein variants in the appropriate biosample, and this can be achieved only through large-scale analysis of the proteome at the peptide level. 3 Table of Contents Figure 2: Functional diversity exists through modifications and interactions of different molecules, from static indicators like the genome to increasingly numerous and complex indicators like the proteome and interactome.
Proteograph Product Suite Performance The Proteograph Product Suite provides five essential capabilities: (i) broad protein sampling with peptide-level resolution; (ii) deep coverage; (iii) accurate and precise measurement; (iv) reproducibility and (v) scalability for high-throughput studies. We believe that our integrated solution is the only product in the market that combines all 12 of these technical and operational capabilities.
Proteograph Product Suite Performance The Proteograph Product Suite provides five essential capabilities: (i) broad protein sampling with peptide-level resolution; (ii) deep coverage; (iii) accurate and precise measurement; (iv) reproducibility and (v) scalability for high-throughput studies. We believe that our integrated solution is the only product in the market that combines all these technical and operational capabilities.
As shown in Figure 2 below, these variants arise from various mechanisms, including alternative splicing of RNA transcripts, genetic variations that alter the amino acid sequence of the protein, and post-translational modifications such as phosphorylation and glycosylation. It is estimated that our approximately 23,000 genes give rise to approximately 69,000 protein isoforms through alternative splicing.
As shown in Figure 2 below, these variants arise from various mechanisms, including alternative splicing of RNA transcripts, genetic variations that alter the amino acid sequence of the protein, and post-translational modifications such as phosphorylation and glycosylation. It is estimated that our approximately 23,000 genes give rise to approximately 70,000 protein isoforms through alternative splicing.
Limitations of Current Unbiased Approaches to Proteomics Rather than relying on predefined epitopes, unbiased approaches can interrogate proteins at the peptide level, providing amino-acid level resolution to protein variants. However, traditional, deep, unbiased proteomic approaches rely on complex workflows that do not scale due to the wide range of protein concentrations in biological samples with high dynamic range.
Limitations of Current Unbiased Approaches to Proteomics Rather than relying on predefined epitopes, unbiased approaches can interrogate proteins at the peptide level, providing amino-acid level resolution to protein variants. However, traditional, deep, unbiased proteomic approaches rely on complex workflows that do not scale because of the wide range of protein concentrations in biological samples with high dynamic range.
For further discussion of the risks we face relating to regulation, see the section titled “Risk factors—Risks related to our business and industry.” The federal Health Insurance Portability and Accountability Act of 1996 (HIPAA), as amended by the Health Information Technology for Economic and Clinical Health Act of 2009 (HITECH), and their implementing regulations, which impose obligations, including mandatory contractual terms, with respect to safeguarding the transmission, security and privacy of protected health information by covered entities subject to HIPAA, such as health plans, health care clearinghouses and healthcare providers, and their respective business associates that access protected health information.
For further discussion of the risks we face relating to regulation, see the section titled “Risk factors—Risks related to our business and industry.” 31 Table of Contents The federal Health Insurance Portability and Accountability Act of 1996 (HIPAA), as amended by the Health Information Technology for Economic and Clinical Health Act of 2009 (HITECH), and their implementing regulations, which impose obligations, including mandatory contractual terms, with respect to safeguarding the transmission, security and privacy of protected health information by covered entities subject to HIPAA, such as health plans, health care clearinghouses and healthcare providers, and their respective business associates that access protected health information.
Enhanced competition at the nano-bio interface enables comprehensive characterization of protein corona dynamics and deep coverage of proteomes. Advanced Materials . 34, 2206008 (2022). Keshishian, H. et al. Quantitative, multiplexed workflow for deep analysis of human blood plasma and biomarker discovery by mass spectrometry. Nat. Proc. 12 1683-1701 (2017). Keshishian, H. et al.
Enhanced competition at the nano-bio interface enables comprehensive characterization of protein corona dynamics and deep coverage of proteomes. Advanced Materials . 34, 2206008 (2022). Keshishian, H. et al . Quantitative, multiplexed workflow for deep analysis of human blood plasma and biomarker discovery by mass spectrometry. Nat. Proc. 12 1683-1701 (2017). Lacar, B et al.
Moreover, the Proteograph allows for pQTL analysis at the peptide level, thus enabling the association of genomic variants with specific protein variants. 2 Figure 1: Utility of genomic vs. proteomic information. Over one million human genomes have been highly characterized with over one billion variants, but they have low utility and represent a static indicator of risk.
Moreover, the Proteograph allows for pQTL analysis at the peptide level, thus enabling the association of genomic variants with specific protein variants. 2 Table of Contents Figure 1: Utility of genomic vs. proteomic information. Over one million human genomes have been highly characterized with over one billion variants, but they have low utility and represent a static indicator of risk.
Figure 4: Sources of variation. Left panel is a graphical summary of factors contributing to variation in the affinity-based discovery of the plasma proteome. Right panel schematically describes reasons for differences in binding profile of aptamer and antibody-based proteomic profiling (PAV protein altering variant; SNV single-nucleotide variant). Adapted from Pietzner et al.
Figure 15: Sources of variation. Left panel is a graphical summary of factors contributing to variation in the affinity-based discovery of the plasma proteome. Right panel schematically describes reasons for differences in binding profile of aptamer and antibody-based proteomic profiling (PAV protein altering variant; SNV single-nucleotide variant). Adapted from Pietzner et al.
Panels of ligands used for protein interrogation have several shortcomings, including (i) they do not recognize differences in protein structure outside of the epitope binding site, so that all variants appear the same and cannot be differentiated from one another, (ii) conformational changes of the protein can affect epitope and ligand binding; for example, those induced by protein-protein interactions or post translational modifications, and (iii) certain protein isoforms may exclude entire protein domains and remove the epitope binding site, yielding false negative results.
Panels of ligands used for protein interrogation have several shortcomings, including: (i) they 20 Table of Contents do not recognize differences in protein structure outside of the epitope binding site, so that all variants appear the same and cannot be differentiated from one another, (ii) conformational changes of the protein can affect epitope and ligand binding; for example, those induced by protein-protein interactions or post-translational modifications, and (iii) certain protein isoforms may exclude entire protein domains and remove the epitope binding site, yielding false negative results.
Mass spectrometry (MS) is a widely used technique for unbiased discovery, basic research and clinical applications, and is considered the gold standard for identification.
Mass spectrometry (MS) is a widely used technique for unbiased discovery, basic research and clinical applications, and is considered the gold standard for protein identification.
We intend to expand the scope of our proprietary engineered NP technology to analyze other biomolecules, such nucleic acids and metabolites.
We intend to expand the scope of our proprietary engineered NP technology to analyze other biomolecules, such as nucleic acids and metabolites.
Our automated workflow is custom configured for researchers to assay samples in approximately seven hours, which includes 30 minutes of hands-on time and six and a half hours of automated instrument time. The output from the Proteograph workflow consists of peptides ready to be processed and evaluated on an MS instrument.
Our automated workflow is custom configured for researchers to assay samples in approximately eight hours, which includes approximately 30 minutes of hands-on time and seven and a half hours of automated instrument time. The output from the Proteograph workflow consists of peptides ready to be processed and evaluated on an MS instrument.
Panel A of Figure 12 shows how the change in MS intensity or intensity fold change varies when mixing the two plasmas at different ratios. Panel B of Figure 12 shows the results of this experiment, looking at threefold changes: 2X, 5.5X, and 11X. At each level, the dashed line is the expected fold change.
Panel A of Figure 11 shows how the change in MS intensity or intensity fold change varies when mixing the two plasmas at different ratios. Panel B of Figure 11 shows the results of this experiment, looking at threefold changes: 2X, 5.5X, and 11X. At each level, the dashed line is the expected fold change.
We anticipate that researchers will use the Proteograph solution to catalog protein variants in a manner similar to the cataloging of genetic variants over the past 15 years, providing functional context at a scale that is not currently accessible with other proteomics methods.
We anticipate that researchers will use the Proteograph solution to catalog 15 Table of Contents protein variants in a manner similar to the cataloging of genetic variants over the past 15 years, providing functional context at a scale that is not currently accessible with other proteomics methods.
The human proteome is far less characterized, but has a much higher utility as a dynamic indicator of health status. Challenges of Accessing the Proteome Complexity of the Proteome The human proteome is dynamic, diverse and complex, with approximately 23,000 genes giving rise to over one million protein variants.
The human proteome is far less characterized, but has a much higher utility as a dynamic indicator of health status. Complexity of the Proteome The human proteome is dynamic, diverse and complex, with approximately 23,000 genes giving rise to over one million protein variants.
Peptides differ between the two species because of genetic differences that result in detectable changes at the amino acid level. By mixing the two plasma samples, the Proteograph can make measurements across thousands of peptides, highlighting the Proteograph Product Suite’s real-world accuracy.
Peptides differ between the two species because of genetic differences that result in detectable changes at the amino acid level. By mixing the two plasma samples, the Proteograph can make measurements across thousands of peptides, highlighting the real-world accuracy of the Proteograph Product Suite.
In the future, if we decide to distribute or market our diagnostic products as IVDs in Europe, such products will be subject to regulation under the IVD Medical Device Regulation (IVDR) European Union (EU) 25 2017/746, which replaces the IVD Directive, is significantly more extensive than the IVD Directive, including requirements on performance data and quality system, and went into application in May 2022.
In the future, if we decide to distribute or market our diagnostic products as IVDs in Europe, such products will be subject to regulation under the IVD Medical Device Regulation (IVDR) European Union (EU) 2017/746, which replaced the IVD Directive, is significantly more extensive than the IVD Directive, including requirements on performance data and quality system, and went into application in May 2022.
The Proteograph’s unique capabilities now enable researchers to undertake first-of-their-kind, large-scale unbiased studies, which complement genomics studies by adding critical missing information that can provide functional context to genomic variation. With the advent of next-generation sequencing and improvement in cost and throughput, researchers have sequenced the equivalent of several million human genomes and human exomes.
The Proteograph’s unique capabilities now enable 1 Table of Contents researchers to undertake first-of-their-kind, large-scale unbiased studies, which complement genomics studies by adding critical missing information that can provide functional context to genomic variation. With the advent of next-generation sequencing and improvement in cost and throughput, researchers have sequenced the equivalent of several million human genomes and human exomes.
In a paper published in Nature Communications, Pietzner et al. from the University of Cambridge experimentally demonstrated the limitations of two distinct commercially available affinity-based approaches. Specifically, the authors show that protein altering variants can affect ligand binding, i.e., each affinity-based platform interacts differently with the same protein, depending on the epitopes to which its ligands are binding.
In a paper published in Nature Communications , Pietzner et al. from the University of Cambridge experimentally demonstrated the limitations of two distinct commercially available affinity-based approaches. Specifically, the authors show that protein-altering variants can affect ligand binding, that is, each affinity-based platform interacts differently with the same protein, depending on the epitopes to which its ligands are binding.
The Proteograph is uniquely capable of generating robust, reproducible, deep and unbiased proteomic data. As this data is used by more customers to generate insights, we believe this cycle will fuel further adoption of the Proteograph Product Suite throughout the industry.
The Proteograph is uniquely capable of generating robust, reproducible, deep and unbiased proteomic data. As this data is used by more customers to generate insights, we believe this cycle will fuel further adoption of the Proteograph Product Suite.
The majority of human genes can produce more than one protein spliceform and, according to the Ensembl genome database project, as many as 69,000 protein spliceforms are generated by more than 23,000 human genes through alternative splicing.
The majority of human genes can produce more than one protein spliceform and, according to the Ensembl genome database project, as many as 70,000 protein spliceforms are generated by more than 23,000 human genes through alternative splicing.
The Proteograph Analysis Suite, a data analytics software suite, provides quality control and allows researchers to analyze and interpret the output from the system to gain insights from their data. Figure 10: Proteograph Product Suite comprises consumables, an automation instrument, and software.
The Proteograph Analysis Suite, a data analytics software suite, provides quality control and allows researchers to analyze and interpret the output from the system to gain insights from their data. Figure 7: Proteograph Product Suite comprises consumables, an automation instrument, and software.
All clinical studies of investigational medical devices to determine safety and effectiveness must be conducted in accordance with FDA’s investigational device exemption (IDE) regulations, including the requirement for the study sponsor to submit an IDE application to FDA, unless exempt, which must become effective prior to commencing human clinical studies.
All clinical studies of investigational medical devices to determine safety and effectiveness must be conducted in accordance with FDA’s 29 Table of Contents investigational device exemption (IDE) regulations, including the requirement for the study sponsor to submit an IDE application to FDA, unless exempt, which must become effective prior to commencing human clinical studies.
Deep unbiased proteomics analysis of complex biosamples at scale have not been feasible for wide adoption by researchers due to the high complexity, cost and time requirements.
Deep unbiased proteomics analysis of complex biosamples at scale has not been feasible for wide adoption by researchers due to the high complexity, cost and time requirements.
Our products are not intended or promoted for use in clinical practice in the diagnosis of disease or other conditions, and they are labeled for research use only, not for use in diagnostic procedures. Accordingly, we believe our products, as we intend to market them, are not subject to regulation by FDA.
Our products are not intended or promoted for use in clinical practice in the diagnosis of disease or other conditions, and they are labeled for research use only, not for use in diagnostic procedures. Accordingly, we 28 Table of Contents believe our products, as we intend to market them, are not subject to regulation by FDA.
The Proteograph Product Suite is detector agnostic and, we believe, will be adaptable to other protein detection instruments in the future. The MS component of the Proteograph workflow is either provided by the researcher’s laboratory or can be outsourced to a third-party provider.
The Proteograph Product Suite is detector 7 Table of Contents agnostic and, we believe, will be adaptable to other protein detection instruments in the future. The MS component of the Proteograph workflow is either provided by the researcher’s laboratory or can be outsourced to a third-party provider.
At binding equilibrium, which occurs within minutes after our NPs encounter a biosample, the selective sampling of proteins by our NPs is robust and highly reproducible. 9 Figure 9: Nanoparticles allow unbiased interrogation of proteoform diversity. Our nanoparticle technology leverages engineered physicochemical properties to reproducibly bind to proteins without prior knowledge, forming a protein corona.
At binding equilibrium, which occurs within minutes after our NPs encounter a biosample, the selective sampling of proteins by our NPs is robust and highly reproducible. 6 Table of Contents Figure 6: Nanoparticles allow unbiased interrogation of proteoform diversity. Our nanoparticle technology leverages engineered physicochemical properties to reproducibly bind to proteins without prior knowledge, forming a protein corona.
We believe these features will facilitate broad adoption of the Proteograph solution across a variety of laboratories and institutions in both decentralized and centralized settings. • Offers a core technology with the potential for development of a range of products, applications and platforms.
We believe these features will facilitate broad adoption of the Proteograph solution across a variety of laboratories and institutions in both decentralized and centralized settings. 14 Table of Contents • Offers a core technology with the potential for development of a range of products, applications and platforms.
This period may be extended by two further months. Furthermore, following the expiration of the specified period, there will be increasing scope for divergence in application, interpretation and enforcement of the data protection law as between the United Kingdom and EEA.
This period may be extended by two further months. Furthermore, following the expiration of the specified period, there will be 32 Table of Contents increasing scope for divergence in application, interpretation and enforcement of the data protection law as between the United Kingdom and EEA.
We designed the performance specifications of the Proteograph Product Suite to meet the core needs of the market in terms of protein coverage and sample throughput required for proteomic experiments that are unbiased and at-scale. The current product allows for the interrogation and processing of up to 16 samples in parallel on a single 96-well plate in approximately seven hours.
We designed the performance specifications of the Proteograph Product Suite to meet the core needs of the market in terms of protein coverage and sample throughput required for proteomic experiments that are unbiased and at-scale. The current product allows for the interrogation and processing of up to 40 samples in parallel on a single 96-well plate in approximately eight hours.
We use a variety of intellectual property protection strategies, including patents, trademarks, trade secrets and other methods of protecting proprietary information. As of December 31, 2022, we owned or exclusively licensed over 125 issued patents and patent applications worldwide. Our intellectual property portfolio includes patents and patent applications directed to proteomic assays, nanoparticle chemistry, data analysis and automation instruments.
We use a variety of intellectual property protection strategies, including patents, trademarks, trade secrets and other methods of protecting proprietary information. As of December 31, 2023, we owned or exclusively licensed over 160 issued patents and patent applications worldwide. Our intellectual property portfolio includes patents and patent applications directed to proteomic assays, nanoparticle chemistry, data analysis and automation instruments.
We intend to seed and develop a new ecosystem of applications and organizations based upon large-scale proteomic analysis. This ecosystem could include areas such as disease detection, large-scale population studies, agriculture, environmental monitoring and food safety.
We intend to seed and develop a new ecosystem of applications and organizations based upon large-scale proteomic analysis. This ecosystem could include areas such as disease detection, large-scale population studies, agriculture, environmental 24 Table of Contents monitoring and food safety.
Our owned or exclusively licensed patents and patent applications, if issued, are expected to expire between 2023 and 2043, in each case without taking into account any possible patent term adjustments or extensions and assuming payment of all appropriate maintenance, renewal, annuity or other governmental fees.
Our owned or exclusively licensed patents and patent applications, if issued, are expected to expire between 2024 and 2044, in each case without taking into account any possible patent term adjustments or extensions and assuming payment of all appropriate maintenance, renewal, annuity or other governmental fees.
Commercial Commercial Strategy We are focused on developing the market for deep, unbiased, rapid proteomics at scale by improving accessibility to our technology and growing the installed base of the Proteograph across a wide variety of customer types.
Commercial Commercial Strategy We are focused on developing the market for deep, unbiased, rapid proteomics at scale by improving accessibility to our technology, growing the number of customer studies and publications, and expanding the installed base of the Proteograph across a wide variety of customer types.
Our market development efforts are focused on creating a body of evidence to support unbiased, deep proteomics at-scale by establishing relationships with key thought leaders and driving programs that make it easier for labs of all types to undertake first-of-their-kind studies.
Our market development efforts are focused on creating a body of evidence to support unbiased, deep proteomics at-scale by establishing relationships with key thought leaders and driving programs that make it easier for labs of all types to access the Proteograph in order to undertake first-of-their-kind studies.
Blume, J.E. et al. Rapid, deep and precise profiling of the plasma proteome with multi-nanoparticle protein corona. Nat. Commun. 11 (2020). Buccitelli C. and Selbach M. mRNAs, proteins and the emerging principles of gene expression control. Nat Rev Genet. 21(10):630-644 (2020). Donovan M. et al.
Nat Rev Molec Cell Biol 21, 327–340 (2020). Blume, J.E. et al . Rapid, deep and precise profiling of the plasma proteome with multi-nanoparticle protein corona. Nat. Commun. 11 (2020). Buccitelli C. and Selbach M. mRNAs, proteins and the emerging principles of gene expression control. Nat Rev Genet. 21(10):630-644 (2020). Donovan M. et al .
We are focused on driving adoption of the Proteograph by customers in the proteomics and genomics markets who recognize the value of large-scale, unbiased, and deep proteomics. Allied Market Research estimated the global proteomics market to be approximately $24 billion in 2021.
We are focused on driving adoption of the Proteograph by customers in the proteomics and genomics markets who recognize the value of large-scale, unbiased, and deep proteomics. Allied Market Research estimated the global proteomics market to be approximately $27 billion in 2022.
We believe these capabilities will have broad appeal to researchers and entities undertaking large-scale genomics studies and should attract spending from the genomics market, which was estimated by Technavio to be approximately $26 billion in 2021.
We believe these capabilities will have broad appeal to researchers and entities undertaking large-scale genomics studies and should attract spending from the genomics market, which was estimated by Technavio to be approximately $28 billion in 2022.
Each sample incubates separately with each of the five nanoparticles, yielding 80 wells of peptides in a 96-well plate. The remaining 16 wells are reserved for integrated quality control samples to ensure consistent process performance and to aid in troubleshooting.
Each sample incubates separately in two wells, yielding 80 wells of peptides in a 96-well plate. The remaining 16 wells are reserved for integrated quality control samples to ensure consistent process performance and to aid in troubleshooting.
PrognomiQ In August 2020, we entered into an intellectual property transfer and license agreement and, in October 2020, we entered into an intellectual property sublicense agreement, in each case with PrognomiQ in connection with the spin-out of PrognomiQ.
PrognomiQ In August 2020, we entered into an intellectual property transfer and license agreement and, in October 2020, we entered into an intellectual property sublicense agreement, in each case with PrognomiQ in connection with the 34 Table of Contents spin-out of PrognomiQ.
In addition to our reliance on patent protection for our inventions, products and technologies, we also rely on trade secrets, know-how, confidentiality agreements and continuing technological innovation to develop and maintain our competitive position.
In addition to our reliance on patent protection for our inventions, products and technologies, we also rely on trade secrets, know-how, confidentiality agreements and continuing technological innovation to develop and maintain our 33 Table of Contents competitive position.
In the future, to the extent we develop any clinical diagnostic assays, we may pursue payment for such products through a diverse and broad range of channels and seek coverage and reimbursement by government health insurance programs and commercial third-party payors for such products. In the United States, there is no uniform coverage for clinical laboratory tests.
In the future, if we or our partners develop any clinical diagnostic assays, we may pursue payment for such products through a diverse and broad range of channels and seek coverage and reimbursement by government health insurance programs and commercial third-party payors for such products. In the United States, there is no uniform coverage for clinical laboratory tests.
Employees Our employees are guided by our mission to imagine and pioneer news ways to decode the secrets of the proteome to improve human health. Our core values Better Together, Customer Centric, Difference Makers, People First and Trailblazers guide us toward achieving our mission.
Employees Our employees are guided by our mission to imagine and pioneer news ways to decode the biology of the proteome to improve human health. Our core values Better Together, Customer Centric, Difference Makers, People First and 35 Table of Contents Trailblazers guide us toward achieving our mission.
Item 1. Business Overview Our mission is to imagine and pioneer new ways to decode the secrets of the proteome to improve human health. Our first product, the Proteograph TM Product Suite (Proteograph), leverages our proprietary engineered nanoparticle (NP) technology to provide unbiased, deep, rapid and large-scale access to the proteome.
Item 1. Busi ness Overview Our mission is to imagine and pioneer new ways to decode the biology of the proteome to improve human health. Our product, the Proteograph TM Product Suite (Proteograph), leverages our proprietary engineered nanoparticle (NP) technology to provide unbiased, deep, rapid and large-scale access to the proteome.
The ready availability of non-particle reagents, combined with our ability to efficiently design and fabricate different NPs with different chemical properties, greatly facilitates the development and production of future iterations or additional versions of the Proteograph assays to address potential customer needs, such as expanded protein coverage or specialized assays.
The ready availability of non-particle reagents, combined with our ability to efficiently design and fabricate different NPs with different chemical properties, greatly facilitates the development and production of future iterations or additional versions of the Proteograph assays to address potential customer needs, such as expanded protein coverage or specialized assays, including potential assays that can be used with clinical products.
These studies are not a part of this prospectus and are not incorporated by reference in this Annual Report. Backman, J.D. et al. Exome sequencing and analysis of 454,787 UK Biobank participants. Nature 599, 628–634 (2021) Bludau, I. et al. Proteomic and interactomic insights into the molecular basis of cell functional diversity. Nat Rev Molec Cell Biol 21, 327–340 (2020).
These studies are not a part of this prospectus and are not incorporated by reference in this Annual Report. Backman, J.D. et al . Exome sequencing and analysis of 454,787 UK Biobank participants. Nature 599, 628–634 (2021) Bludau, I. et al . Proteomic and interactomic insights into the molecular basis of cell functional diversity.
Potential applications of the Proteograph could span several areas, including basic research and discovery, translational research, diagnostics and applications. The proteomics market is estimated by Allied Market Research to have spent $18 billion on reagents, $4 billion on instruments, and $1.5 billion on services in 2021.
Potential applications of the Proteograph could span several areas, including basic research and discovery, translational research, diagnostics and clinical applications. The proteomics market is estimated by Allied Market Research to have spent approximately $21 billion on reagents, $4.5 billion on instruments, and $1.5 billion on services in 2022.
We started broad commercialization of the Proteograph Product Suite in January 2022 and shipped 22 instruments in 2022, bringing our total system shipments to 39 as of December 31, 2022.
We started broad commercialization of the Proteograph Product Suite in January 2022 and shipped 23 instruments in 2023, bringing our total system shipments to 62 as of December 31, 2023.
We have exemplified the utility of the Proteograph in studying secreted proteins across several different sample types, including cell or tissue homogenates, blood or blood components (such as plasma or serum), urine, saliva, cerebrospinal fluid, synovial fluid and conditioned media. Across these studies, over 10,000 distinct proteins have been identified.
We have exemplified the utility of the Proteograph in studying secreted proteins across several different sample types, including cell or tissue homogenates, blood or blood components (such as plasma or serum), urine, saliva, cerebrospinal fluid, synovial fluid and conditioned media.
This capability measures how close the measured abundance of a protein is to the true abundance in a sample. The true abundance of large number of proteins at a protein variant level at scale is not independently possible, so we use the ratio of abundances in two samples to demonstrate the accuracy of protein abundance measurement.
The true abundance of a large number of proteins at the protein variant level at scale is not independently possible, so we use the ratio of abundances in two samples to demonstrate the accuracy of protein abundance measurement.
Functionally distinct BMP1 isoforms show an opposite pattern of abundance in plasma from non-small cell lung cancer subjects and controls (in press; bioRxiv). Ferdosi, S. et al. Engineered nanoparticles enable deep proteomic studies at scale by leveraging tunable nano-bio interactions. PNAS . 119(11) (2022). Ferdosi, S. et al.
Functionally distinct BMP1 isoforms show an opposite pattern of abundance in plasma from non-small cell lung cancer subjects and controls. PLOS One. 18(3): e0282821 (2023). 36 Table of Contents Ferdosi, S. et al . Engineered nanoparticles enable deep proteomic studies at scale by leveraging tunable nano-bio interactions. PNAS . 119(11) (2022). Ferdosi, S. et al .
None of our employees are represented by a labor union or covered under a collective bargaining agreement. Diversity, equality and inclusion awareness and training were an important part of our 2022 human capital strategy. As of December 31, 2022, 66% of our employees were women and people of color.
None of our employees is represented by a labor union or covered under a collective bargaining agreement. Diversity, equality and inclusion awareness were a part of our 2023 human capital strategy. As of December 31, 2023, 62% of our employees were women and people of color.
Hamilton has represented to us that it maintains ISO 9001 and ISO 13485 certification. Competition The life sciences technology industry is highly dynamic, marked by rapidly advancing technologies, intense competition and a strong focus on intellectual property. In the proteomics market, companies offer a range of analytical instruments, such as chromatography and MS instruments, and associated reagents.
Competition The life sciences technology industry is highly dynamic, marked by rapidly advancing technologies, intense competition and a strong focus on intellectual property. In the proteomics market, companies offer a range of analytical instruments, such as chromatography and MS instruments, and associated reagents.
The unbiased, deep and scalable proteomic data generated by the Proteograph has the potential to create ecosystems, similar to the way in which NGS enabled genomics-based diagnostics for cancer and rare genetic diseases.
Diagnostic Applications We believe that the Proteograph Product Suite also holds significant diagnostic potential. The unbiased, deep and scalable proteomic data generated by the Proteograph has the potential to create ecosystems, similar to the way in which NGS enabled genomics-based diagnostics for cancer and rare genetic diseases.
Figure 7 illustrates how content discovery increases as sample cohorts increase in size with an unbiased approach. 7 Figure 7: Unbiased approaches increase the identification of protein variants arising from genomic variants, isoforms and post-translational modifications as sample numbers increase, resulting in new biological insights, applications and utility. Targeted approaches are inherently unable to discover new protein variants.
Figure 4: Unbiased approaches increase the identification of protein variants arising from genomic variants, isoforms and post-translational modifications as sample numbers increase, resulting in new biological insights, applications and utility. Targeted approaches are inherently unable to discover new protein variants.
Neither party may assign the intellectual property transfer and license agreement nor any rights or obligations under the agreement without the other party’s prior written consent, other than to an affiliate or pursuant to an acquisition.
In an amendment to the intellectual property transfer and license agreement, we agreed to extend this negotiation period to August 21, 2024. Neither party may assign the intellectual property transfer and license agreement nor any rights or obligations under the agreement without the other party’s prior written consent, other than to an affiliate or pursuant to an acquisition.
Our NP technology, SP100 automation instrument, and software are protected by numerous issued patents and pending patent applications worldwide, covering improvements in NPs, assay methods and ways to leverage proteomic data and information for life sciences research, clinical diagnostic and drug discovery applications. 17 Our Strategy Our mission is to imagine and pioneer new ways to decode the secrets of the proteome to improve human health.
Our NP technology, SP100 automation instrument, and software are protected by numerous issued patents and pending patent applications worldwide, covering improvements in NPs, assay methods and ways to leverage proteomic data and information for life sciences research, clinical diagnostic and drug discovery applications.
We are establishing our commercial infrastructure to sell and support our products directly in the United States, the European Union,and United Kingdom. We are expanding access to our products in other geographies, starting with select countries in Asia Pacific through distributors, and eventually to the rest of the world.
We are establishing our commercial infrastructure to sell and support our products directly in the United States, the European Union, and United Kingdom. We are expanding access to our products in other geographies through distributors.
If our products become subject to FDA regulation as medical devices, we would need to invest significant time and resources to ensure ongoing compliance with FDA quality system regulations and other post-market regulatory requirements. International sales of medical devices are subject to foreign government regulations, which vary substantially from country to country.
If our products become subject to FDA regulation as medical devices, we would need to invest 30 Table of Contents significant time and resources to ensure ongoing compliance with FDA quality system regulations and other post-market regulatory requirements.
We believe that we will be competing in both the proteomics reagent and instrument markets in the near term, 15 while our service provider customers and Centers of Excellence (COEs) will be accessing the services component. According to Technavio, the genomics market consists of approximately $16 billion spent on products and $9.5 billion spent on services.
We believe we will compete in the proteomics reagent and instrument markets in the near term, while our service provider customers and Centers of Excellence (COEs) will access the services component. According to Technavio, the genomics market consists of approximately $18 billion spent on products and $10 billion spent on services in 2022.
While there is no guarantee that the Proteograph Product Suite will have the same impact on proteomics that NGS had on genomics, we believe there is a significant market opportunity to provide unbiased, deep, rapid, and scalable access to the proteome.
While there is no guarantee that the Proteograph Product Suite will have the same impact on proteomics that NGS had on genomics, we believe there is a significant market opportunity to provide unbiased, deep, rapid, and scalable access to the proteome. Figure 4 illustrates how content discovery increases as sample cohorts increase in size with an unbiased approach.
The Proteograph generates large-scale unbiased proteomic data, enabling researchers to map protein variants to genomic variants, advancing the field of proteogenomics. We anticipate that as researchers conduct large-scale proteomics studies with the Proteograph, proteogenomic content will rapidly increase, providing functional information to existing genomics and gene expression information.
We anticipate that as researchers conduct large-scale proteomics studies with the Proteograph, proteogenomic content will rapidly increase, providing functional information to existing genomics and gene expression information.
We believe providing a simple, consistent interface to evaluate the control data and generate a quality control (QC) report will help customers understand our approach to QC in the Proteograph workflow, simplifying support.
Customers can evaluate trends over time and implement performance boundaries around the expected values that flag unexpected outcomes in the data. We believe providing a simple, consistent interface to evaluate the control data and generate a quality control (QC) report will help customers understand our approach to QC in the Proteograph workflow, simplifying support.
If we account for additional spliceforms at the population level, arising from genetic variants and somatic variants including those responsible for cancers (which affect RNA processing), the number is much larger. Affinity-based approaches generally cannot differentiate between spliceforms, whereas unbiased MS-based approaches survey proteins at the peptide level, enabling differentiation between spliceforms.
If we account for additional spliceforms at the population level, arising from genetic variants and somatic variants including those responsible for cancers (which affect RNA processing), the number is much larger.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeIn addition, our restated certificate of incorporation and restated bylaws contain provisions that may make the acquisition of our company more difficult, including the following: • any transaction that would result in a change in control of our company requires the approval of a majority of our outstanding Class B common stock voting as a separate class; • our multi-class common stock structure provides our holders of Class B common stock with the ability to significantly influence the outcome of matters requiring stockholder approval, even if they own significantly less than a majority of the shares of our outstanding Class A common stock and Class B common stock; • our board of directors is classified into three classes of directors with staggered three-year terms and directors will only be able to be removed from office for cause by the affirmative vote of holders of at least two-thirds of the voting power of our then outstanding capital stock; • certain amendments to our amended and restated certificate of incorporation require the approval of stockholders holding two-thirds of the voting power of our then outstanding capital stock; • any stockholder-proposed amendment to our amended and restated bylaws require the approval of stockholders holding two-thirds of the voting power of our then outstanding capital stock; • our stockholders may only be able to take action at a meeting of stockholders and may not be able to take action by written consent for any matter; • our stockholders are able to act by written consent only if the action is first recommended or approved by the board of directors; • vacancies on our board of directors may be filled only by our board of directors and not by stockholders; • only the chair of the board of directors, chief executive officer or a majority of the board of directors are authorized to call a special meeting of stockholders; • certain litigation against us can only be brought in Delaware; • our restated certificate of incorporation authorizes undesignated preferred stock, the terms of which may be established and shares of which may be issued, without the approval of the holders of our capital stock; and • advance notice procedures apply for stockholders to nominate candidates for election as directors or to bring matters before an annual meeting of stockholders. 69 These anti-takeover defenses could discourage, delay, or prevent a transaction involving a change in control of our company.
Biggest changeIn addition, our restated certificate of incorporation and restated bylaws contain provisions that may make the acquisition of our company more difficult, including the following: • any transaction that would result in a change in control of our company requires the approval of a majority of our outstanding Class B common stock voting as a separate class; • our multi-class common stock structure provides our holders of Class B common stock with the ability to significantly influence the outcome of matters requiring stockholder approval, even if they own significantly less than a majority of the shares of our outstanding Class A common stock and Class B common stock; • certain amendments to our amended and restated certificate of incorporation require the approval of stockholders holding two-thirds of the voting power of our then outstanding capital stock; • any stockholder-proposed amendment to our amended and restated bylaws require the approval of stockholders holding two-thirds of the voting power of our then outstanding capital stock; • our stockholders may only be able to take action at a meeting of stockholders and may not be able to take action by written consent for any matter; • our stockholders are able to act by written consent only if the action is first recommended or approved by the board of directors; • vacancies on our board of directors may be filled only by our board of directors and not by stockholders; • only the chair of the board of directors, chief executive officer or a majority of the board of directors are authorized to call a special meeting of stockholders; • certain litigation against us can only be brought in Delaware; 80 Table of Contents • our restated certificate of incorporation authorizes undesignated preferred stock, the terms of which may be established and shares of which may be issued, without the approval of the holders of our capital stock; and • advance notice procedures apply for stockholders to nominate candidates for election as directors or to bring matters before an annual meeting of stockholders.
Our future success depends upon our ability to recruit, train, retain and motivate key personnel. Our senior management team, including Omid Farokhzad, one of our founders and our Chief Executive Officer and President, and David Horn, our Chief Financial Officer, are critical to our vision, strategic direction, product development and commercialization efforts.
Our future success depends upon our ability to recruit, train, retain and motivate key personnel. Our senior management team, including Omid Farokhzad, one of our founders and our Chief Executive Officer, and David Horn, our Chief Financial Officer and President, are critical to our vision, strategic direction, product development and commercialization efforts.
We may have previously undergone multiple “ownership changes.” In addition, future issuances or sales of our stock, including certain transactions involving our stock that are outside of our control, could result in future “ownership changes.” “Ownership changes” that have occurred in the past or that may occur in the future could result in the imposition of an annual limit on the amount of pre-ownership change NOLs and other tax attributes we can use to reduce our taxable income, potentially increasing and accelerating our liability for income taxes, and also potentially causing those tax attributes to expire unused.
We have previously undergone multiple “ownership changes.” In addition, future issuances or sales of our stock, including certain transactions involving our stock that are outside of our control, could result in future “ownership changes.” “Ownership changes” that have occurred in the past or that may occur in the future could result in the imposition of an annual limit on the amount of pre-ownership change NOLs and other tax attributes we can use to reduce our taxable income, potentially increasing and accelerating our liability for income taxes, and also potentially causing those tax attributes to expire unused.
For example, the CCPA, which increases privacy rights for California residents and imposes obligations on companies that process their personal information, came into effect on January 1, 2020, and CPRA, which increases such rights and responsibilities, came into effect on January 1, 2023.
For example, the CCPA, which increases privacy rights for California residents and imposes obligations on companies that process their personal information, came into effect on January 1, 2020, and the CPRA, which increases such rights and responsibilities, came into effect on January 1, 2023.
If we are held to have breached the terms of an open source software license, we could be subject to damages, required to seek licenses from third parties to continue offering our products on terms that are not economically feasible, to re-engineer our products, to discontinue the sale of our products if re-engineering could not be accomplished on a timely basis, or to make generally available, in source code form, our proprietary code, any of which could materially adversely affect our business, financial condition, results of operations and prospects.
If we are held to have breached the terms of an open source software license, we could be subject to damages, required to seek licenses from third parties to continue offering our products on terms that are not economically feasible, to re-engineer our products, to discontinue the sale of our products or services if re-engineering could not be accomplished on a timely basis, or to make generally available, in source code form, our proprietary code, any of which could materially adversely affect our business, financial condition, results of operations and prospects.
As we increase the commercial scale formulation and manufacturing of our NP panels, if we are not able to repeatably produce our NPs at commercial scale or source them from third-party suppliers, encounter unexpected difficulties in packaging our consumables, fail to comply with regulations relating to laboratory safety, the handling of human samples, the use of certain hazardous substances or chemicals, including in commercial products, or the collection, reuse, and recycling of waste from products we manufacture, our business will be adversely impacted.
As we increase the commercial scale formulation and manufacturing of our NP panels, if we are not able to repeatably produce our NPs at commercial scale or source them from third-party suppliers, encounter unexpected difficulties in packaging our consumables, fail to comply with regulations relating to laboratory safety, the handling of human samples, the use and transportation of certain hazardous substances or chemicals, including in commercial products, or the collection, reuse, and recycling of waste from products we manufacture, our business will be adversely impacted.
We will consider raising additional capital in the future to expand our business, to pursue strategic investments, to take advantage of financing opportunities or for other reasons, including: • increasing our sales and marketing and other commercialization efforts to drive market adoption of the Proteograph Product Suite; • funding development and marketing efforts of the Proteograph Product Suite or any other future products; • expanding our technologies into additional markets; • acquiring, licensing or investing in technologies and other intellectual property rights; • acquiring or investing in complementary businesses or assets; and 47 • financing capital expenditures and general and administrative expenses.
We will consider raising additional capital in the future to expand our business, to pursue strategic investments, to take advantage of financing opportunities or for other reasons, including: • increasing our sales and marketing and other commercialization efforts to drive market adoption of the Proteograph Product Suite; • funding development and marketing efforts of the Proteograph Product Suite or any other future products; • expanding our technologies into additional markets; • acquiring, licensing or investing in technologies and other intellectual property rights; • acquiring or investing in complementary businesses or assets; and • financing capital expenditures and general and administrative expenses.
Although we believe these exclusive forum provisions benefit us by providing increased consistency in the 68 application of Delaware law and federal securities laws in the types of lawsuits to which each applies, the exclusive forum provisions may limit a stockholder’s ability to bring a claim in a judicial forum of its choosing for disputes with us or any of our directors, officers, stockholders, or other employees, which may discourage lawsuits with respect to such claims against us and our current and former directors, officers, stockholders, or other employees.
Although we believe these exclusive forum provisions benefit us by providing increased consistency in the application of Delaware law and federal securities laws in the types of lawsuits to which each applies, the exclusive forum provisions may limit a stockholder’s ability to bring a claim in a judicial forum of its choosing for disputes with us or any of our directors, officers, stockholders, or other employees, which may discourage lawsuits with respect to such claims against us and our current and former directors, officers, stockholders, or other employees.
Patent terms may be inadequate to protect our competitive position on our products and technologies, including the Proteograph Product Suite for an adequate amount of time. Patents have a limited lifespan. In the United States, if all maintenance fees are timely paid, the natural expiration of a patent is generally 20 years from its earliest U.S. non-provisional filing date.
Patent terms may be inadequate to protect our competitive position on our products, services and technologies, including the Proteograph Product Suite for an adequate amount of time. Patents have a limited lifespan. In the United States, if all maintenance fees are timely paid, the natural expiration of a patent is generally 20 years from its earliest U.S. non-provisional filing date.
The absence of harmonized intellectual property protection laws and effective enforcement makes it 55 difficult to ensure consistent respect for patent, trade secret, and other intellectual property rights on a worldwide basis. As a result, it is possible that we will not be able to enforce our rights against third parties that misappropriate our proprietary technology in those countries.
The absence of harmonized intellectual property protection laws and effective enforcement makes it difficult to ensure consistent respect for patent, trade secret, and other intellectual property rights on a worldwide basis. As a result, it is possible that we will not be able to enforce our rights against third parties that misappropriate our proprietary technology in those countries.
If any of these third parties, or any other third parties, were to assert these or any other patents against us and we are unable to successfully defend against any such assertion, we may be required, including by court order, to cease the development and commercialization of the infringing products or technologies and we may be required to redesign such products or technologies so they do not infringe such patents, which may not be possible or may require substantial monetary expenditures and time.
If any of these third parties, or any other third parties, were to assert these or any other patents against us and we are unable to successfully defend against any such assertion, we may be required, including by court order, to cease the development and commercialization of the infringing products, services or technologies and we may be required to redesign such products, services or technologies so they do not infringe such patents, which may not be possible or may require substantial monetary expenditures and time.
In addition, if the breadth or strength of protection provided by our patents and patent applications is threatened, regardless of the outcome, it could dissuade companies from collaborating with us to license intellectual property, or develop or commercialize current or future products. We may not be aware of all third-party intellectual property rights potentially relating to our products.
In addition, if the breadth or strength of protection provided by our patents and patent applications is threatened, regardless of the outcome, it could dissuade companies from collaborating with us to license intellectual property, or develop or commercialize current or future products. We may not be aware of all third-party intellectual property rights potentially relating to our products or services.
Although we review our use of open source software to avoid subjecting our proprietary software to conditions we do not intend, the terms of many open source software licenses have not been interpreted by United States courts, and there is a risk that these licenses could be construed in a way that could impose unanticipated conditions or restrictions on our ability to commercialize our products and proprietary software.
Although we review our use of open source software to avoid subjecting our proprietary software to conditions we do not intend, the terms of many open source software licenses have not been interpreted by United States courts, and there is a risk that these licenses could be construed in a way that could impose unanticipated conditions or restrictions on our ability to commercialize our products, services and proprietary software.
We base our estimates on historical experience and estimates and on various other assumptions 50 that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets, liabilities, equity, revenue and expenses that are not readily apparent from other sources. However, we have a limited operating history.
We base our estimates on historical experience and estimates and on various other assumptions that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets, liabilities, equity, revenue and expenses that are not readily apparent from other sources. However, we have a limited operating history.
An adverse determination in any such proceeding may result in loss of exclusivity or freedom to operate or in patent claims being narrowed, invalidated or held unenforceable, in whole or in part, which could limit our ability to stop others from using or commercializing similar technology, without payment to us, or could limit the duration of the patent 61 protection covering our technology and products.
An adverse determination in any such proceeding may result in loss of exclusivity or freedom to operate or in patent claims being narrowed, invalidated or held unenforceable, in whole or in part, which could limit our ability to stop others from using or commercializing similar technology, without payment to us, or could limit the duration of the patent protection covering our technology and products.
If a defendant or other third party were to prevail on a legal assertion of invalidity or unenforceability, we would lose at least part, and perhaps all, of the patent protection on certain aspects of our products and technologies, which could have a material adverse effect on our business, financial condition, results of operations and prospects.
If a defendant or other third party were to prevail on a legal assertion of invalidity or unenforceability, we would lose at least part, and perhaps all, of the patent protection on certain aspects of our products, services and technologies, which could have a material adverse effect on our business, financial condition, results of operations and prospects.
If we do not prevail, we may be required to pay damages, including treble damages, attorneys’ fees, costs and expenses and royalties or be enjoined from selling our products, including the Proteograph Product Suite, which could adversely affect our ability to offer products or services, our ability to continue operations and our business, financial condition, results of operations and prospects.
If we do not prevail, we may be required to pay damages, including treble damages, attorneys’ fees, costs and expenses and royalties or be enjoined from selling our products or services, including the Proteograph Product Suite and related services, which could adversely affect our ability to offer products or services, our ability to continue operations and our business, financial condition, results of operations and prospects.
We may not be able to identify desirable acquisition targets or be successful in entering into an agreement with any particular target or obtain the expected benefits of any acquisition or investment. To date, the growth of our operations has been organic, and we have limited experience in acquiring or investing in other businesses or technologies.
We may not be able to identify desirable acquisition targets or be successful in entering into an agreement with any particular target or obtain the expected benefits of any acquisition or investment. To date, the growth of our operations has been organic, and we have limited experience in acquiring other businesses or technologies.
To determine the priority of these inventions, we may have to participate in interference proceedings, derivation proceedings or other post-grant proceedings declared by the USPTO, or other similar 56 proceedings in non-U.S. jurisdictions, that could result in substantial cost to us and the loss of valuable patent protection. The outcome of such proceedings is uncertain.
To determine the priority of these inventions, we may have to participate in interference proceedings, derivation proceedings or other post-grant proceedings declared by the USPTO, or other similar proceedings in non-U.S. jurisdictions, that could result in substantial cost to us and the loss of valuable patent protection. The outcome of such proceedings is uncertain.
In addition, we cannot assure investors that our competitors do not have or will not develop products or technologies that currently or in the future will enable them to produce competitive products with greater capabilities or at lower costs than ours or that are able to run comparable experiments at a lower total experiment cost.
In addition, we cannot assure that our competitors do not have or will not develop products or technologies that currently or in the future will enable them to produce competitive products with greater capabilities or at lower costs than ours or that are able to run comparable experiments at a lower total experiment cost.
Risks Related to our Intellectual Property If we are unable to obtain, maintain and enforce sufficient intellectual property protection for our products and technology, or if the scope of the intellectual property protection obtained is not sufficiently broad, our competitors could develop and commercialize products similar or identical to ours, and our ability to successfully commercialize our products may be impaired.
Risks Related to our Intellectual Property If we are unable to obtain, maintain and enforce sufficient intellectual property protection for our products, services and technology, or if the scope of the intellectual property protection obtained is not sufficiently broad, our competitors could develop and commercialize products similar or identical to ours, and our ability to successfully commercialize our products may be impaired.
We rely on patent protection as well as trademark, copyright, trade secret and other intellectual property rights protection and contractual restrictions to protect our proprietary products and technologies, all of which provide limited protection and may not adequately protect our rights or permit us to gain or keep any competitive advantage.
We rely on patent protection as well as trademark, copyright, trade secret and other intellectual property rights protection and contractual restrictions to protect our proprietary products, services and technologies, all of which provide limited protection and may not adequately protect our rights or permit us to gain or keep any competitive advantage.
We cannot predict the breadth of claims that may be allowed or enforced in our patents or in third-party patents. It is possible that third parties will design around our current or future patents such that we cannot prevent such third parties from using similar technologies and commercializing similar products to compete with us.
We cannot predict the breadth of claims that may be allowed or enforced in our patents or in third-party patents. It is possible that third parties will design around our current or future patents such that we cannot prevent such third parties from using similar technologies and commercializing similar products or services to compete with us.
In addition, if we or our licensor initiate legal proceedings against a third party to enforce a patent covering our products, the defendant could counterclaim that such patent covering our products, as applicable, is invalid and/or unenforceable. In patent litigation in the United States, defendant counterclaims alleging invalidity or unenforceability are commonplace.
In addition, if we or our licensor initiate legal proceedings against a third party to enforce a patent covering our products or services, the defendant could counterclaim that such patent covering our products or services, as applicable, is invalid and/or unenforceable. In patent litigation in the United States, defendant counterclaims alleging invalidity or unenforceability are commonplace.
In such an event, we may be required to obtain licenses from third parties and such licenses may not be available on commercially reasonable terms or at all, or may be non-exclusive. If we are unable to obtain and maintain such licenses, we may need to cease the development, manufacture and commercialization of our products and technologies.
In such an event, we may be required to obtain licenses from third parties and such licenses may not be available on commercially reasonable terms or at all, or may be non-exclusive. If we are unable to obtain and maintain such licenses, we may need to cease the development, manufacture and commercialization of our products, services and technologies.
Even if we are able to broadly commercialize the Proteograph Product Suite and achieve broad scientific and market acceptance, our ability to attract new customers and increase revenue from existing customers will depend in large part on our ability to enhance and improve the Proteograph solution and to introduce compelling new products.
Even if we are able to broadly commercialize the Proteograph Product Suite and achieve broad scientific and market acceptance, our ability to attract new customers and increase revenue from existing customers will depend in large part on our ability to enhance and improve the Proteograph solution and to introduce compelling new products and services.
What constitutes a “sufficient” additional feature is uncertain. Furthermore, in view of these decisions, since December 2014, the USPTO has published and continues to publish revised guidelines for patent examiners to apply when examining process claims for patent eligibility. 54 In addition, U.S.
What constitutes a “sufficient” additional feature is uncertain. Furthermore, in view of these decisions, since December 2014, the USPTO has published and continues to publish revised guidelines for patent examiners to apply when examining process claims for patent eligibility. In addition, U.S.
Competitors and other third parties may also use our technologies in jurisdictions where we have not obtained patent protection to develop their own products and technologies and may also export infringing products to territories where we have patent protection, but enforcement is not as strong as that in the United States. These products may compete with our products.
Competitors and other third parties may also use our technologies in jurisdictions where we have not obtained patent protection to develop their own products, services and technologies and may also export infringing products to territories where we have patent protection, but enforcement is not as strong as that in the United States. These products may compete with our products.
In addition, while we cannot currently determine the amount of any future royalty obligations we would be required to pay on future sales of a licensed product, the amount may be significant. The amount of our 62 future royalty obligations will depend on the technology and intellectual property we use in products we commercialize, if at all.
In addition, while we cannot currently determine the amount of any future royalty obligations we would be required to pay on future sales of a licensed product, the amount may be significant. The amount of our future royalty obligations will depend on the technology and intellectual property we use in products we commercialize, if at all.
The CPRA restricts use of certain categories of sensitive personal information that we may handle, establish restrictions on the retention of personal information, expand the 72 types of data breaches subject to the private right of action, and establish the California Privacy Protection Agency to implement and enforce the new law and impose administrative fines.
The CPRA restricts use of certain categories of sensitive personal information that we may handle, establish restrictions on the retention of personal information, expand the types of data breaches subject to the private right of action, and establish the California Privacy Protection Agency to implement and enforce the new law and impose administrative fines.
For example, on March 2, 2021, Virginia enacted the Virginia Consumer Data Protection Act, or CDPA, which took effect on January 1, 2023, on June 8, 2021, Colorado enacted the Colorado Privacy Act, or CPA, which takes effect on July 1, 2023, and on March 24, 2022, Utah enacted the Utah Consumer Privacy Act, or UCPA, which takes effect on December 31, 2023; and on May 10, 2022, Connecticut enacted the Connecticut Data Privacy Act, or CTDPA, which takes effect on July 1, 2023.
For example, on March 2, 2021, Virginia enacted the Virginia Consumer Data Protection Act, or CDPA, which took effect on January 1, 2023, on June 8, 2021, Colorado enacted the Colorado Privacy Act, or CPA, which took effect on July 1, 2023, and on March 24, 2022, Utah enacted the Utah Consumer Privacy Act, or UCPA, which took effect on December 31, 2023; and on May 10, 2022, Connecticut enacted the Connecticut Data Privacy Act, or CTDPA, which took effect on July 1, 2023.
It is not always clear to industry participants, including us, the claim scope that may issue from pending patent applications owned by third parties or which patents cover various types of products, technologies or their methods of use or manufacture.
It is not always clear to industry participants, including us, the claim scope that may issue from pending patent applications owned by third parties or which patents cover various types of products, services, technologies or their methods of use or manufacture.
As our organization continues to grow, we will be required to implement more complex organizational management structures, and may find it increasingly difficult to maintain the benefits of our corporate culture, including our ability to quickly develop and launch new and 39 innovative products.
As our organization continues to grow, we will be required to implement more complex organizational management structures, and may find it increasingly difficult to maintain the benefits of our corporate culture, including our ability to quickly develop and launch new and innovative products.
Changes to the current regulatory framework, including the imposition of additional or new regulations, including regulation of our products, could arise at any time during the development or marketing of our products, which may negatively affect our ability to obtain or maintain FDA or comparable regulatory approval of 52 our products, if required.
Changes to the current regulatory framework, including the imposition of additional or new regulations, including regulation of our products, could arise at any time during the development or marketing of our products, which may negatively affect our ability to obtain or maintain FDA or comparable regulatory approval of our products, if required.
Should any of these events occur, they could materially adversely affect our business, financial condition, results of operations and prospects. 65 Risks Related to Ownership of Our Class A Common Stock An active trading market for our Class A common stock may not be sustained.
Should any of these events occur, they could materially adversely affect our business, financial condition, results of operations and prospects. Risks Related to Ownership of Our Class A Common Stock An active trading market for our Class A common stock may not be sustained.
These laws and regulations may be interpreted and applied differently over time and from jurisdiction to 73 jurisdiction, and it is possible that they will be interpreted and applied in ways that may have a material adverse effect on our business, financial condition, results of operations and prospects.
These laws and regulations may be interpreted and applied differently over time and from jurisdiction to jurisdiction, and it is possible that they will be interpreted and applied in ways that may have a material adverse effect on our business, financial condition, results of operations and prospects.
Filing, prosecuting and defending patents on our technology and products, including the Proteograph Product Suite, in all countries throughout the world would be prohibitively expensive, and our intellectual property rights in some countries outside the United States can be less extensive than those in the United States.
Filing, prosecuting and defending patents on our technology, services and products, including the Proteograph Product Suite, in all countries throughout the world would be prohibitively expensive, and our intellectual property rights in some countries outside the United States can be less extensive than those in the United States.
We may be exposed to, or threatened with, future litigation by third parties having patent or other intellectual property rights alleging that our products, manufacturing methods, software and/or technologies infringe, misappropriate or otherwise violate their intellectual property rights.
We may be exposed to, or threatened with, future litigation by third parties having patent or other intellectual property rights alleging that our products, services, manufacturing methods, software and/or technologies infringe, misappropriate or otherwise violate their intellectual property rights.
Such challenges may also result in our inability to develop, manufacture or commercialize our products without infringing third-party patent rights. Any of the foregoing could harm our business, financial condition, results of operations and prospects.
Such challenges may also result in our inability to develop, manufacture or commercialize our products or services without infringing third-party patent rights. Any of the foregoing could harm our business, financial condition, results of operations and prospects.
Bribery Act of 2010 and other anti-corruption laws, regulations relating to the use of certain hazardous substances or chemicals in commercial products, and to the collection, reuse, and recycling of waste from products we manufacture; • required compliance with U.S. laws such as the Foreign Corrupt Practices Act, and other U.S. federal laws and regulations, including with respect to not doing business with sanctioned parties, as prohibited by the office of Foreign Asset Control; • export requirements and import or trade restrictions, including, without limitation, trade retaliation laws; • laws and business practices favoring local companies; • risks associated with transactions or payments denominated in foreign currency, longer payment cycles and difficulties in enforcing agreements and collecting receivables through certain foreign legal systems; • changes in social, economic, political and climate conditions or in laws, regulations and policies governing foreign trade, manufacturing, research and development, investment, and climate control both domestically as well as in the other countries and jurisdictions in which we operate and into which we may sell our products, including as a result of the separation of the United Kingdom from the European Union (Brexit); • potentially adverse tax consequences, tariffs, customs charges, bureaucratic requirements, and other trade barriers; • difficulties and costs of staffing and managing foreign operations; and 45 • difficulties protecting, maintaining, enforcing or procuring intellectual property rights.
Bribery Act of 2010 and other anti-corruption laws, regulations relating to the use of certain hazardous substances or chemicals in commercial products, and to the collection, reuse, and recycling of waste from products we manufacture; • required compliance with U.S. laws such as the Foreign Corrupt Practices Act, and other U.S. federal laws and regulations, including with respect to not doing business with sanctioned parties, as prohibited by the office of Foreign Asset Control; • export requirements and import or trade restrictions, including, without limitation, trade retaliation laws; • laws and business practices favoring local companies; • risks associated with transactions or payments denominated in foreign currency, longer payment cycles and difficulties in enforcing agreements and collecting receivables through certain foreign legal systems; • changes in social, economic, political and climate conditions or in laws, regulations and policies governing foreign trade, manufacturing, research and development, investment, and climate control both domestically 52 Table of Contents as well as in the other countries and jurisdictions in which we operate and into which we may sell our products, including as a result of the separation of the United Kingdom from the European Union (Brexit); • potentially adverse tax consequences, tariffs, customs charges, bureaucratic requirements, and other trade barriers; • difficulties and costs of staffing and managing foreign operations; and • difficulties protecting, maintaining, enforcing or procuring intellectual property rights.
Our 71 information technology systems and those of our vendors, partners and customers are potentially vulnerable to disruption due to breakdown, malicious intrusion and computer viruses or other disruptive events, including, but not limited to, natural disasters and catastrophes.
Our information technology systems and those of our vendors, partners and customers are potentially vulnerable to disruption due to breakdown, malicious intrusion and computer viruses or other disruptive events, including, but not limited to, natural disasters and catastrophes.
Any future design issues, unforeseen manufacturing problems, such as contamination of our or our manufacturers’ facilities, equipment malfunctions, aging components, quality issues with components and materials sourced from third-party suppliers, or failures to strictly follow procedures or meet specifications, may have a material adverse effect on our brand, business, results of operations and financial condition and could result in us or our third-party manufacturers losing International Organization for Standardization (ISO) quality management certifications.
Any future design issues, unforeseen manufacturing problems, such as contamination of or cyber attacks on our or our manufacturers’ facilities, equipment malfunctions, aging components, quality issues with components and materials sourced from third-party suppliers, or failures to strictly follow procedures or meet specifications, may have a material adverse effect on our brand, business, results of operations and financial condition and could result in us or our third-party manufacturers losing International Organization for Standardization (ISO) quality management certifications.
For example: • others may be able to make products that are similar to products and technologies we may develop or utilize similar technology that are not covered by the claims of the patents that we own or license now or in the future; • we, or our licensor(s), might not have been the first to make the inventions covered by the issued patent or pending patent application that we license or may own in the future; • we, or our licensor(s), might not have been the first to file patent applications covering certain of our or their inventions; • others may independently develop similar or alternative technologies or duplicate any of our technologies without infringing, misappropriating or otherwise violating our owned or licensed intellectual property rights; • it is possible that our pending patent applications, and our licensed pending patent applications, or those that we may own or license in the future, will not lead to issued patents; • issued patents that we hold rights to may be held invalid or unenforceable, including as a result of legal challenges by our competitors; • our competitors might conduct research and development activities in countries where we do not have patent rights and then use the information learned from such activities to develop competitive products for sale in our major commercial markets; • we, and our licensor(s), may not develop additional proprietary technologies that are patentable; • the patents of others may harm our business; and • we may choose not to file a patent for certain trade secrets or know-how, and a third party may subsequently file a patent covering such intellectual property.
For example: • others may be able to make products or services that are similar to products and technologies we may develop or utilize similar technology that are not covered by the claims of the patents that we own or license now or in the future; • we, or our licensor(s), might not have been the first to make the inventions covered by the issued patent or pending patent application that we license or may own in the future; • we, or our licensor(s), might not have been the first to file patent applications covering certain of our or their inventions; • others may independently develop similar or alternative technologies or duplicate any of our technologies without infringing, misappropriating or otherwise violating our owned or licensed intellectual property rights; • it is possible that our pending patent applications, and our licensed pending patent applications, or those that we may own or license in the future, will not lead to issued patents; • issued patents that we hold rights to may be held invalid or unenforceable, including as a result of legal challenges by our competitors; • our competitors might conduct research and development activities in countries where we do not have patent rights and then use the information learned from such activities to develop competitive products for sale in our major commercial markets; • we, and our licensor(s), may not develop additional proprietary technologies that are patentable; • the patents of others may harm our business; and 75 Table of Contents • we may choose not to file a patent for certain trade secrets or know-how, and a third party may subsequently file a patent covering such intellectual property.
If we are unable to successfully maintain internal control over financial reporting, or identify any additional material weaknesses, the accuracy and timing of our financial reporting may be adversely affected.
If we are unable to successfully maintain internal control over financial reporting, or identify any material weaknesses, the accuracy and timing of our financial reporting may be adversely affected.
In addition, some companies that use third-party open source software have faced claims challenging their use of such open source 64 software and their compliance with the terms of the applicable open source license.
In addition, some companies that use third-party open source software have faced claims challenging their use of such open source software and their compliance with the terms of the applicable open source license.
If too few researchers describe the use of our products, too many researchers utilize or shift to a competing product and publish research outlining their use of that product or too many researchers negatively describe the use of our products in publications, it may drive customers away from our products and it may delay market acceptance and adoption of the Proteograph during broad commercialization. 36 Other factors in achieving commercial market acceptance, include: • our ability to market and increase awareness of the capabilities of the Proteograph Product Suite; • the ability of the Proteograph Product Suite to perform intended use applications broadly in the hands of customers; • our customers’ willingness to adopt new products and workflows; • the Proteograph’s ease of use and whether it reliably provides advantages over other alternative technologies; • the rate of adoption of the Proteograph Product Suite by academic institutions, laboratories, biopharmaceutical companies and others; • the prices we charge for the Proteograph Product Suite; • our ability to develop new products and workflows and solutions for customers; • if competitors develop and commercialize products that perform similar functions as the Proteograph; and • the impact of our investments in product innovation and commercial growth.
If too few researchers describe the use of our products, too many researchers utilize or shift to a competing product and publish research outlining their use of that product or too many researchers negatively describe the use of our products in publications, it may drive customers away from our products and it may delay market acceptance and adoption of the Proteograph during broad commercialization.c Other factors in achieving commercial market acceptance, include: • our ability to market and increase awareness of the capabilities of the Proteograph Product Suite; • the ability of the Proteograph Product Suite to perform intended use applications broadly in the hands of customers; • our customers’ willingness to adopt new products and workflows; • the Proteograph’s ease of use and whether it reliably provides advantages over other alternative technologies; • the rate of adoption of the Proteograph Product Suite by academic institutions, laboratories, biopharmaceutical companies and others; • the prices we charge for the Proteograph Product Suite; • our ability to develop new products, services and solutions that achieve commercial market acceptance ; • if competitors develop and commercialize products that perform similar functions as the Proteograph; and • the impact of our investments in product innovation and commercial growth.
The licensing or acquisition of third-party intellectual property rights is a competitive area, 63 and several more established companies may pursue strategies to license or acquire third-party intellectual property rights that we may consider attractive or necessary. These established companies may have a competitive advantage over us due to their size, capital resources and greater clinical development and commercialization capabilities.
The licensing or acquisition of third-party intellectual property rights is a competitive area, and more established companies may pursue strategies to license or acquire third-party intellectual property rights that we may consider attractive or necessary. These established companies may have a competitive advantage over us due to their size, capital resources and greater clinical development and commercialization capabilities.
In August 2020, we transferred certain assets to PrognomiQ, as a separate healthcare company to help enable the growth of ecosystems around new applications that leverage the Proteograph solution for unbiased, deep and large-scale proteomic information. As of December 31, 2022, we held approximately 15% of the outstanding capital stock of PrognomiQ.
In August 2020, we transferred certain assets to PrognomiQ, as a separate healthcare company to help enable the growth of ecosystems around new applications that leverage the Proteograph solution for unbiased, deep and large-scale proteomic information. As of December 31, 2023, we held approximately 15% of the outstanding capital stock of PrognomiQ.
Moreover, disputes may also arise between us and our licensor regarding intellectual property subject to a license agreement, including: • the scope of rights granted under the license agreement and other interpretation-related issues; • our financial or other obligations under the license agreement; • whether, and the extent to which, our products, technology and processes infringe on intellectual property of the licensor that is not subject to the licensing agreement; • our diligence obligations under the license agreement and what activities satisfy those diligence obligations; • the inventorship and ownership of inventions and know-how resulting from the joint creation or use of intellectual property by our licensor(s); and • the priority of invention of patented technology.
Moreover, disputes may also arise between us and our licensor regarding intellectual property subject to a license agreement, including: • the scope of rights granted under the license agreement and other interpretation-related issues; • our financial or other obligations under the license agreement; • whether, and the extent to which, our products, technology and processes infringe on intellectual property of the licensor that is not subject to the licensing agreement; • our diligence obligations under the license agreement and what activities satisfy those diligence obligations; 72 Table of Contents • the inventorship and ownership of inventions and know-how resulting from the joint creation or use of intellectual property by our licensor(s); and • the priority of invention of patented technology.
Competitors or third parties could purchase our products and attempt to replicate some or all of the competitive advantages we derive from our development efforts, design around our protected technology, develop their own competitive technologies that fall outside the scope of our intellectual property rights or independently develop our technologies without reference to our trade secrets.
Competitors or third parties could obtain our products and attempt to replicate some or all of the competitive advantages we derive from our development efforts, design around our protected technology, develop their own competitive technologies that fall outside the scope of our intellectual property rights or independently develop our technologies without reference to our trade secrets.
These fluctuations may occur due to a variety of factors, many of which are outside of our control, including, but not limited to: • our ability to successfully commercialize the Proteograph Product Suite on our anticipated timeline; • our ability to offer high-quality customer service: • the timing and cost of, and level of investment in, research and development and commercialization activities relating to the Proteograph Product Suite, including our SP100 automation instrument, proprietary engineered nanoparticle (NP) technology and Proteograph Analysis Suite software, which may change from time to time; • the level of demand for any products we are able to commercialize, particularly the Proteograph Product Suite, which may vary significantly from period to period; • our ability to drive adoption of the Proteograph in our target markets and our ability to expand into any future target markets; • our relationship with third-party distributorships, the quantity of our products they elect to hold in inventory, and their ability to promote and sell our products; • the prices at which we will be able to sell the Proteograph Product Suite; • the volume and mix of our sales between the Proteograph Product Suite and associated consumables, or changes in the manufacturing or sales costs related to our products; • the length of time and unpredictable nature of the sales cycle; • the lead time needed to procure SP100 automation instruments from our third-party contract manufacturer; • the success of our sales force, which if less than anticipated, could significantly impair our ability to generate revenue; • the failure of customers to exercise Proteograph purchase options; • the effective and efficient use of our financial and other resources, including the timing and amount of expenditures that we may incur to develop, commercialize or acquire additional products and technologies or for other purposes, such as the expansion of our facilities; • changes in governmental funding of life sciences research and development or changes that impact budgets and budget cycles; • seasonal spending patterns and the ability to collect on the accounts receivable of our customers; • the timing of when we recognize revenue; • future accounting pronouncements, changes in accounting rules and regulations, or modifications to our accounting policies; • the outcome of any future litigation or governmental investigations involving us, our industry or both; • higher than anticipated service, replacement and warranty costs; 34 • the impact of health epidemics such as the COVID-19 pandemic or any other pandemic on the economy, investment in life sciences and research industries, our business operations, and resources and operations of our customers, suppliers, and distributors; • global supply chain interruptions; and • general industry, economic and market conditions such as inflation, rising interest rates, and other factors, including factors unrelated to our operating performance or the operating performance of our competitors.
These fluctuations may occur due to a variety of factors, many of which are outside of our control, including, but not limited to: • our ability to successfully commercialize the Proteograph Product Suite on our anticipated timeline; • our ability to offer high-quality customer service: • the timing and cost of, and level of investment in, research and development and commercialization activities relating to the Proteograph Product Suite, including our SP100 automation instrument, proprietary engineered nanoparticle (NP) technology and Proteograph Analysis Suite software, which may change from time to time; • the level of demand for any products we are able to commercialize, particularly the Proteograph Product Suite, which may vary significantly from period to period; • our ability to drive adoption of the Proteograph in our target markets and our ability to expand into any future target markets; • our relationship with third-party distributorships, the quantity of our products they elect to hold in inventory, and their ability to promote and sell our products; • the prices at which we will be able to sell the Proteograph Product Suite and related services; • the volume and mix of our sales between the Proteograph Product Suite and associated consumables, or changes in the manufacturing or sales costs related to our products; • the length of time and unpredictable nature of the sales cycle; • the lead time needed to procure SP100 automation instruments from our third-party contract manufacturer; • the success of our sales force, which if less than anticipated, could significantly impair our ability to generate revenue; • the failure of customers to exercise Proteograph purchase options; • the effective and efficient use of our financial and other resources, including the timing and amount of expenditures that we may incur to develop, commercialize or acquire additional products and technologies or for other purposes, such as the expansion of our facilities; • changes in governmental funding of life sciences research and development or changes that impact budgets and budget cycles; • seasonal spending patterns and the ability to collect on the accounts receivable of our customers; • the timing of when we recognize revenue; 40 Table of Contents • future accounting pronouncements, changes in accounting rules and regulations, or modifications to our accounting policies; • the outcome of any future litigation or governmental investigations involving us, our industry or both; • higher than anticipated service, replacement and warranty costs; • the impact of health epidemics on the economy, investment in life sciences and research industries, our business operations, and resources and operations of our customers, suppliers, and distributors; • global supply chain interruptions; and • general industry, economic and market conditions such as inflation, rising interest rates, bank failures and other factors, including factors unrelated to our operating performance or the operating performance of our competitors.
In Europe, we would need to comply with the new Medical Device Regulation 2017/745 and In Vitro Diagnostic Regulation 2017/746, which became effective on May 26, 2021 (postponed from 2020) and May 26, 2022 respectively. Recently, the European Parliament voted to extend the transition timelines for MDR and IVDR.
In Europe, we would need to comply with the new Medical Device Regulation 2017/745 and In Vitro Diagnostic Regulation 2017/746, which became effective on May 26, 2021 (postponed from 2020) and May 26, 2022 respectively. In 2023, the European Parliament voted to extend the transition timelines for MDR and IVDR.
Even if patents covering our 58 products are obtained, once the patent life has expired, we may be open to competition from competitive products. If one of our products requires extended development, testing and/or regulatory review, patents protecting such products might expire before or shortly after such products are commercialized.
Even if patents covering our products or services are obtained, once the patent life has expired, we may be open to competition from competitive products. If one of our products requires extended development, testing and/or regulatory review, patents protecting such products might expire before or shortly after such products are commercialized.
If we fail to comply with our obligations under any license, collaboration or other agreements, we may be required to pay damages and could lose intellectual property rights necessary for developing and protecting our technologies and products, including the Proteograph Product Suite, or we could lose certain rights to grant sublicenses.
If we fail to comply with our obligations under any license, collaboration or other agreements, we may be required to pay damages and could lose intellectual property rights necessary for developing and protecting our technologies, services and products, including the Proteograph Product Suite and related services, or we could lose certain rights to grant sublicenses.
Any of the foregoing could have a material adverse effect on our competitive position, business, financial conditions, results of operations and prospects. If we cannot license rights to use technologies on reasonable terms, we may not be able to commercialize new products in the future.
Any of the foregoing could have a material adverse effect on our competitive position, business, financial conditions, results of operations and prospects. If we cannot license rights to use technologies on reasonable terms, we may not be able to commercialize new products or services in the future.
We have only recently initiated the broad commercialization of the Proteograph Product Suite, and we may not be able to successfully execute on this phase as planned due to: • the inability to establish the capabilities and value proposition of the Proteograph Product Suite with key opinion leaders and other customers in a timely fashion; • delays or longer-than expected lead times in the sales cycle to establish customer contacts, complete responsive presentations including platform evaluations tailored to specific requests, and move expeditiously from quote to order to revenue to receipt of payment due to budgetary or other constraints of academic organizations, laboratories, biopharmaceutical companies and others; • changing industry or market conditions, customer requirements or competitor offerings during broad commercialization; • delays in continuing the build-out of our sales, customer support and marketing organization as needed for broad commercialization; • delays in ramping up manufacturing, either internally or through our suppliers, to meet the expected demand for broad commercialization; and • the impact of the COVID-19 or any other pandemic on the economy and research industries, our business operations, and resources and the operations of our customers, suppliers and supply chain, and distributors.
We have only recently initiated the broad commercialization of the Proteograph Product Suite, and we may not be able to successfully execute on this phase as planned due to: • the inability to establish the capabilities and value proposition of the Proteograph Product Suite with key opinion leaders and other customers in a timely fashion; • delays or longer-than expected lead times in the sales cycle to establish customer contacts, complete responsive presentations including platform evaluations tailored to specific requests, and move expeditiously from quote to order to revenue to receipt of payment due to budgetary or other constraints of academic organizations, laboratories, biopharmaceutical companies and others; • changing industry or market conditions, customer requirements or competitor offerings during broad commercialization; • delays in continuing the build-out of our sales, customer support and marketing organization as needed for broad commercialization; • delays in ramping up manufacturing, either internally or through our suppliers, to meet the expected demand for broad commercialization; and • the impact of health epidemics on the economy and research industries, our business operations, and resources and the operations of our customers, suppliers and supply chain, and distributors.
We apply for patents covering our products and technologies and uses thereof, as we deem appropriate. However, obtaining and enforcing patents is costly, time-consuming and complex, and we may fail to apply for patents on important products and technologies in 53 a timely fashion or at all, or we may fail to apply for patents in potentially relevant jurisdictions.
We apply for patents covering our products and technologies and uses thereof, as we deem appropriate. However, obtaining and enforcing patents is costly, time-consuming and complex, and we may fail to apply for patents on important products, services and technologies in a timely fashion or at all, or we may fail to apply for patents in potentially relevant jurisdictions.
In addition, our owned and in-licensed patents may be subject to a reservation of rights by one or more third parties. For example, the U.S. government has certain rights, including march-in rights, to patent rights and technology funded by the U.S. government and licensed to us from BWH.
In addition, our owned and in-licensed patents have been, or may be, subject to a reservation of rights by one or more third parties. For example, the U.S. government has certain rights, including march-in rights, to patent rights and technology funded by the U.S. government and licensed to us from BWH.
We rely, or will rely, on information technology systems to keep financial records, facilitate our research and development initiatives, manage our manufacturing operations, maintain quality control, fulfill customer orders, maintain corporate records, communicate with staff and external parties and operate other critical functions.
We rely, or will rely, on information technology systems to keep financial records, facilitate our research and development initiatives, manage our manufacturing operations, provide services, maintain quality control, fulfill customer orders, maintain corporate records, communicate with staff and external parties and operate other critical functions.
Further, in such proceedings, the defendant could counterclaim that our intellectual property is invalid or unenforceable and the court may agree, in which case we could lose valuable intellectual property rights, which could allow third parties to commercialize technology or products similar to ours and compete directly with us, without payment to us, or could require us to obtain license rights from the prevailing party in order to be able to manufacture or commercialize our products without infringing such party’s intellectual property rights, and if we unable to obtain such a license, we may be required to cease commercialization of our products and technologies, any of which could have a material adverse effect on our business, financial condition, results of operations and prospects.
Further, in such proceedings, the defendant could counterclaim that our intellectual property is invalid or unenforceable and the court may agree, in which case we could lose valuable intellectual property rights, which could allow third parties to commercialize technology, services or products similar to ours and compete directly with us, without payment to us, or could require us to obtain license rights from the prevailing party in order to be able to manufacture or commercialize our products without infringing such party’s intellectual property rights, and if we unable to obtain such a license, we may be required to cease commercialization of our products, services and technologies, any of which could have a material adverse effect 69 Table of Contents on our business, financial condition, results of operations and prospects.
If our assumptions underlying our estimates and judgments relating to our critical accounting policies change or if actual circumstances differ from our assumptions, estimates or judgments, or if accounting rules, regulations, standards or practices change, our compensation practices may need to change or our financial statements may need to be restated, and our operating results may be adversely affected and could fall below our publicly announced guidance or the expectations of securities analysts and investors, resulting in a decline in the market price of our Class A common stock.
If our assumptions underlying our estimates and judgments relating to our critical accounting policies change or if actual circumstances differ from our assumptions, estimates or judgments, or if accounting rules, regulations, standards or practices change, our compensation practices may need to change or our financial statements may need to be restated, and our operating results may be adversely 58 Table of Contents affected and could fall below our publicly announced guidance or the expectations of securities analysts and investors, resulting in a decline in the market price of our Class A common stock.
We currently rely on a license from a third party, and in the future may rely on additional licenses from other third parties, in relation to our technologies and products, including the Proteograph Product Suite and if we lose any of these licenses, then we may be subjected to future litigation.
We currently rely on a license from a third party, and in the future may rely on additional licenses from other third parties, in relation to our technologies, services and products, including the Proteograph Product Suite and related services, and if we lose any of these licenses, then we may be subjected to future litigation.
We may rely heavily on trade secrets and confidentiality agreements to protect our unpatented know-how, technology and other proprietary and confidential information, including parts of the Proteograph Product Suite, and to maintain our competitive position. However, trade secrets and know-how can be difficult to protect.
We may rely heavily on trade secrets and confidentiality agreements to protect our unpatented know-how, technology and other proprietary and confidential information, including parts of the Proteograph Product Suite and related services, and to maintain our competitive position. However, trade secrets and know-how can be difficult to protect.
Although we try to ensure that our employees, consultants, advisors and independent contractors do not use confidential or proprietary information or know-how of others in their work for us, we may be subject to claims that our employees, advisors, consultants or independent contractors have inadvertently or otherwise used or disclosed intellectual property, including trade secrets or other confidential or proprietary information of their former employers or other third parties, or to claims that we have improperly used or obtained such trade secrets.
Although we try to ensure that our employees, consultants, advisors and independent contractors do not use confidential or proprietary information or know-how of others in their work for us, we may be subject to claims that our employees, advisors, consultants or independent contractors have inadvertently or otherwise used or disclosed intellectual property, including trade secrets or other confidential or proprietary 70 Table of Contents information of their former employers or other third parties, or to claims that we have improperly used or obtained such trade secrets.
It is also possible that we will fail to identify patentable aspects of our research and development output before it is too late to obtain patent protection. Moreover, we may not develop additional proprietary products, methods and technologies that are patentable.
It is also possible that we will fail to identify patentable aspects of our research and development output before it is too late to obtain patent protection. Moreover, we may not develop additional proprietary products, services and technologies that are patentable.
Our products contain third-party open source software components and failure to comply with the terms of the underlying open source software licenses could restrict our ability to sell our products and service our customers, or require disclosure of our proprietary software. Our products contain software licensed by third parties under open source software licenses.
Our products contain, and our services use, third-party open source software components and failure to comply with the terms of the underlying open source software licenses could restrict our ability to sell our products and service our customers, or require disclosure of our proprietary software. Our products contain software licensed by third parties under open source software licenses.
Because we re-qualified as a smaller reporting company, as of December 31, 2022, we are a non-accelerated filer and are no longer be required to comply with the auditor attestation requirements regarding the effectiveness of our internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act until we become an accelerated filer or large accelerated filer.
Because we re-qualified as a smaller reporting company, as of December 31, 2023, we are a non-accelerated filer and are no longer required to comply with the auditor attestation requirements regarding the effectiveness of our internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act until we become an accelerated filer or large accelerated filer.
Any of the foregoing events could have a material adverse effect on our business, financial condition and results of operations. The U.S. law relating to the patentability of certain inventions in the life sciences technology industry is uncertain and rapidly changing, which may adversely impact our existing patents or our ability to obtain patents in the future.
Any of the foregoing events could have a material adverse effect on our business, financial condition and results of operations. 62 Table of Contents The U.S. law relating to the patentability of certain inventions in the life sciences technology industry is uncertain and rapidly changing, which may adversely impact our existing patents or our ability to obtain patents in the future.
Our efforts to enforce or protect our proprietary rights related to trademarks, trade secrets, domain names, copyrights or other intellectual property may be ineffective and could result in substantial costs and diversion of resources. Any of the foregoing events could have a material adverse effect on our business, financial condition and results of operations.
Our efforts to enforce or protect our proprietary rights related to trademarks, trade secrets, domain names, copyrights or other intellectual property may be ineffective and could result in substantial costs and 67 Table of Contents diversion of resources. Any of the foregoing events could have a material adverse effect on our business, financial condition and results of operations.
The CPA, CDPA, UCPA, and CTDPA share similarities with and differences from the CPRA and legislation proposed in other states. Aspects of these state privacy statutes remain unclear, resulting in further uncertainty and potentially requiring us to modify our data practices and policies and to incur substantial additional costs and expenses in an effort to comply.
The CPA, CDPA, UCPA, and CTDPA share similarities with and differences from the CPRA and legislation proposed in other states. Aspects of these state privacy statutes remain unclear, resulting in 84 Table of Contents further uncertainty and potentially requiring us to modify our data practices and policies and to incur substantial additional costs and expenses in an effort to comply.
The costs incurred in correcting any defects or errors may be substantial and could adversely affect our operating margins. In manufacturing the Proteograph Product Suite, we depend upon third parties for the supply of our instruments and various components, many of which require a significant degree of technical expertise to produce.
The costs incurred in correcting any defects or errors may be substantial and could adversely affect our operating margins. 50 Table of Contents In manufacturing the Proteograph Product Suite, we depend upon third parties for the supply of our instruments and various components, many of which require a significant degree of technical expertise to produce.
We may in the future seek to acquire or invest in businesses, applications or technologies that we believe could complement or expand the Proteograph Product Suite or future products, enhance our technical capabilities or otherwise offer growth opportunities.
We may in the future seek to acquire businesses, applications or technologies that we believe could complement or expand the Proteograph Product Suite or future products or services, enhance our technical capabilities or otherwise offer growth opportunities.
Our instruments are manufactured at our third-party manufacturer’s facilities in Nevada, and our consumables are manufactured at various locations in the United States and internationally. Our facilities in Redwood City and those of our third-party manufacturers are vulnerable to natural disasters, public health crises, including the impact of health epidemics such as the COVID-19 pandemic, climate change and catastrophic events.
Our instruments are manufactured at our third-party manufacturer’s facilities in Nevada, and our consumables are manufactured at various locations in the United States and internationally. 82 Table of Contents Our facilities in Redwood City and those of our third-party manufacturers are vulnerable to natural disasters, public health crises, including the impact of health epidemics such as the COVID-19 pandemic, climate change and catastrophic events.
Any failure or perceived failure by us or our third-party vendors, collaborators, contractors and consultants to comply with any applicable federal, state or similar foreign laws and regulations relating to data privacy and security, or could result in damage to our reputation, as well as proceedings or litigation by governmental agencies or other third parties, including class action privacy litigation in certain jurisdictions, which would subject us to significant fines, sanctions, awards, penalties or judgments, all of which could have a material adverse effect on our business, financial condition, results of operations and prospects. 74 Item 1B.
Any failure or perceived failure by us or our third-party vendors, collaborators, contractors and consultants to comply with any applicable federal, state or similar foreign laws and regulations relating to data privacy and security, including GDPR, could result in damage to our reputation, as well as proceedings or litigation by governmental agencies or other third parties, including class action privacy litigation in certain jurisdictions, which would subject us to significant fines, sanctions, awards, penalties or judgments, all of which could have a material adverse effect on our business, financial condition, results of operations and prospects. 86 Table of Contents Item 1B.
If widespread adoption of the Proteograph takes longer than anticipated, or broad scientific and market acceptance does not occur, we will continue to experience operating losses. The success of life sciences products is due, in large part, to acceptance by the scientific community and their adoption of certain products in the applicable field of research.
If widespread adoption of the Proteograph takes longer than anticipated, or broad scientific and market acceptance does not occur, we will continue to experience operating losses. 42 Table of Contents The success of life sciences products is due, in large part, to acceptance by the scientific community and their adoption of certain products in the applicable field of research.
If the FDA or other regulatory authorities assert that any of our RUO products are subject to regulatory clearance or approval, our business, financial condition, or results of operations could be adversely affected. As manufacturers develop more complex diagnostic tests and diagnostic software, the FDA may increase its regulation of LDTs.
If the FDA or other regulatory authorities assert that any of our RUO products are subject to regulatory clearance or approval, our business, financial condition, or results of operations could be adversely affected. 60 Table of Contents As manufacturers develop more complex diagnostic tests and diagnostic software, the FDA may increase its regulation of LDTs.
New hires require significant training and, in most cases, take significant time before they achieve full productivity. Our failure to successfully integrate these key personnel into our business could adversely affect our business. In addition, competition for qualified personnel is intense, particularly in the San Francisco Bay Area and San Diego.
New hires typically require significant training and, in many cases, take significant time before they achieve full productivity. Our failure to successfully integrate these key personnel into our business could adversely affect our business. In addition, competition for qualified personnel is intense, particularly in the San Francisco Bay Area and San Diego.
We expect to be dependent upon revenue generated from the sale of the Proteograph Product Suite for the foreseeable future. We expect that we will generate substantially all of our revenue from the sale of the Proteograph Product Suite and associated consumables for the foreseeable future.
We expect to be dependent upon revenue generated from the sale of the Proteograph Product Suite and related services for the foreseeable future. We expect that we will generate substantially all of our revenue from the sale of the Proteograph Product Suite and associated consumables and services for the foreseeable future.
Litigation may be necessary to defend against these and other claims challenging inventorship of our or our licensor’s ownership of our owned or in-licensed patents, trade secrets or other intellectual property.
Litigation has been, and may be, necessary to defend against these and other claims challenging inventorship of our or our licensor’s ownership of our owned or in-licensed patents, trade secrets or other intellectual property.
Some of the factors that may cause the market price of our Class A common stock to fluctuate include, but are not limited to: • the degree to which our launch and commercialization of our products meets the expectations of securities analysts and investors; • actual or anticipated fluctuations in our operating results, including fluctuations in our quarterly and annual results; • revenue being less than anticipated or operating expenses being more than anticipated; • the failure or discontinuation of any of our product development and research programs; • changes in the structure or funding of research at academic and research laboratories and institutions, including changes that would affect their ability to purchase our instruments or consumables; • the success of existing or new competitive businesses or technologies; • announcements about new research programs or products of our competitors; • developments or disputes concerning patent applications, issued patents or other proprietary rights; • the recruitment or departure of key personnel; • litigation and governmental investigations involving us, our industry or both; • regulatory or legal developments in the United States and other countries; • volatility and variations in market conditions in the life sciences technology sector generally, or the proteomics or genomics sectors specifically, including volatility in the stock prices of publicly held companies in our industry; • investor perceptions of us or our industry; • the level of expenses related to any of our research and development programs or products; • actual or anticipated changes in our estimates as to our financial results or development timelines, variations in our financial results or those of companies that are perceived to be similar to us or changes in estimates or recommendations by securities analysts, if any, that cover our Class A common stock or companies that are perceived to be similar to us; • whether our financial results meet the expectations of securities analysts or investors; • short-selling strategies that may drive down the price of our Class A common stock; • the announcement or expectation of additional financing efforts; 66 • sales of our Class A common stock by us or sales of our Class A common stock or Class B common stock by our insiders or other stockholders, or future stock issuances; • general economic, industry and market conditions; and • health epidemics such as the COVID-19 pandemic, natural disasters or major catastrophic events.
Some of the factors that may cause the market price of our Class A common stock to fluctuate include, but are not limited to: • the degree to which our launch and commercialization of our products meets the expectations of securities analysts and investors; • actual or anticipated fluctuations in our operating results, including fluctuations in our quarterly and annual results; • revenue being less than anticipated or operating expenses being more than anticipated; • the failure or discontinuation of any of our product development and research programs; 76 Table of Contents • changes in the structure or funding of research at academic and research laboratories and institutions, including changes that would affect their ability to purchase our instruments or consumables; • the success of existing or new competitive businesses or technologies; • announcements about new research programs or products of our competitors; • developments or disputes concerning patent applications, issued patents or other proprietary rights; • the recruitment or departure of key personnel; • litigation and governmental investigations involving us, our industry or both; • regulatory or legal developments in the United States and other countries; • volatility and variations in market conditions in the life sciences technology sector generally, or the proteomics or genomics sectors specifically, including volatility in the stock prices of publicly held companies in our industry; • investor perceptions of us or our industry; • the level of expenses related to any of our research and development programs or products; • actual or anticipated changes in our estimates as to our financial results or development timelines, variations in our financial results or those of companies that are perceived to be similar to us or changes in estimates or recommendations by securities analysts, if any, that cover our Class A common stock or companies that are perceived to be similar to us; • whether our financial results meet the expectations of securities analysts or investors; • short-selling strategies that may drive down the price of our Class A common stock; • the announcement or expectation of additional financing efforts; • sales of our Class A common stock by us or sales of our Class A common stock or Class B common stock by our insiders or other stockholders, or future stock issuances; • the perceived solvency of financial institutions with which we have financial deposits or investments in excess of insurance limits; • general economic, industry and market conditions; and • health epidemics such as the COVID-19 pandemic, natural disasters or major catastrophic events.

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Item 2. Properties

Properties — owned and leased real estate

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Biggest changeItem 2. Properties Our corporate headquarters, research and development facilities, and manufacturing and distribution centers are located at 3800 Bridge Parkway, Redwood City, CA 94065. The facility is approximately 51,000 square feet and is compliant with all relevant state and federal requirements. Our lease on this facility runs through September 2032.
Biggest changeItem 2. Pr operties Our corporate headquarters, research and development facilities, and manufacturing and distribution centers are located at 3800 Bridge Parkway, Redwood City, CA 94065. The facility is approximately 51,000 square feet and is compliant with all relevant state and federal requirements. Our lease on this facility runs through September 2032.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeMine Safety Disclosures Not applicable. 75 PART II.
Biggest changeMine S afety Disclosures Not applicable. 88 Table of Contents PART II.
Item 3. Legal Proceedings We are not currently a party to any material legal proceedings. From time to time we may be involved in legal proceedings or investigations, which could have an adverse impact on our reputation, business and financial condition and divert the attention of our management from the operation of our business. Item 4.
Item 3. Lega l Proceedings We are not currently a party to any material legal proceedings. From time to time we may be involved in legal proceedings or investigations, which could have an adverse impact on our reputation, business and financial condition and divert the attention of our management from the operation of our business. Item 4.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeOur Class B common stock is not listed or traded on any stock exchange. Holders of Common Stock As of March 2, 2023, there were 30 holders of record of our Class A common stock and 6 holders of record of our Class B common stock.
Biggest changeOur Class B common stock is not listed or traded on any stock exchange. Holders of Common Stock As of March 1, 2024, there were 26 holders of record of our Class A common stock and 6 holders of record of our Class B common stock.
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Market Information Our Class A common stock has been listed on the Nasdaq Global Select Market under the symbol “SEER” since December 4, 2020. Prior to that date, there was no public trading market for our Class A common stock.
Item 5. Market for Registrant’s Common Equity, Related Sto ckholder Matters and Issuer Purchases of Equity Securities Market Information Our Class A common stock has been listed on the Nasdaq Global Select Market under the symbol “SEER” since December 4, 2020. Prior to that date, there was no public trading market for our Class A common stock.
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Item 6. [Res erved] 89 Table of Contents

Item 7. Management's Discussion & Analysis

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

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Biggest changeInterest Income Interest income consists of interest earned on cash, cash equivalents and investments. 80 Results of Operations Comparisons of the Years Ended December 31, 2022 and 2021 The following table summarizes our results of operations for the periods presented: Year ended December 31, Change 2022 2021 Amount % (dollars in thousands) Revenue: Product $ 8,557 $ 3,577 $ 4,980 139 % Service 913 500 413 83 % Related party 5,215 2,317 2,898 125 % Grant and other 808 223 585 262 % Total revenue 15,493 6,617 8,876 134 % Cost of revenue: Product 5,459 2,300 3,159 137 % Service 495 42 453 1079 % Related party 1,989 863 1,126 130 % Grant and other 457 — 457 100 % Total cost of revenue 8,400 3,205 5,195 162 % Gross profit 7,093 3,412 3,681 108 % Operating expenses: Research and development 45,797 29,121 16,676 57 % Selling, general and administrative 58,531 45,764 12,767 28 % Total operating expenses 104,328 74,885 29,443 39 % Loss from operations (97,235) (71,473) (25,762) 36 % Other income (expense): Interest income 4,602 326 4,276 1312 % Interest expense — (22) 22 (100) % Other expense (333) — (333) (100) % Total other income 4,269 304 3,965 1304 % Net loss $ (92,966) $ (71,169) $ (21,797) 31 % Revenue Year ended December 31, Change 2022 2021 Amount % (dollars in thousands) Revenue $ 15,493 $ 6,617 $ 8,876 134 % Revenue increased by $8.9 million, or 134%, from $6.6 million in 2021 to $15.5 million in 2022, due to sales of products related to the Proteograph Product Suite in the year ended December 31, 2022.
Biggest changeInterest Income Interest income consists of interest earned on cash, cash equivalents and investments. 92 Table of Contents Results of Operations Comparisons of the Years Ended December 31, 2023 and 2022 The following table summarizes our results of operations for the periods presented: Year ended December 31, Change 2023 2022 Amount % (dollars in thousands) Revenue: Product $ 8,506 $ 8,557 $ (51 ) (1 )% Service 2,016 913 1,103 121 % Related party 4,660 5,215 (555 ) (11 )% Grant and other 1,479 808 671 83 % Total revenue 16,661 15,493 1,168 8 % Cost of revenue: Product 5,398 5,459 (61 ) (1 )% Service 685 495 190 38 % Related party 1,430 1,989 (559 ) (28 )% Grant and other 642 457 185 40 % Total cost of revenue 8,155 8,400 (245 ) (3 )% Gross profit 8,506 7,093 1,413 20 % Operating expenses: Research and development 53,019 45,797 7,222 16 % Selling, general and administrative 58,950 58,531 419 1 % Total operating expenses 111,969 104,328 7,641 7 % Loss from operations (103,463 ) (97,235 ) (6,228 ) 6 % Other income (expense): Interest income 17,764 4,602 13,162 286 % Other expense (578 ) (333 ) (245 ) 74 % Total other income 17,186 4,269 12,917 303 % Net loss $ (86,277 ) $ (92,966 ) $ 6,689 (7 )% Revenue Year ended December 31, Change 2023 2022 Amount % (dollars in thousands) Revenue $ 16,661 $ 15,493 $ 1,168 8 % Revenue increased by $1.2 million, or 8%, from $15.5 million in 2022 to $16.7 million in 2023, primarily due to an increase in service revenue.
We expect our expenses to increase significantly in connection with our ongoing activities, as we: • broadly commercialize the Proteograph Product Suite; • attract, hire and retain qualified personnel; • continue to build our sales, marketing, service, support and distribution infrastructure as part of our commercialization efforts; • build-out and expand our in-house NP manufacturing capabilities; • continue to engage in research and development of other products and enhancements to the Proteograph Product Suite; • implement operational, financial and management information systems; • obtain, maintain, expand, and protect our intellectual property portfolio; and • build the infrastructure to operate and scale as a public company.
We expect our expenses to increase in connection with our ongoing activities, as we: • broadly commercialize the Proteograph Product Suite; • attract, hire and retain qualified personnel; • continue to build our sales, marketing, service, support and distribution infrastructure as part of our commercialization efforts; • build-out and expand our in-house NP manufacturing capabilities; • continue to engage in research and development of other products and enhancements to the Proteograph Product Suite; • implement operational, financial and management information systems; • obtain, maintain, expand, and protect our intellectual property portfolio; and • build the infrastructure to operate and scale as a public company.
Since we were incorporated in 2017, we have devoted substantially all of our resources to research and development activities, including with respect to the Proteograph Product Suite, building our commercial infrastructure including manufacturing, operations, sales and marketing and service and support functions, establishing and maintaining our intellectual property portfolio, hiring personnel, raising capital, becoming a publicly-traded company, and providing general and administrative support for these activities.
Since we were incorporated in 2017, we have devoted substantially all of our resources to research and development activities, including with respect to the Proteograph Product Suite, building our commercial infrastructure including manufacturing, operations, sales and marketing and service and support functions, establishing and maintaining our intellectual property portfolio, hiring personnel, raising capital, becoming and being a publicly-traded company, and providing general and administrative support for these activities.
While we currently perform some filling and packaging of the Proteograph assay and the related consumables, we may eventually have 77 our filling and packaging outsourced to a third party. We conduct vendor and component qualification for components provided by third-party suppliers and quality control tests on our NPs.
While we currently perform some filling and packaging of the Proteograph assay and the related consumables, we may eventually have our filling and packaging outsourced to a third party. We conduct vendor and component qualification for components provided by third-party suppliers and quality control tests on our NPs.
Our ability to generate product revenue sufficient to achieve profitability, if ever, will depend on the successful commercialization of the Proteograph Product Suite. We are commercializing the Proteograph Product Suite as an integrated solution comprised of consumables, our SP100 automation instrument and software.
Our ability to generate product and service revenue sufficient to achieve profitability, if ever, will depend on the successful commercialization of the Proteograph Product Suite. We are commercializing the Proteograph Product Suite as an integrated solution comprised of consumables, our SP100 automation instrument and software.
Factors that could cause or contribute to such differences include, but are not limited to, those identified below and those set forth under the section titled “Risk Factors.” Overview Our mission is to imagine and pioneer new ways to decode the secrets of the proteome to improve human health.
Factors that could cause or contribute to such differences include, but are not limited to, those identified below and those set forth under the section titled “Risk Factors.” Overview Our mission is to imagine and pioneer new ways to decode the biology of the proteome to improve human health.
Our first product, the Proteograph TM Product Suite (Proteograph), leverages our proprietary engineered nanoparticle (NP) technology to provide unbiased, deep, rapid and large-scale access to the proteome. The Proteograph Product Suite is an integrated solution that includes consumables, an automation instrument and software.
Our product, the Proteograph Product Suite (Proteograph), leverages our proprietary engineered nanoparticle (NP) technology to provide unbiased, deep, rapid and large-scale access to the proteome. The Proteograph Product Suite is an integrated solution that includes consumables, an automation instrument and software.
Recent Accounting Pronouncements See Note 2 to our consolidated financial statements included elsewhere in this Annual Report for more information about recent accounting pronouncements, the timing of their adoption, and our assessment, to the extent we have made one yet, of their potential impact on our financial condition of results of operations.
Recent Accounting Pronouncements See Note 2 to our consolidated financial statements included elsewhere in this Annual Report for more information about recent accounting pronouncements, the timing of their adoption, and our assessment, to the extent we have made one yet, of their potential impact on our financial condition of results of operations. 98 Table of Contents
Revenue is recorded net of discounts and sales taxes collected on behalf of governmental authorities. Customers are invoiced generally upon shipment, or upon order for services, and payment is typically due within 30 or 60 days. 84 Cash received from customers in advance of product shipment or providing services is recorded as a contract liability.
Revenue is recorded net of discounts and sales taxes collected on behalf of governmental authorities. Customers are invoiced generally upon shipment, or upon delivery of services, and payment is typically due within 30 or 60 days. Cash received from customers in advance of product shipment or providing services is recorded as a contract liability.
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations You should read the following discussion and analysis of our financial condition and results of operations together with our audited consolidated financial statements and related notes included elsewhere in this Annual Report.
Item 7. Mana gement’s Discussion and Analysis of Financial Condition and Results of Operations You should read the following discussion and analysis of our financial condition and results of operations together with our audited consolidated financial statements and related notes included elsewhere in this Annual Report.
We obtain some of the reagents and components used in the Proteograph workflow from third-party suppliers. While some of these reagents and components are currently sourced from a single supplier, these products are readily available from numerous suppliers.
We obtain some of the reagents and components used in the 90 Table of Contents Proteograph workflow from third-party suppliers. While some of these reagents and components are currently sourced from a single supplier, these products are readily available from numerous suppliers.
However, based on our cash on hand, we believe we will have adequate liquidity over the next twelve months following the date of this Annual Report to operate our business and to meet our cash requirements.
However, based on our cash, cash equivalents and investments, we believe we will have adequate liquidity over the next twelve months following the date of this Annual Report to operate our business and to meet our cash requirements.
Selling, General and Administrative Expenses Selling, general and administrative expenses consist primarily of employee compensation, including stock-based compensation, and related benefits for executive management, sales and marketing, service and support, finance, administration and human resources, legal, allocated overhead, professional service fees and other general overhead costs to support our operations.
Selling, General and Administrative Expenses Selling, general and administrative expenses consist primarily of employee compensation, including stock-based compensation, and benefits for executive management, sales and marketing, customer support, finance, administrative, human resources, legal functions, allocated costs, professional service fees and other general overhead costs to support our operations.
While our significant accounting policies are described in the notes to our consolidated financial statements, we believe that the following critical accounting policies are most important to understanding and evaluating our reported financial results. Revenue Recognition Our revenue is generated primarily from the sale of products and services.
While our significant accounting policies are described in the notes to our consolidated financial statements, we believe that the following critical accounting policies are most important to understanding and evaluating our reported financial results. 96 Table of Contents Revenue Recognition Our revenue is generated primarily from sales of products and services.
Non-cash charges primarily consisted of stock-based compensation of $33.7 million, $3.9 million of depreciation and amortization and $2.0 million of non-cash operating lease expense.
Non-cash charges primarily consisted of stock-based compensation of $33.7 million, $3.9 million of depreciation and amortization and $1.7 million of non-cash operating lease expense.
Product revenue consists of sales of an instrument with embedded software essential to the instrument’s functionality and consumables as well as platform evaluation agreements. Service revenue primarily consists of revenue received from the generation and analysis of proteomic data on behalf of our customers.
Product revenue consists of sales of an instrument with embedded software essential to the instrument’s functionality and consumables. Service revenue primarily consists of revenue received from the generation and analysis of proteomic data on behalf of our customers.
Investing Activities In 2022, cash used in investing activities was $122.7 million, which related to purchases of available-for-sale securities, net of proceeds from maturities, of $112.6 million, in addition to $10.3 million in payments primarily for laboratory equipment. 83 In 2021, cash used in investing activities was $170.9 million, which related to purchases of available-for-sale securities, net of proceeds from maturities, of $164.0 million, in addition to $6.9 million in payments primarily for laboratory equipment.
In 2022, cash used in investing activities was $122.7 million, which related to purchases of available-for-sale securities, net of proceeds from maturities, of $112.6 million, in addition to $10.3 million in payments primarily for laboratory equipment.
The increase was due to higher rates of interest earned on cash invested in money market funds, U.S. Treasury securities, commercial paper and corporate securities in 2022. 82 Liquidity and Capital Resources Since the date of our incorporation, we have not generated significant revenue from product sales and have incurred significant operating losses and negative cash flows from operations.
The increase was due to higher rates of interest earned on cash invested in money market funds, U.S. Treasury securities, commercial paper, corporate securities and government agency debt in 2023. Liquidity and Capital Resources Since the date of our incorporation, we have incurred significant operating losses and negative cash flows from operations.
Revenue recognized primarily consisted of sales of the Proteograph SP100 instrument, consumable kits and platform evaluations, of which $5.2 million was attributed to related parties.
Revenue recognized primarily consisted of sales of the Proteograph SP100 instrument, consumable kits, platform evaluations, instrument upgrades and service revenue, of which $4.7 million was attributed to related parties.
As of December 31, 2022, we had an accumulated deficit of $219.5 million and cash, cash equivalents, and investments of $426.4 million. We expect to continue to incur significant and increasing losses and do not expect positive cash flows from operations for the foreseeable future.
As of December 31, 2023, we had an accumulated deficit of $305.8 million and cash, cash equivalents, and investments of $373.1 million. We expect to continue to incur significant losses and do not expect positive cash flows from operations for the foreseeable future.
Financing Activities In 2022, cash provided by financing activities was $3.9 million. This was attributable to net proceeds from the exercise of stock options of $3.1 million and $0.8 million of proceeds from the issuance of common stock in connection with our employee stock purchase plan. In 2021, cash provided by financing activities was $116.6 million.
Financing Activities In 2023, cash provided by financing activities was $0.5 million, which was primarily attributable to proceeds of $0.4 million from the issuance of Class A common stock in connection with our employee stock purchase plan and net proceeds of $0.1 million from the exercise of stock options. In 2022, cash provided by financing activities was $3.9 million.
Cost of goods sold consists primarily of costs of the components of the Proteograph Product Suite, including the SP100 instrument with embedded software essential to the instrument’s functionality, and consumables, and distribution-related expenses such as logistics and shipping costs. In addition, cost of revenue includes stock-based compensation and related employee benefits, allocated overhead and write-downs or impairments of obsolete inventory.
Cost of revenue consists primarily of costs of the components of the Proteograph Product Suite, including the SP100 instrument and consumables and distribution-related expenses such as logistics and shipping costs. In addition, cost of revenue includes employee compensation, such as stock-based compensation and employee benefits, allocated overhead and charges related to inventory reserves.
Research and Development Year ended December 31, Change 2022 2021 Amount % (dollars in thousands) Research and development $ 45,797 $ 29,121 $ 16,676 57 % Research and development expenses increased by $16.7 million, or 57%, from $29.1 million in 2021 to $45.8 million in 2022.
Research and Development Year ended December 31, Change 2023 2022 Amount % (dollars in thousands) Research and development $ 53,019 $ 45,797 $ 7,222 16 % Research and development expenses increased by $7.2 million, or 16%, from $45.8 million in 2022 to $53.0 million in 2023.
Other increases include costs related to general business expenses of $1.0 million, which include IT support services and expensed software, a $0.7 million increase in laboratory expenses and a $0.8 million increase in depreciation of laboratory equipment.
Other increases include costs related to general business expenses of $0.6 million and a $1.3 million increase in depreciation of laboratory equipment.
Cash Flows The following table summarizes our cash flows for the periods indicated: Year ended December 31, 2022 2021 (in thousands) Net cash used in operating activities $ (60,780) $ (46,347) Net cash used in investing activities (122,718) (170,878) Net cash provided by financing activities 3,893 116,634 Net decrease in cash, cash equivalents and restricted cash $ (179,605) $ (100,591) Operating Activities In 2022, cash used in operating activities was $60.8 million, attributable to a net loss of $93.0 million, partially offset by a net change in our net operating assets and liabilities of $7.4 million and non-cash charges of $39.6 million.
Cash Flows The following table summarizes our cash flows for the periods indicated: Year ended December 31, 2023 2022 (in thousands) Net cash used in operating activities $ (59,065 ) $ (60,780 ) Net cash provided by (used in) investing activities 37,904 (122,718 ) Net cash provided by financing activities 452 3,893 Net decrease in cash, cash equivalents and restricted cash $ (20,709 ) $ (179,605 ) Operating Activities In 2023, cash used in operating activities was $59.1 million, attributable to a net loss of $86.3 million, partially offset by a net change in our net operating assets and liabilities of $2.7 million and non-cash charges of $29.9 million.
R&D expenses consist primarily of employee compensation, including stock-based compensation, and related employee benefits, laboratory supplies used for in-house research, consulting costs, costs related to clinical studies for the collection of biological samples for research use and allocated costs, rent, depreciation, information technology, and utilities.
Research and Development Expenses Research and development (R&D) expenses include costs associated with R&D of our technology and product candidates. R&D expenses consist primarily of employee compensation, including stock-based compensation and employee benefits, laboratory supplies used for in-house research, consulting costs, and allocated costs, including rent, depreciation, information technology and utilities.
Grant and other cost of revenue was attributed to the lease of the SP100 instruments. Cost of revenue related to the Proteograph Product Suite consists of costs of the SP100 instrument, consumable kits and other related costs, including labor and overhead.
Cost of revenue consists of costs of the SP100 instrument, consumable kits, cost of services, and other related costs, including labor and overhead.
Selling, General and Administrative Year ended December 31, Change 2022 2021 Amount % (dollars in thousands) Selling, general and administrative $ 58,531 $ 45,764 $ 12,767 28 % Selling, general and administrative expenses increased by $12.8 million, or 28%, from $45.8 million in 2021 to $58.5 million in 2022, primarily due to a $4.5 million increase in employee compensation and other related expenses, and a $3.8 million increase in stock-based compensation.
Selling, General and Administrative Year ended December 31, Change 2023 2022 Amount % (dollars in thousands) Selling, general and administrative $ 58,950 $ 58,531 $ 419 1 % Selling, general and administrative expenses increased by $0.4 million, or 1%, from $58.5 million in 2022 to $59.0 million in 2023, primarily due to a $3.3 million increase in employee compensation costs and a $0.1 million increase in travel expense.
We are broadly commercializing the Proteograph Product Suite through a direct sales channel in the United States, and through both direct and distributor sales channels in regions outside the United States. Since we are in the early stages of commercialization, we have built, and will continue to build our sales, marketing, support and product distribution capabilities.
Since we are in the early stages of commercialization, we have built, and will continue to build our sales, marketing, support and product distribution capabilities.
The increase was primarily due to an increase in product development efforts related to the Proteograph Product Suite including $5.6 million increase in employee compensation costs and other related expenses, and a $4.7 million increase in stock-based compensation, due to growth in research and development personnel, and a $4.0 million increase in allocated overhead related to the allocation of facility expense associated with the build-out of our expansion facilities to support our R&D efforts.
The increase was primarily due to an increase in product development efforts related to the Proteograph Product Suite, including $2.4 million increase in employee compensation costs, a $0.6 million increase in stock-based compensation, due to growth in research and development personnel and a $2.2 million increase in allocated costs.
Non-cash charges primarily consisted of $25.9 million in stock-based compensation, $2.6 million of depreciation and amortization, $1.2 million of net amortization of premiums on available-for-sales securities and $1.0 million of non-cash operating lease expense.
Non-cash charges primarily consisted of stock-based compensation of $34.4 million, $5.6 million of depreciation and amortization, $0.8 million of provision for inventory excess and obsolescence, $0.4 million of loss on disposal of property and equipment, and $0.2 million of non-cash operating lease expense, offset by $11.5 million of net accretion of premiums on available-for-sale securities.
Total Other Income Year ended December 31, Change 2022 2021 Amount % (dollars in thousands) Total other income $ 4,269 $ 304 $ 3,965 1304 % Total other income increased by $4.0 million, or 1304%, from $0.3 million in 2021 to $4.3 million in 2022.
The increase was offset by a $2.9 million decrease in professional services. Total Other Income Year ended December 31, Change 2023 2022 Amount % (dollars in thousands) Total other income $ 17,186 $ 4,269 $ 12,917 303 % Total other income increased by $12.9 million, or 303%, from $4.3 million in 2022 to $17.2 million in 2023.
Standalone lease arrangements are outside the scope of Accounting Standards Codification (ASC) 606, Revenue Contracts with Customer and are therefore accounted for in accordance with ASC 842, Leases . Each of these contracts is evaluated as a lease arrangement, either as an operating lease or a sales-type finance lease using the lease classification guidance.
Standalone lease arrangements are outside the scope of Accounting Standards Codification (ASC) 606, Revenue Contracts with Customer and are therefore accounted for in accordance with ASC 842, Leases . The total consideration in a lease arrangement is allocated between lease and non-lease components on their relative stand-alone selling prices.
The change in our net operating assets and liabilities was primarily due to an increase in inventory levels of $3.6 million, an increase in accounts receivable of $2.5 million and a decrease of $0.6 million in accrued research and development, which was partially offset by an increase in accounts payable of $1.6 million.
The change in our net operating assets and liabilities was primarily due to an increase in inventory levels of $1.9 million for anticipated revenue growth and a $1.3 million increase in prepaid expenses and other current assets, which was partially offset by a decrease in accounts receivable of $0.3 million. 95 Table of Contents In 2022, cash used in operating activities was $60.8 million, attributable to a net loss of $93.0 million, partially offset by a net change in our net operating assets and liabilities of $7.1 million and non-cash charges of $39.3 million.
This was attributable to net proceeds of $103.0 million from issuance of common stock upon initial public offering, net of issuance costs, $11.4 million in short-swing profits from a beneficial owner and $1.9 million from the exercise of stock options.
This was attributable to net proceeds from the exercise of stock options of $3.1 million and $0.8 million of proceeds from the issuance of Class A common stock in connection with our employee stock purchase plan.
We received net proceeds of $103.0 million after deducting offering costs, underwriting discounts and commissions. During the years ended December 31, 2022 and 2021, we incurred a net loss of $93.0 million and $71.2 million and used $60.8 million and $46.3 million of cash in operations, respectively.
Hamilton has represented to us that it maintains ISO 9001 and ISO 13485 certifications. During the years ended December 31, 2023 and 2022, we incurred a net loss of $86.3 million and $93.0 million and used $59.1 million and $60.8 million of cash in operations, respectively.
Treasury zero coupon issues in effect at the time of grant for periods corresponding with the expected term of the options. • Expected dividend yield—We have never paid dividends on our common stock and have no plans to pay dividends on our common stock. Therefore, we used an expected dividend yield of zero.
The expected dividend yield is assumed to be zero as we have never paid dividends and have no current plans to pay dividends on our common stock.
The comparable companies were chosen based on their similar size, life cycle stage, or area of specialty. We will continue to apply this process until enough historical information regarding the volatility of our own stock price becomes available. • Risk-free interest rate—The risk-free interest rate is based on the U.S.
The comparable companies were chosen based on their similar size, life cycle stage, or area of specialty. The risk-free interest rate is based on the yield available on U.S. Treasury zero-coupon issues in effect at the time of grant for periods corresponding with the expected term of the options.
The Black-Scholes model requires the input of subjective assumptions, including fair value of common stock, expected term, expected volatility, risk-free interest rate, and expected dividend yield, which are described in greater detail below.
The Black-Scholes option-pricing model considers several variables and assumptions in estimating the fair value of service-based stock options and stock purchase rights under our ESPP. These variables include the per share fair value of the underlying common stock, expected term, expected volatility, risk-free interest rate and expected dividend yield over the expected term.
Our grant-funded activities are expected to decrease as a percentage of total revenue as we decrease grant-funded activities and continue to ramp up commercialization of the Proteograph Product Suite. 79 Cost of Revenue We utilize third-party manufacturers for production of our SP100 instrument and we manufacture our NPs and assemble our assay kits internally.
We intend to focus our commercial efforts in the United States and expect to grow our international presence. 91 Table of Contents Cost of Revenue We utilize third-party manufacturers for production of our SP100 instrument and we manufacture our NPs and assemble our assay kits internally.
Revenue related to grant and other consisted of our grant-funded activities related to our Small Business Innovation Research (SBIR) grant from the National Institutes of Health Grant (NIH), which increased between the two periods by $45,000 and $0.5 million respectively, and lease arrangements where we are the lessor. 81 Cost of Revenue Year ended December 31, Change 2022 2021 Amount % (dollars in thousands) Cost of revenue $ 8,400 $ 3,205 $ 5,195 162 % Cost of revenue increased by $5.2 million, or 162%, from $3.2 million in 2021 to $8.4 million in 2022, primarily due to sales of the Proteograph Product Suite.
Revenue from our grant-funded activities related to our Small Business Innovation Research (SBIR) grant from the National Institutes of Health Grant (NIH) increased between the two periods by $0.9 million and was partially offset by a decrease of $0.4 million in lease revenue.
For additional details, see the section titled “Risk Factors.” Components of Results of Operations Revenue We generate revenue from product sales, including sales of the Proteograph Product Suite, which consists of an instrument with embedded software essential to the instrument’s functionality and associated consumables as well as our platform evaluation agreements.
Components of Results of Operations Revenue Our product revenue consists of an instrument with embedded software essential to the instrument’s functionality and consumables. Our service revenue primarily consists of revenue received from the generation and analysis of proteomic data on behalf of the customer. Our related party revenue consists primarily of product sales to related parties.
Stock-Based Compensation We account for stock-based compensation by measuring and recognizing compensation expense for all share-based awards made to employees and non-employees based on estimated grant-date fair values. We use the straight-line method to allocate compensation cost to reporting periods over the requisite service period, which is generally the vesting period.
We estimate the fair value of stock options with service conditions and stock purchase rights under our ESPP on the grant date using the Black-Scholes option-pricing valuation model. We use the straight-line method to allocate compensation cost to reporting periods over the requisite service period in which the awards are expected to vest.
The expected term for options granted to non-employees is the contractual term. • Expected volatility—As we had no publicly available stock price information prior to our IPO and limited publicly available stock price information subsequent to our IPO, the expected volatility was estimated based on the historical average volatility for comparable publicly traded life sciences technology companies over a period equal to the expected term of the stock option grants.
For all service-based stock options granted, we calculate the expected term using the simplified method for “plain vanilla” stock option awards. For the expected volatility, we use a blended rate based on the historical volatility of the stock price of our Class A common stock and average volatility of our comparable publicly traded peer companies.
Removed
Hamilton has represented to us that it maintains ISO 9001 and ISO 13485 certification. On December 8, 2020, we completed our IPO, in which we sold 10,592,106 shares of Class A common stock at a price to the public of $19.00 per share, resulting in net proceeds of $183.9 million after deducting offering costs, underwriting discounts and commissions.
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We are focused on removing barriers to access to the Proteograph, including through our service offering. We are broadly commercializing the Proteograph Product Suite through a direct sales channel in the United States, and through both direct and distributor sales channels in regions outside the United States.
Removed
Concurrent with the IPO, we issued 7,105,262 shares of our Class A common stock in a private placement for net proceeds of $130.3 million after deducting underwriting discounts and commissions. On February 1, 2021, we completed an underwritten public offering of 1,650,000 shares of our Class A common stock at a public offering price of $67.00 per share.
Added
Our grant and other revenue consists of research-related grants, lease arrangements, and shipping revenue. Our revenue is primarily generated domestically.
Removed
PrognomiQ In August 2020, we transferred certain assets related to human disease testing to PrognomiQ, Inc. (PrognomiQ), a new wholly-owned subsidiary, in exchange for all of its outstanding equity interests. Following the transfer, we completed a pro-rata distribution to our stockholders of most of the shares of capital stock of PrognomiQ.
Added
Cost of Revenue Year ended December 31, Change 2023 2022 Amount % (dollars in thousands) Cost of revenue $ 8,155 $ 8,400 $ (245 ) (3 )% 93 Table of Contents Cost of revenue decreased by $0.2 million, or 3%, from $8.4 million in 2022 to $8.2 million in 2023, primarily due to an increase in service revenue, which carries a lower cost of revenue, and lower product revenue from fewer instrument sales, which have a higher cost of revenue, offset by increased overhead expenses, warranty, and other costs of revenue.
Removed
Following the distribution and two subsequent equity financings of PrognomiQ totaling $102 million, we hold approximately 15% of the outstanding capital stock in PrognomiQ as of December 31, 2022. The rationale for this transaction was to enable the growth of ecosystems around new applications that leverage unbiased, deep and large-scale proteomic information.
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If our available cash, cash equivalents and investments and anticipated cash flows from operations are insufficient to satisfy our liquidity requirements, we may consider raising additional 94 Table of Contents capital to expand our business, pursue strategic investments, take advantage of financing opportunities or for other reasons.
Removed
The transaction allows us to remain focused on our core strategy, which is to be a provider, rather than a consumer, of proteomics solutions to all customers across these ecosystems. By focusing on our role as a provider of proteomics solutions, we are no longer potentially competing 78 with, or creating the perception that we are competing with, our customers.
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We enter into agreements as a part of the normal course of business with various vendors, which are generally cancellable without material penalty upon written notice. Payments associated with these agreements are not included in this discussion of contractual obligations.
Removed
Our relationship with PrognomiQ does not preclude us from selling the Proteograph Product Suite to any customer in any geography, nor does it preclude our customers from using the Proteograph in any way.
Added
Our operating lease obligations reflect our lease obligations for our office and laboratory space in Redwood City, California and office space in San Diego, California.
Removed
PrognomiQ has indicated that it plans to combine the protein data from the Proteograph solution with genomics and other -omics data, to create a multi-omics approach to health and disease testing.
Added
We lease approximately 51,000 square feet of office and laboratory space in Redwood City, California, and the lease is set to end on September 30, 2032 with an option to renew for an additional five-year term at then-current market rates.
Removed
We believe PrognomiQ’s use of proteomics and the potential for other similar companies which use proteomics in their research and products will help us drive the adoption of the Proteograph Product Suite in these applications. We have entered into certain agreements with PrognomiQ.
Added
We maintain a letter of credit issued to the lessor in the amount of $0.5 million as of each of December 31, 2023 and 2022, which is secured by restricted cash and is presented as noncurrent at each date based on the term of the underlying lease.
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Omid Farokhzad, our Chief Executive Officer and President, and Chair of our board of directors, also serves as the Chair of PrognomiQ’s board of directors. Philip Ma, Ph.D., our former Chief Business Officer, serves as the Chief Executive Officer and President of PrognomiQ. While Dr.
Added
We lease approximately 6,000 square feet of office space in San Diego, California that runs through September 2024. We have certain purchase commitments related to our inventory management with certain manufacturing suppliers wherein we are required to purchase the amounts forecasted in a blanket purchase order within a certain time period.
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Ma has fully transitioned to PrognomiQ, he will continue to consult until April 2023 at which time, Dr. Ma’s consulting agreement will automatically renew for subsequent one year terms unless and until terminated.
Added
The contractual obligations represent future cash commitments and liabilities under agreements with third parties and exclude orders for goods and services entered into in the normal course of business that are not enforceable or subject to change. These outstanding commitments amounted to $6.3 million as of December 31, 2023.
Removed
We granted PrognomiQ a non-exclusive license to certain patents and patent applications that we own and a non-exclusive sublicense to certain patent applications we exclusively licensed from Brigham and Women’s Hospital (BWH), in each case relating to our core technology, to develop, manufacture and commercialize licensed products for the field of human diagnostics on a worldwide basis.
Added
We take a long-term view in growing and scaling our business and regularly review opportunities that meet our long-term growth objectives.
Removed
In consideration of the non-exclusive sublicense to certain patent applications licensed from BWH, PrognomiQ paid us a low-five digit figure, and would pay a low single digit royalty, in an amount equivalent to what we would have to pay under our license with BWH, on net sales of sublicensed products beginning with the first commercial sale of a sublicensed product during the term of the agreement.
Added
Our future capital requirements will depend on many factors including our revenue growth rate, investments in continued commercialization efforts, acquisitions of complementary or enhancing technologies or businesses, including intellectual property rights, the timing and extent of additional capital expenditures to invest in existing and new facilities, the expansion of sales and marketing and international activities and the extent and magnitude of our ongoing research and development programs.
Removed
We do not view these amounts to be material to our financial condition and results of operations nor do we expect these amounts to be material to us in the future. In accordance with the non-exclusive license agreement with PrognomiQ, we entered into a supply agreement with PrognomiQ in June 2021.
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Investing Activities In 2023, cash provided by investing activities was $37.9 million, which related to the proceeds from maturities of available-for-sale securities of $445.3 million and proceeds from sale of available-for-sale securities of $3.0 million. This was offset by the purchases of available-for-sale securities of $403.1 million and purchases of property and equipment, primarily for laboratory equipment, of $7.3 million.
Removed
The PrognomiQ supply agreement provides that we will supply PrognomiQ with the Proteograph Product Suite and associated consumables. COVID-19 Pandemic As a result of the COVID-19 pandemic, we could experience disruptions that could severely impact our business.
Added
The stand-alone selling price is based on the price we 97 Table of Contents would separately sell that promised good or service to a customer. If a stand-alone price is not available for a component, it is estimated using the best information available.
Removed
Pandemic precautions and preventative measures may also impact our commercialization plans due to restrictions on our customers’ ability to access laboratories, causing delays in the delivery and installation of the Proteograph products, training such customers on our products, and their ability to conduct research.
Added
Shipping revenue is recognized when control of the product is transferred to the customer, and the related shipping and handling costs are included in the cost of revenue.
Removed
We have experienced delays in our ability to access customers in certain countries with strict COVID-19 policies to provide installation and training services. Furthermore, COVID-19 has adversely affected the broader economy and financial markets, resulting in an economic downturn that could curtail the research and development budgets of our customers, our ability to hire additional personnel and our financing prospects.
Added
Stock-Based Compensation Stock-based compensation expense relates to stock options with service-based vesting conditions, stock options with performance and market-based vesting conditions, stock purchase rights under our employee stock purchase plan (ESPP), restricted common stock awards (RSAs) and restricted stock units (RSUs). All awards are measured at fair value on grant date and forfeitures are recognized as they occur.
Removed
Any of the foregoing could harm our operations and we cannot anticipate all the ways in which it could be adversely impacted by health epidemics such as COVID-19.
Added
For stock options with performance and market-based vesting conditions, stock-based compensation expense is recognized using an accelerated attribution method based on the derived service periods and not reversed if the achievement of the market condition does not occur. The fair value of these stock options is estimated using the Monte Carlo simulation model.
Removed
In addition, we may at times generate revenue from performing services, the receipt of grant revenue for the reimbursement of research-related expenses, and lease arrangements. Our revenue is primarily generated domestically. We intend to focus our commercial efforts in the United States and expect to grow our international presence.
Added
We value RSAs based on the difference between the fair value of the underlying stock at the measurement date and the purchase price. We value RSUs based on the fair value of the underlying stock at the measurement date.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeItem 7A. Quantitative and Qualitative Disclosures About Market Risk Interest Rate Risk We have exposure to interest rate risk that relates to our cash and cash equivalents and investments held in money market funds, U.S. Treasury securities, commercial paper and corporate securities. The goals of our investment policy are liquidity and capital preservation.
Biggest changeItem 7A. Quantitative and Qualitative Disclosures About Market Risk Interest Rate Risk We have exposure to interest rate risk that relates to our cash and cash equivalents and investments held in money market funds, U.S. Treasury securities, commercial paper, corporate debt securities and government agency debt. The goals of our investment policy are liquidity and capital preservation.
We believe that we do not have any material exposure to changes in the fair value of these assets as a result of changes in interest rates due to the short-term nature of our cash and cash equivalents and investments. 86
We believe that we do not have material exposure to changes in the fair value of these assets as a result of changes in interest rates due to the short-term nature of our cash and cash equivalents and investments.

Other SEER 10-K year-over-year comparisons